Mocatta J: [p 372] …It is probably too late to make an effective plea that the traditional methods of insuring against ordinary marine risks and what are usually called 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.

Lord MacMillan: [p 7] …This division of liability has given rise to many perplexing cases in which the minister on the one hand and the shipowner or his insurers on the other hand have been at issue as to whether a particular casualty was due to warlike operations or to the ordinary perils of navigation, each naturally seeking to place the casualty in the category for which the other is under liability. The minister accepts the position that he must be treated as if he had granted a marine insurance policy covering the risks which he has undertaken. Consequently, under s 55 of the Marine Insurance Act 1906, he is liable for any loss proximately caused by warlike operations. The adverb ‘proximately’ does not greatly assist the solution of the problem, but it at least serves to emphasise that it is the predominant and determining cause that is to be sought.

More recently, a case came before the South African Court of Appeal which provided a graphic example of the law of proximate cause. In Incorporated General Insurances Ltd v AR Shooter T/A Shooter’s Fisheries, ‘Morning Star’ [1987] 1 Lloyd’s Rep 401, SA CA, the fishing vessel Morning Star was arrested and detained by the People’s Republic of Mozambique for illegal fishing. As the owner was unable to pay the resulting fine, Morning Star was confiscated.

The owner of Morning Star duly claimed upon his policy of insurance, which incorporated war risks, on the basis that the loss had been caused by the ‘arrest, restraints and detainments of all kings…’, a peril insured against. But the court ruled that the insurers were not liable under the policy, because the proximate cause of the loss was not the arrest or detainment, but the failure by the assured to pay the fine.

Galgut AJA: [p 406] …I am, with respect, unable to agree with the finding of the court a quo that the loss of the trawler was due to a continuous process. The Mozambican tribunal imposed a fine. Had that fine been paid, the loss would not have resulted. In my view, the confiscation did not result from the arrest of the trawler, it resulted from the failure to pay the fine. That failure was, therefore, the proximate cause of the confiscation of the trawler. The fact that the plaintiff was unable to pay the fine is irrelevant. The issue is not his ability to pay the fine. The issue is what caused the confiscation. That, as we have seen, was the fact that the fine was not paid. That was not a peril covered by the risk clause. In the result, the appeal [by the insurers] must succeed.

In AG v Adelaide Steamship Co Ltd, ‘Warilda’ [1923] AC 292, HL, a hospital ship, The Warilda, was requisitioned by the Admiralty under the standard form of charter (T 99). The vessel was insured against marine risks and the Admiralty, under the terms of the charter, were liable for any losses proximately caused by war risks. Whilst steaming across the English Channel with wounded soldiers, at full speed with her navigation lights switched off, Warilda was involved in a collision with another ship for which Warilda was deemed solely to blame. The House of Lords ruled that the Admiralty were liable for the loss because, at the time of the collision, Warilda was engaged in a warlike operation, and the f c and s clause in the marine risks policy excluded war risks.

However, subsequently, in another action before the House of Lords, regarding the damage caused to the other vessel, the court ruled that the liability for the collision damage remained with the marine risks insurer. This was because the f c and s clause did exclude collision liability.

Civil war

[p 429] …What are these characteristics of an armed conflict which make it a war, albeit of an internal character? I do not propose to attempt any general definition of a civil war. It does, however, seem to me that a decision on whether such a war exists will generally involve a consideration of three questions:

(1)   Can it be said that the conflict was between opposing sides?

(2)   What were the objectives of the ‘sides’ and how did they set about pursuing them?

(3)   What was the scale of the conflict, and of its effect on public order and on the life of the inhabitants?

As regards the first element, I find it difficult to visualise a war of any kind which is not fought between sides…it must, to my mind, be possible to say of each fighting man that he owes allegiance to one side or another, and it must also be possible to identify each side by reference to a community of objective, leadership and administration. It does not necessarily follow that the objectives of all those on any one side must be identical. There may be considerable differences and even animosities between allies. But there must be some substantial community of aim, which the allies have banded together to promote by the use of force. Nor, in my view, need there always be only two sides. Two factions might fight one another, and also the State, in order to seize power. This would still be a civil war. But if the factions are too numerous, the struggle is no more than a melee, without the clear delineation of combatants which is one of the distinguishing features of a war.

The second matter for consideration is the nature of the objectives for which the sides are fighting. The classical opinion of the international lawyers is that the parties must be either the existing authorities and a faction striving to seize complete dominion over the whole or part of the State; or two factions striving against each other to seize power, with the existing rulers either fighting both factions at once, or standing impotently by…But, where the term is used in ordinary speech, I am not convinced that a desire to seize or retain the reins of State is the only motive which can ever put the contestants into a state of civil war. If all the above requirements are satisfied, I believe that there would be a civil war if the objective was not to seize complete political power, but (say) to force changes in the way in which power is exercised, without fundamentally changing the existing political structure.

Finally, there is the character and scale of the conflict, and its effect on public order and on the life of the inhabitants…I would include: the number of combatants; the number of casualties, military and civilian; the amount and nature of the armaments employed; the relative sizes of the territory occupied by the opposing sides; the extent to which it is possible to delineate the territories so occupied; the degree to which the populace as a whole is involved in the conflict…

[p 436] …As regards ‘rebellion’, I adopt the definition in the Oxford English Dictionary (Murray): …‘organised resistance to the ruler or government of one’s country; insurrection, revolt’ [emphasis added]. To this I would add that the purpose of the resistance must be to supplant the existing rulers, or at least to deprive them of authority over part of their territory.

The dictionary defines ‘insurrections’ in a similar manner, but also suggests the notion of an incipient or limited rebellion. I believe that this reflects the distinction between two exceptions as they are used in the present clause, subject to the rider that a lesser degree of organisation may also mark off an insurrection from a rebellion. But, with each exception, there must be action against the government with a view to supplanting it.

The definitions suggested by Mustill J in the Spinney’s case were later referred to by Saville J, in National Oil Co of Zimbabwe (Private) Ltd v Sturge [1991] 2 Lloyd’s Rep 281, where it was held that losses sustained by an oil company could not be recovered under a marine risks policy of insurance (incorporating only the Institute Strikes Clauses) when installations were blown up by the Mozambique National Resistance, because the policy excepted losses caused by, amongst other things, ‘insurrection’. The judge, however, suggested that the words ‘civil war’, ‘rebellion’, and ‘insurrection’ should be given their ‘business’ meaning rather than, presumably, their technical meaning.

Saville J: [p 282] …In the context of a commercial contract such as the policy under discussion, the expressions ‘civil war’, ‘rebellion’ and ‘insurrection’ bear their ordinary ‘business’ meaning. In this context, ‘civil war’ means a war with the special characteristics of being civil—that is, being internal rather than external—see Spinney’s (1948) Ltd v Royal Insurance Co Ltd [1980] 1 Lloyd’s Rep 406, p 429. ‘Rebellion’ and ‘insurrection’ have somewhat similar meanings to each other. To my mind, each means an organised and violent internal uprising in a country with, as a main purpose, the object of trying to overthrow or supplant the government of that country, though ‘insurrection’ denotes a lesser degree of organisation and size than rebellion—see Home Insurance v Davila (1954) 212 F 2d 731.

Notes

It is emphasised that the insurable risk of ‘civil strife’, excluded by a marine policy and covered under war risks, is only that civil strife which has arisen from ‘war, civil war, revolution, rebellion or insurrection’. O’May suggests that: [p 262] ‘It may be that these additional words “civil strife arising therefrom” add little to the enumerated perils…but…the phrase may be significant enough, in practice, to embrace an event which arises from the war, civil war, revolution, rebellion or insurrection, though it is geographically separated from the main action.’

Any hostile act by or against a belligerent power

Lord Wrenbury: [p 133] …All the decisions have, I think, proceeded, and in my judgment have rightly proceeded, upon the footing that the word ‘hostilities’ does not mean ‘the existence of a state of war’, but means ‘acts of hostility’ or (to use the noun substantive which follows) ‘operations of hostility’.

But, the question arises, what sort of organisation may be ascribed as being a belligerent power and who, in perpetrating hostile acts, may be considered to be acting on behalf of that belligerent power? This question was answered, in part, in Atlantic Mutual Insurance Co v King, below. In this instance, the court was of the opinion that ‘hostile acts’ meant hostile acts ‘by persons acting as the agents of Sovereign Powers or of such organised and considerable forces as are entitled to the dignified name of rebels…’. Whilst the word ‘belligerent’ was not actually used, it is presumed that, for there to be a hostile act, both the sovereign power and the rebels would necessarily have had to be belligerent towards one another.

Atlantic Mutual Insurance Co v King [1918] 1 KB 307

Goods placed aboard the vessel Tennyson, bound from Bahia to New York, were reinsured by the plaintiffs with the defendants under a marine risks policy of insurance. The policy contained an f c and s clause which stated: ‘Warranted free from all consequences of hostilities or warlike operations whether before or after the declaration of war.’ Five days out of Bahia, an explosion occurred in the hold of Tennyson and the goods, the subject matter of the reinsurance, were burned. It transpired that the explosion had been caused by a bomb placed aboard the vessel by a man named Niewerth, a German subject resident in Bahia, aided by an accomplice. The question before the court was whether a hostile act by a German civilian could be construed as a hostile act by a sovereign power.

The court ruled that the reinsurers were not liable under the marine risks policy. The Act by a civilian, in following the policy of his government, amounted to a hostile act within the meaning of the f c and s clause.

Bailhache J: [p 310] …the plaintiffs say rightly, as I think, that the word ‘hostilities’, as used in the clause, means hostile acts by persons acting as the agents of Sovereign Powers, or of such organised and considerable forces as are entitled to the dignified name of rebels as contrasted with mobs or rioters, and does not cover the act of a mere private individual acting entirely on his own initiative, however hostile his action may be.

Clause 1.2: Capture seizure arrest restraint or detainment, and the consequence thereof or any attempt thereat

The IWSC(H)(95), in cl 1.2, states that:

…this insurance covers loss of or damage to the Vessel caused by…capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat.

The same risks are covered by the IWC(C)(82), except that the provision is qualified in that ‘capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat’ is only covered when the loss or damage arises from ‘risks covered under 1.1 above’.

Capture and seizure

The court ruled that the insurers were not liable under the policy. Even if the requisition amounted to the restraint of princes, an insured risk, the policy also contained an f c and s clause, and the ‘constitutional seizure’ of the gold by officers of the government amounted to ‘seizure’ within the meaning of the f c and s clause. Therefore, the insurers were excluded from liability.

Phillimore J: [p 923] …I have no doubt that the gold was, in each case, forcibly taken by officers of the South African Republic within the territory of the South African Republic…I have further no doubt that the gold was legally seized according to the laws in force in the South African Republic; I shall perhaps best explain my meaning by saying that it was constitutionally seized.

[p 925] …This brings us to two questions: Was the taking of this gold an arrest, restraint, or detainment of rulers? If so, was it also a capture, seizure, or detention, or a consequence of warlike operations?

I am in some doubt about the first point. Restraint of princes and rulers is often more exercised by a government against the citizens of another State. It generally arises in a war, or at least as an act of retorsion, such as embargo or blockade. It is not a restraint of princes when a ship or cargo is arrested by civil process at the suit of a subject.

…Was this taking a capture, seizure, or detention within the terms of the clause of exception? It has been suggested that these words point to hostile taking, and to hostile taking only. That is probably true of capture. But seizure is an additional word.

[p 926] …‘Seizure’ signifies ‘the taking of a ship by the act of governments or other public authority for a violation of the laws of trade, or some rule or regulation instituted as a matter of municipal police, or in consequence of an existing state of war’. This is the language of Bigelow CJ, in Greene v Pacific Mutual Insurance Co. In Cory v Burr the seizure was not, as it was at first contended before me, an act of mere force; it was a legal seizure…The cases I have cited further show that seizure is not confined to hostile acts. Nor is the word ‘detention’.

[p 927] …The argument may be put this way: there is no arrest or restraint of princes except by capture, seizure or detention; the most outlying case of restraint of princes, Rodocanachi v Elliott, being a case of detention. In other words, if the risk is one covered in the body of the policy, it is necessarily excluded by the clause of exception—a clause which probably excludes this risk and some others.

Are barratrous and piratical seizures covered by marine or war risks?

Essential to both ‘capture’ and ‘seizure’ is the act of taking forcible possession. But ‘seizure’ is a broad concept, and such an act need not necessarily be confined to external forcible possession. Thus, in Kleinwort v Shepard (1859) E&E 447, the taking over of a ship by emigrants, effectively an act of piracy, was adjudged to be ‘seizure’. But, in the American case of Republic of China, China Merchants Steam Navigation Co Ltd and United States of America v National Union Fire Insurance Company Of Pittsburgh, Pennsylvania, ‘Hai Hsuan’ [1958] 1 Lloyd’s Rep 351, where Communist Chinese crews took control of Nationalist Chinese vessels, the court was in no doubt that such action by a crew could not amount to seizure as it applied to an f c and s clause. It amounted to barratry. The court, in reaching its decision, distinguished the Kleinwort case.

Circuit Judge Soper: [p 359] …No case has come to our attention in which the barratrous conduct of either the master or the crew of a vessel has been held to be within the capture and seizure exclusion clause of a marine insurance policy. In Kleinwort v Shepard (1859) 1 E&E 447, coolie passengers took control of a ship and made off with her. The court, in holding that the resulting loss came within the exclusion of ‘capture and seizure’, inquired, argumentatively, whether it would not also be a seizure if a crew, intending to turn pirates, should murder the master and run away with the ship. But this was mere dictum…The single point decided was that the passengers on board the ship, owing no duty of loyalty to the owner and being incapable of committing barratry, had effected a ‘seizure’ of the vessel within the excluding clause.

It is emphasised that barratry and piracy are specifically excepted from the paramount War Exclusion Clause of the ITCH(95) and the IVCH(95). To that effect, cl 24.2 of the ITCH(95) states:

In no case shall this insurance cover loss damage liability or expense caused by…

24.2  capture seizure arrest restraint or detainment (barratry and piracy excepted) and the consequences thereof or any attempt thereat.