Court of Appeal clarifies issues relating to Marine Insurance, Piracy, and the treatment of Ransom Payments as a matter of English Law and Public Policy


Masefield AG v Amlin Corporate Member Ltd [2011] EWCA 24 The Facts

The vessel "BUNGA MELATI DUA" was captured in the Gulf of Aden by Somali pirates, while carrying cargo belonging to the Claimant. Negotiations for the payment of a ransom, to which the Claimant was not a party, were commenced by the vessel's owners and the ship, crew and cargo subsequently released. Prior to the release, the Claimant made a claim under its cargo policy on the grounds that seizure by pirates amounted to an actual total loss.

The Court of Appeal's Decision

Does seizure by pirates amount to an actual total loss under a marine insurance policy?

The Claimant had argued that the cargo became an immediate actual total loss when the vessel was seized by pirates, whatever the prospects of recovery. The Defendant submitted that section 57(1) of the Marine Insurance Act 1906, which requires the insured to be "irretrievably deprived", would only be satisfied if there was a physical or legal impossibility of recovery and, in this case, the cargoes were not irretrievably lost as there was a good chance of the ransom negotiations being successful.

The Court rejected the proposition that there was a rule of law that the seizure of a vessel by pirates amounted to an "actual total loss". It held that it is ultimately a question of fact as to whether the insured has been irretrievably deprived of possession and in this case, the seizure did not amount to an actual total loss.

There could be no actual total loss where there was not only a chance, but a strong likelihood, that payment of a ransom of a comparatively small sum, relative to the value of the vessel and her cargo, would secure the recovery of both. The Claimant had not been irretrievably deprived of its property.

Ransom Payments and Public Policy

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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