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MARINE INSURANCE – WAR RISKS, NOT BUREAUCRACY: UK COURT OF APPEAL UPHOLDS COVER IN INDONESIAN DETENTION CASE

1. Summary and Facts

In Delos Shipholding SA v Allianz Global Corporate and Specialty SE [2025] 2 Lloyd’s Rep 117, The Win Win, a Capesize bulk carrier owned by Delos (part of the NGM Group) and insured under a war risks policy worth USD 37.5 million with Allianz and other insurers. In February 2019, the vessel was detained by the Indonesian Navy for anchoring in Indonesian waters without permission. The detention lasted for almost a year, until January 2020. The owners then claimed that the vessel was a constructive total loss under the insurance policy.

However, the insurers refused to pay. They argued that the detention was excluded under the policy clause for arrests or detentions under customs or quarantine regulations. They also claimed that the insured failed to disclose that its nominee director, Mr. Evangelos Bairactaris, had faced criminal charges in Greece. The High Court decided in favour of the vessel owners, holding that the exclusion did not apply and there was no breach of duty. The insurers then appealed to the Court of Appeal.

2. Legal Issues

• Whether the detention fell within the exclusion for “arrest, restraint or detainment under customs or quarantine regulations and similar arrests” under the American Institute War Risks Clauses (AIWRC) 1977.
• Whether the Indonesian detention fell within the customs/quarantine exclusion.

3. Court’s Findings

• The UK Court of Appeal dismissed the insurers’ arguments and upheld the Judge’s decision at first instance.
• The detention was caused by a sudden change in Indonesian government policy asserting sovereignty over its territorial waters.
• There was no breach of duty of fair presentation under the UK Insurance Act 2015.
• The insurers lost their bid to avoid paying the US$37.5 million for the vessel detention where the decision marked a “win-win” for the vessel interest.
• Mr. Bairactaris, a nominee director acting solely on instructions, did not qualify as part of Delos’s senior management.
• It was unreasonable to expect Delos or NGM to ask Mr. Bairactaris if he faced criminal charges, given his limited administrative role and longstanding professional relationship.

4. Practical Implications

This decision affirms several important legal principles including:
• The “customs or quarantine” exclusion applies only to regulations concerning import control or health — not to general regulatory detentions or assertions of sovereignty.
• “Senior management” means those with decision-making authority, not nominal directors.

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