JOHN M. WOODS

NEW YORK ⁽¹⁾

Chapter 13

EXCLUSION OF HULL

COVERAGE AND WAR RISKS

Notwithstanding anything to the contrary contained in this policy, no liability attaches to the Assurer:

For any loss, damage, or expense which would be payable under the terms of the form of policy on hull and machinery, etc., if the vessel were fully covered by such insurance sufficient in amount to pay such loss, damage, or expense.

Phrase "would be payable" construed to mean "could be payable" so that, despite a hull cover exemption clause, a protection and indemnity ("P & I") policy still covers collision losses which could not be covered by an American hull policy in standard form regardless of whether collision losses were actually covered by any existing hull policy or not. The amount of coverage provided by the hull policy is immaterial. Thus, despite the clause exempting hull cover, a P & I policy would still cover such items as excess collision. Steamship Mutual Underwriting Ass'n, Ltd. v. Landry, 281 F.2d 482, 485 (1^st Cir. 1960).

Under language identical to the hull cover exemption of form SP-23, P & I policy does not provide coverage where loss of coverage under hull policy is due to breach of implied warranty of seaworthiness. Employer's Insurance of Wausau v. International Marine Towing, 864 F.2d 1224, 1224-25 (5^th Cir. 1989).

Because P & I policies have historically been designed to insure against risks for which standard commercial coverage is unavailable, claims for liability which "could be covered or would be payable under the standard form of hull policy are excepted from the P & I policy," including sue and labor expenses. Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500, 503, 505 (2d Cir. 1972).

For a discussion of Landry, supra, 281 F.2d 482, and an argument that the hull cover exemption clause of form SP-23 was never intended to allow P & I policies to cover excess collision, see LESLIE J. BUGLASS, MARINE INSURANCE AND GENERAL AVERAGE IN THE UNITED STATES, 503-04, 3d ed., 1991.

Following Landry, supra, 281 F.2d 482, many P & I underwriters amended their hull cover exemption clauses to include the phrase "whether or not the vessel were fully covered by such [hull] insurance" in order to make clear that the absence of hull cover would not trigger liability under the P & I policy so long as hull cover could be obtained. Hugh S. Meredith, Fines, Penalties, and Other Miscellaneous Liabilities; Expenses of Defense; General Conditions and Exclusions; Grounds for Cancellation; Second Seaman's Policy; Club Letters of Guarantee or Undertaking, 43 TULANE L. REV. 602, 607 (1969).

For any loss, damage or expense sustained by reason of capture, seizure, arrest, restraint or detainment, or the consequence thereof or of any attempt thereat; or sustained in consequence of military, naval or air action by force of arms, including mines and torpedoes or other missiles or engines of war, whether of enemy or friendly origin; or sustained in consequence of placing the vessel in jeopardy as an act or measure of war taken in the actual process of a military engagement, including embarking or disembarking troops or material of war in the immediate One of such engagement; and any such loss, damage and expense shall be excluded from this policy without regard to whether the Assured's liability therefor was based on negligence or otherwise, and whether before or after a declaration of war.

Sinking of vessel by U.S. military does not fall under "free of capture and seizure" ("F.C. & S.") clause of P & I policy (listing not only "capture, seizure, arrest, restraint, [and] detainment" but also "preemption, confiscation, [and] requisition") but under war risk clause. Flota Mercante Dominica, C. Por A. v. American Manufacturers Mutual Insurance Co., 272 F. Supp. 540, 543 (S.D.N.Y. 1967).

Inclusion of the risk of detention by civil authorities during peacetime under F.C. & S. clause (similar to form SP-23 F.C. & S. clause except that it also included "confiscation, pre-emption, requisition or nationalization") is "consistent with the general purposes of the Clause, which is to exclude from coverage losses arising from unforeseeable actions of sovereign states." Blaine Richards & Co., Inc. v. Marine Indemnity Insurance Co. of America, 635 F.2d 1051, 1053 (2d Cir. 1980).

Risk of detention by civil authorities during peacetime is included under F.C. & S. clause of P & I policy where qualified by the phrase "whether in time of peace or war and whether lawful or otherwise." Blaine Richards & Co., Inc. v. Marine Indemnity Insurance Co. of America, 635 F.2d 1051, 1052-53 (2d Cir. 1980).

Mere warning of seizure by purported military authority does not rise to the level of "restraint" under F.C. & S. clause of P & I policy. King v. The Delaware Insurance Co., 10 U.S. (6 Cranch) 71, 81-82 (1810).

"[M]ere fear of peril" does not qualify as a "restraint" under F.C. & S. clause of P & I policy. Betesh v. Fire Ass'n of Philadelphia, 187 F.2d 526, 529 (2d Cir. 1951).

Government action need not be specifically directed to the detention of insured property in order to qualify as a "restraint" of that property under P & I policy's F.C. & S. clause if such action is forcible and has the same consequences as a restraint. Commodities Reserve Co. v. St. Paul Fire & Marine Insurance Co., 879 F.2d 640, 645 (9^th Cir. 1989).

Where a seized vessel is allowed to proceed to her destination only upon a "guaranty" that contraband would be returned to the seizing authority following delivery of non-contraband cargo, and vessel complies accordingly, there is a "seizure" of the contraband within the meaning of a F.C. & S. clause, notwithstanding delivery of non-contraband. The Hellig Olav, 282 F. 534, 539-40, 544-45 (2d Cir. 1922).

Whether loss suffered subsequent to requisition is a "marine risk" or a "war risk" depends on whether loss was a consequence of "warlike operation." Libby, McNeil & Libby v. United States, 87 F. Supp. 866, 877 (Ct. Cl. 1950).

Deciding whether the cause of a loss is a war risk requires determination of the "real efficient cause" of the loss, rather than the cause nearest in time to the loss. Ope Shipping Ltd. v. Allstate Insurance Co., 687 F.2d 639 (2d Cir. 1982).

"[T]he characterization of an act as barratrous is independent of the motives which provoked the act." Thus, where a crew commits barratry in order to take part in armed conflict, the event is not a "war risk" unless barratry is specifically included thereunder. National Union Fire Insurance Co. of Pittsburgh v. Republic of China, 254 F.2d 177, 187 (4^th Cir. 1958).

While the violent taking of a ship may constitute "barratry," such action is not necessarily a "seizure" within the meaning of a F.C. & S. clause of P & I policy. National Union Fire Insurance Co. of Pittsburgh v. Republic of China, 254 F.2d 177, 185 (4^th Cir. 1958).

Practical necessity is not a "restraint" under F.C. & S. clause of P & I policy. Crist v. United States War Shipping Administration, 163 F.2d 145, 150-52 (3d Cir. 1947).

A blackout is a "wartime restraint" where imposed by naval authorities. Risks incident to war but not imposed by military authorities are not "restraints" within the meaning of the policy. Quinn v. United States, 72 F. Supp. 94, 97 (D.Hawaii 1947).

1. The author would like to acknowledge the contribution of William M. Cooney to the preparation of this chapter.