In August 2007, ‘The B Atlantic’, having been loaded with a cargo in Venezuela, was used by smugglers to strap drugs to the hull of the vessel. The drugs were discovered by the Venezuelan authorities and the vessel was, consequently, detained. Following a period of more than six months under detention, owners treated the vessel as a constructive total loss and made a claim to her War Risk insurers, contending that the vessel's detention fell within the scope of clause 1.5 of the Institute War and Strikes Clauses - Hulls (1/10/83) (the vessel's war policy), which covered losses arising from ".... any person acting maliciously ....".
The Supreme Court held that 'acting maliciously' required an element of spite, ill-will or the like. However, under the circumstances of the case, the smugglers' acts were not aimed at the detention of or any loss or damage to the Vessel. To the contrary, smugglers obviously hoped that the drugs would not be discovered by the authorities and that the vessel would not be detained. It was for this reason that the Court held that the vessel's detention fell outside the scope of clause 1.5.
The Supreme Court went on to address whether owners would have been covered by the war policy had the smugglers' actions been deemed to have fallen within the scope of clause 1.5. Their Lordships held, albeit obiter, that in such case the loss would have been excluded by Clause 4.1.5 of the war policy as it arose, at least concurrently, from "…. detainment .… by reason of infringement of any customs or trading regulations …. ", confirming the standard English law position that where a loss is caused by an insured peril as well as an excluded one, the exclusion takes precedence, meaning that the policy does not cover that loss.