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Insuring the Risk of Terrorist Damage and

Other 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, broughtinto stark relief the
massive propertylosses thatmight be caused by an act ofterrorism. However,on the basis that
it ispeople, ratherthan property who are the principal targetofterrorism, the risk ofa teronst
attack on, and consequentphysicaldamageto, a commercial vessel andhercargo whilst at seais
relatively low Nevertheless, the risk of damage to marineproperty done deliberately and
aggressively and outside situations of actual war does exist, and protection against the
consequences of such damage haslong been availablein the English marine insurance market
ThisArticle categorizes such risk as the risk ofdamage by "hostile deliberateacts." Itprovides
an overview of the historical developments of the English marine insurance market and
describes the overallfiamework ofthe insurancecover that is availablein respect ofdamage by
hostile deliberate acts: It covers the standardclausesapplicable to hull and cargo risks, and it
considers the top up or alternative cover available from the P & I Clubs and War Risks
Associations. It also considers each of the hostile deliberate act perils in detail,namely the
'naine perils" ofpicy, violent thef? bypersons from outside the vessel and barmry,and the
"war perils" of seizure, riots, malicious acts, and acts of terroristsor persons acting from a
politicalmotive.
I.
INTRODUCTION ..........................................................................
II.
THE INSTITUTE CLAUSES AND THE OVERALL STRUCTURE
1297
OF THE MARKET COVERS FOR THE HOSTILE DELIBERATE
A CT PERILS ................................................................................
1299
A.
HistoricalBackground.....................................................
1299
1. The Separation of Marine and War Risks and
the Exclusion of the Latter from the Marine
Policy ........................................................................
1300
2. The Traditional Method of Insuring Against
War Risks and the Hostile Deliberate Act Perils .... 1301
B. The Frameworkas It Is Today ......................................... 1303
1. C argo ........................................................................
1304
a. The Marine Cover ...................................... 1304
b. The Institute Cargo Clauses (A) ................ 1304
c. Institute Cargo Clauses (B) and (C) ........... 1306
Senior Partner, Ince & Co., London. The author would like to acknowledge the
assistance given by his colleague, William Marsh, in the preparation of this Article.
*
1295
TULANE LA W REVIEW
1296
[Vol. 77:1295
The Available Hostile Deliberate Act

Cover- Cargo ............................................
e. The Institute Malicious Damage Clause
1/8/82 .........................................................
f. Institute War Clauses (Cargo) 1/1/82 ........
g. The Institute Strikes Clauses (Cargo)
1/1/82 .........................................................
h. The Termination of Cargo Cover ..............
i. Waterborne Agreement ..............................
2. Hull and Freight .......................................................
a. The Marine Cover ......................................
b. The Marine Exclusions ..............................
TheAvailable Hostile DelibeateActCover. The
Institute War andStrikes Clauses,Hulls." Time
1/11/95..............................................................................
d.
III. P & I CLUBS AND WAR RISKS ASSOCIATION,
1307
1307
1308
1309
1309
1309
1311
1311
1312
13 14
LIABILITIES,
Top-Up, AND ALTERNATIVE COVER ...........................................
1316
IV THE HOSTILE DELIBERATE ACT PERILS IN DETAIL ................... 1317

A. The MarinePeils." Piracy,Violent Theft by Persons
from Outside the Vessel, andBarratry............................ 1317
13 17
1. Piracy .......................................................................
a. Piracy in Public International Law ............ 1318
b. Piracy in Marine Insurance ........................ 1318
2. Violent Theft by Persons from Outside the
1320
Vessel .......................................................................
132 1
3. B arratry ....................................................................
B. The War PenIls: Seizure, Riots, MaliciousActs,and
Acts of TerroristsorPersonsActing from a Political
1322
Motive...............................................................................
1322
1. Seizure ..............................................
1323
2. Riots ...............................................
3. Malicious Acts, Terrorists, and Persons Acting
from a Political Motive ............................................ 1325
1326
a. Malicious Acts ...........................................
1328
b. Terrorism ...................................................
Motive
.....
1330
c. Persons Acting from a Political
1331
V
C ONCLU SION ..............................................................................
2003)
I.
ANENGLISHLA WPERSPECTIVE
1297
INTRODUCTION
The ingenuity of the modem terrorist knows no bounds. The

terrible events of the last two years have shown clearly that the actions
terrorists might take and the lengths to which they might go in the
pursuit of their aims are limited only by the means physically and
practically 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 means
used, every act of terrorism has one basic motive in common with
every 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 actual
or threatened loss of life. Certainly, property damage can be, and
usually is, the consequence of an act of terrorism; indeed, the World
Trade Center (WTC) attacks on September 11, 2001, gave rise to
property losses estimated to be in excess of twenty billion U.S. dollars.'
However, if the word "terrorism" is given its ordinary and popular
meaning, which has become familiar through terrorist campaigns in
recent times, few would consider the deliberate causing of damage to
property for its own sake, without being coupled with a desire to kill or
injure, or at least frighten and intimidate, an act of terrorism.4 For this
reason-with the exception of cruise ships, which have long been
recognized as a potential target of terrorists attacks'-the property
involved in a commercial marine adventure-i.e., the ship and the
cargo-may be considered unlikely to be at significant risk of terrorist
attacks,6 at least while at sea.' Nevertheless, that risk exists, as does the
risk of loss or damage to marine property done deliberately and
1.
Statutory and policy definitions of terrorism are dealt with in detail infa Part
IVB.3.b.
2.
Prevention of Terrorism (Temporary Provisions) Act, 1989, c. 4, 20(1) (Eng.),
repealedby TerrorismAct, 2000, c. 11, sched. 16 (Eng.), availableathttp://www.legislation.
hmso.gov.uk/acts/acts2000/20000011 .htm (last visited Feb. 21, 2003). The Prevention of
Terrorism (Temporary Provisions) Act defined terrorism in terms of "any use of violence for
the 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 MaritimeLaw 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 that
land risks have been dealt with in marine insurance is discussed infra Part II.C in relation to
the Waterborne Agreement.
1298
TULANE LA W REVIEW
[Vol. 77:1295
aggressively,' but with an object other than that of terrorizing and

outside situations of actual warfare.! In the English marine insurance
market, cover is available for the risk of such loss or damage in policy
provisions dealing with the perils of piracy, barratry, violent theft,
seizure, riots, malicious acts, and, indeed, terrorism itself.'" These
perils might accurately be named the "hostile deliberate act perils."
This Article considers, in detail, the constituents of each of the
hostile deliberate act perils and the available cover (and exclusions) in
the context of physical loss of or damage to marine property, namely
ships (including the consequences of such loss or damage in terms of
loss of freight or hire)" and cargo; it also touches briefly upon the role
of the Protection & Indemnity (P & I) Clubs and War Risks
Associations in providing insurance against liabilities arising from
deliberately and aggressively caused loss or damage and top-up or
alternative insurance to that provided by Lloyd's and the companies.
Is terrorism a new peril? There is as yet no universally accepted
legal definition of the terms "terrorism" or "terrorist."' 2 However, such
definitions as there are, whether statutory or policy, all focus on the
8.
The word "aggressively" has been purposely adopted in this Article to distinguish
the type of loss currently under discussion from other types of loss caused deliberately but
with a bona fide motive like, for example, jettison and other similar acts that might constitute
general 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 October
6, 2002, The LIMBURG, a French oil tanker, was just off the Yemeni coast when she suffered
an explosion, resulting in one fatality. Despite initial differences in early press reports as to
whether the explosion was the result of a deliberate act or of a fault in the vessel, more recent
reports have concluded that a fishing boat (possibly teleguided) loaded with explosives had
been driven into the side of the tanker, mirroring the attack almost two years previously on
the U.S. naval destroyer, the U.S.S. COLE. The pan-daily Ashanq al-Awsa4 published in
London, claimed that it had received a statement from a militant Muslim group, Aden-Abyan
Islamic Army, claiming it attacked the ship to avenge the execution of one of its leaders for
the 1998 kidnapping of sixteen Western tourists. The group is believed to have links with the
Al Qaeda terrorist network.
10. Terrorism first appeared as a term in many of the Institute Clauses in 1983 as a
reflection of contemporary developments. CompareE.R. HARDY IVAMY, MARINE INSURANCE
555 (3d ed. 1979) (including the Institute Strikes, Riots and Civil Commotions Clauses from
1963, 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 Strike
Clauses (Cargo) 1/11/82, which do mention terrorism).
1I.
In fact, the Institute Time Clauses, Freight-the Institute Clause dealing with
insurance against loss of freight-contains a perils clause and a paramount exclusion clause
in 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 this
Article.
12. Giorgio Gaja, Measures Against TerroristActs Under InternationalLaw, in
MARITIME TERRORISM AND INTERNATIONAL LAW 15 (Natalino Ronzitti ed., 1990) (noting the
difficulty of defining terrorism in international conventions).
20031
1299
motive for the act (the mens rea), rather than the act itself (the actus
reus).' 3 And clearly, all of the hostile deliberate act perils involve the
doing of the type of things that terrorists might do. Although making a
political or ideological point by means of a terrorist act is largely a late
twentieth-century phenomenon, there is nothing particularly novel
about the nature of the act itself.'" Terrorism, therefore, is not,
conceptually at least, a new peril, and, as will be seen, the existing
insurance framework is probably fully equipped to deal with any legal
issues that a terrorist attack might raise.'5
II.
THE INSTITUTE CLAUSES AND THE OVERALL STRUCTURE OF THE

MARKET COVERS FOR THE HOSTILE DELIBERATE ACT PERILS
Before considering each of the hostile deliberate act perils in

more detail, the perils should first be set in the context of the clauses in
which they appear. For this, a short history lesson is needed.
A.
HistoricalBackground'6
Section 30(1) of the Marine Insurance Act 1906 provides that a

policy 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 and
goods (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 until
1982 when damage caused by any terrorist was introduced in the Strikes Exclusion Clause in
the Institute Cargo Clauses and terrorism was introduced as a named peril in the Institute
Strikes Clauses (Cargo). See HUDSON & ALLEN, supra note 10, at 297-99. The words did not
appear 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 SIR
MICHAEL 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 International
Defence 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 late
twelfth and early thirteenth centuries. See VICTOR DOVER, A HANDBOOK TO MARINE
INSURANCE 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 during
the reign of Henry IV, and the earliest English policy came into existence in 1547.
MUSTILL
1300
TULANE LA W REVIEW
[Vol. 77:1295
The recital to the S.G. policy set out the perils, "which we the assurers
are 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 at
sea, arrests, restraints, and detainments of all kings, princes, and people,
of what nation, condition, or quality soever, barratry of the master and
mariners, and of all other perils, losses, and misfortunes, that have or
shall come to the hurt, detriment, or damage of the said goods and
merchandises, and ship, &c., or any part thereof 20
The Marine Insurance Act codified several centuries of development
of marine insurance and in fact postdates both the S.G. Policy and the
birth of the Institute Clauses, the first of which was produced in 1889."
The Institute Clauses evolved to add to, amend, or exclude, as the
parties agreed, the risks covered by the S.G. policy. Then, when the
S.G. policy was replaced with the MAR forms of policy, the Institute
Clauses were used to deal with all aspects of coverage, depending
upon which particular set of the clauses was specified in the policy as
attaching to it.22 This remains the framework today.
1.
The Separation of Marine and War Risks and the Exclusion of the
Latter from the Marine Policy
From the very earliest times, it was customary to exclude liability

for the "consequences of hostilities and war-like operations." 3 This
evolved into the "FC&S" warranty and the consequent development of
separate policies covering war risks, with cover for marine risks
remaining with the S.G. or marine policy.4 FC&S is an abbreviation
of "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 at
least the seventeenth century until its abolition and the first introduction of the Lloyd's
Marine Policy (MAR Form) in 1982. See PARKS, suprA at 83-98; HUDSON & ALLEN, supra
note 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 the
insurance in return for the payment of premium. Id.app. II, at 467. Details of the subjectmatter insured, the insured value, the premium, and other information regarding the risk are
shown in the schedule where the titles of the applicable Institute Clauses are inserted along
with 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.); GRANT
GILMORE & CHARLES L. BLACK, JR., THE LAW OF ADMIRALTY 72 (2d ed. 1975). The precise
formula adopted by Lloyd's in 1883 was "free from all consequences of hostilities and warlike operations." See BntishS.S Co., [1919] 2 K.B. at 692-93.
24. BENNETT, supra note 22, 5.2, at 103-06.
2003]
1301
form of the clause that was produced in 1895; the full wording of the
clause was as follows: "Warranted free of capture, seizure, and
detention, and the consequences thereof, or of any attempt thereat,
piracy excepted ... , and also from all consequences of hostilities or
'
warlike operations, whether before or after declaration of war."25
The practice developed of printing the warranty in italics on the
body of the S.G. policy to emphasize its paramountcy over all other
coverage wordings.26 If the perils enunciated in the FC&S clause were
not to be excluded, then the FC&S warranty was simply deleted. 7 If
undeleted, then the warranty overrode the perils cited in the marine
policy that were inconsistent with its terms.28
Over time, the FC&S clause developed in complexity and the
latest, and ultimate, version of the FC&S clause was adopted in 1943.9
It read as follows:
Warranted free of capture, seizure, arrest, restraint or detainment, and
the consequences thereof or of any attempt thereat; also from the
consequences of hostilities or warlike operations, whether there be a
declaration 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 (and
independently of the nature of the voyage or service which the vessel
concerned or, in the case of a collision, any other vessel involved
therein, is performing) by a hostile act by or against a belligerent power;
and for the purpose of this warranty 'power' includes any authority
maintaining 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 the

Hostile Deliberate Act Perils
The traditional method of insuring against war risks was to state

in the war-risk policy that it covered "only the risks excluded from the
Standard 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:
PRACTICES 169 (5th ed. 1981).
28. Id.
29. See HUDSON & ALLEN, supm note 10, at 284.
30. Id.
31.
See Bennett, supranote 16.
ITS PRINCIPLES AND
1302
TULANE LA W REVIEW
[Vol. 77:1295
However, a loss was not necessarily covered under the war-risk policy
simply because it resulted from one of the specific perils set out in the
FC&S clause.3 ' Rather, however detailed the FC&S clause was, a loss
was only recoverable under war risks if it would have been recoverable
under the marine policy and the marine policy had not included the
FC&S exception. 3 Thus at least two questions had to be answered to
determine whether a loss was covered under war risks: First, did the
loss 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&S
exclusion?" Finally, even if the answers to both of these questions
were in the affirmative, the risk would still be subject to further
express 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 form
of marine policy ... afford little guidance in the way of description or
explanation as to the circumstances which the insurer agrees shall
constitute a loss for which he has to pay." 7
Thirty-five years later, in PanamanianOientalSteamship Corp.
v Wight (The Anita), Mr. Justice Mocatta said:
It is probably too late to make an effective plea that the traditional
methods of insuring ... war risks should be radically overhauled. The
present method, certainly as regards war risks insurance, is tortuous and

complex in the extreme. It cannot be beyond the wit of underwriters
and those who advise them in this age of law reform to devise more
straightforward and easily comprehended terms of cover.3
With the abandonment of the S.G. form and the introduction of the
MAR forms in 1982, this plea was answered and the opportunity was
taken 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, supranote 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 which
pronounced the following:
The antiquated Lloyd's S.G Form should be revised and updated. Specifically, the
Perils Clause should be revised to be comprehensive in the modem-day context
.... Furthermore, the Perils Clause should be combined with the other appropriate
Institute Clauses so that the designated risks appear in one unified Risks Clause.
Consideration should be given to altering the method of granting insurance
2003]
1303
modem and rational structure for insuring against both marine and war
risks, which we have today, was created.4
B.
The Fmneworkas It Is Today
There are separate policies for ship and cargo, and there are
separate policies for marine and war risks." Thus cover under one
policy does not depend upon exclusion under the other, and vice versa.
In general terms, and with the notable exception of piracy, the
hostile deliberate act perils are regarded more as war perils than
marine perils. 42 The general scheme, therefore, is that loss of or
damage to marine property caused by the operation of these perils is
excluded in the marine clauses and included in the war clauses.
However, because the law relating to the hostile deliberate act perils is
to be found in cases involving both the exclusion and the inclusion of
losses caused by such perils, it is germane to set out the relevant parts
of 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 on
Trade and Development, at 65, U.N. Doc. TD/B/C.4/ISL/50 (Mar. 4,1985), quoted in Patrick
J.S. Griggs, Coverage, Warranties,Concealment,Disclosure,Exclusions, Misrepresentations,
and Bad Faith,66 TUL. L. REV. 423, 428-29 (1991) (alterations in original). Inresponse to
this, Lloyd's Underwriters Association (LUA), representing marine underwriters at Lloyd's,
and the Institute of London Underwriters (ILU), representing insurance companies writing
marine business in the United Kingdom, "set up ajoint working party to consider what might
be 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 Companion
Institute of London Underwriters Companies Marine Policy Form were approved and
published. 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 new
MAR 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 Joint
Cargo Committee and the Joint Hull Committee. See VICTOR DOVER, A HANDBOOK OF
MARINE INSURANCE 52-53 (8th rev. ed. 1975). The actual drafting of amendments to or
updates 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 as
exceptions.
1304
1.
TULANE LA WREVIEW
[Vol. 77:1295
Cargo
a.
The Marine Cover
There are three primary sets of institute clauses that deal with
cargo. These are the Institute Cargo Clauses (A) (the (A) Clauses), the
Institute Cargo Clauses (B) (the (B) Clauses), and the Institute Cargo
Clauses (C) (the (C) Clauses).3 The (A) Clauses provide cover on a
wide, "all risks" basis, which nowadays is the most common form of
cargo insurance." The (B) and (C) Clauses provide cover on a more
restricted, "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 insurance
insured
covers all risks of loss of or damage to the subject-matter
' 7
below.
7
and
6,
5,
4,
Clauses
in
except as provided
The classic statement of what is meant by "all risks" is that of
Lord Sumner in Bitish & Foreign Maine Insurance Co. v Gaunt,
where he said:
There are, of course, limits to "all risks." They are risks and risks
insured against. Accordingly the expression does not cover inherent
vice or mere wear and tear ....
It covers a risk, not a certainty; it is
something, which happens to the subject-matter from without, not the

natural behaviour of that subject-matter, being what it is, in the
circumstances under which it is carried. Nor is it a loss which the
assured brings about by his own act, for then he has not merely exposed
the goods to the chance of injury, he has injured them himself."
The Gaunt case dealt with marine insurance on bales of wool, which
were 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 PanAm.
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.
2003]
1305
damaged by fresh water wetting.5 The House of Lords held that the
existence of fortuitous damage was sufficient evidence of a casualty,
and that under an insurance against 'all risks' it was not necessary to
prove the exact nature of the casualty which had occasioned the loss.
Accordingly, Lord Sumner was able to conclude that .'[a]ll risks' has
the same effect as if all insurable risks were separately enumerated."5'
The bottom line is that under an all risks policy, loss by any
happening, which is fortuitous with regard to the subject matter of the
insurance, is covered except to the extent that it is excluded
specifically in the policy or under the general law. 2 Thus the focus in
an 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 exclusion
of, loss or damage caused by hostile deliberate act perils are those
contained in clauses 4.1 and 4.7 (as part of the General Exclusions
Clause), clause 6 (the War Exclusions Clause), and clause 7 (the
Strikes Exclusions Clause). These clauses read as follows:
Clause 4-General Exclusions Clause
4 In no case shall this insurance cover
4.1 loss damage or expense attributable to wilful misconduct of the
Assured
4.7 loss damage or expense arising from the use of any weapon of
war employing atomic or nuclear fission and/or fusion or other
like reaction or radioactive force or matter.
Clause 6-War Exclusion Clause
6 In no case shall this insurance cover loss damage or expense caused
by
6.1 war civil war revolution rebellion insurrection, or civil strife
arising therefrom, or any hostile act by or against a belligerent
power
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 of
war.
50.
51.
52.
53.
54.
55.
Id.
at 250, 257.
Id at 259.
See id at 257-60; HUDSON & ALLEN, supranote 10, at 12.
See Gaunt, 26 Corn. Cas. at 257-60.
HUDSON&ALLEN, supranote 10, at 12, 19-25.
Seeid at 19-25.
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Clause 7-Strikes Exclusion Clause

7 In no case shall this insurance cover loss damage or expense
7.1 caused by strikers, locked-out workmen, or persons taking part
in labour disturbances, riots or civil commotions
7.2 resulting from strikes, lock-outs, labour disturbances, riots or
civil commotions
7.3 caused by any terrorist or any person acting from a political
motive.56
In line with the overall scheme of the covers available for loss of
or damage to marine property, cargo losses excluded by the War
Exclusion Clause and the Strikes Exclusion Clause are brought back in
by more specific sets of clauses, namely the Institute War Clauses
(Cargo) and the Institute Strikes Clauses (Cargo). 7 These clauses are
discussed below following an analysis of the cover provided by the (B)

and the (C) Clauses. The important fact to note in the context of this
Article is that cover in respect to loss of or damage to cargo caused by
piracy is provided by the (A) Clauses because it is specifically
excepted 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 is
that the latter are drafted to provide only a very basic (and hence
cheaper) standard of cargo cover against major casualties, whereas the
former are supposed to provide an intermediate standard of cover. 9
Both the (B) and the (C) Clauses contain, in Clause 4.7, the following
general exclusion:
4 In no case shall this insurance cover
4.7 deliberate damage to or deliberate destruction of the subjectmatter insured or any part thereof by the wrongful act of any
person or persons.
60
Under this wording, certain acts are excluded that would, under
the traditional wording of Lloyd's S.G. form language, have founded a
legitimate 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.
See id at 39-50.
59.
60. Id at 43. This exclusion was introduced for the first time in the 1982 version of
at 39.
the clauses. See id.
2003]
1307
ship, and jettison of the goods without reasonable cause.6' Damage by

vandalism or malicious damage is also excluded."
Furthermore, the (B) and (C) Clauses also contain wide war and
strikes exclusion clauses,63 which are similar to the War Exclusion
Clauses in the (A) Clauses, but with one significant exception. While
in the (A) Clauses the risk of piracy is excepted from the list of war
perils--"capture seizure arrest restraint or detainment"-enumerated
in Clause 6.2, piracy is not so excepted under the (3) and (C)
Clauses.'
Moreover, because piracy is not included as one of the
Institute War Clauses (Cargo), if cargo cover is obtained only on the
basis of the (B) or (C) clauses together with the standard clauses65for
war risks, there will be no protection at all against the risk of piracy.
d.
The Available Hostile Deliberate Act Cover--Cargo
As stated, there are two main sets of Institute Clauses that bring
cargo losses back under the cover excluded by the War and Strikes
Exclusion Clauses.66 There is also one special optional clause that
reinstates6 the perils excluded by Clause 4.7 of the (B) and (C)
Clauses. Y
e.
The Institute Malicious Damage Clause 1/8/82
To obtain the cargo cover that is otherwise excluded under Clause

4.7 of the (B) and (C) Clauses, the Institute Malicious Damage Clause
1/8/82 might be included as part of the cargo cover. This clause
provides:
In consideration of an additional premium, it is hereby agreed that
the exclusion "deliberate damage to or deliberate destruction of the
subject-matter insured or any part thereof by the wrongful act of any
person or persons" is deemed to be deleted and further that this
insurance covers loss of or damage to the subject-matter insured caused
61. Id. at 44.

62. See id
63. 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 other

exclusions contained in this insurance. 69
This will extend cover to embrace malicious acts, vandalism, and
sabotage, but only insofar as the loss or damage caused thereby is not
excluded by other parts of the insurance.0 Thus, for example, loss,
damage, or expense that resulted from excluded strikes or (unless the
terms are effectively interchangeable) was caused by terrorists or by
persons 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 are
set out in Clause 1,72 mirror the War Exclusion Clause in the Institute
Cargo Clauses (A), (B), and (C), except that, as stated above, piracy is
not 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
arising therefrom, or any hostile act by or against a
belligerent power
1.2 capture seizure arrest restraint or detainment, arising from risks
covered under 1.1 above, and the consequences thereof or
any attempt thereat
74
war.
Note that the perils set out in Clause 1.2 (capture, seizure, etc.)
are only covered by the War Clauses on Cargo when their operation
arises from the perils enumerated in Clause 1.1 (the group of perils
headed by war, civil war, etc.).7 ' Thus a nonbelligerent seizure of cargo
(except in cases involving piracy under the (A) Clauses) will be
excluded from the marine cover, but will not be insured under the war
risks cover."
Id at 79.
See id at 79-80.
See id
Id at 285-90.
See id at 24, 44.
Id at 285.
Id at 285-89.
See id
2003]
g.
1309
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 Exclusion
Clause 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 by

1.1
strikers, locked-out workmen, or persons taking part in
labour disturbances, riots or civil commotions
1.2 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 various

Cargo Clauses insofar as they describe the hostile deliberate act perils
is dealt with in Part IV below. However, before moving on to the final
pieces of the "context jigsaw" and considering the Institute Clauses
dealing with hull perils and marine liability insurance, brief
consideration must be given to provisions relating to the termination of
cargo cover against the risk of deliberately and aggressively caused
loss or damage because this has become of considerable topical
importance following September 1 th.
i.
Waterborne Agreement
In 1939, agreement was reached between nonmarine underwriters on a global basis that the potential liability of insurers arising
from the accumulation in one location of valuable property exposed to
war risks on land was too formidable to be handled in the insurance
market. This agreement was reflected in the war and civil war
exclusion clauses.
Obviously, when ships and cargos are at sea, the likelihood of a
major concentration of value is not as great. However, that likelihood
rises markedly when, as is the norm, goods are insured on a warehouse
to warehouse basis and where, as commonly happens, ports of loading
and 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:
TULANE LA WREVIEW
1310
[Vol. 77:1295
It was recognized that if marine underwriters were to grant

unlimited war risks cover, it might seriously prejudice the universal
understanding between nonmarine underwriters. Accordingly, the
"Waterborne Agreement," of world wide application, was introduced
whereby marine underwriters agreed not to insure goods against war
risks while on land, unless the goods were at a port of transhipmentand even then, only for a limited period.8' This agreement is reflected
in Clause 5 of the Institute War Clauses (Cargo), which specifically
restricts cover to the period in transit while the goods are waterbome.82
The Institute War Clauses also include a clause (Clause 7), printed in
bold type, which emphasizes that Clause 5 is to have paramount affect
in 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 or
damage 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 carried
out by terrorists. Although the United States and its allies are involved
in a "war on terrorism" and so, to that extent, might be regarded as
belligerent 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 with
under the Institute War Clauses, but rather under the Institute Strikes
Clauses (which specifically cover loss or damage caused by
8.1
This insurance attaches from the time the goods leave the warehouse or
place of storage at the place named herein for the commencement of the
transit, continues during the ordinary course of transit and terminates either
8.1.1 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, supra
note 16, at 297.
82. See HUDSON & ALLEN, supra note 10, at 293-95. Clause 5 of the Institute War
Clauses (Cargo) also bears the title "Transit Clause" and provides, in material part:
5.1
This insurance
5.1.1 attaches only as the subject-matter insured.., is loaded on an oversea
vessel and
5.1.2 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 Cargo
Clauses (A), (B), and (C). See id. at 25, 45, 293.
83. Id at 295.
84. Id at 285-88.
2003]
1311
terrorists). 5 The latter clauses do not contain a Waterborne transit

clause; instead, they have a standard "warehouse-to-warehouse" clause
as in the Institute Cargo Clauses.86 On November 20, 2001, the Joint
Cargo Committee issued a "Termination of Transit Clause
(Terrorism)," which states that coverage for loss or damage caused by
terrorists is conditional upon the subject-matter insured and such being
in the ordinary course of transit. 7
2.
Hull and Freight 8

a.
The Marine Cover
After the S.G. policy was finally jettisoned, the Institute Time
Clauses, Hulls 1/10/83 (ITC Hulls) was introduced as a comprehensive
form for the insurance of ships alone. 9 Initially, consideration was
given to whether it would be preferable to change the method of
granting 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 cargo
insurance, the preferred approach in relation to hull insurance was the
"named perils" approach." The named perils were set out in two
groups.' 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 ofTransit Clause (Terrorism) reads, in material part:
This clause shall be paramount and shall override anything contained in this
insurance inconsistent therewith.
1. Notwithstanding any provision to the contrary contained in this Policy
or the Clauses referred therein, it is agreed that insofar as this Policy covers loss of
or damage to the subject-matter insured caused by any terrorist or any person
acting from a political motive, such cover is conditional upon the subject-matter
insured being in the ordinary course of transit ....
2.
If this Policy or the Clauses referred therein specifically provide cover
for inland or further transits following on from storage.., cover will re-attach, and
continues 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.
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[Vol. 77:1295
due diligence of the Assured, Owners, or Managers." Those in the

second group were all subject to such a proviso.93
On November 1, 2002, a revised version of the ITC Hulls was
introduced as the "International Hull Clauses (01/11/02) ""'
The perils clause, insofar as it relates to any of the hostile
deliberate act perils, reads as follows:
2. Perils
2.1. 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-matter

insured caused by
2.2.5.
b.
barratry of Master, Officers or Crew

provided that such loss or damage has not resulted
from want of due diligence by the Assured, Owners
or Managers.95
The Marine Exclusions
As with the Cargo Clauses, war and strikes perils are excluded
from the marine cover. 6 In a manner reminiscent of the old FC&S
Clause, Part I of the International Hull Clauses ends with a set of
clauses that are preceded with the following words: "The following
Clauses shall be paramount and shall override anything contained in
this 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 were
revised in 1995. However, the reaction of shipowners and market practitioners to the new
clauses 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 hull
insurances 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.
2003]
1313
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 or
less identical "paramount clause" in the 1983 and 1995 ITC Hulls.9
The paramount exclusion clauses in relation to war, strikes, malicious
acts, and radioactive contamination read as follows:
29. WAR EXCLUSION
In no case shall this insurance cover loss damage liability or expense
caused by
29.1. war civil war revolution rebellion insurrection, or civil
strife rising therefrom, or any hostile act by or against a
belligerent power
29.2. capture seizure arrest restraint or detainment (barratry
and piracy excepted), and the consequences thereof or any
attempt thereat
29.3. derelict mines torpedoes bombs or other derelict weapons
of war.
30. STRIKES EXCLUSION
caused by
strikers, locked-out workmen, or persons taking part in
30.1.
labour disturbances, riots or civil commotions
30.2. any terrorist or any person acting from a political motive.
31. MALICIOUS ACTS EXCLUSION
arising from
31.1. the detonation of an explosive
31.2. any weapon of war and caused by any person acting
maliciously or from a political motive.
32. RADIOACTIVE CONTAMINATION EXCLUSION
directly or indirectly caused by or contributed to by or arising
from
98. Id. at 14-15. The first four exceptions, viz. war, strikes, malicious acts, and
radioactive 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 since
October 1, 1990, that London market marine insurance policies have included a Radioactive
Contamination Exclusion Clause; but since then, this has become a standard clause. Id. In
fact, the Technical & Clauses Committee is currently awaiting final approval of a new
Institute Extended Radioactive Contamination Exclusion clause, which has been produced to
address concerns relating to the use of the "dirty bomb" and other similar types of threat.
1314
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[Vol. 77:1295
32.1.
ionising radiations from or contamination by radioactivity

from any nuclear fuel or from any nuclear waste or from
the combustion of nuclear fuel
32.2. the radioactive, toxic, explosive or other hazardous or
contaminating properties of any nuclear installation,
reactor or other nuclear assembly or nuclear component
thereof
32.3.
any weapon employing atomic or nuclear fission and/or
fusion or other like reaction or radioactive force or matter
32.4. the radioactive, toxic, explosive or other hazardous or
contaminating properties of any radioactive matter. The
exclusion in this Clause 32.4 does not extend to radioactive
isotopes, other than nuclear fuel, when such isotopes are
being prepared, carried, stored, or used for commercial,
agricultural, medical, scientific or other similar peaceful
purposes.10
The fifth exception in the paramount clause is new and clearly

has been introduced to meet a perceived new type of hostile deliberate
act peril.' However, as suggested at the beginning of this Article, it
may be that the extra exclusion in fact adds little or nothing to the
overall insurance framework. 2 The final exclusion reads as follows:
33. CHEMICAL, BIOLOGICAL, BIO-CHEMICAL, ELECTROMAGNETIC
WEAPONS
AND
CYBER
ATTACK
EXCLUSION
directly or indirectly caused by or contributed to by or arising
from
33.1. any
chemical,
biological,
bio-chemical
or
electromagnetic weapon
33.2. the use or operation, as a means for inflicting harm, of
any computer, computer system, computer software
programme, computer
virus or process or any other
03
electronic system.
C.
The Available HosileDelibemteAct Cover. The Institute War

and Stinkes Clauses,Hulls.- Time 1/11/95
The cover excluded by the war, strikes, malicious acts, and

radioactive contamination and the exclusions in the ITC Hulls are
100. LLOYD'S JOINT HULL COMM., supra note 94, at 14-15.
101.
102.
See supra note 97 and accompanying text.

See supra notes 13-15 and accompanying text.
103.
LLOYD'S JOINT HULL COMM., supra note 94, at 15.
2003]
1315
reinstated by the Institute War and Strikes Clauses, Hulls.' " The latest
version of these clauses was produced in 1995 to mirror the
introduction of the ITC Hulls, 1/11/95. 05' No revised version of the
War and Strikes Clauses has been produced to mirror the International
Hull Clauses. The risks covered by the Institute War and Strikes
Clauses are identified as follows:
Clause 1-Perils
1 ... this insurance covers loss of or damage to the Vessel caused by
arising therefrom, or any hostile act by or against a
belligerent power
1.2 capture seizure arrest restraint or detainment, and the
consequences thereof or any attempt thereat
war
1.4 strikers, locked-out workmen, or persons taking part in labour
disturbances, riots or civil commotions
1.5 any terrorist or any person acting maliciously or from a
political motive
1.6 confiscation or expropriation. 6
Clause 1.1 lists the war and war-like risks in the same words that
appear in the Institute War Clauses (Cargo). However, Clause 1.2 is
wider than the corresponding clause in the Institute War Clauses
(Cargo), in that the perils of capture, seizure, arrest; restraint or
detainment are not limited to those that arise in consequence of the war
and war-like risks listed in Clause 1.1, that is, the requirement for the
loss 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), and
Clause 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 rather
than expansion (and to mirror Clause 1.2 of the Institute Strikes
Clauses (Cargo)), the risks of loss or damage caused by a terrorist or a
person acting from a political motive.
104.
105.
106.
See HUDSON& ALLEN, supra note 10, at 306-14.

Seeid
Id.at 306-07 (citations omitted).
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[Vol. 77:1295
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 or

in the Companies market.' 7 However, the general position is that, by
reason of his membership in a P & I Club, a shipowner will have a
protection and indemnity insurance that, subject to the rules of the
Club, will seek to indemnify him in respect of the discharge of any
legal liabilities incurred in operating the vessel. ' However, the P & I
Clubs generally exclude cover in respect to liabilities, costs, and
expenses arising out of or consequent to war, civil war, rebellion, civil
strife, insurrection, or any hostile acts by or against a belligerent
power; or capture, seizure, arrest, restraint or detainment, mines,
torpedoes, bombs, rockets, explosives, or similar weapons of war.'" In
other words, the P & I Clubs will generally exclude cover for liabilities
arising out of all the perils (and more) for both hulls and cargo, which
are excepted under the standard Institute Clauses.'
Nevertheless, mutual marine insurance has long been adopted as
the method of insuring marine risks where the traditional market has
been uninterested, too cautious, or too expensive. This adopted
process required existing P & I Clubs to increase their service by
forming new classes to insure against such risks, or for entirely new
clubs to be established."'
There have been specialized war risks and strikes clubs for very
many years."2 The first mutual club to offer war risks insurance was
the 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& I
Insurance. The Brtish Scene, 43 TUL. L. REv. 457, 463-68 (1969); see also CHRISTOPHER
HILL ETAL., INTRODUCTION TO P & 19 (2ded. 1996).
108. See HILL ET AL., supra note 107, at 61. The P & I Clubs offer indemnities for
ordinary marine liabilities. See id. A typical P & I Club's rule book provides indemnity
insurance in respect to its members' liabilities arising from the following events: collisions
and noncontact damage; damage to fixed and floating objects; cargo claims; property on
land; loss of life, personal injury, and illness; passengers; crew liabilities; fines; inquiries and
criminal proceedings; quarantine expenses; stowaways; diversion expenses; life salvage;
unrecoverable general average; ship's proportion of general average; liabilities relating to the
wreck of the entered vessel; pollution; towage contracts; and expenses incurred pursuant to
any 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).
2003)
1317
other clubs favored this innovation. During the First World War, the
Clubs and the British Government adopted a scheme whereby the
government acted as reinsurer to the Clubs against losses by the
enemies of the Crown."' A revised form of this scheme is still in
operation today and is used when the United Kingdom is at war."5 The
type of insurance offered by War Risks Associations or War Classes
covers not only hull, machinery, freight, and disbursements, but also
protection and indemnity liabilities to the crew.'
IV
THE HOSTILE DELIBERATE ACT PERILS IN DETAIL
A.
The MarinePeNis. Piracy,Violent Thelf by Pesonsfrom Outside

the Vessel, andBarmtry
1.
Piracy
Piracy was one of the standard perils in the Lloyd's S.G. Form
and, 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 taken
out of the marine policy by adding "or piracy" to the perils excluded
by the FC&S clause and switched to the war risk policy."8 Following
the revisions of the Institute Clauses in 1982 and 1983, piracy has
reverted to being covered, in most circumstances, under the ordinary
policies covering marine risks.' 9 Although there has been piracy as
long as vessels have sailed the seas, and although it is established as an
international crime subject to universal jurisdiction,' 21 there is no set
and 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 strife
arising 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 or
otherwise); 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 political
motive; piracy and violent theft by persons from outside the ships; confiscation or
expropriation-i.e., all of the hostile deliberate act perils. SegeneMllyHELLENIC MUT. WAR
RISKS 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 to
capture, 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 of
the Geneva Convention on the High Seas, 1958, stipulates: "On the high seas, or in any other
1318
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a.
[Vol. 77:1295
Piracy in Public International Law
As part of public international law, the description of piracy in

article 15 of the Geneva Convention on the High Seas 1958, as
confirmed in article A101 of the Geneva Convention on the Law of the
Sea 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 a
private 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 or
aircraft;
(3) Any act of inciting or of intentionally facilitating an act
23 described
in sub-paragraph 1 or sub-paragraph 2 of this article.'
The essential feature of this definition is that the acts must be
committed for private ends.' 2' Thus, in public international law, piracy
cannot be committed by war ships or other government ships (or
government aircraft), except where the "crew has mutinied and taken
control of the ship or aircraft."'25
b.
Piracy in Marine Insurance
The "private ends" criterion is essential in marine insurance as

well. Although piracy has been categorized by some as terrorism on
the 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 a
ship taken by piracy and under the control of pirates, and arrest the persons and seize the
property on board." Id.
121. BARRY H. DUBNER, THE LAW OF INTERNATIONAL SEA PIRACY 40 (1980).
122.
123.
124.
125.
See Convention on the High Seas, Apr. 29, 1958, 450 U.N.T.S. 82, 90.
Id.
See id
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 (last

visited Feb. 15, 2003). Commenting upon the work carried out by the Council of Security
Co-operation in the Asia-Pacific (CSCAP) Working Group on Maritime Co-operation in its
examination of the link between maritime terrorism and piracy, Picar points out:
20031
1319
between piracy (which is covered under a marine policy) and

terrorism'2 (which is covered under a "war" policy), is that piracy is
commercially motivated and terrorism is politically motivated.' 8 Thus,
in Republic of Bolivia v Indemnit, Mutual Marine Assurance Co., it
was 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 be
interpreted to mean "[persons] plundering indiscriminately for [their]
own ends, and not [persons] simply operating against the property of a
particular State for a public end"'2 9
Mr. Justice Staughton considered the authorities in detail in the
Athens MaritimeEnterprisescase. 3 In that case, the vessel (Andreas
Lemos) was anchored within port limits and the territorial waters of
the Republic of Bangladesh.' Armed thieves boarded the vessel and
began 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 the
vessel.'33 It was only after the theft was complete that force was used
or threatened by the thieves when making their escape.' 4 A claim was
made against the shipowner's Mutual War Risks Association for the
value of the stolen equipment.' 5 The question for the court's determi-
When plain pirates use physical force and psychological intimidation against noncombatants in order to achieve their objective of forcing authorities to allow them
to go free, then they transform themselves from being pirates to [being] maritime
terrorists. Furthermore, piracy attacks worldwide have been increasing, thereby
instilling fear among owners, masters and crews of ships plying the seas. Instilling
fear 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 the
many forms terrorism manifests itself. This considering that one of the primary goals of
terrorism is to instill fear among people." Id.
127. Terrorism has never been formally defined. See supra notes 1, 13-14, and
accompanying text.
128. See HUDSON & ALLEN, supra note 10, at 24-25, 44, 106-07, 297-99. In light of
the Terrorism Act 2000, "politically motivated" should be extended to read "for the purpose
of 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. Idat 652.
132. Id.at 651.
133. Id.
134. Id.
135. Id.
at 649.
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[Vol. 77:1295
nation was whether the loss had arisen from either an act of piracy or a
riot.136
The judgment of Mr. Justice Staughton deals with three

important points on the scope of piracy as an insured peril. First, in
respect to geographical limitations of piracy as a peril, public
international law dictated that piracy could only be committed on the
high seas, outside the territorial waters of any State.'37 However, Mr.
Justice Staughton held that there was no reason to limit the term piracy
under an insurance policy to acts outside territorial waters, and, in an
insurance policy context, if a ship is "at sea or if the attack upon her
can be described as 'a maritime offence' then ... she is ... in a place
where piracy can be committed"' 38'
Second, in respect to whether force or a threat of force is an
essential element of piracy as an insured peril, Mr. Justice Staughton
held that "theft without force or a threat of force is not piracy under a
policy of marine insurance."'39
Third, in respect to whether there can be piracy where the act of
appropriating the insured property is completed before any force is
used or threatened, Mr. Justice Staughton held that there could not be
piracy in such situations. Mr. Justice Staughton expressly stated that
[t]he [insurer], by the word "piracy,' insures the loss caused to
shipowners because their employees are overpowered by force, or
terrified into submission. [The insurer] does not insure the loss caused
to shipowners when their night-watchman is asleep ... and thieves steal
clandestinely. The very notion of piracy is inconsistent with clandestine
theft. [Counsel for the owners] described this as a prosaic form of
piracy; a recent judge might have preferred the word "anaemic," It is
not necessary that the thieves must raise the pirate flag and fire a shot
across the victim's bows before
they can be called pirates. But piracy is
40
not committed by stealth.
2.
Violent Theft by Persons from Outside the Vessel
The perils of "rovers" and "thieves" came directly after the peril
of "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 because
there was no forcible robbery."). The latter case is discussed in detail below.
140. AthensMar Enters., [1983] 1 Q.B. at 661.
2003]
1321
scheduled to the Marine Insurance Act provided: "The term 'thieves'

does not cover clandestine theft or a theft committed by any one of the
ship'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 give
effect, in plain English, to what
has always been encompassed in the
2
perils of rovers and thieves.1
Nothing new was added by the revised terminology and
essentially the expression means precisely what it says. In the words
of Amould, "robbery accompanied by violence, and committed by
strangers, not by the crew, is a loss to which the underwriters on the
ship or 3goods are liable as a loss by rovers or thieves under the
14
policy."
3.
Barratry
Rule 11 of the Rules for Construction of Policy in the first

schedule to the Marine Insurance Act provides that "[t]he term
'barratry' includes every wrongful act wilfully committed by the
master 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 every
type of fraud and malfeasance deliberately committed by the Master or
crew for the intention of benefiting themselves at the expense of the
shipowners, but every wilful act on the part of the Master or crew of
illegality, corruption or criminal
45 negligence, whereby the shipowners or
the charterers are prejudiced.1
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 Athens
MaritimeEnterprisescase that, in relation to the word "rovers" in the S.G. Policy, "[i]ts only
current and popular meaning is, I suppose, a species of motor car, such as Fords or
Vauxhalls." [1983] 1 Q.B. at 661.
143. 2 ARNOULD'S LAW OF MARINE INSURANCE AND AVERAGE 672 (Mustill & Gilman
eds., 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 is
to be traced to the Italians ... , who were the first great traders of the modern
world. In the Italian dictionary, the word barratrare means to cheat, and
whatsoever is done by the master, amounting to a cheat, a fraud, a cozening, or a
trick, is barratry in him.
1 SIR JAMES ALLAN PARK, A SYSTEM OF THE LAW ON MARINE INSURANCES 188 (Francis
Hildyard ed., 8th ed. 1987). A barratrous act has been catalogued as
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[Vol. 77:1295
It is important to note in this Article, which deals generally with

the hostile deliberate act perils covered by policies of marine insurance
against the specific background of the risk of terrorist attack of ship
and/or cargo, that the scope of barratry is strictly limited. In order to
constitute barratry, it is not enough that there be wrongful conduct by
the master and crew against the interests of the person insured if that
person is not the shipowner (whether actual or pro hac vice). It is an
essential element of the peril of barratry that the wrongful act be
committed against the interest of the owner of the ship, whether or not
they are insured under the policy.
B. The War Perls." Seizure, Riots,MaliciousActs, andActs of
TerroristsorPersonsA cting from a PoliticalMotive
1.
Seizure
It has already been shown that many of the perils enumerated in

the Institute War Clauses, Cargo are circumscribed by the need for the
act occasioning the loss or damage to be carried out by or against a
belligerent power,'46 and, as such, a detailed consideration of them is
outside the scope of this Article. The perils enumerated in clause 1.1
of the Institute War and Strikes Clauses, Hulls (i.e. those in the group
covering war, civil war, revolution, etc.), are similarly circumscribed.' 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 of
the clause, subject to the belligerent power limitation."8 That said,
however, the strict definition of "capture" is "a taking by the enemy as
prize, 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 fraudulent
purpose, contrary to their duty to their owners, and whereby the owners sustain an
injury: As, by running away with the ship, wilfully carrying her out of the course
of the voyage prescribed by the owners, sinking or deserting her, embezzling the
cargo, smuggling, or any other offence whereby the ship or cargo may be subjected
to arrest, detention, loss, or forfeiture. Barratry, in short, comprehends every fraud
that may be committed by the master or mariners, to the detriment of the
owners....
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, supranote 10, at 306-07.
148. See id.
2003]
1323
49
the owner of all dominion or right of property over the thing taken."'
Thus "capture" is probably confined to belligerent capture. However,
it is rare in practice to find the term "capture" by itself,unallied with
the term "seizure"; it is also clear that "capture" and "seizure" do not
mean the same thing.' Lord Fitzgerald stated the following in Cory v
Burr.
"Capture" would seem properly to include every act of seizing or taking
by an enemy or belligerent. "Seizure" seems to be a larger term than
"capture" and goes beyond it, and may reasonably be interpreted to
embrace every act of taking forcible possession either by a lawful
authority or by overpowering force.'5 '
52
In English law, "seizure" is not confined to acts of state.
Furthermore, because the forcible taking of the vessel by pirates may
be described both as seizure and piracy, seizure may likewise be
covered as a marine loss, given a policy incorporating the International
Hull Clauses by reason of the exception to the exception in the war
exclusion at clause 29.2.2" Similarly, a barratrous taking of the vessel
may be covered as a marine loss.'
2.
Riots
The word "riots" appears as one of the perils in the group of

perils "strikers, locked-out workmen, or persons taking part in labour
disturbances, riots or civil commotions."'5 There appear to be no
reported decisions on the first three perils in this group. However,
assuming that they are to be given their ordinary meaning in the
context 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. Id
152. 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 E2d
989 (2d Cir. 1974). There are many examples of "seizure" by nonstate actors. SeeKleinwort
v. Shepard, [1859] 120 Eng. Rep. 977, 979 (Eng.) (regarding a seizure of the ship by
passengers); Johnston & Co. v. Hogg, [1883] 10 Q.B. 432, 433 (Eng.) (regarding the seizure
of a ship by members of the local population).
153. LLOYD'S JOINT HULL COMM., supranote 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 War
Clauses. See infh notes 98-99 and accompanying text.
155. HUDSON & ALLEN, supra note 10, at 25, 45, 297 (regarding the Institute Cargo
Clauses (A), (B), and (C), Clause 7.1; Institute Strikes Clauses (Cargo), Clause 1.1); LLOYD'S
JOTNT HULL COMM., supra note 94, at 15.
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[Vol. 77:1295
purposes of this Article. Similarly, although the expression "civil

commotions" has been judicially construed, it is clear that civil
commotions are not really apt to describe hostile deliberate acts of the
sort that terrorists might carry out.'56 In Athens MaritimeEnterprises,
in addition to considering whether the loss had arisen as a result of
piracy, the court also considered whether it arose from riots.' The
court held that the word "riots" is to be construed in accordance with
the criminal law.' 8 Mr. Justice Staughton accepted the criminal law
definition of "riot" provided by Mr. Justice Phillimore in Field v
Receiver ofMetropolitanPolic' 5 9 as it had been adopted in relation to
a policy of insurance in Bolands, Ltd v London & Lancashire Fire
InsuanceCo.,6 which reads as follows:
In order to constitute a riot five elements are necessary--(1) a number
of persons not less than three; (2)a common purpose; (3) execution or
inception of the common purpose; (4) an intent on the part of the
number of persons to help one another, by force if necessary, against
any 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 general
purposes, though not amounting to rebellion; but it is probably not capable of any very
precise 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 the
authorities compelling the Court to hold that a civil commotion necessarily involved a revolt
against the government although the disturbances had to have sufficient cohesion to prevent
them 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 in
accordance 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). The
approach adopted by the New York court in that case was specifically rejected by Mr. Justice
Staughton in Athens Martime Enterpisesin the following terms:
If one takes the word ["riots"] in its current and popular meaning, nobody
but a Sloane Ranger would say of this casualty: "It was a riot." The word today
means the sort of civil disturbance which has recently occurred in Brixton, Bristol
or Wormwood Scrubs. [Counsel for the Association] referred me, in this
connection, to [PanAmerican] ....There an aircraft had been hijacked and blown
up by members of the Popular Front for the Liberation of Palestine. The insurers
denied liability on the ground that this was a loss by "riots," and therefore
excluded. District Judge Frankel expressed some forthright criticism of English
jurisprudence on this point, and declined to depart from the current and ordinary
meaning of the word.
That approach attracts considerable sympathy, at any rate from me, and at
any rate in theory. But on further examination it cannot be adopted for an English
policy 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.).
2003]
1325
purpose; (5)force or violence, not merely used in and about the

common purpose, but displayed in such a manner as to alarm at least
one 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 riot
definition of three or more persons has been increased to twelve or
more persons.'62 Section 10(2) of the Act expressly provides that the
terms "rioters" in Rule 8163 and "riot" in Rule 10' 6 of the Rules for
Construction of Policy in Schedule 1 to the Marine Insurance Act 1906
shall be construed in accordance with the definition of riot in section 1
of the Public Order Act unless a different intention appears.' 5
3.
Malicious Acts, Terrorists, and Persons Acting from a Political

Motive
The Institute Malicious Damage Clause covers cargo damage

caused by, among other things, "malicious acts.' 6 Prior to their
revision in 1982, the Strikes Clauses for Cargo covered loss or damage
to the subject-matter insured by "person[s] acting maliciously.' '67 This
category of persons has now been substituted in the Institute Strikes
Clauses (Cargo) by "terrorist[s] or... person[s] acting from a political
motive. ' 11 In the ITC Hulls, both the 1983 and the 1995 versions, and
now in the new International Hull Clauses, loss or damage caused by
"terrorist[s]," and loss or damage caused by "person[s] acting
maliciously" are subject to separate exclusions (although each is
coupled with an express alternative of "person[s] acting from a
political motive"). 69 The Institute War and Strikes Clauses, HullsTime 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 PanAmerican,
Judge Frankel of the United States District Court for the Southern District of New York
refused to follow the English authorities and held that the destruction of the aircraft by
hijackers 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 ordinary
judicial 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., supranote 94, 30-31.
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[Vol. 77:1295
maliciously," and "person[s] acting from a political motive.' 7 It may

be, 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 case
may be. The only real indication that they might mean different things
arises from the slight difference in wording between the Strikes
Exclusion and the Malicious Acts Exclusion in the International Hull
Clauses.'
The former will exclude any type of loss, damage, or
liability "caused by any terrorist or any person acting from a political
motive"' 72 whereas the latter will only exclude such loss, damage, or
liability if it arises from "the detonation of an explosive" or from "any
weapon of war."'7 3 Thus if loss, damage, or liability arises out of
anything other than the detonation of an explosive or any weapon of
war and is caused by a person acting maliciously who is neither a
terrorist nor acting from a political motive, then that loss will not be
excluded and will fall within the marine cover.' Although this seems
logical, it is questionable given that such loss or damage would seem
to fall squarely within the cover provided by Clause 1.5 of the Institute
War and Strikes Clauses, Hull-Time.
a.
Malicious Acts
In Allen v Flood, (which concerned a labor dispute) Lord

Halsbury, in his dissent, said the following:
Now intentionally to do that which is calculated in the ordinary course
of events to damage, and which does, in fact, damage another in that

other person's property or trade, is actionable if done without just cause
or excuse. Such intentional action, when done without just cause or
excuse, is what the law calls a malicious wrong."'
In the same case, Lord Watson said that "[m]aliciously ...means
and implies an intention

to do an act which is wrongful to the
76
detriment of another."
The point first arose in a marine insurance contract in Pesquerias
y Secaderos de Bacalao de Espatia, S.A. v Beer'77 This was a hull
170.
171.
172.
173.
174.
HUDSON & ALLEN, supra note 10, at 307.

LLOYD'S JOINT HULL COMM., supra note 94, 30-3 1.
Id.30.
Id31.
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', 1892
A.C. 25 (Eng.) (citations omitted)).

176. Id.at 93-94 (quoting Mogul S.S. Co., 23 Q.B. at 612).
2003]
1327
insurance case arising from events in Spain at the outset of what

became the Spanish Civil War.'78 This case concerned several trawlers
seized in ports on the Basque Coast in 1936 at the outbreak of the
unrest.'79 The perils relied upon by the owners were those of riots and
malicious acts.'80 Ultimately, the hull underwriters succeeded on the
war exclusion of the policy, overturning Mr. Justice Atkinson. 8 In his
initial opinion, Mr. Justice Atkinson added that the taking of the
fishing boats was also a malicious act, citing the comments of Lord
Halsbury in Allen v Floodas the authoritative definition of "malicious
acts."'82 Mr. Justice Atkinson went on to add references to passages
from Lord Herschell's opinion in Allen v Flood emphasizing that3
there need be no ill-will for there to be malice under the law.'
However, when the point next arose in the marine insurance context in
Nishina Tradng Co. v Chijyoda Fire & Marine Insurance Co. (The
Mandarin Sta), Lord Denning (in the Court of Appeal) observed that
the malicious act peril connoted "spite, or ill will, or the like."' 4
The matter then came up for consideration in 1983 in Salem
where Mr. Justice Mustill said that "there may, consistently with the
decision in The MandarinStar,be a right to recover where the insured
property is damaged by an act of wanton violence, the malice being
directed, so to speak, at the goods rather than their owner."'8 5
On the facts of the Salem case, which concerned, among other
things, a conspiracy to steal a cargo of oil, the conspirators did not
actually wish to harm the goods; the conspirators merely wished to
make off with the goods, so the judge found no "malicious acts"
coverage. 86
The latest pronouncement on the subject is that of Mr. Justice
Coleman 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 loss
after 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).
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[Vol. 77:1295
opened.'88 The owner relied on "malicious acts" coverage because the

vessel was covered under a mutual association on terms including
coverage for loss or damage caused by any person acting
maliciously.'89 The judge referred to The MandarinStarand Salem and
concluded that he was not bound by either of them because, in both
cases, the malicious act peril had been inapplicable, regardless of
whether spitefulness was necessary.' 9 Then, referring to The
Malicious Damage Act, 1861, Mr. Justice Coleman concluded that the
malicious act peril applied so that if "the vessel was lost or damaged
due to the conduct of someone who was intending to cause it to be lost
or damaged or was reckless as to whether such loss or damage would
be caused, that is enough to engage the liability of war risk
underwriters."''
b.
Terrorism
It has already been noted that there are, as yet, no universally

accepted legal definitions of the terms "terrorism" or "terrorist."' 9'2 The
terms have not been the subject of judicial discussion in any English
marine insurance cases. However, it is remarked above that the
wording of the various Institute Clauses indicates that the terms
"person acting maliciously" and "terrorist' are more or less
interchangeable;'. 3 the comments of Mr. Justice Coleman in The
Grecia Express seem to speak for themselves to this connection.'9'
Moreover, the long history of troubles in Northern Ireland has
produced various statutory definitions of terrorism, the most recent of
which 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 Legislationagainst terrorism(Cm 3420), which
was published in December 1998." Id. explanatory notes 14. Paragraph 8 of the
Explanatory Notes to the Act states the following:
The previous counter-terrorist legislation was originally designed in response to
terrorism connected with the affairs of Northern Ireland ("Irish terrorism"), and
some of its provisions had subsequently been extended to certain categories of
international terrorism. It did not apply to any other terrorism connected with UK
affairs ("domestic terrorism"). Under the Act these restrictions have been lifted, so
2003]
1329
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 or
not subsection (1)(b) is satisfied.'96
Following the terrorist action on September 11, 2001, a number
of revised War and Terrorism Exclusion Clauses were published for
use in the nonmarine market. The International Underwriting
Association's (IUA) Technical Underwriting Committee, therefore,
issued a brief to the Clauses Committee to examine the existing and
the new clauses and to determine whether any redrafting was
necessary.'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 the
following definition of terrorism for the purposes of a revised
terrorism exclusion clause:
For the purposes of this Clause "terrorism" means an act or acts
(whether threatened or actual) of any person or persons involving the
causing 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),
availableathttp://www.forc.org/journal/faII02/FaIlO2PIayer2.pdf (last visited June 3, 2003).
198. See id.
1330
TULANE LA W REVIEW
[Vol. 77:1295
by whatever means made or claimed to be made in whole or in part for

political, religious, ideological or similar purposes. 99
On January 10, 2002, the IUA issued a bulletin confirming that "it is
of 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 their
20 0
current form.
c.
Persons Acting from a Political Motive
The term "political motive" has not been judicially defined in the
context of an insurance policy.20 ' It seems clear, though, that the
additional phrase "or any person acting from a political motive" (or
any variant thereof) in any of the Clauses is disjunctive and does not
qualify either "terrorist" or "person acting maliciously.' 22 Thus the
effect of the alternative "any person acting from a political motive" as
a named peril is, in broad terms, simply to extend the cover over
consequences of politically motivated hostile deliberate acts to include
the consequences of politically motivated acts by individuals, as well
as those acts by persons acting or professing to act with governmental
authority.2 3 In other words, the phrase does not seem to add very
much, 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/PIPolicy
SampleERC.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 its
policy." 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 of
weapons of war. See IVAMY, supra note 10, at 562. The exclusion in the 1983, the 1995, and
the 2000 Clauses could appear to be wider in scope. See supra notes 166-202 and
accompanying text.
204. 3 JONATHAN C.B. GILMAN, ARNOULD'S LAW OF MARINE INSURANCE AND
AVERAGE 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 certain
types 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. An
example of the type of conduct which may now be brought within the war cover
and removed from the scope of the ordinary marine cover is afforded by the
litigation in the United States concerning the HaiHsuan and other vessels, whose
crews 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 "any
person acting from a political motive," see HUDSON & ALLEN, supra note 10, at 75-80. The
language "any person acting from a political motive," according to Hudson and Allen,
20031
V
1331
CONCLUSION
At the start of this Article, it was observed that where a terrorist

has sufficient money, influence, and connections, the means
available-and hence the type of terrorist acts possible-are limitless.
This Article has examined the various market covers available for
physical loss of or damage to marine property caused by any hostile
deliberate act-effectively, anything that a terrorist might do (and
more)-and has demonstrated that here, too, the only real limit is
money. Where an assured has sufficient funds, it should be possible,
in theory at any rate, to select from the various covers available on the
market to put together a package of protection providing virtually
seamless marine insurance cover.
Certainly, the terrorist attacks of September 11, 2001, have
caused 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, the
scope of any positive cover or exceptions. The primary impact of
September 11th on the marine insurance market has been a financial
one."5 However, while price increases have been significant, they have
paled in comparison with increases for other classes of business.
covers the phenomenon of the "gentle terrorist," who does not wish to do anyone
any harm, but wishes merely to demonstrate his objections to somebody or some
cause by doing some physical damage to some property associated with the object
of his objection. (The Editor has some knowledge of this class of case, having
dealt with claims for damage to a ship and her cargo on board caused by a refugee
group 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 property
insurance in the United States and was not intended to have any extreme effects on the
marine insurance market), have found themselves compelled to offer insurance against a
terrorist attack up to the limits of ordinary P & I Club cover, notwithstanding the traditional
scheme of the P & I Clubs to deal with war and marine risks separately with cover for war
risks set at a lower limit. See Terrorism Risk Insurance Act, 15 U.S.C. 6701 (2002). The
members 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. legislation
allows the insurer to offer the cover at whatever premium deemed appropriate, the Clubs
have advised that premiums will probably amount to several million dollars per vessel.

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Insuring the Risk of Terrorist Damage and

Involved in the Marine Adventure:

THE INSTITUTE CLAUSES AND THE OVERALL STRUCTURE

OF THE MARKET COVERS FOR THE HOSTILE DELIBERATE

The Available Hostile Deliberate Act

III. P & I CLUBS AND WAR RISKS ASSOCIATION,

Top-Up, AND ALTERNATIVE COVER ...........................................

IV THE HOSTILE DELIBERATE ACT PERILS IN DETAIL ................... 1317

The ingenuity of the modem terrorist knows no bounds. The

aggressively,' but with an object other than that of terrorizing and

THE INSTITUTE CLAUSES AND THE OVERALL STRUCTURE OF THE

Before considering each of the hostile deliberate act perils in

Section 30(1) of the Marine Insurance Act 1906 provides that a

4-6 (1987). It became concentrated in the City of London during

From the very earliest times, it was customary to exclude liability

The Traditional Method of Insuring Against War Risks and the

The traditional method of insuring against war risks was to state

ITS PRINCIPLES AND

present method, certainly as regards war risks insurance, is tortuous and

The Fmneworkas It Is Today

The Marine Cover

The Institute Cargo Clauses (A)

It covers a risk, not a certainty; it is

something, which happens to the subject-matter from without, not the

43. Id. at 12-50.

Clause 7-Strikes Exclusion Clause

discussed below following an analysis of the cover provided by the (B)

Institute Cargo Clauses (B) and (C)

ship, and jettison of the goods without reasonable cause.6' Damage by

The Available Hostile Deliberate Act Cover--Cargo

The Institute Malicious Damage Clause 1/8/82

To obtain the cargo cover that is otherwise excluded under Clause

61. Id. at 44.

by malicious acts vandalism or sabotage, subject always to the other

Institute War Clauses (Cargo) 1/1/82

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

The risks covered by the Institute Strikes Clauses (Cargo) 1/1/82,

loss of or damage to the subject-matter insured caused by

The Termination of Cargo Cover

The definition of the particular terms included in the various

It was recognized that if marine underwriters were to grant

oversea vessel ....

terrorists). 5 The latter clauses do not contain a Waterborne transit

Hull and Freight 8

The Marine Cover

85. See id.

due diligence of the Assured, Owners, or Managers." Those in the

violent theft by persons from outside the vessel

2.2 This insurance covers loss of or damage to the subject-matter

barratry of Master, Officers or Crew

The Marine Exclusions

There are five specific exclusion clauses covering war, strikes,

ionising radiations from or contamination by radioactivity

The fifth exception in the paramount clause is new and clearly

The Available HosileDelibemteAct Cover. The Institute War

The cover excluded by the war, strikes, malicious acts, and

See supra note 97 and accompanying text.

LLOYD'S JOINT HULL COMM., supra note 94, at 15.

See HUDSON& ALLEN, supra note 10, at 306-14.

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