Piracy not an insured loss

Posted: 6th March 2015

shipIn a ruling of crucial significance to those engaged in international trade, the Court of Appeal has emphasised that cargos are not insured against high seas piracy unless cover for such risks is specifically included in shipping contracts.

An oil tanker had more than 5,000 tonnes of oil siphoned from its hold after it was attacked by armed pirates off the Ivory Coast. The charterer of the vessel argued that its owner was liable for the loss on the basis that the shipping contract imposed responsibility on the latter for ‘any in-transit loss’ exceeding 0.5 per cent of the cargo.

The charterer’s claim failed when a judge ruled that a loss caused by piracy did not fall within that category. In dismissing the charterer’s appeal against that decision, the Court noted that pirates are viewed as ‘enemies of the human race’ and, as a matter of both domestic and international law, losses arising from their activities are excluded from insurance cover, unless clearly stated otherwise.

The ‘in-transit loss’ provision in the contract referred to losses ‘incidental to the carriage of the cargo’ or losses ‘of a kind encountered on a normal voyage’. Despite the increasing prevalence of banditry at sea, the Court found that losses inflicted by pirates could not fit within either of those definitions.