Re-drawing the Lines: “Similar Arrests” and “Senior Management” under the Insurance Act 2015
Commentary on Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2025] EWCA Civ 1019

1. Introduction

The Court of Appeal’s decision in Delos Shipholding is the most significant marine-insurance ruling since the Insurance Act 2015 came into force. Two seemingly technical matters were squarely addressed:

1. How far the “customs or quarantine” exclusion 1(e) in the American Institute Hull War Risks Clauses reaches; and
2. Who counts as “senior management” for the duty of fair presentation where the insured is a single-ship special-purpose vehicle (“SPV”) with only a nominee director.

Both issues arose after the bulk carrier WIN WIN was lawfully detained for anchoring in Indonesian territorial waters without a permit, ultimately qualifying as a constructive total loss (“CTL”) under her war-risk policy. The insurers resisted payment but lost before Dias J. They appealed; Males LJ (with Popplewell LJ and Asplin LJ agreeing) has now dismissed that appeal, clarifying two important points of insurance law.

2. Summary of the Judgment

• War-Risk Exclusion 1(e): The Court held that “customs or quarantine regulations” must be given a business-like meaning. They cover laws regulating importation or health, and the phrase “and similar arrests” only sweeps in detentions with a purpose akin to those two categories. An arrest aimed at asserting territorial sovereignty by policing anchoring permissions is not “similar”. The exclusion therefore did not bar the insured’s claim.
• Duty of Fair Presentation: A nominee director who merely rubber-stamps instructions plays no “significant role” in managing or organising the company’s activities. He was therefore not part of Delos’s “senior management”; knowledge of his private criminal charges was not the insured’s knowledge. Nor did reasonable enquiries require the owners to ask him about such charges. There was thus no breach of the duty of fair presentation.
• Result: Appeal dismissed; the USD 37.5 million CTL claim stands.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

(a) War-risk exclusion cases

• The Anita [1970] 2 Lloyd’s Rep 365 — smuggling law treated as “customs regulations”; foundation for the “business-like” construction approach.
• The Kleovoulos of Rhodes [2003] EWCA Civ 12 — confirmed Anita; definition must work worldwide, not by English statutory niceties.
• The B Atlantic [2016] EWCA Civ 808 — smuggling as a “paradigm” customs infringement; emphasised reading perils and exclusions together.
• US authority: Blaine Richards, 635 F.2d 1051 (2nd Cir 1980) — FDA detention counted as “customs”; supports functional test.

(b) Construction canons

Insurers invoked ejusdem generis and noscitur a sociis (referencing FCA v Arch [2020] EWHC 2448) to argue all peacetime regulations were “similar”. The Court rejected that over-reach.

(c) Fair-presentation jurisprudence

There is little post-2015 case law. Males LJ leaned on:

• Law Commission Report (Law Com 353)
• Legislative materials (Explanatory Notes; Parliamentary debates)

He also cited general appellate restraint principles from Sprintroom [2019] EWCA Civ 932 for interfering with a trial judge’s evaluation.

3.2 Legal Reasoning in Depth

(A) Interpreting Exclusion 1(e)

1. Step 1 – Discover the ordinary commercial meaning of “customs or quarantine regulations”.
   • “Customs” = laws controlling the import/export of goods, whether by prohibiting entry or charging duty.
   • “Quarantine” = laws protecting human/animal/plant health.
   A “business-like” meaning is necessary because the clauses govern vessels trading worldwide.
2. Step 2 – Give content to “and similar arrests”.
   • The phrase extends the exclusion only to detentions whose underlying purpose is similar to customs or quarantine (i.e., import/health control).
   • It does not create a catch-all for any peacetime detention; that would make the explicit customs/quarantine words superfluous.
3. Step 3 – Apply to the facts.
   • Indonesia detained WIN WIN to enforce shipping/anchoring permits and symbolically assert sovereignty—not to police imports or disease.
   • Therefore, the detention lies outside exclusion 1(e); coverage stands.
4. Rejection of Insurers’ Wider & Narrower Constructions.
   • “All peacetime laws” theory does violence to the text.
   • “Clearance/control” genus theory fails because customs and quarantine share no single genus beyond import/health concerns.

(B) Senior Management & Fair Presentation

1. Statutory Framework: s.3–4 Insurance Act 2015.
2. Key definition: “Senior management” = individuals playing significant roles in decisions on how the insured’s activities are managed/organised.
3. Factual evaluation: Judge found nominee director Mr Bairactaris exercised zero discretion; he merely signed documents drafted by the beneficial owners’ lawyers (often his own firm). Real decision-making lay with the Moundreas family.
4. Consequences:
   • His personal knowledge (criminal charges) was not imputed to Delos/NGM/FML.
   • Reasonable search did not require questioning a non-operational nominee director about personal matters.
   • No breach; thus no need to consider inducement or proportional remedies.
5. Broader ratio: A one-ship SPV can have no senior management at board level if true decision-makers sit elsewhere; “director” is not a proxy for “senior management”.

(C) Remarks on Remedies (obiter)

Although not determinative, the Court indicated scepticism about allowing insureds to rely on a hypothetical compliance argument once a notional condition is inserted under Schedule 1, paragraph 5 of the Act. This suggests future courts may confine the counterfactual enquiry to terms, not to speculative behaviour.

3.3 Likely Impact of the Decision

• Marine-Insurance Drafting: Underwriters using American Institute clauses must accept that exclusion 1(e) remains narrow. If broader protection is desired, new wording will be required.
• SPV Governance & Disclosure: Shipping groups frequently use fleets of Marshall-Islands/BVI SPVs with nominee directors. The ruling lowers the risk of technical non-disclosure where those directors are mere cyphers. Nevertheless, insurers may respond with bespoke questionnaires aimed directly at beneficial owners and external directors.
• Insurance Act 2015 Jurisprudence: The judgment is the first appellate guidance on “senior management” and “reasonable search”. It confirms that these are factual, context-driven questions, making summary disposition difficult.
• Litigation Strategy: Males LJ’s approach to legislative materials (willingness to consult but declining to treat them as decisive) provides a roadmap for future 2015-Act arguments.
• Commercial Behaviour in Hot-Spot Anchorages: Ship operators will note the refusal to label sovereignty-assertion detentions as “similar” to customs/quarantine arrests. Insurers may revisit premium models for anchorages lying just inside territorial seas.

4. Complex Concepts Simplified

Constructive Total Loss (CTL)

A situation where the vessel is not physically destroyed but is deprived from the owner’s use for a contractually defined period (here six months), allowing the insured to claim as though it were an actual total loss.

American Institute Hull War Risks Clauses (1977/1984)

Standard form clauses widely used in global marine insurance, particularly for war & political risks, often “written back” into policies governed by English law.

Exclusion 1(e)

Carves out detentions “under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilities.”

Nominee Director

An individual formally appointed to a company’s board but contractually required to act only per instructions from the beneficial owners; often used for confidentiality or convenience in SPVs.

Duty of Fair Presentation

Under the Insurance Act 2015, the insured must disclose every material circumstance it knows or ought to know, present information clearly, and ensure statements of fact are substantially correct.

Senior Management (s.4(8)(c))

Persons playing “significant roles” in decision-making on how the insured’s activities are managed/organised; not automatically the board of directors.

5. Conclusion

Delos Shipholding recalibrates two key risk-allocation tools in marine insurance:

1. War-risk exclusions must be interpreted narrowly but purposively, respecting the words chosen. “Customs or quarantine” is not shorthand for “any peacetime law”. For underwriters, clarity now demands new drafting if a wider carve-out is sought.
2. Fair presentation turns on real, not formal, governance. The label “director” does not by itself import knowledge to the company, nor does it invariably trigger further enquiries under a “reasonable search”.

The Court’s reasoned, contextual approach honours the Insurance Act 2015’s aim of balanced risk disclosure while avoiding draconian outcomes based on technicalities. In doing so, it delivers both certainty for insurers (by delineating the boundaries of exclusion 1(e)) and fairness for the insured (by preventing the imputed-knowledge net from being cast too widely). Future disputes over SPV structures, nominee officials, and worldwide detentions will now navigate by the markers set in this influential judgment.