77TulLRev

Citation: 77 Tul. L. Rev. 1295 2002-2003

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Insuring the Risk of Terrorist Damage andOther Hostile Deliberate Damage to Property

Involved in the Marine Adventure:An English Law Perspective

Peter Rogan

The World Trade Center attacks on September 11, 2001, brought into stark relief themassive property losses that might be caused by an act of terrorism. However, on the basis thatit is people, rather than property who are the principal target of terrorism, the risk of a teronstattack on, and consequentphysical damage to, a commercial vessel and her cargo whilst at sea isrelatively low Nevertheless, the risk of damage to marine property done deliberately andaggressively and outside situations of actual war does exist, and protection against theconsequences of such damage has long been available in the English marine insurance marketThis Article categorizes such risk as the risk of damage by "hostile deliberate acts." It providesan overview of the historical developments of the English marine insurance market anddescribes the overall fiamework of the insurance cover that is available in respect of damage byhostile deliberate acts: It covers the standard clauses applicable to hull and cargo risks, and itconsiders the top up or alternative cover available from the P & I Clubs and War RisksAssociations. It also considers each of the hostile deliberate act perils in detail, namely the'naine perils" ofpicy, violent thef? by persons from outside the vessel and barmry, and the"war perils" of seizure, riots, malicious acts, and acts of terrorists or persons acting from a

political motive.

I. INTRODUCTION .......................................................................... 1297II. THE INSTITUTE CLAUSES AND THE OVERALL STRUCTURE

OF THE MARKET COVERS FOR THE HOSTILE DELIBERATE

A CT PERILS ................................................................................ 1299A. Historical Background ..................................................... 1299

1. The Separation of Marine and War Risks andthe Exclusion of the Latter from the MarinePolicy ........................................................................ 1300

2. The Traditional Method of Insuring AgainstWar Risks and the Hostile Deliberate Act Perils .... 1301

B. The Framework as It Is Today ......................................... 13031. C argo ........................................................................ 1304

a. The Marine Cover ...................................... 1304b. The Institute Cargo Clauses (A) ................ 1304c. Institute Cargo Clauses (B) and (C) ........... 1306

* Senior Partner, Ince & Co., London. The author would like to acknowledge theassistance given by his colleague, William Marsh, in the preparation of this Article.

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d. The Available Hostile Deliberate ActCover- Cargo ............................................ 1307

e. The Institute Malicious Damage Clause1/8/82 ......................................................... 1307

f. Institute War Clauses (Cargo) 1/1/82 ........ 1308g. The Institute Strikes Clauses (Cargo)

1/1/82 ......................................................... 1309h. The Termination of Cargo Cover .............. 1309i. Waterborne Agreement .............................. 1309

2. Hull and Freight ....................................................... 1311a. The Marine Cover ...................................... 1311b. The Marine Exclusions .............................. 1312

C TheAvailable Hostile DelibeateAct Cover. TheInstitute War and Strikes Clauses, Hulls." Time1/11/95 .............................................................................. 13 14

III. P & I CLUBS AND WAR RISKS ASSOCIATION, LIABILITIES,Top-Up, AND ALTERNATIVE COVER ........................................... 1316

IV THE HOSTILE DELIBERATE ACT PERILS IN DETAIL ................... 1317A. The Marine Peils." Piracy, Violent Theft by Persons

from Outside the Vessel, and Barratry ............................ 13171. P iracy ....................................................................... 13 17

a. Piracy in Public International Law ............ 1318b. Piracy in Marine Insurance ........................ 1318

2. Violent Theft by Persons from Outside theV essel ....................................................................... 1320

3. B arratry .................................................................... 132 1B. The War PenIls: Seizure, Riots, MaliciousActs, and

Acts of Terrorists or Persons Acting from a PoliticalM otive ............................................................................... 13221. Seizure ...................................................................... 13222. R iots ......................................................................... 13233. Malicious Acts, Terrorists, and Persons Acting

from a Political Motive ............................................ 1325a. Malicious Acts ........................................... 1326b. Terrorism ................................................... 1328c. Persons Acting from a Political Motive ..... 1330

V C ONCLU SION .............................................................................. 1331

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I. INTRODUCTION

The ingenuity of the modem terrorist knows no bounds. Theterrible events of the last two years have shown clearly that the actionsterrorists might take and the lengths to which they might go in thepursuit of their aims are limited only by the means physically andpractically available to them. Where the terrorist has sufficient money,influence, and connections, those means are limitless.

Whatever the end sought to be achieved, and whatever the meansused, every act of terrorism has one basic motive in common withevery other act of terrorism, viz., a desire to cause fear and terrorize'the "public or any section of the public " '2 primarily by means of actualor threatened loss of life. Certainly, property damage can be, andusually is, the consequence of an act of terrorism; indeed, the WorldTrade Center (WTC) attacks on September 11, 2001, gave rise toproperty losses estimated to be in excess of twenty billion U.S. dollars.'However, if the word "terrorism" is given its ordinary and popularmeaning, which has become familiar through terrorist campaigns inrecent times, few would consider the deliberate causing of damage toproperty for its own sake, without being coupled with a desire to kill orinjure, or at least frighten and intimidate, an act of terrorism.4 For thisreason-with the exception of cruise ships, which have long beenrecognized as a potential target of terrorists attacks'-the propertyinvolved in a commercial marine adventure-i.e., the ship and thecargo-may be considered unlikely to be at significant risk of terroristattacks,6 at least while at sea.' Nevertheless, that risk exists, as does therisk of loss or damage to marine property done deliberately and

1. Statutory and policy definitions of terrorism are dealt with in detail infa PartIVB.3.b.

2. Prevention of Terrorism (Temporary Provisions) Act, 1989, c. 4, § 20(1) (Eng.),repealed by Terrorism Act, 2000, c. 11, sched. 16 (Eng.), available athttp://www.legislation.hmso.gov.uk/acts/acts2000/20000011 .htm (last visited Feb. 21, 2003). The Prevention ofTerrorism (Temporary Provisions) Act defined terrorism in terms of "any use of violence forthe purpose of putting the public or any section of the public in fear." Id

3. More News. The World Trade Center, WASH. POST, June 19, 2002, at E2.4. See MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 1217 (10th ed. 1993).5. See Lawrence J. Kahn, Pirates, Rovers, and Thieves: New Problems with an Old

Enemy, 20 TUL. MAR. L.J. 293, 304 (1996).6. Piracy is a major risk and has been described by some as "marine terrorism."

Piracy is dealt with in detail infra Part IVA. 1.7. See Jane Andrewartha & Norris Riley, English Maritime Law Update, 33 J. MAR.

L. & COM. 329, 368-69 (2002). Clearly, when marine property is in port or in storage ashore,it is subject to the same level of land-based terrorist risks as any other property. The way thatland risks have been dealt with in marine insurance is discussed infra Part II.C in relation tothe Waterborne Agreement.

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aggressively,' but with an object other than that of terrorizing andoutside situations of actual warfare.! In the English marine insurancemarket, cover is available for the risk of such loss or damage in policyprovisions dealing with the perils of piracy, barratry, violent theft,seizure, riots, malicious acts, and, indeed, terrorism itself.'" Theseperils might accurately be named the "hostile deliberate act perils."

This Article considers, in detail, the constituents of each of thehostile deliberate act perils and the available cover (and exclusions) inthe context of physical loss of or damage to marine property, namelyships (including the consequences of such loss or damage in terms ofloss of freight or hire)" and cargo; it also touches briefly upon the roleof the Protection & Indemnity (P & I) Clubs and War RisksAssociations in providing insurance against liabilities arising fromdeliberately and aggressively caused loss or damage and top-up oralternative insurance to that provided by Lloyd's and the companies.

Is terrorism a new peril? There is as yet no universally acceptedlegal definition of the terms "terrorism" or "terrorist."' 2 However, suchdefinitions as there are, whether statutory or policy, all focus on the

8. The word "aggressively" has been purposely adopted in this Article to distinguishthe type of loss currently under discussion from other types of loss caused deliberately butwith a bona fide motive like, for example, jettison and other similar acts that might constitutegeneral average sacrifices and as such are outside the scope of this Article.

9. The incident involving the M.V LIMBURG may be a case in point. On October6, 2002, The LIMBURG, a French oil tanker, was just off the Yemeni coast when she sufferedan explosion, resulting in one fatality. Despite initial differences in early press reports as towhether the explosion was the result of a deliberate act or of a fault in the vessel, more recentreports have concluded that a fishing boat (possibly teleguided) loaded with explosives hadbeen driven into the side of the tanker, mirroring the attack almost two years previously onthe U.S. naval destroyer, the U.S.S. COLE. The pan-daily Ashanq al-Awsa4 published inLondon, claimed that it had received a statement from a militant Muslim group, Aden-AbyanIslamic Army, claiming it attacked the ship to avenge the execution of one of its leaders forthe 1998 kidnapping of sixteen Western tourists. The group is believed to have links with theAl Qaeda terrorist network.

10. Terrorism first appeared as a term in many of the Institute Clauses in 1983 as areflection of contemporary developments. Compare E.R. HARDY IVAMY, MARINE INSURANCE

555 (3d ed. 1979) (including the Institute Strikes, Riots and Civil Commotions Clauses from1963, which do not mention terrorism), with N. GEOFFREY HUDSON & J.C. ALLEN, THE

INSTITUTE CLAUSES 297 (N. Geoffrey Hudson ed., 3d ed. 1999) (including the Institute StrikeClauses (Cargo) 1/11/82, which do mention terrorism).

1I. In fact, the Institute Time Clauses, Freight-the Institute Clause dealing withinsurance against loss of freight-contains a perils clause and a paramount exclusion clausein virtually identical terms to those in the Institute Time Clauses, Hulls. See HUDSON &ALLEN, supa note 10, at 229-38. Consequently, they are not discussed separately in thisArticle.

12. Giorgio Gaja, Measures Against Terrorist Acts Under International Law, inMARITIME TERRORISM AND INTERNATIONAL LAW 15 (Natalino Ronzitti ed., 1990) (noting thedifficulty of defining terrorism in international conventions).

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20031 ANENGLISHLA WPERSPECTIVE 1299

motive for the act (the mens rea), rather than the act itself (the actusreus).'3 And clearly, all of the hostile deliberate act perils involve thedoing of the type of things that terrorists might do. Although making apolitical or ideological point by means of a terrorist act is largely a latetwentieth-century phenomenon, there is nothing particularly novelabout the nature of the act itself.'" Terrorism, therefore, is not,conceptually at least, a new peril, and, as will be seen, the existinginsurance framework is probably fully equipped to deal with any legalissues that a terrorist attack might raise.'5

II. THE INSTITUTE CLAUSES AND THE OVERALL STRUCTURE OF THEMARKET COVERS FOR THE HOSTILE DELIBERATE ACT PERILS

Before considering each of the hostile deliberate act perils inmore detail, the perils should first be set in the context of the clauses inwhich they appear. For this, a short history lesson is needed.

A. Historical Background'6

Section 30(1) of the Marine Insurance Act 1906 provides that apolicy may be in the form of the first schedule to the act.'" As worded,that form, known as the Lloyd's S.G. policy,'" covered both ship andgoods (hence the acronym S.G.) against both marine and war risks. 9

13. SeeTerrorism Act, 2000, c. 11 § 1(1) (Eng.).14. See Yohan Alexander, Terrorism in the Twenty-First Century: Threats and

Responses, 12 DEPAUL Bus. L.J. 59, 65-67 (1999/2000) (discussing the history of terrorism).15. See infira notes 16-22 and accompanying text. It is doubtless for this reason that

the words "terrorist" or "terrorism" did not appear at all in any of the Institute Clauses until1982 when damage caused by any terrorist was introduced in the Strikes Exclusion Clause inthe Institute Cargo Clauses and terrorism was introduced as a named peril in the InstituteStrikes Clauses (Cargo). See HUDSON & ALLEN, supra note 10, at 297-99. The words did notappear in any of the hulls clauses until the 1983 version of the Institute Time Clauses Hulls.See id. at 155.

16. What follows is a summary only. For greater historical details, see 1 SIRMICHAEL J. MUSTILL & JONATHAN C.B. GILMAN, ARNOULD'S LAW OF MARINE INSURANCE

AND AVERAGE (16th ed. 1981); DONALD O'MAY, MARINE INSURANCE: LAW AND POLICY 251 -58 (Julian Hill ed., 1993); Howard N. Bennett, Marine Insurance & War Risks (May 26,1993) (unpublished paper delivered to the Nottingham University Centre for InternationalDefence Law Studies), available at http://www.fsa.ulaval.ca/personnel/vernag/EH/F/cons/lectures/war.risks.html (last visited June 1, 2003).

17. Marine Insurance Act, 1906, 6 Edw. 7, c. 41, § 30(1), sched. 1 (Eng.).18. MUSTILL & GILMAN, supm note 16, at 23 n.60.19. See Marine Insurance Act, § 30. Modern marine insurance originated with the

Hanseatic merchants of Germany and the Lombard merchants of Northern Italy in the latetwelfth and early thirteenth centuries. See VICTOR DOVER, A HANDBOOK TO MARINEINSURANCE 8-13 (6th ed. 1964); 1 ALEX L. PARKS, THE LAW AND PRACTICE OF MARINE

INSURANCE AND AVERAGE 4-6 (1987). It became concentrated in the City of London duringthe reign of Henry IV, and the earliest English policy came into existence in 1547. MUSTILL

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The recital to the S.G. policy set out the perils, "which we the assurersare contented to bear," in the following terms:

[T]hey are of the seas, men of war, fire, enemies, pirates, rovers,thieves, jettisons, letters of mart and countermart, surprisals, takings atsea, arrests, restraints, and detainments of all kings, princes, and people,of what nation, condition, or quality soever, barratry of the master andmariners, and of all other perils, losses, and misfortunes, that have orshall come to the hurt, detriment, or damage of the said goods andmerchandises, and ship, &c., or any part thereof20

The Marine Insurance Act codified several centuries of developmentof marine insurance and in fact postdates both the S.G. Policy and thebirth of the Institute Clauses, the first of which was produced in 1889."The Institute Clauses evolved to add to, amend, or exclude, as theparties agreed, the risks covered by the S.G. policy. Then, when theS.G. policy was replaced with the MAR forms of policy, the InstituteClauses were used to deal with all aspects of coverage, dependingupon which particular set of the clauses was specified in the policy asattaching to it.22 This remains the framework today.

1. The Separation of Marine and War Risks and the Exclusion of theLatter from the Marine Policy

From the very earliest times, it was customary to exclude liabilityfor the "consequences of hostilities and war-like operations." 3 Thisevolved into the "FC&S" warranty and the consequent development ofseparate policies covering war risks, with cover for marine risksremaining with the S.G. or marine policy.4 FC&S is an abbreviationof "Free of Capture and Seizure," the opening words of the original

& GILMAN, supra note 16, at 22 n.57. Versions of the Lloyd's S.G. Policy were in use from atleast the seventeenth century until its abolition and the first introduction of the Lloyd'sMarine Policy (MAR Form) in 1982. See PARKS, suprA at 83-98; HUDSON & ALLEN, supranote 10, at 3.

20. See Marine Insurance Act, § 30.21. See DOVER, supra note 19, at 49-50.22. HOWARD N. BENNETr, THE LAW OF MARINE INSURANCE § 5.2, at 105 (1996). The

MAR terms consist of only a few lines, which state that underwriters agree to undertake theinsurance in return for the payment of premium. Id. app. II, at 467. Details of the subject-matter insured, the insured value, the premium, and other information regarding the risk areshown in the schedule where the titles of the applicable Institute Clauses are inserted alongwith any special conditions and warranties. See id § 5.2, at 105-06.

23. Britain S.S. Co. v. The King, [1919] 2 K.B. 670, 697 (Eng. C.A.); GRANTGILMORE & CHARLES L. BLACK, JR., THE LAW OF ADMIRALTY 72 (2d ed. 1975). The preciseformula adopted by Lloyd's in 1883 was "free from all consequences of hostilities and war-like operations." See BntishS.S Co., [1919] 2 K.B. at 692-93.

24. BENNETT, supra note 22, § 5.2, at 103-06.

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form of the clause that was produced in 1895; the full wording of theclause was as follows: "Warranted free of capture, seizure, anddetention, and the consequences thereof, or of any attempt thereat,piracy excepted ... , and also from all consequences of hostilities orwarlike operations, whether before or after declaration of war."'25

The practice developed of printing the warranty in italics on thebody of the S.G. policy to emphasize its paramountcy over all othercoverage wordings.26 If the perils enunciated in the FC&S clause werenot to be excluded, then the FC&S warranty was simply deleted. 7 Ifundeleted, then the warranty overrode the perils cited in the marinepolicy that were inconsistent with its terms.28

Over time, the FC&S clause developed in complexity and thelatest, and ultimate, version of the FC&S clause was adopted in 1943.9It read as follows:

Warranted free of capture, seizure, arrest, restraint or detainment, andthe consequences thereof or of any attempt thereat; also from theconsequences of hostilities or warlike operations, whether there be adeclaration of war or not; but this warranty shall not exclude collision,contact with any fixed or floating object (other than a mine or torpedo),stranding, heavy weather or fire unless caused directly (andindependently of the nature of the voyage or service which the vesselconcerned or, in the case of a collision, any other vessel involvedtherein, is performing) by a hostile act by or against a belligerent power;and for the purpose of this warranty 'power' includes any authoritymaintaining naval, military or air forces in association with a power.Further warranted free from the consequences of civil war, revolution,rebellion, insurrection, or civil strife arising therefrom, or piracy.30

2. The Traditional Method of Insuring Against War Risks and theHostile Deliberate Act Perils

The traditional method of insuring against war risks was to statein the war-risk policy that it covered "only the risks excluded from theStandard Form of English Marine Policy by the [FC&S] clause."'"

25. 2 EDWARD LOUIS DE HART & RALPH ILIFF SIMEY, ARNOULD ON THE LAW OF

MARINE INSURANCE AND AVERAGE § 905, at 1127 (9th ed. 1914) (citation omitted).26. See THE MODERN LAW OF MARINE INSURANCE app. 2, at 375-77 (D. Rhidian

Thomas ed., 1996).27. R.J. LAMBETH, TEMPLEMAN ON MARINE INSURANCE: ITS PRINCIPLES AND

PRACTICES 169 (5th ed. 1981).28. Id.29. See HUDSON & ALLEN, supm note 10, at 284.30. Id.31. See Bennett, supra note 16.

2003] 1301

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However, a loss was not necessarily covered under the war-risk policysimply because it resulted from one of the specific perils set out in theFC&S clause.3 ' Rather, however detailed the FC&S clause was, a losswas only recoverable under war risks if it would have been recoverableunder the marine policy and the marine policy had not included theFC&S exception.3 Thus at least two questions had to be answered todetermine whether a loss was covered under war risks: First, did theloss fall prima facie within the positive cover in the marine policy?34

Secondly, was the loss then taken out of the marine cover by the FC&Sexclusion?" Finally, even if the answers to both of these questionswere in the affirmative, the risk would still be subject to furtherexpress exclusion or modification in the war policy.36

In Kulukmd's v Norwich Union Fire Insurance Society, Mr.Justice Scott commented that: "The archaic words of our ancient formof marine policy ... afford little guidance in the way of description orexplanation as to the circumstances which the insurer agrees shallconstitute a loss for which he has to pay."7

Thirty-five years later, in Panamanian Oiental Steamship Corp.v Wight (The Anita), Mr. Justice Mocatta said:

It is probably too late to make an effective plea that the traditionalmethods of insuring ... war risks should be radically overhauled. Thepresent method, certainly as regards war risks insurance, is tortuous andcomplex in the extreme. It cannot be beyond the wit of underwritersand those who advise them in this age of law reform to devise morestraightforward and easily comprehended terms of cover.3

With the abandonment of the S.G. form and the introduction of theMAR forms in 1982, this plea was answered and the opportunity wastaken to carry out the radical overhaul so plaintively demanded by Mr.Justice Mocatta.39 The FC&S clause was laid to rest and the more

32. LAMBETH, supra note 27, at 169.33. SeeBENNETT, supm note 22, § 5.1, at 105.34. See id.35. See id.36. See id.37. [1937] 1 K.B. 2, 34-35 (Eng. C.A.).38. [1970] 2 Lloyd's Rep. 365,367 (Eng. Q.B.).39. See HUDSON & ALLEN, supm note 10, at 3. In November, 1978, the Secretariat of

the United Nations Conference on Trade and Development (UNCTAD) issued a report whichpronounced the following:

The antiquated Lloyd's S.G Form should be revised and updated. Specifically, thePerils Clause should be revised to be comprehensive in the modem-day context.... Furthermore, the Perils Clause should be combined with the other appropriateInstitute Clauses so that the designated risks appear in one unified Risks Clause.Consideration should be given to altering the method of granting insurance

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modem and rational structure for insuring against both marine and warrisks, which we have today, was created.4 °

B. The Fmnework as It Is Today

There are separate policies for ship and cargo, and there areseparate policies for marine and war risks." Thus cover under onepolicy does not depend upon exclusion under the other, and vice versa.

In general terms, and with the notable exception of piracy, thehostile deliberate act perils are regarded more as war perils thanmarine perils.42 The general scheme, therefore, is that loss of ordamage to marine property caused by the operation of these perils isexcluded in the marine clauses and included in the war clauses.However, because the law relating to the hostile deliberate act perils isto be found in cases involving both the exclusion and the inclusion oflosses caused by such perils, it is germane to set out the relevant partsof both the war and the marine clauses.

coverage from the enumeration of perils method to an "all risks" grant of coverage,minus specific exceptions ....

Legal and Documentary Aspects of the Marine Insurance Contract, U.N. Conference onTrade and Development, at 65, U.N. Doc. TD/B/C.4/ISL/50 (Mar. 4, 1985), quoted in PatrickJ.S. Griggs, Coverage, Warranties, Concealment, Disclosure, Exclusions, Misrepresentations,and Bad Faith, 66 TUL. L. REV. 423, 428-29 (1991) (alterations in original). In response tothis, Lloyd's Underwriters Association (LUA), representing marine underwriters at Lloyd's,and the Institute of London Underwriters (ILU), representing insurance companies writingmarine business in the United Kingdom, "set up a joint working party to consider what mightbe done in order to counter the criticisms made in the U.N.C.T.A.D. Report" in 1979.HUDSON & ALLEN, supra note 10, at 2. By 1982, the new MAR form and the CompanionInstitute of London Underwriters Companies Marine Policy Form were approved andpublished. See E.R. HARDY IVAMY, MARINEINSURANCE 104-05 (4th ed. 1985).

40. See BENNETr, supra note 22, § 5.2, at 105-06. At the same time that the newMAR forms were published, new Institute Clauses were published to go with them. Griggs,supra note 39, at 429.

The review of policy conditions is one of the responsibilities exercised by the JointCargo Committee and the Joint Hull Committee. See VICTOR DOVER, A HANDBOOK OFMARINE INSURANCE 52-53 (8th rev. ed. 1975). The actual drafting of amendments to orupdates of any of the standard forms is undertaken by the Technical and Clauses Committee.Id. at 52.

41. Raymond P. Hayden & Sanford E. Balick, Marine Insurance: Varieties,Combinations, and Coverages, 66 TuL. L. RE. 311, 314-16 (1991).

42. See HUDSON & ALLEN, supra note 10, at 44. As far as hull perils are concerned,piracy, together with barratry and violent theft from outside the vessel, are regarded asexceptions.

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1. Cargo

a. The Marine Cover

There are three primary sets of institute clauses that deal withcargo. These are the Institute Cargo Clauses (A) (the (A) Clauses), theInstitute Cargo Clauses (B) (the (B) Clauses), and the Institute CargoClauses (C) (the (C) Clauses).3 The (A) Clauses provide cover on awide, "all risks" basis, which nowadays is the most common form ofcargo insurance." The (B) and (C) Clauses provide cover on a morerestricted, "named perils" basis.45

b. The Institute Cargo Clauses (A)

The risks covered by the (A) Clauses are set out in clauses 1, 2,and 3.46 The principal one for the purposes of this paper is Clause 1,which reads as follows: "Clause 1-Risks Clause 1. This insurancecovers all risks of loss of or damage to the subject-matter insuredexcept as provided in Clauses 4, 5, 6, and 7 below.' 7

The classic statement of what is meant by "all risks" is that ofLord Sumner in Bitish & Foreign Maine Insurance Co. v Gaunt,where he said:

There are, of course, limits to "all risks." They are risks and risksinsured against. Accordingly the expression does not cover inherentvice or mere wear and tear .... It covers a risk, not a certainty; it issomething, which happens to the subject-matter from without, not thenatural behaviour of that subject-matter, being what it is, in thecircumstances under which it is carried. Nor is it a loss which theassured brings about by his own act, for then he has not merely exposedthe goods to the chance of injury, he has injured them himself."

The Gaunt case dealt with marine insurance on bales of wool, whichwere subject to conditions "[i]ncluding... all risks from sheep's back... until safely delivered."" In this case, many of the bales had been

43. Id. at 12-50.44. See id at 12-13. For an example of a U.S. case that considered the operation of

all risks cover under hull and machinery in the context of "deliberate act" perils, see Pan Am.WorldAirways, Inc. v Aetna Cas. & Sur Co., 368 E Supp. 1098 (S.D.N.Y. 1973), aff1, 505

F.2d 989 (2d Cir. 1974).45. SeeHUoDSON& ALLEN, supra note 10, at 39-43.46. Id. at 12.47. Id.48. [1921] 26 Com. Cas. 247, 259-60 (appeal taken from Eng. C.A.) (Sumner, L.,

concurring).49. Id. at 248.

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damaged by fresh water wetting.5° The House of Lords held that theexistence of fortuitous damage was sufficient evidence of a casualty,and that under an insurance against 'all risks' it was not necessary toprove the exact nature of the casualty which had occasioned the loss.Accordingly, Lord Sumner was able to conclude that .' [a]ll risks' hasthe same effect as if all insurable risks were separately enumerated."5'

The bottom line is that under an all risks policy, loss by anyhappening, which is fortuitous with regard to the subject matter of theinsurance, is covered except to the extent that it is excludedspecifically in the policy or under the general law.2 Thus the focus inan all risks policy is on the exclusions.53

The risks excluded in the (A) Clauses are set out in clauses 4, 5,and 6. Those that are relevant to an analysis of cover for, or exclusionof, loss or damage caused by hostile deliberate act perils are thosecontained in clauses 4.1 and 4.7 (as part of the General ExclusionsClause), clause 6 (the War Exclusions Clause), and clause 7 (theStrikes Exclusions Clause). These clauses read as follows:

Clause 4-General Exclusions Clause4 In no case shall this insurance cover

4.1 loss damage or expense attributable to wilful misconduct of theAssured

4.7 loss damage or expense arising from the use of any weapon ofwar employing atomic or nuclear fission and/or fusion or otherlike reaction or radioactive force or matter.

Clause 6-War Exclusion Clause6 In no case shall this insurance cover loss damage or expense caused

by6.1 war civil war revolution rebellion insurrection, or civil strife

arising therefrom, or any hostile act by or against a belligerentpower

6.2 capture seizure arrest restraint or detainment (piracy excepted),and the consequences thereof or any attempt thereat

6.3 derelict mines torpedoes bombs or other derelict weapons ofwar.

50. Id. at 250, 257.51. Id at 259.52. See id at 257-60; HUDSON & ALLEN, supra note 10, at 12.53. See Gaunt, 26 Corn. Cas. at 257-60.54. HUDSON&ALLEN, supranote 10, at 12, 19-25.55. Seeid at 19-25.

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Clause 7-Strikes Exclusion Clause7 In no case shall this insurance cover loss damage or expense

7.1 caused by strikers, locked-out workmen, or persons taking partin labour disturbances, riots or civil commotions

7.2 resulting from strikes, lock-outs, labour disturbances, riots orcivil commotions

7.3 caused by any terrorist or any person acting from a politicalmotive.56

In line with the overall scheme of the covers available for loss ofor damage to marine property, cargo losses excluded by the WarExclusion Clause and the Strikes Exclusion Clause are brought back inby more specific sets of clauses, namely the Institute War Clauses(Cargo) and the Institute Strikes Clauses (Cargo). 7 These clauses arediscussed below following an analysis of the cover provided by the (B)and the (C) Clauses. The important fact to note in the context of thisArticle is that cover in respect to loss of or damage to cargo caused bypiracy is provided by the (A) Clauses because it is specificallyexcepted from the exception in clause 6.2.58

c. Institute Cargo Clauses (B) and (C)

The essential difference between the (B) and the (C) Clauses isthat the latter are drafted to provide only a very basic (and hencecheaper) standard of cargo cover against major casualties, whereas theformer are supposed to provide an intermediate standard of cover. 9

Both the (B) and the (C) Clauses contain, in Clause 4.7, the followinggeneral exclusion:

4 In no case shall this insurance cover

4.7 deliberate damage to or deliberate destruction of the subject-matter insured or any part thereof by the wrongful act of any

60person or persons.

Under this wording, certain acts are excluded that would, underthe traditional wording of Lloyd's S.G. form language, have founded alegitimate claim; for example: "barratry of the Master and crew,"arson or sabotage causing the ship to sink, scuttling of the carrying

56. Id.57. See id at 285-303.58. See id at 24-25.59. See id at 39-50.60. Id at 43. This exclusion was introduced for the first time in the 1982 version of

the clauses. See id. at 39.

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ship, and jettison of the goods without reasonable cause.6' Damage byvandalism or malicious damage is also excluded."

Furthermore, the (B) and (C) Clauses also contain wide war andstrikes exclusion clauses,63 which are similar to the War ExclusionClauses in the (A) Clauses, but with one significant exception. Whilein the (A) Clauses the risk of piracy is excepted from the list of warperils--"capture seizure arrest restraint or detainment"-enumeratedin Clause 6.2, piracy is not so excepted under the (3) and (C)Clauses.' Moreover, because piracy is not included as one of theInstitute War Clauses (Cargo), if cargo cover is obtained only on thebasis of the (B) or (C) clauses together with the standard clauses forwar risks, there will be no protection at all against the risk of piracy.65

d. The Available Hostile Deliberate Act Cover--Cargo

As stated, there are two main sets of Institute Clauses that bringcargo losses back under the cover excluded by the War and StrikesExclusion Clauses.66 There is also one special optional clause thatreinstates the perils excluded by Clause 4.7 of the (B) and (C)Clauses.

6Y

e. The Institute Malicious Damage Clause 1/8/82

To obtain the cargo cover that is otherwise excluded under Clause4.7 of the (B) and (C) Clauses, the Institute Malicious Damage Clause1/8/82 might be included as part of the cargo cover. This clauseprovides:

In consideration of an additional premium, it is hereby agreed thatthe exclusion "deliberate damage to or deliberate destruction of thesubject-matter insured or any part thereof by the wrongful act of anyperson or persons" is deemed to be deleted and further that thisinsurance covers loss of or damage to the subject-matter insured caused

61. Id. at 44.62. See id63. See id. These exclusions also appear in clauses 6 and 7 of the (B) and (C)

Clauses. Id.64. Id.65. Id. Nor, of course, is piracy covered by the Institute Strikes Clauses (Cargo). Id.

at 297-303.66. Id. at 285-303.67. Id. at 44, 79.68. Ad.

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by malicious acts vandalism or sabotage, subject always to the otherexclusions contained in this insurance.69

This will extend cover to embrace malicious acts, vandalism, andsabotage, but only insofar as the loss or damage caused thereby is notexcluded by other parts of the insurance.0 Thus, for example, loss,damage, or expense that resulted from excluded strikes or (unless theterms are effectively interchangeable) was caused by terrorists or bypersons acting from a political motive would not be covered.'

f, Institute War Clauses (Cargo) 1/1/82

The risks covered by the Institute War Clauses (Cargo), which areset out in Clause 1,72 mirror the War Exclusion Clause in the InstituteCargo Clauses (A), (B), and (C), except that, as stated above, piracy isnot mentioned. 3 Clause 1 reads as follows:

I This insurance covers, except as provided in Clauses 3 and 4 below,loss of or damage to the subject-matter insured caused by

1.1 war civil war revolution rebellion insurrection, or civil strifearising therefrom, or any hostile act by or against abelligerent power

1.2 capture seizure arrest restraint or detainment, arising from riskscovered under 1.1 above, and the consequences thereof orany attempt thereat

1.3 derelict mines torpedoes bombs or other derelict weapons of74war.

Note that the perils set out in Clause 1.2 (capture, seizure, etc.)are only covered by the War Clauses on Cargo when their operationarises from the perils enumerated in Clause 1.1 (the group of perilsheaded by war, civil war, etc.).7 ' Thus a nonbelligerent seizure of cargo(except in cases involving piracy under the (A) Clauses) will beexcluded from the marine cover, but will not be insured under the warrisks cover."

Id at 79.See id at 79-80.See idId at 285-90.See id at 24, 44.Id at 285.Id at 285-89.See id

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g. The Institute Strikes Clauses (Cargo) 1/1/82

The risks covered by the Institute Strikes Clauses (Cargo) 1/1/82,which are set out in Clause 17 mirror exactly the Strikes ExclusionClause in the Institute Cargo Clauses (A), (B), and (C). 8 Accordingly,it provides:

I This insurance covers, except as provided in Clauses 3 and 4 below,loss of or damage to the subject-matter insured caused by1.1 strikers, locked-out workmen, or persons taking part in

labour disturbances, riots or civil commotions1.2 any terrorist or any person acting from a political motive.79

h. The Termination of Cargo Cover

The definition of the particular terms included in the variousCargo Clauses insofar as they describe the hostile deliberate act perilsis dealt with in Part IV below. However, before moving on to the finalpieces of the "context jigsaw" and considering the Institute Clausesdealing with hull perils and marine liability insurance, briefconsideration must be given to provisions relating to the termination ofcargo cover against the risk of deliberately and aggressively causedloss or damage because this has become of considerable topicalimportance following September 1 th.

i. Waterborne Agreement

In 1939, agreement was reached between nonmarine under-writers on a global basis that the potential liability of insurers arisingfrom the accumulation in one location of valuable property exposed towar risks on land was too formidable to be handled in the insurancemarket. This agreement was reflected in the war and civil warexclusion clauses.

Obviously, when ships and cargos are at sea, the likelihood of amajor concentration of value is not as great. However, that likelihoodrises markedly when, as is the norm, goods are insured on a warehouseto warehouse basis and where, as commonly happens, ports of loadingand discharge are congested."

77. Id at 297.78. Seeid at 25, 45, 297.79. Id at 297.80. See 2 THE MODERN LAW OF MARINE INSURANCE § 1.41 (D. Rhidian Thomas ed.,

2002). The Transit Clause, clause 8 of the Institute Cargo Clauses, provides:

2003] 1309

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It was recognized that if marine underwriters were to grantunlimited war risks cover, it might seriously prejudice the universalunderstanding between nonmarine underwriters. Accordingly, the"Waterborne Agreement," of world wide application, was introducedwhereby marine underwriters agreed not to insure goods against warrisks while on land, unless the goods were at a port of transhipment-and even then, only for a limited period.8' This agreement is reflectedin Clause 5 of the Institute War Clauses (Cargo), which specificallyrestricts cover to the period in transit while the goods are waterbome.82

The Institute War Clauses also include a clause (Clause 7), printed inbold type, which emphasizes that Clause 5 is to have paramount affectin relation to the risks covered under that set of clauses. 3

Cover under the Institute War Clauses is, for the most part,circumscribed by the requirement that the act occasioning the loss ordamage be carried out by or against a belligerentpower.4 Many of the"war-like" acts (particularly those enumerated in Clause 1.2, viz.,capture, seizure, etc.) are precisely the sort of acts that might be carriedout by terrorists. Although the United States and its allies are involvedin a "war on terrorism" and so, to that extent, might be regarded asbelligerent powers, it is likely that the consequences of most, if not all,terrorist acts, in so far as they affect cargo, would not be dealt withunder the Institute War Clauses, but rather under the Institute StrikesClauses (which specifically cover loss or damage caused by

8.1 This insurance attaches from the time the goods leave the warehouse orplace of storage at the place named herein for the commencement of thetransit, continues during the ordinary course of transit and terminates either8.1.1 on delivery to the Consignees' or other final warehouse or place of

storage at the destination named herein,8.1.2 on delivery to any other warehouse or place of storage, whether prior

to or at the destination named herein ....HUDSON & ALLEN, supra note 10, at 25-26.

81. The current text of the Waterborne Agreement is reproduced in O'MAY, supranote 16, at 297.

82. See HUDSON & ALLEN, supra note 10, at 293-95. Clause 5 of the Institute WarClauses (Cargo) also bears the title "Transit Clause" and provides, in material part:

5.1 This insurance5.1.1 attaches only as the subject-matter insured.., is loaded on an oversea

vessel and5.1.2 terminates ... as the subject-matter insured ... is discharged from an

oversea vessel ....Id. at 293.

This, obviously, is substantially different to the Transit Clause in the Institute CargoClauses (A), (B), and (C). See id. at 25, 45, 293.

83. Id at 295.84. Id at 285-88.

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terrorists). 5 The latter clauses do not contain a Waterborne transitclause; instead, they have a standard "warehouse-to-warehouse" clauseas in the Institute Cargo Clauses.86 On November 20, 2001, the JointCargo Committee issued a "Termination of Transit Clause(Terrorism)," which states that coverage for loss or damage caused byterrorists is conditional upon the subject-matter insured and such beingin the ordinary course of transit. 7

2. Hull and Freight8

a. The Marine Cover

After the S.G. policy was finally jettisoned, the Institute TimeClauses, Hulls 1/10/83 (ITC Hulls) was introduced as a comprehensiveform for the insurance of ships alone. 9 Initially, consideration wasgiven to whether it would be preferable to change the method ofgranting coverage from enumeration of specific perils-as in the S.G.Policy-to "all risks," subject to whatever exceptions were required.However, while the "all risks" formula was adopted in relation to cargoinsurance, the preferred approach in relation to hull insurance was the"named perils" approach." The named perils were set out in twogroups.' Those in the first group were not subject to the proviso of

85. See id. at 297-99.86. Id. at 25, 293-301.87. LLOYD'S JOINT CARGO COMM., TERMINATION OF TRANSIT CLAUSE (TERRORISM)

(2001). The Termination of Transit Clause (Terrorism) reads, in material part:This clause shall be paramount and shall override anything contained in thisinsurance inconsistent therewith.

1. Notwithstanding any provision to the contrary contained in this Policyor the Clauses referred therein, it is agreed that insofar as this Policy covers loss ofor damage to the subject-matter insured caused by any terrorist or any personacting from a political motive, such cover is conditional upon the subject-matterinsured being in the ordinary course of transit ....

2. If this Policy or the Clauses referred therein specifically provide coverfor inland or further transits following on from storage.., cover will re-attach, andcontinues during the ordinary course of that transit ....

Id.88. See supm note 11 and accompanying text. Hull and Freight are discussed

together in this Article.89. See HUDSON & ALLEN, supra note 10, at 2, 87-88, 101. Previously, the Institute

Clauses had to be attached to the S.G. policy and the S.G. policy covered both ship and cargo.Seeid at 87, 101.

90. Seeid at 12, 100-01.91. Seeid at 100-18.

2003] 1311

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due diligence of the Assured, Owners, or Managers." Those in thesecond group were all subject to such a proviso.93

On November 1, 2002, a revised version of the ITC Hulls wasintroduced as the "International Hull Clauses (01/11/02) '""

The perils clause, insofar as it relates to any of the hostiledeliberate act perils, reads as follows:

2. Perils2.1. This insurance covers loss of or damage to the subject-matter

insured caused by

2.1.3. violent theft by persons from outside the vessel

2.1.5. piracy

2.2 This insurance covers loss of or damage to the subject-matterinsured caused by

2.2.5. barratry of Master, Officers or Crewprovided that such loss or damage has not resultedfrom want of due diligence by the Assured, Ownersor Managers.95

b. The Marine Exclusions

As with the Cargo Clauses, war and strikes perils are excludedfrom the marine cover. 6 In a manner reminiscent of the old FC&SClause, Part I of the International Hull Clauses ends with a set ofclauses that are preceded with the following words: "The followingClauses shall be paramount and shall override anything contained inthis insurance inconsistent therewith." 7

92. Id. at 100-11 (regarding Clause 6.1 of the 1983 ITC Hulls).93. Id. at 100-01, 111-18 (regarding Clause 6.2 of the 1983 ITC Hulls).94. LLOYD'S JOINT HULL COMM., INTERNATIONAL HULL CLAUSES (01/11/02),

available at http://www.waltonsandmorse.com/resources/bulletins/attached/International%20Hull%20Clauses%20Specimen.pdf (last visited June 3, 2003). In fact, the ITC Hulls wererevised in 1995. However, the reaction of shipowners and market practitioners to the newclauses produced at that time, although not containing any particularly far-reaching changes,was almost universally unfavorable with the result that only a very small proportion of hullinsurances placed on the London market are subject to the ITC Hulls 1/11/95.

95. HUDSON& ALLEN, supra note 10, at 1-2.96. Seeid at 14-15.97. Id at 14. The International Hull Clauses are divided into three "parts": Part I,

Principal Insurance Conditions; Part II, Additional Clauses; and Part III, Claims Provisions.Id. at 1-27.

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There are five specific exclusion clauses covering war, strikes,malicious acts, radioactive contamination, and lastly, chemical,biological, bio-chemical, electro magnetic weapons, and cyber-attack. 8

The first four of these were set out as excepted perils under a more orless identical "paramount clause" in the 1983 and 1995 ITC Hulls.9

The paramount exclusion clauses in relation to war, strikes, maliciousacts, and radioactive contamination read as follows:

29. WAR EXCLUSIONIn no case shall this insurance cover loss damage liability or expense

caused by29.1. war civil war revolution rebellion insurrection, or civil

strife rising therefrom, or any hostile act by or against abelligerent power

29.2. capture seizure arrest restraint or detainment (barratryand piracy excepted), and the consequences thereof or anyattempt thereat

29.3. derelict mines torpedoes bombs or other derelict weaponsof war.

30. STRIKES EXCLUSIONIn no case shall this insurance cover loss damage liability or expense

caused by30.1. strikers, locked-out workmen, or persons taking part in

labour disturbances, riots or civil commotions30.2. any terrorist or any person acting from a political motive.

31. MALICIOUS ACTS EXCLUSIONIn no case shall this insurance cover loss damage liability or expense

arising from31.1. the detonation of an explosive31.2. any weapon of war and caused by any person acting

maliciously or from a political motive.32. RADIOACTIVE CONTAMINATION EXCLUSION

In no case shall this insurance cover loss damage liability or expensedirectly or indirectly caused by or contributed to by or arisingfrom

98. Id. at 14-15. The first four exceptions, viz. war, strikes, malicious acts, andradioactive contamination, were set out as perils earlier. The final exception, however, is new.

99. Id. at 155-56. In fact, Clause 32 of the International Hull Clauses (01/11/02)marks something of a change from the 1983 ITC Hulls. See id at 156. It is only sinceOctober 1, 1990, that London market marine insurance policies have included a RadioactiveContamination Exclusion Clause; but since then, this has become a standard clause. Id. Infact, the Technical & Clauses Committee is currently awaiting final approval of a newInstitute Extended Radioactive Contamination Exclusion clause, which has been produced toaddress concerns relating to the use of the "dirty bomb" and other similar types of threat.

2003] 1313

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32.1. ionising radiations from or contamination by radioactivityfrom any nuclear fuel or from any nuclear waste or fromthe combustion of nuclear fuel

32.2. the radioactive, toxic, explosive or other hazardous orcontaminating properties of any nuclear installation,reactor or other nuclear assembly or nuclear componentthereof

32.3. any weapon employing atomic or nuclear fission and/orfusion or other like reaction or radioactive force or matter

32.4. the radioactive, toxic, explosive or other hazardous orcontaminating properties of any radioactive matter. Theexclusion in this Clause 32.4 does not extend to radioactiveisotopes, other than nuclear fuel, when such isotopes arebeing prepared, carried, stored, or used for commercial,agricultural, medical, scientific or other similar peacefulpurposes.10

The fifth exception in the paramount clause is new and clearlyhas been introduced to meet a perceived new type of hostile deliberateact peril.' However, as suggested at the beginning of this Article, itmay be that the extra exclusion in fact adds little or nothing to theoverall insurance framework. 2 The final exclusion reads as follows:

33. CHEMICAL, BIOLOGICAL, BIO-CHEMICAL, ELECTRO-MAGNETIC WEAPONS AND CYBER ATTACKEXCLUSION

In no case shall this insurance cover loss damage liability or expensedirectly or indirectly caused by or contributed to by or arisingfrom33.1. any chemical, biological, bio-chemical or

electromagnetic weapon33.2. the use or operation, as a means for inflicting harm, of

any computer, computer system, computer softwareprogramme, computer virus or process or any otherelectronic system. 03

C. The Available Hosile DelibemteAct Cover. The Institute Warand Stinkes Clauses, Hulls.- Time 1/11/95

The cover excluded by the war, strikes, malicious acts, andradioactive contamination and the exclusions in the ITC Hulls are

100. LLOYD'S JOINT HULL COMM., supra note 94, at 14-15.101. See supra note 97 and accompanying text.102. See supra notes 13-15 and accompanying text.103. LLOYD'S JOINT HULL COMM., supra note 94, at 15.

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reinstated by the Institute War and Strikes Clauses, Hulls.' " The latestversion of these clauses was produced in 1995 to mirror theintroduction of the ITC Hulls, 1/11/95. '05 No revised version of theWar and Strikes Clauses has been produced to mirror the InternationalHull Clauses. The risks covered by the Institute War and StrikesClauses are identified as follows:

Clause 1-Perils1 ... this insurance covers loss of or damage to the Vessel caused by1.1 war civil war revolution rebellion insurrection, or civil strife

arising therefrom, or any hostile act by or against abelligerent power

1.2 capture seizure arrest restraint or detainment, and theconsequences thereof or any attempt thereat

1.3 derelict mines torpedoes bombs or other derelict weapons ofwar

1.4 strikers, locked-out workmen, or persons taking part in labourdisturbances, riots or civil commotions

1.5 any terrorist or any person acting maliciously or from apolitical motive

1.6 confiscation or expropriation. 6

Clause 1.1 lists the war and war-like risks in the same words thatappear in the Institute War Clauses (Cargo). However, Clause 1.2 iswider than the corresponding clause in the Institute War Clauses(Cargo), in that the perils of capture, seizure, arrest; restraint ordetainment are not limited to those that arise in consequence of the warand war-like risks listed in Clause 1.1, that is, the requirement for theloss or damage to be carried out by or against a belligerent power.Clause 1.3 is the same as in the Institute War Clauses (Cargo), andClause 1.4 is the same as Clause 1.1 in the Institute Strikes Clauses(Cargo). Clause 1.5 -retains the risk of loss or damage by persons"acting maliciously" and adds, seemingly by way of clarification ratherthan expansion (and to mirror Clause 1.2 of the Institute StrikesClauses (Cargo)), the risks of loss or damage caused by a terrorist or aperson acting from a political motive.

104. See HUDSON& ALLEN, supra note 10, at 306-14.105. Seeid106. Id. at 306-07 (citations omitted).

2003] 1315

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III. P & I CLUBS AND WAR RISKS ASSOCIATION, LIABILITIES, TOP-UP,AND ALTERNATIVE COVER

A shipowner may obtain his liability insurance in the Lloyd's orin the Companies market.' °7 However, the general position is that, byreason of his membership in a P & I Club, a shipowner will have aprotection and indemnity insurance that, subject to the rules of theClub, will seek to indemnify him in respect of the discharge of anylegal liabilities incurred in operating the vessel. ' However, the P & IClubs generally exclude cover in respect to liabilities, costs, andexpenses arising out of or consequent to war, civil war, rebellion, civilstrife, insurrection, or any hostile acts by or against a belligerentpower; or capture, seizure, arrest, restraint or detainment, mines,torpedoes, bombs, rockets, explosives, or similar weapons of war.'" Inother words, the P & I Clubs will generally exclude cover for liabilitiesarising out of all the perils (and more) for both hulls and cargo, whichare excepted under the standard Institute Clauses.'

Nevertheless, mutual marine insurance has long been adopted asthe method of insuring marine risks where the traditional market hasbeen uninterested, too cautious, or too expensive. This adoptedprocess required existing P & I Clubs to increase their service byforming new classes to insure against such risks, or for entirely newclubs to be established."'

There have been specialized war risks and strikes clubs for verymany years."2 The first mutual club to offer war risks insurance wasthe North of England P & I Club in 1898."' Shortly after that date,

107. See William R.A. Birch Reynardson, The History and Development of P& IInsurance. The Brtish Scene, 43 TUL. L. REv. 457, 463-68 (1969); see also CHRISTOPHERHILL ETAL., INTRODUCTION TO P & 19 (2d ed. 1996).

108. See HILL ET AL., supra note 107, at 61. The P & I Clubs offer indemnities forordinary marine liabilities. See id. A typical P & I Club's rule book provides indemnityinsurance in respect to its members' liabilities arising from the following events: collisionsand noncontact damage; damage to fixed and floating objects; cargo claims; property onland; loss of life, personal injury, and illness; passengers; crew liabilities; fines; inquiries andcriminal proceedings; quarantine expenses; stowaways; diversion expenses; life salvage;unrecoverable general average; ship's proportion of general average; liabilities relating to thewreck of the entered vessel; pollution; towage contracts; and expenses incurred pursuant toany directions of the Club. See id at 65-87, 155.

109. SeeHILL ETAL., supranote 107, at 152-53.110. See HUDSON & ALLEN, supra note 10, at 19-25, 43-45, 155-56.111. SeeHILL ETAL., supranote 107, at 153.112. Seeid. at153-54.113. See NORTH OF ENGLAND P & I CLUB, SAFE SAILING INTO THE NEW MILLENNIUM

(detailing the history of the North of England P & I Association), at http://www.nepia.com/LossPrev/Signals/anOO/sigjanOO.htm (last visited Feb. 18, 2003).

1316 [Vol. 77:1295

2003) ANENGLISHLA WPERSPECTIVE 1317

other clubs favored this innovation. During the First World War, theClubs and the British Government adopted a scheme whereby thegovernment acted as reinsurer to the Clubs against losses by theenemies of the Crown."' A revised form of this scheme is still inoperation today and is used when the United Kingdom is at war."5 Thetype of insurance offered by War Risks Associations or War Classescovers not only hull, machinery, freight, and disbursements, but alsoprotection and indemnity liabilities to the crew.'

IV THE HOSTILE DELIBERATE ACT PERILS IN DETAIL

A. The Marine PeNis. Piracy, Violent Thelf by Pesons from Outsidethe Vessel, and Barmtry

1. Piracy

Piracy was one of the standard perils in the Lloyd's S.G. Formand, as such, loss by piracy was covered as a marine risk."7 However,from 1937, as a result of the Spanish Civil War cases, piracy was takenout of the marine policy by adding "or piracy" to the perils excludedby the FC&S clause and switched to the war risk policy."8 Followingthe revisions of the Institute Clauses in 1982 and 1983, piracy hasreverted to being covered, in most circumstances, under the ordinarypolicies covering marine risks.' 9 Although there has been piracy aslong as vessels have sailed the seas, and although it is established as aninternational crime subject to universal jurisdiction,' 21 there is no setand universally accepted definition of piracy.'

114. SeeHILL ETAL., supra note 107, at 154.115. Seeid.at 153-54.116. See id at 155-56. Thus, for example, the rules of the Hellenic Mutual War Risks

Association define the risks insured (to hull, machinery, and freight) in terms of loss,damage, or expense caused by war, civil war, revolution, rebellion, insurrection, or civil strifearising therefrom, or any hostile act by or against a belligerent power; capture, seizure, arrest,restraint, or detainment, and the consequences thereof, or any attempt thereat; mines,torpedoes, bombs, or other weapons of war (whether any of the aforesaid are derelict orotherwise); strikers, locked-out workmen, or persons taking part in labor disturbances, riots,or civil commotions; any terrorist or any person acting maliciously, or from a politicalmotive; piracy and violent theft by persons from outside the ships; confiscation orexpropriation-i.e., all of the hostile deliberate act perils. SegeneMllyHELLENIC MUT. WARRISKS ASS'N, RULES (1994).

117. Marine Insurance Act, 1906, 6 Edw. 7, c. 41, § 226, sched. 6 (Eng.).118. J. KENNETH GOODACRE, MARINE INSURANCE CLAIMS 239 (3d ed. 1996).119. See HUDSON & ALLEN, supra note 10, at 24-25. However, in relation to cargo

risks, only the (A) Clauses cover piracy by excluding piracy from the exclusion in relation tocapture, seizure, arrest, restraint, or detainment. See id

120. Convention on the High Seas, Apr. 29, 1958, 450 U.N.T.S. 82, 92. Article 19 ofthe Geneva Convention on the High Seas, 1958, stipulates: "On the high seas, or in any other

TULANE LA W REVIEW

a. Piracy in Public International Law

As part of public international law, the description of piracy inarticle 15 of the Geneva Convention on the High Seas 1958, asconfirmed in article A101 of the Geneva Convention on the Law of theSea 1982, represents the existing customary law.'22

Piracy consists of any of the following acts:(1) Any illegal acts of violence, detention or any act of depredation,

committed for private ends by the crew or the passengers of aprivate ship or a private aircraft, and directed:(a)On the high seas, against another ship or aircraft, or against

persons or property on board such ship or aircraft;(b) Against a ship, aircraft, persons or property in a place

outside the jurisdiction of any State;(2) Any act of voluntary participation in the operation of a ship or of

an aircraft with knowledge of facts making it a pirate ship oraircraft;

(3) Any act of inciting or of intentionally facilitating an act describedin sub-paragraph 1 or sub-paragraph 2 of this article.' 23

The essential feature of this definition is that the acts must becommitted for private ends.' 2' Thus, in public international law, piracycannot be committed by war ships or other government ships (orgovernment aircraft), except where the "crew has mutinied and takencontrol of the ship or aircraft."'25

b. Piracy in Marine Insurance

The "private ends" criterion is essential in marine insurance aswell. Although piracy has been categorized by some as terrorism onthe high seas,' 26 the distinction that is generally accepted by the market

place outside the jurisdiction of any State, every State may seize a pirate ship or aircraft, or aship taken by piracy and under the control of pirates, and arrest the persons and seize theproperty on board." Id.

121. BARRY H. DUBNER, THE LAW OF INTERNATIONAL SEA PIRACY 40 (1980).122. See Convention on the High Seas, Apr. 29, 1958, 450 U.N.T.S. 82, 90.123. Id.124. See id125. Id. at 90; see also Third United Nations Conference on the Law of the Sea, art.

102 (1982).126. See REI FERDINAN B. PICAR, MARITIME TERRORISM: AN EMERGING CHALLENGE

(July 2, 2002), at http://www.apan-info.net/terrorism/terrorismview_article?id=29 (lastvisited Feb. 15, 2003). Commenting upon the work carried out by the Council of SecurityCo-operation in the Asia-Pacific (CSCAP) Working Group on Maritime Co-operation in itsexamination of the link between maritime terrorism and piracy, Picar points out:

1318 [Vol. 77:1295

20031 ANENGLISHLA WPERSPECTIVE 1319

between piracy (which is covered under a marine policy) andterrorism'2 (which is covered under a "war" policy), is that piracy iscommercially motivated and terrorism is politically motivated.'8 Thus,in Republic of Bolivia v Indemnit, Mutual Marine Assurance Co., itwas held, in the context of a claim on a policy covering loss by pirates,that the term "pirates" must be construed in its popular sense and beinterpreted to mean "[persons] plundering indiscriminately for [their]own ends, and not [persons] simply operating against the property of aparticular State for a public end"'2 9

Mr. Justice Staughton considered the authorities in detail in theAthens Maritime Enterprises case. 3° In that case, the vessel (AndreasLemos) was anchored within port limits and the territorial waters ofthe Republic of Bangladesh.' Armed thieves boarded the vessel andbegan to steal equipment, but fled when confronted by the ship's crew,some of whom were also armed.' 2 Before the alarm was sounded,however, quantities of equipment had already been removed from thevessel.'33 It was only after the theft was complete that force was usedor threatened by the thieves when making their escape.'4 A claim wasmade against the shipowner's Mutual War Risks Association for thevalue of the stolen equipment.'5 The question for the court's determi-

When plain pirates use physical force and psychological intimidation against non-combatants in order to achieve their objective of forcing authorities to allow themto go free, then they transform themselves from being pirates to [being] maritimeterrorists. Furthermore, piracy attacks worldwide have been increasing, therebyinstilling fear among owners, masters and crews of ships plying the seas. Instillingfear among non-combatants is, of course, the primary objective of terrorists.

Id. Picar therefore concludes that "[p]iracy with its increasing incidence and magnitude,thereby creating fear among ship-related people, could rightfully be considered as one of themany forms terrorism manifests itself. This considering that one of the primary goals ofterrorism is to instill fear among people." Id.

127. Terrorism has never been formally defined. See supra notes 1, 13-14, andaccompanying text.

128. See HUDSON & ALLEN, supra note 10, at 24-25, 44, 106-07, 297-99. In light ofthe Terrorism Act 2000, "politically motivated" should be extended to read "for the purposeof advancing a political, religious or ideological cause." Terrorism Act, 2000, c. 11, § 1 (1)(c)(Eng.).

129. [1909] 1 K.B. 785, 796-97 (Eng. C.A.).130. Athens Mar, Enters. v. Hellenic Mut. War Risks Ass'n (Bermuda), [1983] 1 Q.B.

647, 654-62 (Eng. C.A.).131. Id at 652.132. Id. at 651.133. Id.134. Id.135. Id. at 649.

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nation was whether the loss had arisen from either an act of piracy or ariot.136

The judgment of Mr. Justice Staughton deals with threeimportant points on the scope of piracy as an insured peril. First, inrespect to geographical limitations of piracy as a peril, publicinternational law dictated that piracy could only be committed on thehigh seas, outside the territorial waters of any State.'37 However, Mr.Justice Staughton held that there was no reason to limit the term piracyunder an insurance policy to acts outside territorial waters, and, in aninsurance policy context, if a ship is "at sea or if the attack upon hercan be described as 'a maritime offence' then ... she is ... in a placewhere piracy can be committed"' '38

Second, in respect to whether force or a threat of force is anessential element of piracy as an insured peril, Mr. Justice Staughtonheld that "theft without force or a threat of force is not piracy under apolicy of marine insurance."'39

Third, in respect to whether there can be piracy where the act ofappropriating the insured property is completed before any force isused or threatened, Mr. Justice Staughton held that there could not bepiracy in such situations. Mr. Justice Staughton expressly stated that

[t]he [insurer], by the word "piracy,' insures the loss caused toshipowners because their employees are overpowered by force, orterrified into submission. [The insurer] does not insure the loss causedto shipowners when their night-watchman is asleep ... and thieves stealclandestinely. The very notion of piracy is inconsistent with clandestinetheft. [Counsel for the owners] described this as a prosaic form ofpiracy; a recent judge might have preferred the word "anaemic," It isnot necessary that the thieves must raise the pirate flag and fire a shotacross the victim's bows before they can be called pirates. But piracy isnot committed by stealth. 40

2. Violent Theft by Persons from Outside the Vessel

The perils of "rovers" and "thieves" came directly after the perilof "piracy" in the S.G. Policy. Rule 9 of the Rules for Construction

136. Seeid at653-54.137. Id. at 654, 658.138. Id. at 658. In support of this conclusion, Mr. Justice Staughton relied on dicta in

Republic of Bolivia v Indemnity Mutual Marine Assurance Co., [1909] 1 K.B. 785, 802(Eng. C.A.).

139. Athens Mar Enters., [ 1983] 1 Q.B. at 659-60; see also Shell Int'l Petroleum Co. v.Gibbs (The Salem), 1982 Q.B. 946, 986 (Eng. C.A.) ("There were no 'pirates' here becausethere was no forcible robbery."). The latter case is discussed in detail below.

140. AthensMar Enters., [1983] 1 Q.B. at 661.

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scheduled to the Marine Insurance Act provided: "The term 'thieves'does not cover clandestine theft or a theft committed by any one of theship's company, whether crew or passengers.""'

The term "violent theft by persons from outside the vessel,"which appears in the modem Institute Clauses, is intended to giveeffect, in plain English, to what has always been encompassed in theperils of rovers and thieves.12

Nothing new was added by the revised terminology andessentially the expression means precisely what it says. In the wordsof Amould, "robbery accompanied by violence, and committed bystrangers, not by the crew, is a loss to which the underwriters on theship or goods are liable as a loss by rovers or thieves under thepolicy."

143

3. Barratry

Rule 11 of the Rules for Construction of Policy in the firstschedule to the Marine Insurance Act provides that "[t]he term'barratry' includes every wrongful act wilfully committed by themaster or crew to the prejudice of the owner, or, as the case may be,the charterer.' 44 Commentators have noted:

This definition is not exhaustive and barratry includes not only everytype of fraud and malfeasance deliberately committed by the Master orcrew for the intention of benefiting themselves at the expense of theshipowners, but every wilful act on the part of the Master or crew ofillegality, corruption or criminal negligence, whereby the shipowners orthe charterers are prejudiced.145

141. Marine Insurance Act, 1906,6 Edw. 7, § 30(9) (Eng.).142. HUDSON & ALLEN, supra note 10, at 100, 106. The urgent need for

modernization is exemplified in the comments of Mr. Justice Staughton, in the AthensMaritime Enterprises case that, in relation to the word "rovers" in the S.G. Policy, "[i]ts onlycurrent and popular meaning is, I suppose, a species of motor car, such as Fords orVauxhalls." [1983] 1 Q.B. at 661.

143. 2 ARNOULD'S LAW OF MARINE INSURANCE AND AVERAGE 672 (Mustill & Gilmaneds., 16thed. 1981).

144. Marine Insurance Act, 1906, § 30(11).145. HUDSON & ALLEN, supra note 10, at 113. It is said of the word "barratry" that

[t]he English... most probably have taken it from the French, barrateur, which isto be traced to the Italians ... , who were the first great traders of the modernworld. In the Italian dictionary, the word barratrare means to cheat, andwhatsoever is done by the master, amounting to a cheat, a fraud, a cozening, or atrick, is barratry in him.

1 SIR JAMES ALLAN PARK, A SYSTEM OF THE LAW ON MARINE INSURANCES 188 (FrancisHildyard ed., 8th ed. 1987). A barratrous act has been catalogued as

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It is important to note in this Article, which deals generally withthe hostile deliberate act perils covered by policies of marine insuranceagainst the specific background of the risk of terrorist attack of shipand/or cargo, that the scope of barratry is strictly limited. In order toconstitute barratry, it is not enough that there be wrongful conduct bythe master and crew against the interests of the person insured if thatperson is not the shipowner (whether actual or pro hac vice). It is anessential element of the peril of barratry that the wrongful act becommitted against the interest of the owner of the ship, whether or notthey are insured under the policy.

B. The War Perls." Seizure, Riots, Malicious Acts, andActs of

Terrorists or Persons A cting from a Political Motive

1. Seizure

It has already been shown that many of the perils enumerated inthe Institute War Clauses, Cargo are circumscribed by the need for theact occasioning the loss or damage to be carried out by or against abelligerent power,'46 and, as such, a detailed consideration of them isoutside the scope of this Article. The perils enumerated in clause 1.1of the Institute War and Strikes Clauses, Hulls (i.e. those in the groupcovering war, civil war, revolution, etc.), are similarly circum-scribed.' 7 However, unlike the position under the War Clauses, Cargo,the next group of perils in the War and Strikes Clauses, Hulls (i.e.,capture, seizure, arrest, or detainment) are not, at least on the face ofthe clause, subject to the belligerent power limitation."8 That said,however, the strict definition of "capture" is "a taking by the enemy asprize, in time of open war, or by way of reprisals, with intent to deprive

any act committed by the master or mariners, for an unlawful or fraudulentpurpose, contrary to their duty to their owners, and whereby the owners sustain aninjury: As, by running away with the ship, wilfully carrying her out of the courseof the voyage prescribed by the owners, sinking or deserting her, embezzling thecargo, smuggling, or any other offence whereby the ship or cargo may be subjectedto arrest, detention, loss, or forfeiture. Barratry, in short, comprehends every fraudthat may be committed by the master or mariners, to the detriment of theowners....

2 SAMUEL MARSHALL, A TREATISE ON THE LAW OF INSURANCE 515 (2d ed. 1842).Mr. Justice Wiles in Lockyer v Offley defined barratry succinctly as "every species of

fraud or knavery in the master of the ship by which the freighters or owners are injured"[ 1786] 1 K.B. 252, 259 (Eng.) (emphasis omitted). SeegeneralyO'MAY, supm note 16, at 4,149-61.

146. See supra notes 72-76 and accompanying text.147. See HUDSON & ALLEN, supra note 10, at 306-07.148. See id.

1322 [Vol. 77:1295


the owner of all dominion or right of property over the thing taken."' 4 9

Thus "capture" is probably confined to belligerent capture. However,it is rare in practice to find the term "capture" by itself, unallied withthe term "seizure"; it is also clear that "capture" and "seizure" do notmean the same thing.' ° Lord Fitzgerald stated the following in Cory vBurr.

"Capture" would seem properly to include every act of seizing or takingby an enemy or belligerent. "Seizure" seems to be a larger term than"capture" and goes beyond it, and may reasonably be interpreted toembrace every act of taking forcible possession either by a lawfulauthority or by overpowering force.'5 '

In English law, "seizure" is not confined to acts of state.5 2

Furthermore, because the forcible taking of the vessel by pirates maybe described both as seizure and piracy, seizure may likewise becovered as a marine loss, given a policy incorporating the InternationalHull Clauses by reason of the exception to the exception in the warexclusion at clause 29.2.2" Similarly, a barratrous taking of the vesselmay be covered as a marine loss.'

2. Riots

The word "riots" appears as one of the perils in the group ofperils "strikers, locked-out workmen, or persons taking part in labourdisturbances, riots or civil commotions."'5 There appear to be noreported decisions on the first three perils in this group. However,assuming that they are to be given their ordinary meaning in thecontext of a business contract, no more needs to be said of them for the

149. Andersen v. Marten, [1907] 2 K.B. 248, 253 (Eng.) (quotations omitted).150. See Cory v. Burr, [1883] 8 App. Cas. 393, 405 (P.C. 1883) (appeal taken from

Q.B.).151. Id152. Contrast this definition to the position in the United States. For example, under

the law of New York, seizure is limited to governmental acts. See Pan Am. World Airways,Inc. v. Aetna Cas. & Sur. Co., 368 E Supp. 1098, 1128-32 (S.D.N.Y. 1973), aff, 505 E2d989 (2d Cir. 1974). There are many examples of "seizure" by nonstate actors. SeeKleinwortv. Shepard, [1859] 120 Eng. Rep. 977, 979 (Eng.) (regarding a seizure of the ship bypassengers); Johnston & Co. v. Hogg, [1883] 10 Q.B. 432, 433 (Eng.) (regarding the seizureof a ship by members of the local population).

153. LLOYD'S JOINT HULL COMM., supra note 94, at 14.154. See id. An ordinary barratrous taking is different, however, from a politically

motivated barratrous taking of the vessel, which would probably be covered by the WarClauses. See infh notes 98-99 and accompanying text.

155. HUDSON & ALLEN, supra note 10, at 25, 45, 297 (regarding the Institute CargoClauses (A), (B), and (C), Clause 7.1; Institute Strikes Clauses (Cargo), Clause 1.1); LLOYD'SJOTNT HULL COMM., supra note 94, at 15.

2003] 1323


purposes of this Article. Similarly, although the expression "civilcommotions" has been judicially construed, it is clear that civilcommotions are not really apt to describe hostile deliberate acts of thesort that terrorists might carry out.'56 In Athens Maritime Enterprises,in addition to considering whether the loss had arisen as a result ofpiracy, the court also considered whether it arose from riots.' Thecourt held that the word "riots" is to be construed in accordance withthe criminal law.' 8 Mr. Justice Staughton accepted the criminal lawdefinition of "riot" provided by Mr. Justice Phillimore in Field vReceiver ofMetropolitan Polic'5 9 as it had been adopted in relation toa policy of insurance in Bolands, Ltd v London & Lancashire FireInsuance Co.,6 which reads as follows:

In order to constitute a riot five elements are necessary--(1) a numberof persons not less than three; (2) a common purpose; (3) execution orinception of the common purpose; (4) an intent on the part of thenumber of persons to help one another, by force if necessary, againstany person who may oppose them in the execution of the common

156. See Levy v. Assicurazione Generali, [ 1940] 67 Lloyd's List L. Rep. 174, 179 (RC.1940) (stating that "civil commotions" refer to "an insurrection of the people for generalpurposes, though not amounting to rebellion; but it is probably not capable of any veryprecise definition. The element of turbulence or tumult is essential"; see also Spinney's, Ltd.v. Royal Ins. Co., [1980] 1 Lloyd's Rep. 406, 408, 438 (Q.B.) ("[There is] nothing in theauthorities compelling the Court to hold that a civil commotion necessarily involved a revoltagainst the government although the disturbances had to have sufficient cohesion to preventthem from being the work of a mindless mob... .

157. [1983] 1 Q.B. 647, 654-62.158. See id. at 661-62. Note that American and Canadian Courts have declined to

follow the English decisions, construing "riots" in the context of insurance policies inaccordance with its popular meaning. SeePan Am. World Airways, Inc. v. Aetna Cas. & Sur.Co., 368 F Supp. 1098, 1132-37 (S.D.N.Y 1973), affd, 505 F2d 989 (2d Cir. 1974). Theapproach adopted by the New York court in that case was specifically rejected by Mr. JusticeStaughton in Athens Martime Enterpises in the following terms:

If one takes the word ["riots"] in its current and popular meaning, nobodybut a Sloane Ranger would say of this casualty: "It was a riot." The word todaymeans the sort of civil disturbance which has recently occurred in Brixton, Bristolor Wormwood Scrubs. [Counsel for the Association] referred me, in thisconnection, to [Pan American] .... There an aircraft had been hijacked and blownup by members of the Popular Front for the Liberation of Palestine. The insurersdenied liability on the ground that this was a loss by "riots," and thereforeexcluded. District Judge Frankel expressed some forthright criticism of Englishjurisprudence on this point, and declined to depart from the current and ordinarymeaning of the word.

That approach attracts considerable sympathy, at any rate from me, and atany rate in theory. But on further examination it cannot be adopted for an Englishpolicy of marine insurance.

[1983] 1 Q.B. at 661 (citation omitted).159. [1907] 2 K.B. 853 (Eng.).160. [1924] 19 Lloyd's List L. Rep. 1 (Eng.).

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purpose; (5)force or violence, not merely used in and about thecommon purpose, but displayed in such a manner as to alarm at leastone person of reasonable firmness and courage."

It should be noted that, as a result of the Public Order Act 1986,which came into force on April 1, 1987, the requirement in this riotdefinition of three or more persons has been increased to twelve ormore persons.'62 Section 10(2) of the Act expressly provides that theterms "rioters" in Rule 8163 and "riot" in Rule 10' 6 of the Rules forConstruction of Policy in Schedule 1 to the Marine Insurance Act 1906shall be construed in accordance with the definition of riot in section 1of the Public Order Act unless a different intention appears.'5

3. Malicious Acts, Terrorists, and Persons Acting from a PoliticalMotive

The Institute Malicious Damage Clause covers cargo damagecaused by, among other things, "malicious acts.' 6 Prior to theirrevision in 1982, the Strikes Clauses for Cargo covered loss or damageto the subject-matter insured by "person[s] acting maliciously.' '67 Thiscategory of persons has now been substituted in the Institute StrikesClauses (Cargo) by "terrorist[s] or... person[s] acting from a politicalmotive. '

11 In the ITC Hulls, both the 1983 and the 1995 versions, andnow in the new International Hull Clauses, loss or damage caused by"terrorist[s]," and loss or damage caused by "person[s] actingmaliciously" are subject to separate exclusions (although each iscoupled with an express alternative of "person[s] acting from apolitical motive").69 The Institute War and Strikes Clauses, Hulls-Time use just one clause to cover "terrorist[s]," "person[s] acting

161. [1983] 1 Q.B. at 662 (quoting Field, [1907] 2 K.B. at 860). In Pan American,Judge Frankel of the United States District Court for the Southern District of New Yorkrefused to follow the English authorities and held that the destruction of the aircraft byhijackers was not a loss by riots. 368 E Supp. at 1132-37.

162. Public OrderAct, 1986, c. 64, § 1(1) (Eng.).163. Rule 8 provides that "[t]he term 'pirates' includes passengers who mutiny and

rioters who attack the ship from the shore." Marine Insurance Act, 1906, 6 Edw. 7, c.41,§ 30(8) (Eng.).

164. Rule 10 provides that "[t]he term 'arrests &c., of kings, princes, and people'refers to political or executive acts, and does not include a loss caused by riot or by ordinaryjudicial process." Id. § 30(10).

165. Public Order Act, 1986, c. 64, § 10(2) (Eng.).166. HUDSON & ALLEN, supra note 10, at 79-80.167. IVAMy, supm note 10, at 555; seeHuDSON &ALLEN, supmnote 10, at 79,297-98.168. See HUDSON & ALLEN, supra note 10, at 79-80, 297-99.169. Id. at 155-56; LLOYD'S JOINT HULL COMM., supra note 94, §§ 30-31.

2003] 1325

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maliciously," and "person[s] acting from a political motive.' 7° It maybe, therefore, that the terms are, for all intents and purposes,interchangeable; thus their inclusion in the clauses may be to clarify,rather than extend, the scope of the cover or the exclusion, as the casemay be. The only real indication that they might mean different thingsarises from the slight difference in wording between the StrikesExclusion and the Malicious Acts Exclusion in the International HullClauses.' The former will exclude any type of loss, damage, orliability "caused by any terrorist or any person acting from a politicalmotive"' 72 whereas the latter will only exclude such loss, damage, orliability if it arises from "the detonation of an explosive" or from "anyweapon of war."'7 3 Thus if loss, damage, or liability arises out ofanything other than the detonation of an explosive or any weapon ofwar and is caused by a person acting maliciously who is neither aterrorist nor acting from a political motive, then that loss will not beexcluded and will fall within the marine cover.' Although this seemslogical, it is questionable given that such loss or damage would seemto fall squarely within the cover provided by Clause 1.5 of the InstituteWar and Strikes Clauses, Hull-Time.

a. Malicious Acts

In Allen v Flood, (which concerned a labor dispute) LordHalsbury, in his dissent, said the following:

Now intentionally to do that which is calculated in the ordinary courseof events to damage, and which does, in fact, damage another in thatother person's property or trade, is actionable if done without just causeor excuse. Such intentional action, when done without just cause orexcuse, is what the law calls a malicious wrong."'

In the same case, Lord Watson said that "[m]aliciously ... meansand implies an intention to do an act which is wrongful to thedetriment of another." 76

The point first arose in a marine insurance contract in Pesqueriasy Secaderos de Bacalao de Espatia, S.A. v Beer'77 This was a hull

170. HUDSON & ALLEN, supra note 10, at 307.171. LLOYD'S JOINT HULL COMM., supra note 94, §§ 30-3 1.172. Id.§30.173. Id§31.174. Id §§ 30-31.175. Allen v. Flood, 1898 A.C. 1, 75 (P.C. 1897) (appeal taken from H.L.) (quoting

Mogul S.S. Co. v. McGregor, Gow, & Co., [1889] 23 Q.B. 598, 613 (Eng. C.A.)), aff', 1892A.C. 25 (Eng.) (citations omitted)).

176. Id. at 93-94 (quoting Mogul S.S. Co., 23 Q.B. at 612).

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insurance case arising from events in Spain at the outset of whatbecame the Spanish Civil War.'78 This case concerned several trawlersseized in ports on the Basque Coast in 1936 at the outbreak of theunrest.'79 The perils relied upon by the owners were those of riots andmalicious acts.'80 Ultimately, the hull underwriters succeeded on thewar exclusion of the policy, overturning Mr. Justice Atkinson. 8 In hisinitial opinion, Mr. Justice Atkinson added that the taking of thefishing boats was also a malicious act, citing the comments of LordHalsbury in Allen v Flood as the authoritative definition of "maliciousacts."'82 Mr. Justice Atkinson went on to add references to passagesfrom Lord Herschell's opinion in Allen v Flood emphasizing thatthere need be no ill-will for there to be malice under the law. ' 3

However, when the point next arose in the marine insurance context inNishina Tradng Co. v Chijyoda Fire & Marine Insurance Co. (TheMandarin Sta), Lord Denning (in the Court of Appeal) observed thatthe malicious act peril connoted "spite, or ill will, or the like."' 4

The matter then came up for consideration in 1983 in Salemwhere Mr. Justice Mustill said that "there may, consistently with thedecision in The Mandarin Star, be a right to recover where the insuredproperty is damaged by an act of wanton violence, the malice beingdirected, so to speak, at the goods rather than their owner."'8 5

On the facts of the Salem case, which concerned, among otherthings, a conspiracy to steal a cargo of oil, the conspirators did notactually wish to harm the goods; the conspirators merely wished tomake off with the goods, so the judge found no "malicious acts"coverage. 86

The latest pronouncement on the subject is that of Mr. JusticeColeman in Strive Sh'pping Corp. v Hellenic Mutual War Risks Ass'n(The Grecia Express).87 In that case, a car ferry suffered a total lossafter her mooring ropes were cut and the seaward drencher valve

177. 79 Lloyd's List L. Rep. 417,423-32 (K.B. 1946).178. Seeid. at423-31.179. Seeid. at 417, 424.180. See id. at 48.181. Pesquerias y Secaderos de Bacalao de Espafia, S.A. v. Beer, 82 Lloyd's List L.

Rep. 500, 503 (H.L. 1949).182. Beer, 79 Lloyd's List L. Rep. at 431-32.183. Id. at 432.184. [1969] 2 Q.B. 449, 460-62 (Eng. C.A.).185. Shell Int'l Petroleum Co. v. Gibbs (The Salem), 1982 Q.B. 946, 966 (Eng. C.A.).

Although this case was appealed, the appeal was on other aspects.186. Id. at 950-66.187. [2002] 2 Lloyd's Rep. 88 (Q.B. 2001).

2003] 1327

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opened.'88 The owner relied on "malicious acts" coverage because thevessel was covered under a mutual association on terms includingcoverage for loss or damage caused by any person actingmaliciously.'89 The judge referred to The Mandarin Starand Salem andconcluded that he was not bound by either of them because, in bothcases, the malicious act peril had been inapplicable, regardless ofwhether spitefulness was necessary.'9° Then, referring to TheMalicious Damage Act, 1861, Mr. Justice Coleman concluded that themalicious act peril applied so that if "the vessel was lost or damageddue to the conduct of someone who was intending to cause it to be lostor damaged or was reckless as to whether such loss or damage wouldbe caused, that is enough to engage the liability of war riskunderwriters."''

b. Terrorism

It has already been noted that there are, as yet, no universallyaccepted legal definitions of the terms "terrorism" or "terrorist."' 9'2 Theterms have not been the subject of judicial discussion in any Englishmarine insurance cases. However, it is remarked above that thewording of the various Institute Clauses indicates that the terms"person acting maliciously" and "terrorist' are more or lessinterchangeable;'.3 the comments of Mr. Justice Coleman in TheGrecia Express seem to speak for themselves to this connection.'9'

Moreover, the long history of troubles in Northern Ireland hasproduced various statutory definitions of terrorism, the most recent ofwhich is in the Terrorism Act 2000, enacted on July 20, 2000.'Section 1 of this Act defines terrorism in the following terms:

188. Id. at 93.189. Id.190. Id at 95-96.191. Id. at 96.192. See supm Part I.193. See supra notes 170-174 and accompanying text.194. [2002] 2 Lloyd's Rep. at 95-96.195. SeeTerrorism Act, 2000, c. 11, §§ 1-2 (Eng.). This "Act builds on the proposals

in the Government's consultation document Legislation against terrorism (Cm 3420), whichwas published in December 1998." Id. explanatory notes 14. Paragraph 8 of theExplanatory Notes to the Act states the following:

The previous counter-terrorist legislation was originally designed in response toterrorism connected with the affairs of Northern Ireland ("Irish terrorism"), andsome of its provisions had subsequently been extended to certain categories ofinternational terrorism. It did not apply to any other terrorism connected with UKaffairs ("domestic terrorism"). Under the Act these restrictions have been lifted, so

1328 [Vol. 77:1295


1. (1) In this Act "terrorism" means the use or threat of action where-(a)the action falls within subsection (2),(b) the use or threat is designed to influence the government

or to intimidate the public or a section of the public, and(c)the use or threat is made for the purpose of advancing a

political, religious or ideological cause.(2) Action falls within this subsection if it-

(a)involves serious violence against a person,(b) involves serious damage to property,(c)endangers a person's life, other than that of the person

committing the action,(d) creates a serious risk to the health or safety of the public

or a section of the public, or(e)is designed seriously to interfere with or seriously to disrupt an

electronic system.(3) The use or threat of action falling within subsection (2) which

involves the use of firearms or explosives is terrorism whether ornot subsection (1)(b) is satisfied.'96

Following the terrorist action on September 11, 2001, a numberof revised War and Terrorism Exclusion Clauses were published foruse in the nonmarine market. The International UnderwritingAssociation's (IUA) Technical Underwriting Committee, therefore,issued a brief to the Clauses Committee to examine the existing andthe new clauses and to determine whether any redrafting wasnecessary.'97 A working party was formed, which examined in detail(a) the perpetrator of the terrorism, (b) the motive for the terrorism,(c) the modus operandi, and (d) the reaction to the act of terrorism.'98

Looking to the 2000 Act for guidance, the committee came up with thefollowing definition of terrorism for the purposes of a revisedterrorism exclusion clause:

For the purposes of this Clause "terrorism" means an act or acts(whether threatened or actual) of any person or persons involving thecausing or occasioning or threatening of harm of whatever nature and

that counter-terrorist measures are to be applicable to all forms of terrorism: Irish,international, and domestic.

Id. explanatory note 8.196. Id § 1(1)-(3).197. Cf Thomas A. Player, A Global Definition of Terrorism, FORC Q.J. INS. L. &

REG., Sept. 9, 2002 (stating that the IUA "expanded" the clause after September 11, 2001),available athttp://www.forc.org/journal/faII02/FaIlO2PIayer2.pdf (last visited June 3, 2003).

198. See id.

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by whatever means made or claimed to be made in whole or in part forpolitical, religious, ideological or similar purposes. 99

On January 10, 2002, the IUA issued a bulletin confirming that "it isof the opinion of the TUA's Clauses Sub-Committee that [this clause]offer(s) a robust and strong exclusion to all acts of terrorism in theircurrent form.

20 0

c. Persons Acting from a Political Motive

The term "political motive" has not been judicially defined in thecontext of an insurance policy.20' It seems clear, though, that theadditional phrase "or any person acting from a political motive" (orany variant thereof) in any of the Clauses is disjunctive and does notqualify either "terrorist" or "person acting maliciously.' 22 Thus theeffect of the alternative "any person acting from a political motive" asa named peril is, in broad terms, simply to extend the cover overconsequences of politically motivated hostile deliberate acts to includethe consequences of politically motivated acts by individuals, as wellas those acts by persons acting or professing to act with governmentalauthority.2 °3 In other words, the phrase does not seem to add verymuch, if anything, to the cover already provided .

199. DEXTA CORP., PROFESSIONAL INDEMNITY INSURANCE POLICY SAMPLE § 3.13, at 5(2002) (adopting the IUA language), avalable at http://delta.axe.net.au/pdf/PIPolicySampleERC.pdf (last visited June 3, 2003).

200. Bulletin, Int'l Underwriting Ass'n (Jan. 10, 2002) (on file with author).201. In a very different context, the word "political" has been said to "be confined to

the object of overthrowing or changing the government of a state or inducing it to change itspolicy." Cheng v. Governor of Pentonville Prison, [1973] 2 All E.R. 204, 209 (H.L. 1973).

202. See HUDSON& ALLEN, supra note 10, at 44, 155, 297-99.203. See id Cover was excluded in respect to persons acting with a political motive

under the 1970 Clauses, but only in the limited context of detonation of explosives or use ofweapons of war. See IVAMY, supra note 10, at 562. The exclusion in the 1983, the 1995, andthe 2000 Clauses could appear to be wider in scope. See supra notes 166-202 andaccompanying text.

204. 3 JONATHAN C.B. GILMAN, ARNOULD'S LAW OF MARINE INSURANCE ANDAVERAGE 338, at 200-01 (16th ed. 1997). In Arnould it is suggested that the words"person acting from a political motive" may operate to take out the consequences of certaintypes of conduct from the marine cover and put it within the war cover. It is said:

The meaning of "political motive" does not appear to call for explanation. Anexample of the type of conduct which may now be brought within the war coverand removed from the scope of the ordinary marine cover is afforded by thelitigation in the United States concerning the Hai Hsuan and other vessels, whosecrews mutinied from political motives following the change of regime in China;barratry from a political motive would now appear to fall within the war risk cover.

Id. at 339 (citations omitted). For further examination of the effect of the alternative "anyperson acting from a political motive," see HUDSON & ALLEN, supra note 10, at 75-80. Thelanguage "any person acting from a political motive," according to Hudson and Allen,

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V CONCLUSION

At the start of this Article, it was observed that where a terroristhas sufficient money, influence, and connections, the meansavailable-and hence the type of terrorist acts possible-are limitless.This Article has examined the various market covers available forphysical loss of or damage to marine property caused by any hostiledeliberate act-effectively, anything that a terrorist might do (andmore)-and has demonstrated that here, too, the only real limit ismoney. Where an assured has sufficient funds, it should be possible,in theory at any rate, to select from the various covers available on themarket to put together a package of protection providing virtuallyseamless marine insurance cover.

Certainly, the terrorist attacks of September 11, 2001, havecaused marine underwriters to reexamine their standard wordings,causing some new clauses to be produced. However, for the most part,these new clauses serve to clarify, rather than expand or limit, thescope of any positive cover or exceptions. The primary impact ofSeptember 11 th on the marine insurance market has been a financialone."5 However, while price increases have been significant, they havepaled in comparison with increases for other classes of business.

covers the phenomenon of the "gentle terrorist," who does not wish to do anyoneany harm, but wishes merely to demonstrate his objections to somebody or somecause by doing some physical damage to some property associated with the objectof his objection. (The Editor has some knowledge of this class of case, havingdealt with claims for damage to a ship and her cargo on board caused by a refugeegroup having placed a bomb against the side of the ship).205. This is particularly true in the case of the P & I Clubs that, in accordance with the

U.S. Terrorism Risk Insurance Act 2002 (which was principally intended to aid propertyinsurance in the United States and was not intended to have any extreme effects on themarine insurance market), have found themselves compelled to offer insurance against aterrorist attack up to the limits of ordinary P & I Club cover, notwithstanding the traditionalscheme of the P & I Clubs to deal with war and marine risks separately with cover for warrisks set at a lower limit. See Terrorism Risk Insurance Act, 15 U.S.C. § 6701 (2002). Themembers are not obliged to take up the additional cover that the Clubs are obliged to offer,but the additional cover will be largely unreinsurable. Also, because the U.S. legislationallows the insurer to offer the cover at whatever premium deemed appropriate, the Clubshave advised that premiums will probably amount to several million dollars per vessel.

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