Insurance fraud is regrettably viewed by some as a way out of financial difficulties – but judges are well equipped to ensure that perpetrators do not get away with it. A case on point concerned a conspiracy to scuttle a loss-making merchant vessel under the guise of a fake attack by pirates.
The vessel was laden with oil and drifting off the coast of Yemen when her owner claimed that she was boarded by armed pirates who demanded that she be sailed to Somalia. Gunshots were said to have been fired on the bridge before a blaze broke out in the engine room. The crew ultimately abandoned ship and were rescued by a US Navy ship which was on patrol in the area.
The fire damaged the vessel beyond economic repair and, after her war risk insurers refused to pay out for the loss, her owner made a $77 million claim against them. His claim was subsequently struck out due to a failure to comply with an order requiring disclosure of electronic documents. However, the action was continued by a bank which had a mortgage interest in the vessel.
In dismissing the bank’s claim, the High Court had no hesitation in finding that the armed men who boarded the vessel had no intention of hijacking her and were only pretending to be pirates. The conspiracy to scuttle the vessel was orchestrated by the owner, who had an economic motive for doing so, and the ship’s master and chief engineer had assisted in the plot. Although the bank had done nothing wrong, it could not establish that the loss was caused by an insured peril.