In Atlasnavios-Navegação, LDA v. Navigators Insurance Company Limited & Others [2012] EWHC 802 (Comm), the Commercial Court had to decide, as a preliminary issue, the meaning of clause 4.1.5 of a war risks policy, which incorporated the Institute War and Strikes Clauses 1.10.83 (the Policy).

In August 2007, a vessel, owned by Atlasnavios-Navegação, LDA (AN), was detained by the Venezuelan authorities before departing on its voyage to Italy. The vessel had been detained as 3 bags of cocaine had been discovered by the authorities strapped to the vessel’s hull below the waterline.

AN claimed under the Policy for the constructive total loss of the vessel. However, the defendant insurers denied that AN’s claim was covered by virtue of an exclusion contained in clause 4.1.5 of the Policy. That exclusion provided that there was no coverage under the Policy for loss, damage, liability or expense arising from “arrest, restraint, detainment, confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations“.

Before determining the preliminary issues before it, the Court noted that: the exclusion must be given a businesslike interpretation in the context in which it appears; the questions of construction needed to be answered in light of the fact that the exclusion was intended to be used worldwide and not therefore only in accordance with the niceties of the local law; and the burden was on the insurers to bring themselves within the exclusion as a matter of fact and, the Court commented, logically, as a matter of construction.

The main preliminary issue for the Court was “whether [insurers] must show that there was privity or complicity on the part of the servants or agents of the insured in any infringement of customs regulations“. The Court found that the words of the exclusion were general and unqualified; they did not say that the infringement of customs regulations was one to which servants or agents must be privy or one in which they must be complicit. The Court noted that any such qualification may well involve difficult factual issues which the insurers would not have intended when entering into the Policy.

This case is yet another illustration of the English courts’ unwillingness to construe a policy provision other than in accordance with its plain meaning.