The surge in piracy off the coast of Somalia could trigger legal disputes between marine and war risk insurers, a leading QC has warned.

Jonathan Gilman, QC, said that piracy could be covered by either type of policy - depending on the number of pirates involved. If 12 or more pirates are involved in an attack, according to Mr Gilman, the incident is likely be classified under the Public Order Act 1986 as a riot. These are covered by war risk insurers rather than by marine insurers. However, if the attack involves fewer than a dozen pirates, the incident would typically be covered by marine insurance.

Mr Gilman - editor of Arnould's Law of Marine Insurance, published by Sweet & Maxwell - said that because it was often very difficult to verify accurately the number of pirates involved in an attack, it could lead to legal conflicts. He said: “Piracy is normally covered by marine insurers, the exception being where the incident is legally a riot. There have been House of Lords decisions where it was held the word ‘riot' in insurance policies is to be given its strict criminal law meaning, so that the critical question is likely to be whether the number of pirates is 12 or more. It may be very difficult to assess accurately the exact number of pirates involved in any particular incident, which may result in disputes between marine and war risk insurers.

“Some new clauses were introduced in 2005 to transfer the risks of loss by piracy, violent theft or barratry from the marine to the war risk cover, but so far these have not been widely adopted. That may change as a result of the incidents in Somalia.”

The legal definition of a riot, under the 1986 Act, is that 12 or more people use or threaten violence for a common purpose.

Mr Gilman said that, in most of the incidents in the Gulf of Aden, the pirates were not captured. He said this made verifying the exact number of attackers potentially very difficult. He added: “The testimony of a scared crew may be quite unreliable and conflicting statements more than likely. The Gulf of Aden has already been treated as an area of enhanced risk under war risk policies for some time. In current circumstances the additional premium rates charge by war risk insurers may well escalate considerably. War risk insurers can cancel and reissue policies at very short notice at a considerable increase if they think the risk of claims is much more likely.”

Mr Gilman said that it was difficult to predict what effect these incidents would have on rates for marine cover because there were many other factors affecting premiums at present.

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