The Creola - Malicious acts, Piracy and Perils of the Seas examined

News / / The Creola - Malicious acts, Piracy and Perils of the Seas examined

The Claimant was the owner of the 15 metre sailing yacht CREOLA, which ran aground in the Sulu Sea in the Philippines in March 2014 After failing to refloat the yacht, the Claimant was forced to abandon her, securing and padlocking the hatches before being picked up by a fishing vesselnbspThe Claimant returned to the yacht the following day to find that she had been looted several windows were broken, and many items stolen (including navigation systems, machinery, and personal effects) By the time that a surveyor inspected the yacht on 30 March 2014, she had flooded to a depth of 6 inches in some sections The yacht was then refloated and taken to the Penuwasa boat yardThe Claimant attempted to claim from the Defendant insurer, Northernreef Insurance Co SA, for the losses resulting from the grounding and subsequent looting The yacht was insured on the Northernreef Yacht Clauses, which incorporated the usual range of marine risks After considering the issue of jurisdiction and other procedural matters arising from the Defendant's lack of participation in the hearing, the court went on to address the substantive disputeGrounding DamageThe first issue was whether the damage caused by the grounding was caused by perils of the seas This requires that the grounding itself was fortuitous rather than caused by the ordinary action of the winds and waves Given that the grounding was not alleged to be deliberate or caused by wilful misconduct, and given that it could not be said to be the natural and inevitable result of the wind and waves, the court held that the grounding was fortuitousnbspThe defences pleaded by the Defendant yacht Insurer, that (i) there was a breach of the maintenance warranty, (ii) the yacht was unseaworthy owing to outdated charts, and (iii) the grounding was caused by the Assured's negligence (which was expressly excluded), were all rejected on the evidence Consistent perhaps with the CMA CGM Libra 2019 EWHC 481 (Admlty), the judge remarked that she saw the vessel's charts and navigational equipment as going to seaworthiness rather than the promissory warranty to maintain the condition of the vesselWater IngressThe second issue was whether there was coverage for the losses attributable not to the grounding but to water ingress caused by the looters breaking windows and leaving hatches opennbsp It did so with reference to four insured perils piracy, malicious acts, theft, and perils of the seasPiracyThe Claimant's argument that the water ingress was caused by piracy was dismissed in short order Piracy is defined within English law as forcible robbery at sea, and therefore a key element of robbery is the threat of or use of force towards a person Given that the yacht was unmanned at the time that it was looted, this element was not fulfilled It might be said that the door was left open to the contrary argument being made before a higher court in future by the judge's statement that it was only the strong implication of the case law that piracy requires the threat or use of force against persons, not simply propertyMalicious ActsThe leading case on the meaning of malicious acts is the recent Supreme Court decision in the B Atlantic 2019 AC 136 There, after considering the case law (and in particular the case of the Salem 1982 QB 946), the Supreme Court determined that malicious acts must involve an element of spite or ill-will It is not necessary for this ill-will to be directed at the specific property of the claimant, so long as the act causing the damage was motivated by ill-will at some property or personnbspFurther, in the Salem, where the thieves had stolen the majority of the cargo and destroyed the remainder, the destruction of the remainder was not considered a malicious act as it was a component part of the larger conspiracy carried out for personal gain rather than malice It was held not to be possible to separate out the specific actions taken by the wrongdoers, but rather their scheme must be considered as a wholeThe judge held that in the looting of the CREOLA, the looters were not motivated by malice but rather self-interest While smashing the windows of the yacht might have been considered malicious if viewed in isolation, when considered as part of the larger scheme those acts were clearly carried out for gain Accordingly, the judge held that the damage had not been caused by malicious acts, albeit not without expressing her slight reluctance to draw this conclusionTheftAs with piracy, the argument that the water ingress damage was caused by theft was rejected quickly The wording of the policy clause was to cover the theft of machinery caused by forcible entry The proximate cause of the water ingress was the forcible entry admittedly for the purposes of theft but not the theft itself, and therefore not coveredPerils of the SeasThe judge followed the position as summarised by Popplewell J in the DC Merwestone 2013 2 Lloyd's Rep 131, that water ingress is prima facie to be regarded as caused by the perils of the seas where the cause of the ingress is fortuitous (including, in that case, where the fortuity is crew negligence) The looters smashing the windows and forcing the hatches was, from the Claimant's point of view, entirely fortuitous Therefore the Claimant's claim for water ingress related damages succeedednbspConclusionAfter considering issues of quantum (including sue and labour expenses), the court awarded the Claimant the diminution in the market value of the yacht owing to the totality of the damage suffered, the value of the stolen items, and her sue and labour expensesThis article was co-authored by Keith Rowbory,nbsptrainee solicitor at Ince

Related sectors:

Related services:

Related news & insights

Insights / Success with subrogation in the UAE

25-05-2021 / Insurance

Insurers often perceive subrogated recoveries as challenging and uncertain in this region and that can be true to some extent. 

Success with subrogation in the UAE

Insights / Insurance & Reinsurance guide 2021

25-01-2021 / Insurance

We are pleased to share with you Chambers and Partners 'Insurance & Reinsurance guide 2021', of which Simon Cooper is the contributing editor.

Insurance & Reinsurance guide 2021

Insights / Supreme Court checks out of Orient Express Hotel

19-01-2021 / Insurance

On 15 January 2020, the Supreme Court handed down its judgment in this test case that was initiated by the Financial Conduct Authority (“”FCA”) in order to determine a number of common coverage issues pertaining to the correct response of non-damage business interruption policies to the Covid-19 pandemic.

Supreme Court checks out of Orient Express Hotel

Insights / Decennial Liability in the UAE

05-10-2020 / Insurance

At its core, decennial liability is a form of strict liability imposed on architects, engineers and contractors in the case of total or partial collapse of a building or structure or defects found in the building or structure that threaten the structural integrity of the building.

Decennial Liability in the UAE

Insights / The Insurance and Reinsurance Law Review Eighth Edition

16-06-2020 / Insurance

We’re pleased to share with you the eighth edition of The Insurance and Reinsurance Law Review. Ince is a member of The Law Reviews (TLR) leading panel of contributors and the team this year led by Peter Rogan as the Editor, contributed to the following topics:

The Insurance and Reinsurance Law Review Eighth Edition

Insights / Chapter 15 - England and Wales

16-06-2020 / Insurance

The UK insurance and reinsurance industry is the largest in Europe and the fourth-largest in the world.

Chapter 15 - England and Wales

Quick links

The Legal 500 2021

“Very available and responsive to company developments in real time. Frank, clear advice – not just the ‘easy’ answer.”

The Legal 500 2022

“The solicitors who have handled our employment related issues are of the highest quality in terms of their specialist area of expertise, their professionalism and their approach to us as clients and as people. Special mention has to be made of Laura Livingstone. Laura became a key member of our team and felt more like a colleague than an external adviser – a colleague you could rely upon. Laura’s attention to detail, professionalism and responsiveness was second to none. Laura has come to know and understand us as individuals and this has enabled her to personalise her advice and even sometimes to preempt our future requirements. We have a very special and extremely valuable relationship with her and the firm.”

- The Legal 500

The Legal 500 2022

“Ince are an excellent “fit” with our specific needs. The firm has consistently provided a broad range of personnel-related advice and in our experience that advice has been consistently of the very highest professional standard: it has been timely, comprehensive, accurate and at a cost which is commensurate with the budget of an organisation of our size.”

- The Legal 500

The Legal 500 2022

“The firm has an unusually high degree of insight into the practices and policies required by the Gambling Commission as regards compliance with its own requirements and conditions – particularly Andrew Tait, derived from his previous in-house experience.”

- The Legal 500