Lessons in Interpretation from Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2025] EWCA Civ 1019  

Square brackets refer to paragraphs in the judgement

Delos & Ors v Allianz provides valuable guidance on “businesslike interpretation” and the duty of fair presentation under Section 3 of the Insurance Act 2015 (“IA”), particularly concerning the marine industry. The judgement is also likely influence how insurance policies are interpreted generally.

This case concerns the Capesize bulk carrier "Win Win", which was detained by Indonesian authorities from 17 February 2019 until 9 January 2020. The reason for the detention was Win Win dropping anchor without clearance from the authorities within Indonesian territorial waters. This anchoring, as the Judge described, was the "illegal parking" off the island of Bintan, just inside the 12-mile limit. Consequently, the master committed a criminal offence under Indonesian law.

The Defendant insurers insured Win Win under a war risk policy, using the American Institute Hull War Risks and Strikes Clauses (1977) and the Addendum (1984). The policy included a detainment clause (“Exclusion 1(e)”) in the following terms:

"In the event that the Vessel shall have been the subject of capture, seizure, arrest, restraint, detainment, confiscation or expropriation, and the Assured, by reason thereof, has lost the free use and disposal of the Vessel for a continuous period of [six (6)] months…then for the purposes of ascertaining whether the Vessel is a constructive Total Loss, the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery."

Given the effect of Exclusion 1(e), the insureds treated the detention as a constructive total loss under the war risks policy, on the ground that the vessel had been deprived of its unrestricted use for six months. The insurers resisted, raising multiple defences. The Commercial Court rejected insurer defences, and subsequently they obtained permission to appeal on two key issues:

1. Whether to exclude the detention from the war risks policy's protection, given the provisions in Exclusion 1(e). Exclusion 1(e) states "Arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilities".

2. Whether the insureds breached the duty of fair presentation under section 3 of the IA by failing to disclose that Delos's sole nominee director, Mr Bairactaris, was charged in Greece on serious criminal charges shortly before renewal of the policy. However, Mr Bairactaris exercised his extensive powers as a director only in accordance with instructions received from the company's beneficial owners. He monitored the activities of the NGM Group, comprising both Delos and NGM.

The Court of Appeal (Males LJ, Asplin LJ, Popplewell LJ) dismissed the appeal and upheld Dias J's decision. Males LJ gave the Court of Appeal’s judgement.

The role of a "businesslike interpretation"

The central issue was whether the Indonesian detention fell within Exclusion 1(e), which excluded "loss […] caused by […] Arrest, restraint or detainment under customs or quarantine regulations and similar arrests […] not arising from actual or impending hostilities."

Dias J had taken the approach of equating the "and similar" wording to a broad construction of "customs regulations", in the same way the English counterpart clause in the Institute English War Clauses is interpreted. In the absence of any authority dealing with Exclusion 1(e), Dias J held that the detention under Indonesian shipping/territorial laws was not "sufficiently similar" to a customs or quarantine regulation to come within the exclusion.

On appeal, Males LJ accepted that one must interpret the American clause on its own terms, because the two clauses have different drafting histories. However, the principles underlying the interpretation of a marine insurance policy are common to the two clauses. One must look at the commercial background and take a "businesslike interpretation" as it would be understood by "commercial people in the shipping and marine insurance industry". [39] Additionally, one must consider "that the perils and exclusions together express the ambit of the cover, and they have to be construed together". [40]

Males LJ agreed that "customs regulations" in the exclusion should be understood in a marine context to include laws regulating importation, even if not under a country's customs statute. That is, the focus is on what commercial people would regard as "customs" regulation in a trade or import context. [44] He also accepted that "quarantine regulations" would naturally be understood as relating to health or sanitary regimes. There was no significant difference in interpretation between "under" in the English clause and "by reason of" in the American clause. Industry people would give them the same meaning [55]. As to the "and similar" wording, Males LJ held that the regulation under which the vessel was detained must have a "similar purpose". Here, the vessel was detained because it had anchored without permission, rather than an arrest or detention under customs or quarantine regulations. [58]

Males LJ concluded the exclusion did not apply and rejected this ground of appeal. Even in the context of war, terror, or political risk policies, exclusions must be interpreted considering the commercial context and the express drafting. One cannot stretch an exclusion to catch all peacetime detentions, as similarity of purpose is required. Consequently, the decision gives meaning to "and similar" exclusions. Such exclusions are not redundant but extend coverage only to detentions under regulations that are akin in function to customs or quarantine. This ensures clarity and fairness in the apportionment of risk in different jurisdictions.

Duty of Fair Presentation Under Section 3 of the Insurance Act 2015

The duty of fair presentation, contained in section 3 of the Insurance Act 2015, represents the central obligation placed upon insureds in the placement of non-consumer insurance contracts. Under this duty, the insured must either (a) disclose every material circumstance which it knows or ought to know, or (b) provide sufficient information to put a prudent insurer on notice that it needs to make further enquiries.

As per Section 7(3), a circumstance is “material” if it “would influence the judgement of a prudent insurer in determining whether to accept the risk, and on what terms”. The presentation must also be made in a reasonably clear and accessible manner, to avoid “data dumping” or obscuring significant facts within a mass of immaterial detail.

For corporate insureds, the Act defines whose knowledge is relevant. It includes not only the actual knowledge of individuals who form the insured’s “senior management” or are responsible for insurance, but also information that would have been revealed had the insured made reasonable enquiries. Thus, boards and managers must ensure that internal processes are robust, that relevant personnel are questioned, and that available information is collated properly.

A failure to comply with the duty is termed a “qualifying breach.” A qualifying breach can be two things. The first is deliberate or reckless, where the insured knew that it was in breach of the duty of fair presentation, or did not care whether it violated that duty. The second is that it was neither deliberate nor reckless. The burden of proof lies with the insurer to demonstrate that a qualifying breach was deliberate or reckless. The remedies available depend on whether the breach was deliberate/reckless or neither.

The remedies available to the insurer are proportionate and depend on what it can prove would have been its response had a fair presentation been made. Where the breach is deliberate or reckless, the insurer may avoid the policy altogether, retaining the premium. In other cases, remedies range from avoidance to variation of terms or proportionate reduction of claims.

In this case, the undisclosed fact was that before renewal in March 2018, Mr Bairactaris was charged in Greece with membership of an organised crime group and drug trafficking. Those charges were never disclosed to insurers.

The critical factual and legal questions:

1. Was Mr Bairactaris part of the senior management of Delos (or the other assured) such that his knowledge should be imputed?

2. What should the insureds (or their group) reasonably have done to discover the existence of those charges?

Initially, the Judge held, and the Court of Appeal agreed, that even though Mr Bairactaris was formally a director and had broad powers on paper, in substance, he exercised no independent judgment. He acted only on instructions from the Moundreas family group. He had no fundamental decision-making role in vessel operations or risk management. Therefore, he did not form part of "senior management" under Section 4 of the IA for the purpose of imputing knowledge. [92] This reasoning underscores that a director's formal title is not determinative. The factual reality of whether someone plays a decision-making role is critical in assessing whether they form part of "senior management" and thus their knowledge is imputable. Parties cannot simply rely on paper constructs of control to attribute knowledge.

On the second point, the insurers argue that a prudent search would have included inquiring whether any proceedings existed or otherwise whether any circumstances might affect the risk. The Judge declined to require such an enquiry because (i) in context, he had no operational role; (ii) she accepted that it would have been pointless to ask him general risk-based questions; and (iii) she found no standard practice of making such enquiries of nominee directors in comparable shipping groups. [100] The judgment reflects a realistic approach to the reasonableness of enquiry and insurer expectations. This includes what searches or enquiries may be imposed, given the nature of the relationship, whether that be a longstanding one, a trusted nominee, or a minimal role. Insurers must justify what additional enquiries would have been reasonable in context, especially in complex group or SPV structures.

The Court of Appeal accepted that, on these facts, the insurers had not proved that the insured "ought to have known" the charges. Accordingly, no qualifying breach of duty of fair presentation was established. [103]

Even if there had been a breach, the Judge's further (though obiter) view was that insurers would have agreed to insure on the same terms but would have imposed a condition that Bairactaris be replaced as nominee director, and the respondents would have complied. Thus, insurers would have had no remedy under Schedule 1. [103] This demonstrates that even where a nondisclosure is arguable, the remedial route under the IA does not necessarily lead to outright avoidance, as other remedies falling short of this outcome are available.

Conclusion

For marine insurers, Delos v Allianz teaches us that carefully calibrating exclusions and ensuring that the drafting aligns with the intended scope is essential. Furthermore, underwriters renewing war risks must consider how the Act's disclosure regime and insurer expectations function in complex shipping group structures. For shipowners and insureds, the case is a reminder that operational reality matters. Nominee arrangements cannot shield nondisclosure in all circumstances, and transparency about risk-relevant exposures is critical.