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Exclusion of loss arising from arrest, restraint, detainment

05 June 2018 Patrick Bracher, Norton Rose Fulbright
Patrick Bracher from Norton Rose Fulbright.

Patrick Bracher from Norton Rose Fulbright.

The UK Supreme Court examined the question whether a vessel detained in Venezuela as a result of being used by a drug cartel to smuggle cocaine strapped to the hull fell within the exclusion for ‘arrest, restraint, detainment, confiscation or expropriation … by reason of infringement of any customs … regulations’.

The owners of the vessel argued that the proximate cause of the loss was the malicious acts of the drug cartel and not the detainment of the vessel for six months which resulted in its constructive total loss. The court had already found that there was no malicious act but addressed the position as if it had been accepted as a malicious act.

Firstly, the owners themselves had relied on the detainment of the vessel in order to establish the constructive total loss. Secondly, while the general aim in insurance law is to identify a single real, effective or proximate cause of any loss, there are sometimes two concurrent causes, as here, where there was the malicious act and the detention of the vessel. If the attempted smuggling constituted a malicious act this was at best only one element in the causative events leading to the loss. The detainment for at least six months was an equally essential contributing cause of the loss and therefore the exclusion applied because no one peril dominated and excluded the other peril from relevance.

Of course, if one peril dominated and excluded the other from relevance they would not both be proximate causes.

The case is Navigators Insurance Co Ltd v Atlasnavios-Navegacao LDA.

First published by Financial Institutions Legal Snapshot.

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