Miller's Marine War Risks
Page 30
CHAPTER 5
The insured perils: An overview
The insured perils: An overview
5.1 As is explained in which considers “proximate cause” in detail, and in common with the ordinary rules of causation, a claim against a war risk underwriter will succeed only if the loss was “proximately caused” by one of the perils for which insurance is given by the policy (a rule with its roots in section 55(1) of the Marine Insurance Act 1906, and which has received very recent attention from the Court of Appeal and Supreme Court in The B Atlantic).1 In other words, the insured must show that the facts surrounding the casualty which the insured object has suffered lead to the conclusion that the loss or damage was caused by one (or more) of the perils against which the policy gives insurance cover. The purpose of this and the following chapters is to consider the decisions which have been made by the courts and, where appropriate, the practices of the London market in relation to each of them.“Insured perils” versus “risks covered”
5.2 There has in the past been much discussion about whether there is any difference between “insured perils”, perhaps the older and more traditional description favoured by the MAR form and the Marine Insurance Act, or “risks covered” (sometimes simply “risks”), the terms used by the Mutual War Risks Associations. For the purposes of this and the following chapters, it should be noted that section 2 of the Marine Insurance Act 1906 defines “maritime perils”. On the other hand, several cases have dealt with “all risks” or simply “risks” and have defined how far the all-embracing expression of “all risks” actually extends to give insurance cover. It is suggested that where the insurance policy sets out in well-defined lists the misfortunes which the insured object may encounter, as do the Institute Clauses and the Rules of the Mutual War Risks Associations, and states clearly that insurance cover is given in case they are encountered and the terms upon which it is given, there is no substantial difference between the two expressions. The misfortunes themselves are now so well defined by a large body of case law that it can, and will, be assumed that the meaning and extent of each separate misfortune is well known to the parties to the insurance contract when they make it.Page 31
Approach to the interpretation of the insured perils
5.3 In the following chapters the main subdivisions of the insured perils of the Institute Clauses and the Rules of the Mutual War Risks Associations each have a chapter devoted to them. Each insured peril is described individually. That structure is necessary because the proximate cause of any loss must be established by the insured with a considerable degree of certainty. On the other hand, it is also necessary to appreciate that it is not always possible to divide the insured perils into hard and fast categories. For instance, whilst on one view “seizure” and “detention” could be regarded as having entirely independent and distinct meanings, the authorities have not always treated them as such. Conversely, where the meanings of insured perils do overlap, the language sometimes used in various judgments can blur the strict distinctions which do still exist. Whilst, therefore, the perils are treated separately in the following chapters so as to be able to properly delineate their meanings, one should not, at least in respect of some, approach them as having a sense of exclusivity about them. Rix J. cautioned against such an approach of “no overlap” in the context of an aviation war risks policy in Kuwait Airways Corp v. Kuwait Insurance Co SAK.2 It is suggested that the same approach should apply to the lists of perils in the Institute and Mutual clauses. 5.4 Whilst “military and usurped power” is no longer an insured peril, some mention of it is still required because the modern law, particularly on “revolution”, “rebellion”, “insurrection” and “civil commotion”, so greatly depends for its evolution on the cases concerning it. Likewise, mention of the similarly now defunct “consequences of hostilities and warlike operations” from the f.c. & s. warranty cannot be omitted when considering its successor perils of “war” and “hostile act by or against a belligerent power”. The prior incarnations of these new perils were subject to so many and varying interpretations by the courts that the result of any case was completely unforeseeable. It was therefore decided when the new system of war exclusions was implemented in 1983, replacing the old Lloyd’s S.G. Form, that their intended purposes and functions would be better served by these wholly new insured perils. Undoubtedly these new provisions, even though difficulties will arise in their interpretation, are more precise and thus more satisfactory to insurer and assured alike. Whilst “warlike operations”, with all its uncertainties of what was insured and what was not insured, has thankfully disappeared from the War Risk insurance, it had an influence on the formulation of the law during the 100 years of its existence (1883–1983) and it cannot be entirely ignored. 5.5 In line with the consistent thrust of the Supreme Court’s decisions in recent years,3 all of the perils should be approached and construed in a commercial, common sense manner, giving effect to the ordinary meaning of the word or words which make them up: see the Pesquerias and Spinney’s cases in the war risks policy context. See section 8.3 of for analysis of whether the proximate cause of a casualty must be proven to fall within one of the specified insured perils in order for cover to be engaged.Page 32
The role of criminal and public international law when interpreting the insured perils
5.6 Many of the insured perils of the War Risk Policy involve the criminal liability of the perpetrator, and this must be so in any insurance which gives cover against what other people do to the insured object. A definition of a criminal offence at common law was not rigidly binding on a court which was considering the same offence as an insured peril in an insurance policy, where the judges felt free to give it the meaning that the two parties to the contract must have intended it to mean. In the war risks context, for example, piracy () has definite requirements for the proof of the criminal offence of piracy, but the rules for the proof of the insured peril of “piracy” are more general and less rigorous. Before 1987, there was greater similarity between the criminal offence of riot and the insured peril of “riot”, but the Public Order Act 1986 () has changed the position. The suitability and role of this statute from a domestic perspective is one matter, but is it apt to govern the insured peril of “riot”, particularly when it is contained in a contract of insurance which has an international application? This would seem to lead to some strange, and possibly very unsatisfactory results. 5.7 In many cases the obvious intention of the parties will lead straight back to the technical criminal definition. However, this will not necessarily be the case, and neither should it be assumed to be so. Where parties have reached particular agreement on the meaning of words that otherwise would carry a different meaning under English criminal law, one must defer to the parties’ autonomy: see Re George v. The Goldsmiths and General Burglary Insurance Association Ltd.4 This should be the case whether that agreement is express or otherwise to be inferred. 5.8 Pickford J., in the Republic of Bolivia case,5 seems to have been the first judge to have made a clear distinction between a criminal offence and an insured peril. Goddard J., in the Kawasaki case,6 called for construction in “a commonsense way” having regard to the general tenor and purpose of the document which describes the parties’ intentions. 5.9 In sum, the criminal law provides a useful, and persuasive, indication of the meaning that parties will likely have intended to give to an insured peril which is on identical terms with a criminal offence. However, each case will turn on the construction of the particular policy at hand, and the circumstances in which it was concluded. 5.10 Broadly speaking, the same position is true in relation to the technical meaning of any of the insured perils in Public International Law. As Mustill J. explained succinctly in Spinney’s in the context of deciding whether the Court should receive the input of the Secretary of State of Foreign Affairs on whether or not the events in Lebanon had amounted to a civil war:The issue is not whether events in Lebanon were recognized by the United Kingdom as amounting to a civil war in the sense in which the term is used in Public International Law … The question here is whether there was a civil war within the meaning of the policy.