The Zouzou was insured against war risks and was mortgaged to a bank. The bank was the loss payee under the war risks policy and also the assignee. To protect its interest further, the bank entered into a mortgagee’s interest insurance policy (MII) with the insurers involved in the present litigation. The MII policy incorporated standard “Mortgagees’ Interest Insurance Wording”. The interest insured was that of the bank to the extent of outstanding indebtedness. Clause 1 of the MII policy provided indemnity for “loss of damage to, or liability arising in connection with the vessel (i) which is prima facie covered by the Owners’ Policies … but in respect of which, there is subsequent non-payment … resulting from any act or omission of any of one or more of the Owners and/or Operators and/or Charterers and/or Managers of the Vessel concerned and/or their Servants and/or Agents or anyone else responsible (… the ‘Relevant Parties’) including any breach of warranty or condition whether express or implied or any misrepresentation or non-disclosure or alleged non-disclosure of any fact or circumstance of any kind whatsoever … or (ii) which occurs by virtue of any alleged deliberate, negligent or accidental act or omission or any knowledge or privity of any of the Relevant Parties including the deliberate or negligent casting away or damaging the Vessel or the Vessel being unseaworthy or inadequately equipped, manned or certified …”.

The Zouzou was detained in Venezuela in late August 2015 on suspicion that the crew had attempted to smuggle part of a cargo of high-sulphur diesel oil by diverting it from the cargo tanks nominated for loading to other tanks through the cargo lines. Four members of the crew allegedly involved in this smuggling attempt were tried and acquitted. The ship was detained for about 14 months. Two weeks before its release, the owners tendered a notice of abandonment (NOA) and sought indemnity under its war risk policy for constructive total loss. The war risk insurer denied liability owing to the owners’ alleged non-disclosure of the vessel’s calls into an Additional Premium Area. The bank then issued proceedings