Legal Challenges and Responses
Edited by Douglas Guilfoyle
Chapter 12: Insurance protection against piracy
With the rise of piracy in the modern world in Somalia and elsewhere, the risks encountered by shipowners, cargo-owners, traders, crew members and passengers of sustaining a loss by piracy is one for which there should be adequate protection. Such protection may be arranged by suitable risk-allocation provisions in transport and sale contracts or by appropriate insurance cover. If a piratical attack occurs, such contractual assignments of risk become critical to the contractual parties. Once pirates attack or seize a vessel, those interested in the maritime adventure (i.e., the voyage of a ship and cargo) – those who own the property and those who will financially benefit from the adventure – will alert their contractual counterparts. Almost invariably, this will involve notifying the attack or seizure to the parties’ insurers. The insurance industry has had to respond to attempted and successful piratical attacks using legal principles developed since the foundation of the industry and insurance law itself. Piracy was in the past a prevalent risk insured against and, in recent years, has become prevalent again. The operation of an insurance contract and the essential elements of a valid insurance claim can be usefully considered against the background of a piratical attack on a ship and cargo. Today, such attacks occur in particular areas around the world. A typical attack can occur when a ship with cargo on board is transiting the Gulf of Aden or the Indian Ocean and the ship is attacked by Somali pirates who threaten and seek to take possession of the vessel,
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