5 Some reflections
It appears that the strengthening of the cover for insurance of marine risk regarding political risk in 2019 was highly relevant in relation to the problems met by the ship owner industry in today’s geopolitical surroundings. This cover is also far better than the UK marine risk cover. The NP marine risk cover does not, however, include total loss cover for seizure/detention and blocking and trapping or loss of hire cover if the vessel is prevented from leaving port.
The NP war risk cover appears as a main rule to be similar to the UK war risk cover even if the approach is different. The interventions covered by NP Cl. 2-9 letter b appear to be covered also under the UK war risk clauses, and the cover for detention and blocking also seems to be similar.
However, the UK war risk clauses cover “arrest restraint detainment confiscation or expropriation” by foreign state unless these interventions are under quarantine regulations or by reason of infringement of any customs or trading regulations. This is a broader war risk concept than NP Cl. 2-9 sub-clause 1 letter b requiring interventions “for the furtherance of overriding political motives” as the Commentary delimit such overriding political motives against “interventions in accordance with applicable law for the purpose of enforcing customs-, police-, safety- or navigation-regulations or any private law rights against the insured vessel are outside the scope of the war insurance cover” and states that if “the vessel is arrested/captured at sea by the Coast Guard or representations of the police or customs authorities to hinder or investigate illegal fishery, import or export or breach of trade regulations, this will not be covered. The same is true if the ship is arrested or detained in port because of doubt as to whether the ship is compliant with the rules regarding technical and operational safety, or because the crew is suspected of smuggling.” It should be noted that this difference is only relevant for the detainment cover and not for the blocking and trapping cover, but it is still a distinguished difference.
As an extension of this, it can be questioned whether the criteria chosen in NP to distinguish between war and marine risks for the sake of clarification are convenient. In the words of the Heroic Idun case, the difficulty of analyzing the individual components of the expression “interventions for the furtherance of overriding political goals typical for war or times of international crisis” in isolation “strongly suggests that the phrase should be understood as a whole in the context in which it was used in the Chemical Ruby case, namely as a flexible requirement encompassing key situations covered by war risk insurance, by contrast to Law Enforcement” (para 1256). This implies that the expression in the Plan text is quite meaningless on its own, and that the core of the matter lies in the Commentary, which provides little help on what constitutes “typical for war and times of international crisis”. Again, from the Heroic Idun case: it is easier to state what is not covered than what is covered. The guidelines listed in the case and the problems pointed out regarding evidence further demonstrate that the criteria are not easy to use.
This is interesting because the opposite approach – to exclude what is not covered – is used in the UK war risk conditions. These conditions start out with a wide blanket cover for a long list of interventions – broadly speaking comprising the same interventions as listed in fewer words in NP – but then narrow the cover down through exclusions. The interesting exclusions in this context are exclusions for interventions made by own state power (cl. 5.1.3) and “under quarantine regulations or by reason of infringement of any customs or trading regulations” (cl. 5.1.4). The latter exclusion does not include “capture”, but the word capture has a narrower meaning and does not encompass interventions taken for the mentioned reasons. This approach could easily be adjusted to NP Cl. 2-9 sub-clause 1 letter b by adopting similar wordings to the UK conditions for the exclusions: “capture at sea, confiscation, expropriation and other similar interventions that is not made by own state power or caused by infringement of regulations concerning quarantine, customs or trading”.
There are two advantages to this approach. First, as mentioned, some market participants have criticized NP for providing a narrower cover than the UK conditions, which as described above is correct in this regard. The second advantage is that the Commentary can outline the cover by defining and discussing the exclusions, instead of trying to explain the expression “overriding political objectives”, which has turned out to be extremely difficult. The exclusion may also be broadened by adding the expression “or similar regulation” if a narrower war risk cover is wanted.(1) See the American clause referred to in the Win Win case.
On the other hand, the solution creates a disadvantage for the insurer because the burden of proof will shift: the starting point is that the interventions are covered, and the insurer will have the burden of proving that the intervention was made by own state or due to the mentioned breaches of the listed legislation. This outcome will, however, be similar to the UK regulation.
The risk for seizure by military groups that is not acting on behalf of a governing state is covered by IWSCH 1.2, and included in the cover for detainment, but not for blocking. This risk appears to be covered by NP 2-9 sub-clause 1 letter c, but it is more uncertain whether Cl. 15-11 sub-clause 2 applies to this situation.
The UK conditions have no extended loss of hire cover similarly to NP Cl. 15-16 sub-clause 2. This extension is limited to war risk as defined in Cl. 2-9 sub-clause 2. To avoid pressure against the total loss cover in Cl. 15-11 and 15-12 it may be convenient to consider an extension of such loss of hire cover to blocking by terrorists or military groups. In light of the criteria “for the furtherance of overriding political motives”, it may also be argued that there is a need for loss of hire cover in severe cases of corruption/misuse of power. Even if it is generally agreed that a breach of trading and customs regulation is not a war risk, such breaches may be outside the knowledge of the assured and may have consequences in the form of misuse of power that is out of proportion compared to the initial breach. However, this presumes that a majority of the assureds want such cover in the general standard conditions, instead of political risk insurance effected by the individual assured that needs it.