Cargo policy implications for the MV Nave Andromeda hijacking

Policy implications for the MV Nave

The MV Nave Andromeda is a 9-year old, Liberian flagged Crude Oil tanker capable of carrying approximately 500.000 barrels of crude oil. On her way from Lagos Nigeria to Southampton, UK, a number of stowaways threatened her crew and hijacked the vessel as it was off the coast of the Isle of Wight. After a 24hrs standoff the crisis was resolved on Sunday night when Special Forces intervened and arrested the hijackers.

Whilst details are still somewhat scarce and a number of specific questions remain unanswered in this case (did the crew retain operational control of the vessel at all times, what was the amount of cargo on board still being carried etc.)  and with  the immediate crisis having passed, it makes interesting speculation what an alternative scenario could have been and how such a situation would interact with typical marine cargo insurance covers.

Even though purely conjecture, in this note we briefly examine the possible impact thereof and highlight a number of considerations in case a more sinister turn of event would have played out.

Our insights are focused on a number of relevant clauses typically features in cargo covers, with an additional emphasis on oil-related products.

1.    Piracy

  1. Under international law piracy is defined as any illegal act involving robbery, violence or detention for private ends of a ship and committed on the high seas
  2. In modern times, piracy most often involves a demand for ransom payments, instead of merely hijacking cargoes.
  3. Under the most commonly used Institute Cargo Clauses A (ICCA), ‘All Risks’, coverage is provided against loss or damage of cargo resulting from piracy. Interestingly however, piracy is not listed in the area of coverage of Institute Cargo Clauses B and C (ICC (B)/ ICC(C)).
  4. Also noteworthy is that cargoes will need to be physically lost, stolen or damaged for cargo covers to respond under this section, instead of merely hijacked

2.    Terrorism

If a similar incident would have been caused by parties acting with very different intent, there could be cause for a terrorism trigger under the policy, albeit not under the standard ICC (A) provisions:

  1. ICC (A) ordinarily does not cover risks of terrorism for goods afloat when such acts are committed by anyone acting from a political, ideological or religious motive, or connected to any organisation which carries out activities aimed at overthrowing or influencing any government, by force or violence.
  2. For these perils to be insured against however, one will need to ensure additional protection is afforded by means of the so-called Institute Strikes Clauses (Cargo)
  3. This extension is usually provided for under most cargo cover, and is also to be read in conjunction with the provisions of the ‘Termination of Transit Cover (Terrorism), which limits the duration of such terrorism protection.

 

3.    General Average

  1. In past cases involving pirates not hijacking so much the goods on board but instead merely holding the ship, its cargo and its crew as hostages for ransom, shipping companies have resorted to General Average provisions under cargo policies to seek remedies from their insurers.
  2. In such instances, reimbursement of the ransom monies paid to hijackers for release of the shipping interest was recouped from all parties concerned, including cargo owners, in the shape of GA contributions claimed by Ship Owners.

4.    Non-delivery/ Abandonment

  1. Seizure of good does not automatically render a cargo an actual total loss as long as there is no irretrievable deprivation: vessel and cargo will likely be fully recovered once the ransom monies have been paid.
  2. In exceptional circumstances however, some cargo covers can contain specific provisions for non-delivery or missing cargoes which could result in settlement for actual or constructive total loss.
  3. Non-delivery entitles a cargo owner to claim for the value of the goods after a certain period of time, as if the goods have effectively been considered lost once a pre-determined period of time has been exhausted.
  4. Similarly, some cargo policies will give the assured the right to ‘abandon’ goods to insurers, who would be compelled to settle the loss in full once a number of specific conditions have been met.
  5. It is important to stress that such policy provisions are invariably highly bespoke, time-limited and very conditional. The abandonment provisions most typically also contain piracy-specific exclusions.

5.    Oil Pollution

In the case of the Nave Andromeda, the nature of the cargo on board justifies shedding some light on pollution coverage components under a standard marine cargo cover:

  1. Costs of removal and/or destruction of damaged cargoes following an order from a Public Authority  can be covered under cargo covers
  2. Clean-up expenses and debris-removal are also expenses recoverable under most cargo cover , usually subject to certain insured limits
  3. Expenses reasonably incurred to preserve cargo and minimise losses fall under the so-called ‘sue and labour’ provisions which can generally be recovered

6.    Other insurance

Hijacking situations involving ships at sea will typically involve other types of insurance in addition to marine cargo only, including but not limited to :

  1. Hull & Machinery War covers, designed to protect Ship Owners interests
  2. Charterer’s liability covers designed to protect charterer’s responsibilities viz Ship Owners
  3. Kidnap & Ransom covers: includes ransom payment an expenses related to arrange a vessel’s release

For more information, please contact Jonathan Eaton, Head of Cargo and Stock Throughput.

Disclaimer:

It is stressed that every situation will be different and that this briefing note only seeks to provide general advice and may not be applicable to your specific case, insurance policy or circumstances, as the case may be.