Reviewed August 13, 2018
It used to be that the subject of pirates conjured up thoughts of eye patches, stolen treasure, and handsome men with cutlasses saving damsels in distress. While that is Hollywood's version and not reality, pirates are not just Hollywood stories. Pirates are alive and well off the coast of Somalia. In 2008 they hijacked forty-nine ships and took 889 crew members hostage. The exact amount of ransom the pirates garnered is unknown since ship owners hesitate to disclose what they paid and pirates are not keeping a lot of records. Ransoms generally range from $1 to $3 million, and it is estimated that between $40 and $150 million was paid to pirates in ransom in 2008. Since they are taking property and hostages and demanding ransoms, insurance may enter the picture.
Terms
There are several terms specific to marine coverage. Average is the apportionment of loss among the different interests involved in a voyage – the ship owner, cargo shipper, cargo owner, to name a few. A general average is a loss in which the different interests share; for example, when the entire ship sinks. Particular or simple average refers to loss in which all parties do not share – for example the cargo burns, but the ship is intact. Cargo insurance covers the cargo against loss or damage while in transit. Damage to the vessel itself is covered by hull insurance, and liability may be provided if it is not separately covered under a protection and indemnity policy.
Protection and indemnity, called P&I, is liability coverage for ship-owners, charterers, and individuals liable to third parties arising out of the operation of the vessel. There are five separate categories of coverages under P&I coverage.
They are:
·Compensation and medical expenses for the crew
·Damage caused by the vessel to any fixed or movable property
·Wreck removal
·Fines levied by any state, federal, or foreign government
·Investigating and defending claims
The first is compensation/medical expenses for the crew. This provides coverage for maintenance and cure, the Jones Act, and seaworthiness of the vessel. Maintenance and cure is the legal obligation of the vessel's owner to maintain and cure an injured or ill seaman. The Jones act gives the seaman the right to sue the owner of the vessel in federal court for damages if the seaman is injured through the negligence of the owner. Seaworthiness provides for recovery against the vessel if the injury was due to unseaworthy condition of the vessel, equipment, or crew. The second is damage caused by the vessel to other objects including piers, docks, or stationary fishing gear. Wreck removal is just that, the removal of the vessel if it has sunk and removal of the vessel is required by law. Fines levied by a governmental entity are the fourth category, and are paid as long as the insured acted prudently. Negligent acts of the crew that result in fines are not covered. Finally the cost of investigating and defending claims is covered.
Barratry is fraud conducted by the master or crew; acts committed in disobedience to the owner's instructions, or for their own purposes, i.e. mutiny. Perils of the sea are those perils generally unique to the sea such as storms, waves, animals encountered at sea, and rocks or shoals. Generally the ordinary dangers that all vessels are exposed to are excluded. The policy responds to the out of the ordinary perils, such as the giant squid. Sue and labor allows the master, crew, and others associated with the voyage to take steps to protect or recover the vessel or cargo without voiding the insurance policy. For example, costs to limit physical damage or to take legal action in order to protect the ship and its cargo are covered.
The definition of pirate is critical to this discussion. The classic definition is in Republic of Bolivia v. Indemnity Mutual Marine Assurance Company Ltd., 1 K.B. 785 (1908), where a pirate is defined as "a man who is plundering indiscriminately for his own ends, and not a man who is simply operating against the property of a particular state for a public end, the end of establishing a government, although that act may be illegal and even criminal, and although he may not be acting on behalf of a society which is politically organized." While this is an old definition, the basics still stand. The International Maritime Bureau defines piracy as; "An act of boarding or attempting to board any ship with the apparent intent to commit theft or any other crime and with the apparent intent or capability to use force in the furtherance of that act."
The United Nations Convention of the Law of the Sea defines piracy as:
(a) any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed:
(i) on the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft;
(ii) against a ship, aircraft, persons or property in a place outside the jurisdiction of any State;
(b) any act of voluntary participation in the operation of a ship or of an aircraft with knowledge of facts making it a pirate ship or aircraft;
(c) any act of inciting or of intentionally facilitating an act described in subparagraph (a) or (b).
Other definitions state that on land their actions would be considered a felony. A distinction needs to be made between pirates and terrorists; terrorists are politically motivated in some way; supporting a particular government, seeking to harm a political enemy, or trying to overthrow a current government. Pirates, on the other hand, are in it for themselves. They are not supporting any organized political or religious mechanism; they are simply looking for cash for themselves. This distinction is important because injury or damage caused by terrorism is excluded on most policies. Assailing thieves is another term, which is generally defined as persons committing robbery by force or violence from outside the vessel in contrast to theft in secret or from the crew or passengers. Like pirates, assailing thieves are out for personal gain. They may take goods only or goods and the whole ship.
Background of Modern Day Piracy
The Somali government toppled when Dictator Mohamed Siad Barre was overthrown in 1991. The lack of government led to illegal fishing and dumping of toxic waste by boats from Asia and Europe in the waters off the East African country. Somali locals began patrolling the area to either apprehend or drive away these boats. Once they realized how easy it was to capture a vessel, their intent turned to piracy versus protection of the waters.
At first they started with a few guns and fishing boats and simply tried to board the ships. Gaining funds and experience, they purchased faster and better boats, tracking systems, and better weapons. They started to use mother ships to spot a target with smaller ships then launched from them. Most crews of target ships are unarmed in keeping with international maritime practice, so sailors generally surrender once the pirates are on board. This makes it particularly easy for pirates to hijack a ship. Hostages report that in many cases they are actually treated quite well, with the pirates sometimes roasting goats on board and letting them use satellite phones to call loved ones. While Somali tribal leaders condemn the pirates as immoral, piracy has become a good job in Somalia, providing a way out of abject poverty, and young men are lining up to go to sea.
Repercussions are few and far between. Pirates who have been caught are generally returned to Somalia because of either a lack of evidence or confusion over what jurisdiction can prosecute them. Countries are reluctant to assume jurisdiction over captured pirates. The United Nations Convention on the Law of the Sea clearly states that on the high seas or anyplace outside the jurisdiction of the State, every State may seize a pirate ship or aircraft, or ship taken by pirates, and arrest the persons and seize the property. The courts of the State may determine the penalties to be imposed. However this is easier said than done.
The difficulty of prosecuting pirates can be illustrated through a situation involving France. The French have kept six Somali pirates jailed for a year. Because of legal challenges and case backlog a trial is still eighteen months away. Court-appointed defense lawyers for the pirates are arguing that the detentions violate the French requirement that suspects be released or placed under investigation within forty-eight hours of arrest. The pirates were held for seven days before being sent to France, and another four days lapsed before an investigation was started.
The Danes have a similar situation where the court-appointed lawyer for the defense states that the pirates were held for a month without any legal assistance. Since this is the first time Denmark has prosecuted pirates since the 17th century, the required process for prosecution is muddied at best. The United States and the European Union have recently signed agreements with Kenya that suspected pirates will be turned over to Kenya for prosecution. Even under this agreement, trials can drag on because of the backlog in Kenyan courts and the difficulties of bringing foreign sailors to testify to court.
A captured pirate who was involved in the hijacking of the Maersk Alabama and the kidnapping of Captain Richard Phillips has been brought to New York and will be tried as an adult. The federal prosecutor's office in Manhattan is familiar with prosecuting crimes that occur outside of the United States. Expectations are that the trial will be viewed with great interest by the shipping industry and other countries.
Coverages
For this discussion of coverage, pirates will be considered simply pirates and not terrorists since terrorism is excluded. Traditionally piracy was covered under hull insurance as a general average loss. Hull coverage is named perils, generally including fire, lightning, perils of the sea, earthquake, assailing thieves, pirates, jettisons, barratry, and detriment or damage to the vessel or any part thereof except for excluded perils.
Many markets changed their forms in 2005 and moved piracy to the war category of coverage, although the Indian market still covers piracy under hull coverage. Moving the coverage eliminates the question of whether pirates are pirates or terrorists and the attendant exclusion of coverage for terrorism under hull coverage. Depending on what versions of the coverage are used, piracy could be covered under hull, war risks of P&I, or kidnap and ransom.
As piracy is no longer covered in certain markets under hull coverages, owners are being forced to purchase it under their P&I policies or take out kidnap and ransom policies. Recent activity has caused premiums for war and kidnap and ransom coverage to steadily increase. Cargo is covered under the Marine clauses and, since pirates generally don't tamper with cargo, it is not much of an issue.
Ransom for the crew and the ship is covered under kidnap and ransom coverage. However, if pirates hijack a cruise ship, what about the passengers? Kidnap and ransom only covers the property and crew, not passengers. There are no personal lines policies or endorsements that provide such coverage. The ship owner must discuss the issue with the P&I insurer since passenger liability is not normally covered under the P&I policy.
Loss Control
The easiest form of loss control, avoidance, is one of the most expensive. Avoiding the Gulf of Aden and going around the southern tip of Africa can extend travel time by ten to twelve days and add one to two million dollars to the cost of a trip. Some private security forces and military experts have recommended arming the at risk ships. Although some companies are considering this, other shipping experts disagree and fear that arming ships and crew would make the entire situation more dangerous. There are many ordinary fishing boats in the area, and firing on them mistakenly puts the crew into a bad situation. Some cargo is flammable, and there are issues with firearms being allowed into various ports. Insuring a heavily armed ship would be costly, and armed fights with pirates are something the industry generally wants to avoid.
While various navies have taken to patrolling the waters, it is an enormous area to cover and virtually impossible to track down all pirate ships.
Various international industry representatives have developed a best practices guide for companies and ships navigating through the Gulf of Aden and off the Coast of Somalia. The guide encourages those traveling in these areas to use these practices as protection against pirate hijackings.
The best practices guide states that an analysis of successful attacks has shown that the pirates target ships with the following characteristics:
·Low speed
·Low freeboard
·Inadequate planning/procedures
·Obvious low state of alert or low self-protection measures
·Obvious slow response from the crew
Pirate mother ships are used to allow smaller boats to attack farther from shore. The pirates tend to strike at first light or last light. Few successful attacks have occurred at night so ships are encouraged to travel the most dangerous portions of the trip at that time. Ships that can travel faster than eighteen knots are encouraged to maintain speed and to not join an escorted transport. No ships moving at fifteen knots or more have been attacked, and attacks on ships with well-trained crew have been successfully turned away. Pirates generally give up if they have not successfully boarded a ship within thirty to forty-five minutes.
Suggested protection measures include the following:
·Using fire hoses
·Placing razor wire around stern/lowest points of ship
·Placing dummies around the ship to look like posted guards
·Keeping a look out and reporting suspected mother ships
·Using lights, bells, and crew activity to let pirates know they have been spotted
·Crew training of attack responses
·Making small zigzag maneuvers to make it harder to board the ship
·Using bow wave and stern wash to make it difficult for pirate craft to come alongside ship
These are just some of the recommendations listed in the best practices guide. The guide also provides contact information for various organizations, how an attack should be reported, and photos of various pirate ships. The marine industry is taking the threat of piracy seriously and doing everything it can to help mariners avoid being caught.
Resources
There are various resources to help ship masters avoid pirates. The most widely known follow.
Maritime Security Center Horn of Africa (MSCHOA)—www.mschoa.eu—planning and coordination authority for European Union forces in Gulf of Aden and off coast of Somalia . Provides updates and statistics on pirate activity, transit guidance, warnings, and other information.
UK Maritime Trade Operations (UKMTO) Dubai—first point of contact for ships in the region. Requires regular updates from ships as to position and intended movements. They use this info to help naval units have an accurate picture of shipping.
International Maritime Bureau (IMB),Pirate Reporting Center—only worldwide pirate reporting center dedicated to be the point of first contact for the ship master to report suspicious activity, attempted or actual attacks on ships. Alerts, maps of pirate activity, and other pirate related information is available.
EUNAVFOR Somalia, European Union Naval Force, operation Atalanta—military operation to aid in the protection of vessels off the coast of Somalia, prevent and deter piracy, protection of world food program vessels. The first EU maritime operation, it operates within the framework of the European Security and Defence Policy (ESDP).
Original article May 21, 2013
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