In a victory for policyholders, the Court of Appeal’s decision in Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2025] EWCA Civ 1019 provides important guidance on the interpretation of war risks insurance policies and the application of the duty of fair presentation under the Insurance Act 2015 (the “2015 Act”).

The underlying facts involve the detention of the Capesize bulk carrier “WIN WIN” by Indonesian authorities in 2019, after the vessel anchored within Indonesian territorial waters without permission. The vessel was detained for nearly a year, ultimately becoming a constructive total loss under the terms of Delos’ war risks policy with Allianz (the “Insurers”).

The Insurers denied Delos’ claim, relying on four grounds (all of which were denied at first instance by Mrs. Justice Dias), two for which Insurers were granted permission to appeal:

(1) that the detention fell within a policy exclusion for arrest, restraint, or detainment under customs or quarantine regulations (and similar detentions not arising from hostilities); and

(2) that the insureds had breached its duty of fair presentation by failing to disclose serious criminal charges against the company’s sole nominee director, Mr. Bairactaris, at the time of policy renewal.

The Court of Appeal dismissed the appeal. 

Key Findings of the Appeal

1. Scope of the policy exclusion: ‘customs or quarantine regulations’

The Insurers argued that the exclusion for “arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilities” should be interpreted broadly, so as to exclude cover for any detention under ordinary peacetime laws, or at least any regulation of the same genus as customs / quarantine, being laws concerning state control over territory.

The Court of Appeal undertook a careful analysis of the exclusion’s wording and its commercial context. The Court held that the phrase “customs regulations” should be given a “businesslike interpretation”, referring to laws regulating the import of goods into a state, whether by prohibiting imports or imposing duties. The Court adopted the same approach to the term “quarantine regulations”, interpreting the words as they would be understood by business people, and concluded that it referred to laws concerned with the protection of health, whether of people or animals. Accordingly, the “and similar” wording in the exclusion clause was held to refer only to detentions under regulations with a similar purpose to customs or quarantine regulations—namely, those concerning the import of goods or the protection of health.

As such, the Court rejected both interpretations put forward by the Insurers. The Indonesian law under which the vessel was detained, which related to anchoring in territorial waters without permission, was found to have no relevant similarity to customs or quarantine regulations. The exclusion did not apply, and the Insurers’ appeal on this ground was dismissed.

2. Duty of Fair Presentation under the 2015 Act

The Insurers’ second ground of appeal was that the insureds had breached their duty of fair presentation by failing to disclose criminal charges against Mr. Bairactaris, the sole director of the owning company, at the time of policy renewal. The Court’s analysis here provides important guidance on the operation of the 2015 Act.

Actual Knowledge and Senior Management

The 2015 Act requires disclosure of material circumstances known to the insured’s “senior management” or those responsible for the insured’s insurance. The Court found that, although Mr. Bairactaris was the sole director, President, Secretary and Treasurer, that was a matter of form rather than substance; he acted only on instructions from the beneficial owners and played no role in decision-making about the company’s activities. The real decision-makers were members of the Moundreas family, who had no knowledge of the charges against Mr. Bairactaris. The Court rejected the Insurers’ argument that a sole director must always be part of senior management, emphasizing that the statutory definition requires a factual assessment of who actually makes decisions about the company’s management, in light of what the company in fact does.

Reasonable Enquiries and What the Insured ‘Ought to Know’

The Court also addressed what constitutes a “reasonable search” for the purposes of the duty of fair presentation under the 2015 Act. It found that reasonable enquiries do not require asking pointless questions—such as asking a nominee director with no operational role whether he knew of any circumstances affecting the risk. The Court noted that there was no evidence that such questions were routinely asked in the shipping industry, particularly where nominee directors are common.

Importantly, the Court observed that while the 2015 Act’s language suggests an objective test, it would be unfair and contrary to the 2015 Act’s purpose if an insured who had made all reasonable enquiries could still lose cover because those enquiries would not, in fact, have revealed the material circumstance. The Court left open the possibility that subjective elements may be relevant where the insured has made all reasonable enquiries.

Counterfactual and Remedies

On the question of remedies, the Court considered the scenario where, had the charges been disclosed, Insurers would have imposed a condition requiring the replacement of Mr. Bairactaris as director. The Court found that the 2015 Act does not require consideration of whether the insured would have complied with such a condition; the contract is simply to be treated as if it had been entered into on those terms.

Comments

This decision provides welcome clarity and reassurance for policyholders. The Court of Appeal has confirmed that exclusions in war risks policies will be interpreted narrowly and in accordance with their commercial purpose, rather than being given an unduly broad reading. For the duty of fair presentation, the judgment emphasizes the importance of a practical, fact-based approach to identifying “senior management” and the scope of reasonable enquiries. Policyholders can take comfort that courts will not impose unrealistic disclosure obligations, particularly in industries where nominee directors are common and operational control lies elsewhere. Nevertheless, it remains essential for insureds to review their internal processes for gathering and presenting material information at renewal, ensuring that all reasonable steps are taken to comply with the 2015 Act.

This post was co-authored by Rebecca Brown of Two Temple Gardens