If it is proved ………… then what?

This is a short post. A futuristic post. Maybe an imaginary post……… but at times truth is stranger than our widest imagination. If someone had told you in the beginning of 2020 that you will BE locked in your home for months, you would have laughed it off. Today this is the reality. Covid-19 has wreaked havoc across the world and the casualty figures and economic losses are very large in the United States & Western Europe.

President Trump has called Covid-19 as Chinese virus, hinting that China had created the virus or had been careless in controlling it. A lawyer by name Larry Klayman has filed a US $ 20 trillion lawsuit against China in a Texas court. He has alleged that Covid-19 virus is a biological weapon unleashed by China & hence has violated US Law, international law and treaties. Several class action suits have been filed in different American states claiming compensation from China towards damages and accountability as it had failed to contain the Covid-19 virus. The International Council of Jurists has moved the UNHRC seeking compensation from China for ‘ surreptitiously developing a biological weapon capable of mass destruction’.

So how does this impact marine insurance you may wonder. Will invite reference to the Institute R.A.C.E. clause CL 370-10/11/03. When I had posted about this clause in September 2018, the emphasis was on explaining why this clause should exist given the fact that loss, damage or expense arising out of the use of any nuclear weapon or device would anyway be excluded by 4.8 of ICC. The Institute R.A.C.E. clause CL 370-10/11/03 reads as under:

This clause shall be paramount and shall override anything contained in this insurance  inconsistent therewith
1. In no case shall this insurance cover loss damage liability or expense directly or indirectly  caused by or contributed to by or arising from
1.1 ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel
1.2 the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof
1.3 any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter
1.4 the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter. The exclusion in this sub-clause does not extend to radioactive isotopes, other than nuclear fuel, when such isotopes are being prepared, carried, stored, or used for commercial, agricultural, medical, scientific or other similar peaceful purposes
1.5 any chemical, biological, bio-chemical or electromagnetic weapon.

CL 370
Dated: 10.11.2003.

Lurking almost surreptitiously at the bottom of this clause is 1.5, which was not dwelt at length in my post in happier times. Now with Covid-19 pandemic raging all over the globe and with litigation and accusations against China flying around, there could be many more countries joining in as well. Leaving aside the political and economic ramifications, what if ( A VERY BIG ‘IF’) it is proved that Covid-19 was indeed a laboratory-created chemical, biological or bio-chemical weapon to be used in biological warfare? 

All claims under marine cargo policies for loss, damage, liability or expense arising from the time the  virus surfaced till such time it is eliminated, will run into trouble and may give the insurers the right to decline.Bizarre it may sound, but remember this is a ‘clause paramount’ and it excludes any loss, damage,liability or expense arising Directly or Indirectly from perils stated in 1.5. The onus will be on the insured to establish his claim, even if arising during Covid-19 times was not directly or indirectly arising out of the same. Proximate cause will be given the go-by. E.g. If a vessel declares General Average on account of say a fire in the engine room and the vessel has some crew members who test positive for Covid-19.  If it is proved that this virus  was a biological weapon, this claim could be declined. Similarly, if a truck stranded on the road due to lock-down for fighting the Covid-19 spread catches fire damaging the cargo, claim could still be declined.

Frightening? Yes. Probability of occurrence? Low. Impossible? NO.