War, Political And Strike Risks
1. War Risks Clauses
The SG form scheduled to the MIA covered marine and war risks. However, it became common for war risks to be excluded from cover. This was done by the ‘FC&S’ clause (standing for ‘free of capture and seizure’). One form of the FC&S clause provided:
‘Warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof and of any attempt thereat; also from the consequences of hostilities and warlike operations, whether there be a declaration of war or not…Further warranted free from the consequences of civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or piracy’.
In the past, war risks were often insured by a policy which covered those risks excluded by the FC&S clause.
Today, the Institute Clauses provide an indemnity against losses caused by specified war and strike perils. The Institute War and Strikes Clauses Hulls – Time (1995) covers loss of or damage to the vessel caused by:
a) War, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power.
b) Capture, seizure, arrest, restraint or detainment, and the consequences thereof or any attempt thereat.
c) Derelict mines, torpedoes, bombs or other derelict weapons of war (this was introduced to counteract the decision in The Nassau Bay).
d) Strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions.
e) Any terrorist or any person acting maliciously or from a political
f) Confiscation or expropriation.
It should be noted that the Institute War Clauses (Cargo) (1982) provide cover for losses caused by the first three of the above perils. However, the fourth and fifth perils referred to above are covered by the Institute Strikes Clauses (Cargo) (1982).
Note that the Institute Time Clauses – Hulls (1/11/95) contain a war exclusion clause (clause 24 – the first, second and third perils above), strikes exclusion clause (clause 25 – the fourth and fifth perils above), a malicious acts exclusion clause (clause 26) and, for good measure, a radioactive contamination exclusion clause (clause 27).
These exclusions are described as ‘paramount and shall override anything contained in this insurance inconsistent therewith’.
The Institute Cargo Clauses (1/1/82) contain a war exclusion clause (clause 6 – the first, second and third perils above), a strikes exclusion clause (clause 7 – the fourth and fifth perils above) and a ‘radioactive’ exclusion in clause 4.7 in the ‘A’ Clauses) and 4.8 (in the ‘B’ and ‘C’ Clauses). It may be that the ‘A’ Clauses will cover the peril of ‘confiscation or expropriation’, unless of course one of these exclusions apply. See also the Institute Cargo Clauses (1/1/09). One set of facts may give rise to more than one insured peril, not least because there is considerable overlap between some of the ‘war risks’ and some of the ‘political risks’.
2. War risks
i)War, civil war, belligerent powers
The traditional form of cover against war risks was against ‘the consequences of hostilities and warlike operations’. It was clear, however, merely because a loss was sustained during a war, or in conditions of war which made it more probable that the loss would happen, did not mean that the loss was sustained by reason of an insured peril.
The term currently used is ‘war, civil war’, etc. ‘War’ often includes ‘civil war’ in any event. In order to determine whether or not there has been ‘war’, the Court is concerned to construe the contract and not to impose a definition of ‘war’ which is familiar only to international lawyers. It therefore does not matter whether there has been a declaration of war; it may not be necessary for the loss to be sustained in battle; it may be that the loss is suffered by reason of defensive operations. In Spinney’s (1948) Ltd v Royal Insurance Co, the Court identified several criteria which should be considered in determining if there is a ‘war’:
a) whether there is an armed conflict between opposing ‘sides’
b) the objectives of the parties and how those objectives are pursued
c) the scale of the conflict and the effect on public order.
It is unlikely that one or both of the ‘sides’ in a conflict need be a government exercising sovereign authority in order that there be a ‘war’. (However, note the US position: Pan American World Airways Inc v Aetna Casualty & Surety Co).
The peril ‘any hostile act by or against a belligerent power’ requires a ‘hostile’ act to be carried against or by a ‘belligerent power’, that is, a power engaged in war or hostilities (British Steamship Co v R (The Petersham), Green v British India Steam Navigation Co Ltd.
However, if the conflict is sporadic or indiscriminate or without purpose these are factors which count against there being a war or civil war.
ii)Revolution, rebellion, insurrection, civil strife
‘Revolution’ means a forcible overthrow of an established ruler or government.
‘Rebellion’ means organised armed resistance to a ruler or government, insurrection or revolt (Spinney’s (1948) Ltd v Royal Insurance Co , where the Court held that the purpose of the rebellion must be to remove the existing rulers or deprive them of dominion over a particular territory). In Spinney’s, ‘insurrection’ was given a similar meaning to rebellion. In National Oil Co of Zimbabwe (Private) Ltd v Sturge, the Court said that ‘insurrection’ denotes a lesser degree of organisation and size than ‘rebellion’ and that it did not matter why the rebels wanted to overthrow the government. In Tappoo Holdings Ltd v Stuchbery, the Supreme Court of the Fiji Islands held that loss and damage caused by looters amidst the breakdown of law and order following the armed seizure of Parliament amounted to damage caused by an ‘insurrection’ which was excluded by the relevant policy.
‘Civil strife’ has overtones of even less organisation and refers to civil disputes or unrest. However, given that it takes its meaning from the other perils in this clause, it is likely to require violence or force.
3. Political risks
i)Capture and seizure
‘Capture’ has been defined as including ‘every act of seizing or taking by an enemy or belligerent’. Submission to a hostile force is probably sufficient.
‘Seizure’ has been defined as a wider term than ‘capture’ to embrace ‘every act of taking forcible possession either by lawful authority or by overpowering force’. In Kuwait Airways Corp v Kuwait Insurance Co SAK, the House of Lords referred to ‘seizure’ as ‘belligerent or non-belligerent forcible dispossession’.
However, the House of Lords also said it was always a question of construction.
Even in the case of unlawful seizure, actual force is not required; the threat of force is sufficient (Bayview Motors Ltd v Mitsui Marine and Fire Insurance Co Ltd).
As to the meaning of ‘capture’ and ‘seizure’, where both concepts are referred to together in the one provision, see Osmium Shipping Corporation v Cargill International SA(The Captain Stefanos).
ii) Arrest, restraint and detainment
‘Arrest’, ‘restraint’ and ‘detainment’ connote the loss of the freedom or right to use one’s property as one chooses. The terms have different meanings, but they overlap in their meaning. Indeed, they may also overlap with ‘capture and seizure’ (Miller v The Law Accident Insurance Co). Arrest, restraint and detainment may be accompanied with a loss of possession, but it need not; or by the threat of force; but it may not.
Rule 10 of the Rules of Construction scheduled to the MIA provides: ‘The term “arrests, etc, 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’.
The notion of ‘arrest, etc.’ traditionally has been limited to those cases of the exercise of sovereign or executive power over the insured property for political or public purposes. If the arrest is by reason of ordinary judicial process, the arrest is seen as non-fortuitous.
Where the power exercised goes beyond ordinary judicial process so as to amount to the exercise of executive power, there will be an arrest, etc and the exception will not apply: Melinda Holdings SA v Hellenic Mutual War Risks Association (Bermuda) Ltd.
iii)Consequences and attempts
‘Consequences’ may broaden the scope of the cover. It has been suggested that ‘consequences’ refer to a ‘loss’ caused by capture, etc.
However, that would be a forced reading of the cover.
‘Attempts’ provide cover for any uncompleted or failed attempt to capture, etc. the insured property.
iv)Persons acting maliciously
In Atlasnavios-Navegacao Lda v Navigators Insurance Co Ltd, the Supreme Court explained the meaning of ‘any person acting maliciously’ in that it should now be understood as relating to situations where a person acts in a way which involves an element of spite or ill-will or the like in relation to the property insured or at least to other property or perhaps even a person, and consequential loss of, or damage to, the insured vessel or cargo. It is not designed to cater for situations where the state of mind of spite, ill-will or the like is absent.
v)Institute Cargo (War) Clauses
Under the Institute Cargo (War) Clauses 1982 and 2009, there is cover for loss or damage caused by political risks only insofar as they arise from the war risks. There is no such limitation in the Institute War and Strikes Clauses applicable to lull policies.
4. Strike Risks
It is to be noted that the ‘strikers, etc.’ perils in fact stipulate that there will be insurance coverage in the event that the loss or damage is caused by persons engaged in strikes, lock-outs, labour disturbances and riots, etc. and not by the ‘strike’, ‘lock-out’, etc. itself. Indeed, clause. 3.7 of the Institute Strikes Clauses (Cargo) excludes loss arising from the absence of labour resulting from a strike, lock-out, etc. Nevertheless, it is worth considering the meaning of a ‘strike’, etc.
A ‘strike’ is a stoppage of work or a refusal to work as a result of a grievance, with a view to improving labour conditions or terms of employment, or by way of protest in connection with other workers’ conditions or possibly a political protest. To be a ‘striker’, all that is necessary is that the person should stop work or refuse labour; his or her personal motives may not be relevant.
A ‘lock-out’ by contrast constitutes a refusal by an employer to furnish work to an employee or to allow an employee access to the workplace, except on conditions demanded by the employer and to be accepted by the employees.
The definition of ‘riot’ in the Public Order Act 1986 and similar legislation has been adopted in the context of insurance policies (compare the position in respect of ‘war’).
A ‘civil commotion’ is something between a ‘riot’ and a ‘civil war’.
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