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Shipowner's piracy claim against war risk insurers dismissed

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A judge in the High Court in London has thrown out a claim by a shipowner against a group of 10 war risk underwriters over the total constructive loss of a vessel that the owner claimed was boarded by pirates in the Gulf of Aden who then detonated a bomb on board.

In the case of Suez Fortune Investments Ltd. & Piraeus Bank A.E. v Talbot Underwriting Ltd., Mr. Justice Julian Flaux ruled that reasons given by the shipowner for its refusal to hand over an electronic archive to lawyers were a “fabrication.”

Even if the shipowner's story were true, the judge said, after the court had granted an extension to them for handing over the archive, he was “firmly of the view that there could not be a fair trial as between the owners and the insurers unless there was full and proper compliance by the owners with their disclosure obligations, including handing over the archive.”

The case concerned the loss of the motor tanker Brillante Virtuoso, which was owned by Suez Investments and mortgaged by Piraeus Bank.

The vessel suffered an explosion near its engine room while stopped in the Gulf of Aden on July 5, 2011.

The owner claimed that the vessel was boarded by pirates who, when the vessel's engine, which had stopped, could not be restarted, detonated an explosive device in its purifier room.

After a salvage effort, the ship was sold for scrap, and the owner instigated a claim against its war risk underwriters claiming the vessel was a total constructive loss.

The underwriters resisted that claim, and court proceedings began in the commercial court in London in 2012.

The parties agreed that the issue of quantum of claim should be tried before liability and, on Nov. 8, 2013, Mr. Justice Flaux ordered a split trial.

In a judgment handed down on Jan. 15, 2015, Mr. Justice Flaux ruled that the vessel was a total constructive loss.

The insurers contended that in the matter of liability for the loss, the shipowner was not entitled to claim under its policy because by delaying transit through the Gulf of Aden and/or calling at a port of place within the Gulf of Aden, it had breached Talbot's Gulf of Aden warranty, which stated that “when transiting, vessels/craft shall not call at any port or place or delay their passage in the transfer of cargo, stores, personnel or the like,” according to court papers.

The insurers also claimed that the owner and manager of the vessel had breached the policy by failing to apply best practices to deter piracy.

In March 2015, Norton Rose Fulbright L.L.P. in London, the law firm representing the insurers, served a defense and counterclaim to the owner and bank's lawyers, Hill Dickinson L.L.P. and Clyde & Co. L.L.P., alleging that the vessel had been lost “as a result of willful misconduct on the part of the owners,” the court papers show.

In May 2015, the judge ordered the shipowner to disclose certain documents, which had been transferred to a USB flash drive, to the insurers' lawyers.

The owners and their lawyers subsequently made several applications for an extension of the time needed for them to disclose the electronic archive held on that flash drive.

A letter sent by Hill Dickinson in December 2015 set out the shipowner's reasons for its unwillingness to relinquish the flash drive, including that the drive contained information about an unrelated case, confidential information including telephone records and bank details about third parties, and information about the shipowner's health, among other things.

The shipowner then applied for a further extension of time, until Feb. 29, 2016, contending that a lawyer for World Wide Worldwide Green Tankers Ltd., which previously had managed the vessel, would not hand over the flash drive for various reasons.

In the meantime, the insurers alleged that the owner of the vessel had conspired with the charterers of the vessel to issue false bills of lading in order to deceive Chinese authorities into charging a lower import duty.

A date for a hearing was set for March, but in a statement made on Feb. 2, the ship's ultimate owner, Marios Iliopoulos, claimed he could not travel to London from Greece for health reasons.

He also was arrested by City of London Police for conspiracy to commit fraud — in an unrelated matter — and released on bail after several hours of questioning on April 12.

The judge said in his Tuesday ruling that he had ignored those events in evaluating Mr. Iliopoulos' evidence in this case.

Despite a claim by Hill Dickinson that the case could be heard without the electronic archive, on May 10 the judge threw the case out.