Delos Shipholding S.A v Allianz Global Corporate & Specialty S.E

DMC/INS/25/03

England

Delos Shipholding S.A. & Others v Allianz Global Corporate & Specialty S.E. & Others (The “Win Win”)

English Court of Appeal: Asplin, Males & Popplewell LJJ: [2025] EWCA Civ 1019: 30 July 2025

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWCA/Civ/2025/1019.html:

Peter MacDonald Eggers KC, Sandra Healy and Sophie Hepburn (instructed by Hill Dickinson International) for Delos & Others (Insureds)

Philippa Hopkins KC, David Walsh KC and Lorraine Aboagye (instructed by Adams & Moore Solicitors LLP) for Allianz & Others (Insurers)

MARINE WAR & POLITICAL RISKS INSURANCE: WHETHER ARREST AND DETENTION OF VESSEL FOR ANCHORING UNLAWFULLY IN INDONESIAN WATERS EXCLUDED FROM COVER AS ARREST AND DETENTION UNDER CUSTOMS OR QUARANTINE REGULATIONS OR “SIMILAR” ARREST AND DETENTION

Summary

This was an appeal from the judgment of the High Court, which held that the Vessel was a constructive total loss under the Policy, following her detention in Indonesia for more than six months.  In consequence, the Insureds were entitled to be paid the Vessel’s total agreed sums insured of USD37.5 million.

In dismissing the appeal by the Insureds, the Court of Appeal held that exclusion 1(e) of the Policy [see further below] did not operate to exclude the loss because the exclusion – understood in a business like sense – meant that Indonesia asserting sovereignty over the Vessel for unauthorised anchoring in territorial waters was not “similar” to the purposes of customs regulations (to regulate the import of goods into a state’s territory) nor to those of quarantine regulations (to protect human and animal health), to which the exclusion applied.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and Deputy Editor of DMC’s CaseNotes

Background

The claim arose out of the unlawful anchoring of the Capesize bulk carrier “Win Win” (Vessel) just inside Indonesian territorial waters off Singapore in February 2019.  The incident led to the Indonesian authorities detaining the Vessel for nearly a year and the prosecution of the Vessel’s Master, who received a suspended sentence of seven months’ imprisonment and a fine of USD7,000.

The Vessel was covered by the Insurers for war risks, including the risk of arrest and detention (Policy).  The Insureds brought a claim under the Policy, asserting that the Vessel had become a constructive total loss by virtue of being detained for more than six months, such that they were, accordingly, entitled to recover the agreed total sums insured of USD37.5 million.

The Insurers broadly accepted that the requirements for a constructive total loss were met but, nonetheless, denied the claim on essentially four grounds:

(1) the detainment was not fortuitous since the Master and/or one or more of the Insureds knew or should have known that the Vessel had anchored in territorial waters and the arrest was the consequence of their voluntary conduct in so doing;

(2) the claim fell within an exclusion to the Policy;

(3) the delay was materially caused by the Insureds’ allegedly unreasonable conduct in breach of their duty to sue and labour; and

(4) the Insurers were allegedly entitled to avoid the Policy for material non-disclosure.

The High Court (Dias J) found against the Insurers on all four grounds (fn.1).  The Insurers appealed to the Court of Appeal on grounds (2) and (4), of which this note will focus on ground (2), although, for the sake of completeness, ground (4) of the Insurers’ defence also failed (as briefly summarised in the Comment).

It was common ground that the Policy covered "seizure, arrest, restraint or detainment, or any attempt thereat" (these being risks which had been excluded by the American Institute Hull Clauses and written back in by the War Risks Clauses) exceeding six months’ duration, and included exclusion 1(e), which stated:

“This insurance does not cover any loss, damage or expense caused by, resulting from, or incurred as a consequence of:…

e. Arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilities …”

It was also common ground that detainment of a vessel under the criminal laws of a country is not ordinary judicial process, and so may, therefore, amount to a restraint or detainment within the meaning of a marine war risks policy.

Judgment

Having dealt with the background, the facts, the terms of the Policy, the parties’ evidence and submissions, and the High Court judgment, Males LJ (with whom Apslin and Popplewell LJJ agreed) gave the opinion of the Court.

(2) Exclusion 1(e)

The Court departed from the trial judge's approach of interpreting this clause (from the American Institute clauses) as having the same effect as the English Institute clauses.  However, while each clause had to be interpreted on its own terms, the principles that governed their interpretation should be understood as commercial people in the shipping and marine insurance industry would understand them, which are common to all such clauses.  The Court’s analysis also emphasised that perils and exclusions must be construed together, with neither having primacy over the other, because together they express the ambit of the cover, so have to be construed together in light of each other.

The Court defined “customs regulations” using a business-like interpretation that considered what commercial people would regard as typically governed by such regulations.  The Court drew upon precedents including The Anita (fn.2) and The Kleovoulos of Rhodes (fn.3), in the vessel detention context, and an American case in which the US Food & Drug Administration detained imported cargo that had been fumigated with a European but not US FDA approved pesticide (fn.4).

The Court concluded that customs regulations referred to laws regulating the import of goods into a state’s territory, whether by prohibition of import or by imposing payment conditions on import.  This interpretation gave proper effect to the parties’ reasonable intentions and expectations in a clause designed for worldwide application.

Similarly, “quarantine regulations”, while not interpreted by English or American case law in the marine insurance context, were interpreted by the Court as being laws concerned with protecting the health of people or animals, understood from a business perspective, without regard to domestic law technicalities in the place of detention.

The Court rejected the trial judge’s view that there was significance in the different wording between the English Institute clauses (detention “under” quarantine regulations compared to “by reason of infringement of” customs regulations) and the American Institute clauses (detention “under” both types).  These were considered by the Court to be equivalent wordings that would be understood the same way by business people.

The phrase “and similar” extended the exclusion to detentions under regulations having a similar purpose to customs or quarantine regulations – meaning regulations concerned with importing goods or protecting health.  This required a genuine connection in purpose, though not necessarily that the purpose be “materially the same”, as the trial judge had held.  Examples canvased might include detention for smuggling goods into another state’s territory or carrying infected cargo, but the Court did not have to decide these hypothetical cases.

Applying this interpretation to the case at hand, the Court found that Indonesia’s detention of the Vessel for anchoring without permission in territorial waters bore no relevant similarity to customs or quarantine regulations.  The Vessel was in ballast (empty of cargo), there were no health concerns, and no smuggling was involved – the detention was simply an assertion of sovereignty over territorial waters.  This had no connection to importing goods or protecting health, making the exclusion inapplicable.

The Court, therefore, observed that the exclusion referred to two distinct kinds of regulation and extended only to regulations with similar purposes to either of them.  Since the Indonesian detention concerned permission to anchor and thus was not related to anyone or anything on board the Vessel, the Court concluded that exclusion 1(e) did not apply.  Hence the appeal was rejected on this ground.

Comment

This judgment highlights the distinction between interpreting each marine insurance clause on its own terms and the common principles that are applied in undertaking that exercise – a business-like approach is taken to determining the parties’ reasonable objective intentions.  While the Court of Appeal did disagree with the approach taken by the High Court in some respects this, ultimately, did not make a material difference to the outcome of the dispute on the appeal.

The judgment is also worth reading on the topic of material non-disclosure in relation to the duty of fair representation of the risk.  On this aspect the Court held that alleged criminal conduct of a private practice lawyer who was the sole nominee director of the Vessel’s registered owner (Delos) and did not act in a decision-making capacity, as he simply did what he was told, meant he was not ‘senior management’ under section 4(8)(c) of the Insurance Act 2015.  The result was that knowledge of the alleged criminal conduct could not be imputed to Delos to enable the Insurers to seek to avoid the policy of insurance.

Footnote 1:          

The DMC case note on the High Court judgment can be found at https://www.onlinedmc.co.uk/index.php/Delos_Shipholding_v_Allianz_Global_&_Specialty_ - The "Win Win": [1]

Footnote 2:

[1970] 2 Lloyd's Rep 365

Footnote 3:

[2003] EWCA Civ 12, [2003] 1 Lloyd’s Rep 138

Footnote 4:

Blaine Richards & Co Inc v Marine Indemnity Insurance Company of America 635 F.2d 1051 (1980) – N.B. the American appeal court concluded that the US FDA regulations were within the “customs regulations” exclusion of the cargo policy