Win-Win, and Win again: Delos Shipholding v Allianz in the Court of Appeal

4 September 2025By Christopher Ives

Introduction

In October 2024, our colleagues Toby Nabarro and Eugene Lee wrote here about the policyholders’ first instance success in the case of Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2024]. The Court of Appeal has recently upheld those findings in a judgment which will be essential reading for those involved in coverage disputes, especially concerning the duty of fair presentation under the Insurance Act 2015 (the Act).

Background

The case originated from an incident in February 2019 when the “WIN WIN”, a bulk carrier vessel, was detained by Indonesian authorities for anchoring inside Indonesian territorial waters without permission. The vessel was detained for over a year, leading to its classification as a constructive total loss under the terms of the war risks insurance policy issued by the appellant insurers.

Key Issues on Appeal

The insurers were granted permission to appeal on two primary issues:

  1. Exclusion Clause Interpretation:

The first issue concerned the interpretation of Exclusion (e) of the American Institute Hull War Risks and Strikes Clauses (1977), which excludes loss caused by, resulting from, or incurred as a consequence of “Arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilities“. The insurers argued that the detention of the vessel fell under this exclusion.

  1. Duty of Fair Presentation:

The second issue was whether the policyholders had breached the duty of fair presentation under the Act by failing to disclose that the sole director of the registered owner of the vessel was the subject of criminal charges in Greece.

Court of Appeal’s Decision

The Court of Appeal unanimously dismissed the insurers’ appeal and upheld the policyholders’ claim for an indemnity.

  1. The Exclusion:

The Court of Appeal interpreted the exclusion as applying to detentions under two different kinds of regulation, i.e. customs or quarantine regulations, and extending to other regulations with a similar purpose.  The reason for the detainment here was because the vessel did not have the correct licence and it was common ground that it had not been detained under any customs or quarantine regulations.

The insurers’ case was that there had been a detention which was “similar” to a detention under customs or quarantine regulations, in part because customs and quarantine regulations are concerned with the exercise of state sovereignty and security, or clearances, and that the regulations under which the arrest was made were “similar”.

The Court found that the exclusion was concerned with:

Arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments …’ As a matter of strict language it might be said that it is the arrest, restraint or detainment which has to be similar to an arrest, restraint or detainment under customs or quarantine regulations, but as all arrests are similar in that they place a vessel under the control of the arresting state, it is clear that the similarity with which the clause is concerned is whether the regulation under which the arrest is effected is similar to, or has a similar purpose to, a customs or quarantine regulation”

As the detention of the vessel was completely unconnected – on the facts – to customs or quarantine regulations, the Court found that it therefore did not fall under the exclusion.

  1. Duty of Fair Presentation:

On the issue of fair presentation, the issue was whether the insureds ought to have disclosed criminal charges which had been brought against its sole nominee director prior to inception of the policy.

The principal insured was Delos Shipholding S.A. (Delos), which was the registered owner of the vessel. Its sole nominee director was a Mr Bairactaris, a Greek maritime lawyer.   Delos was part of the NGM Group, a well-known Greek shipping group run by the Moundreas family. Mr Bairactaris was the only person who was aware of the charges which had been brought against him. Mr Bairactaris was limited in his role as nominee director to taking instructions from the Moundreas family, he exercised no independent judgment and made no decisions.

Actual knowledge

As a corporate insured, pursuant to s.4 of the Act, Delos was obliged to disclose material information within the actual knowledge of its “senior management” (or information which Delos “ought to know”, as discussed further below). The first issue was whether Mr Bairactaris fell within the definition of “senior management”, being “those individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed or organised”.

Both Courts found that Delos’ activities consisted of owning and operating the vessel for profit, which included acquiring contractual rights and obligations. Mr Bairactaris played no part in these activities and had no decision-making role; he simply did what he was told by the Moundreas family.

Therefore, the Court of Appeal upheld the first instance finding that Delos was not aware of the criminal allegations that had been brought against Mr Bairactatris. Whilst the sole director of a corporate insured will normally be part of the insured’s senior management, this will not always be the case. Further, it did not follow from this finding that Delos had no senior management for the purposes of the Act; rather, the senior management comprised those members of the Moundreas family who took the decisions on behalf of Delos.

Ought to know

The Court of Appeal also upheld the first instance finding that the criminal allegations did not amount to information which Delos ought to have known pursuant to s3(4)(a). In short, the obligation to make reasonable enquires pursuant to s4(6) did not extend to asking Mr Bairactaris about whether he knew of any material information, essentially because he knew nothing about the vessel to be insured and thus Delos would reasonably have considered it futile to make enquiries of him .

Inducement and remedy

Pursuant to s5, Schedule 1 of the Act, if the insurer would have entered into the contract, but on different terms, the contract is to be treated as if it had been entered into on those terms. The trial judge had found that, upon full presentation of the criminal charges, insurers would have imposed a condition that Mr Bairactaris should resign as a director and that the insured would have complied with that condition because Mr Bairactaris would have resigned (i.e. that the non-disclosure had not, therefore, induced insurers to enter into the policy).

Insurers argued that it was impermissible to consider what the insured would have done in response to any hypothetical additional terms imposed by insurers as this was not provided for in the Act itself; an argument which was supported by the Law Commission Report on the draft Act (para 11.82), which had stated:

”… it should not be open to an insured to say that it would have complied with any term which the insurer would have imposed (for example, an exclusion or warranty) and so the loss should be covered…”

Given the finding that the insureds had not breached the duty of fair presentation, the Court of Appeal stated that it was unnecessary to determine whether the trial judge was wrong in her findings on inducement, although the Court of Appeal said they found insurers’ submissions persuasive. The Court also noted that it had not received any submissions on whether it was legitimate to use the Law Commission Report or Explanatory Notes to the Act as aids to interpretation and made no findings in this regard.

This important issue of inducement will therefore be left to be decided in another case.

Implications of the Decision

The Act is one of, if not the, most important pieces of legislation for policyholders and coverage lawyers. Therefore, any judgment from an appellate Court discussing the Act is essential reading, especially when the policyholders prevailed. The Court of Appeal’s decision should be kept in mind, especially in relation to the duty of fair presentation, when considering:

  1. The circumstances when an individual may or may not form part of the insured’s senior management. Senior management may include individuals who are not on the board, not employees and who have no contract with the insured;
  2. The extent to which reasonable enquires have to be made of someone within the organisation seeking insurance; and
  3. Inducement, and the extent to which it may be legitimate to consider steps which the insured would have taken in response to an additional term which the insurer hypothetically would have imposed following fuller disclosure. The Court of Appeal strongly indicated that such an approach was wrong, whilst not making any findings on this point meaning that, technically, this is still an open issue for another day.

Author:

Chris Ives, Partner

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