Richards Butler sinks insurance fraudsters

Richards Butler has recorded a victory in a highly unusual shipping case in which shipowners were found guilty of bombing their own vessel.

The North Star was damaged by a bomb in July 1994 while it was being repaired in a Greek shipyard near Piraeus. The bombing resulted in the loss of the ship.

The shipowners, North Star Shipping, along with Kapelco Maritime Services and co-owners Harry and Michael Petrakakos, claimed $3m (£1.6m) in damages plus interest under their war risk policy, arguing that the bomb had been planted externally and alleging a terrorist act. However, the insurers, led by Sphere Drake Insurance, rejected the claim.

The case was heard in the English High Court by Mr Justice Colman between October 2004 and February this year.

In the judgment, which was handed down on 22 April, Judge Colman dismissed the shipowners’ claim, finding that the bomb damage was “attributable to the wilful misconduct of Mr Harry Petrakakos and the owners”. He also found that the shipowners had failed to disclose the North Star’s true value and that previous insurance policies had been refused.

Judge Colman added that he was confident Harry Petrakakos had been responsible personally for procuring, placing and detonating the explosives, and that the bomb had been placed inside the vessel rather than on the exterior of the hull.

It is understood that this is the first case to reject a claim under a war risk policy on the grounds that an owner has cast away their own ship.

Richards Butler head of insurance and reinsurance Mark Connoley acted for the insurers and instructed Nicholas Hamblen QC and Graham Charkham of 20 Essex Street. Shipping boutique Shaw and Croft advised the shipowners, with Quadrant Chambers’ David Goldstone as counsel.