UK: Marine Insurance: Recovery Under Cargo Policy Where Ransom Paid

Last Updated: 8 March 2010
Article by Andrew Symons and Katie Houston

In a recent case the court has held that payment of a ransom was not contrary to public policy and would be taken into account when assessing whether a cargo owner had been deprived of an insured cargo and suffered a loss.

Following the hi-jacking of a vessel (the Bunga Melati Dua) carrying cargoes of bio-diesel, Somali pirates demanded a ransom which was agreed and paid by or on behalf of the ship-owner. As a result the vessel, cargo and crew were released. The cargo owner, Masefield, claimed an indemnity under its cargo policy, which covered loss by both piracy and theft, for the actual or constructive loss of the cargoes. Under the obligatory cargo policy, declarations totalling over US$13.3m had been made in relation to the cargo. On disposal of the cargo, after recovery, it was valued at just US$7m. Masefield argued that payment of the ransom (US$4m) should not be taken into account when determining whether it had been irretrievably deprived of the cargo, because such a payment was contrary to English public policy.

The court held that Masefield had not been irretrievably deprived of the cargo. The claim for a total loss, whether actual or constructive, had not been made out. The test for deciding whether an insured has been "irretrievably denied" is an objective one and has to be determined on the facts. If it is legally and physically possible to recover a cargo then an insured has not been irretrievably deprived. This is the case even if recovery of the cargo can only be achieved by disproportionate effort and expense. In this case:

  • The contemporaneous correspondence and the information in the public domain showed that all interested persons (including Masefield) were fully aware that the cargoes were likely to be recovered.
  • This was entirely consistent with the unchallenged expert evidence.
  • Other vessels seized by Somali pirates had been promptly released following negotiations over a relatively short period.
  • In fact the vessel and cargo were safely recovered only 11 days later after payment of the ransom.

The fact that the pirates were holding the ship to ransom did not alter this analysis. There was no "clear and urgent reason" to categorise the payment of the ransom as contrary to public policy:

  • The payment of a ransom is not illegal as a matter of English law.
  • Circumstances have arisen in the past where legislative action has intervened to make such payments illegal; the courts should refrain from entering into the same field.
  • If the crews of the vessel are to be taken out of harm's way, the only option is to pay the ransom. Diplomatic or military intervention cannot usually be relied upon and failure to pay may put in jeopardy other crews.

To view the article in full, please see below:

Full Article


On 19th August 2008, the vessel Bunga Melati Dua, a chemical/palm oil tanker, was seized by Somali pirates in the Gulf of Aiden and taken to Somali waters. Masefield was the owner of two parcels of bio-diesel which had been shipped onboard the vessel. Amlin was the insurer of the cargo under an open cover policy which covered loss by both piracy and theft.

The initial ransom demand was US$4.7m. The Bunga Melati Dua was the sixth ship to be hijacked in 2008. In fact in the 12 month period from November 2007- November 2008, some 30 vessels were seized and then released on payment of ransoms in excess of $60m. Negotiations commenced between the ship-owners and the pirates regarding the release of the vessel, cargo and crew. During this time, on 18th September 2008, Masefield served a Notice of Abandonment on Amlin. This was declined but the parties entered into an agreement that proceedings should be deemed to have commenced on this date. About 10 days later, the owners paid a ransom of US$4m to the pirates, and the vessel, cargo and crew were released.

It was Masefield's case that on capture of the vessel, the cargo became an actual total loss under the Marine Insurance Act 1906, in that the assured had been "irretrievably deprived" of the cargo. Alternatively there was a constructive total loss in that the vessel and cargo had been reasonably abandoned on account of its actual total loss appearing to be unavoidable. Further, the possibility of an effective ransom payment should be ignored for these purposes.

During the capture, one of the crew of the vessel had been killed. Thereafter there was no attempt to recover the vessel by military intervention nor any diplomatic attempts.


It was common ground that both theft of cargo and the capture of seizure of the cargo by pirates were insured risks under the policy.

The primary issue was whether, when notice of abandonment was served on 18th September 2008, Masefield had been irretrievably deprived of the cargo and thus it had been actually totally lost, albeit restored at a later date following the payment of the ransom.

The Masefield relied on the decision in Dean v Hornby (1854) 3 El & Bl.180 that it said supported the proposition that, in the case of capture by pirates who intend to exercise dominion over a ship or cargo, there is straightaway an actual total loss even though the property is later recovered.

The Judge stated that much was known about the modus operandi of Somali pirates. It was evident that they would demand a ransom, which was likely to be paid, and then would release the vessel, cargo and crew upon payment. This likely result was also backed up by expert evidence during the hearing.

Indeed, the "striking feature" of this case was that the cargo was safely recovered following the payment of a ransom - less than 6 weeks after the vessel was seized and 11 days after Masefield had served a notice of abandonment on Amlin.


This decision clarifies the law of marine insurance, piracy and total losses and the treatment of ransom payments as a matter of English law.

  • When looking at actual total loss, under the Marine Insurance Act, the test of "irretrievably deprived" is an objective one and has to be assessed on the facts. If there is any way to recover property – even if it is through disproportionate effort or expense, there is no irretrievable deprivation.
  • Further, the payment of a ransom to pirates is not contrary to English public policy. Such a payment is not illegal but may on occasion be seen as the only option.

Further reading: Masefield AG v Amlin Corporate Member Ltd [2010] EWHC 280 (Comm)

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 05/03/2010.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.