Unknown persons in Venezuela had attached three bags of cocaine weighing 132kg to the hull of a vessel which was carrying coal to Italy. The cocaine was discovered on 12 August 2007, the vessel was detained by Venezuelan authorities, and the crew were arrested. On 31 October 2007 the master and second officer were charged with complicity in drug smuggling, and the continued detention of the vessel was ordered. In 2010 the master and second officer were convicted by a jury, and each sentenced to nine years’ imprisonment. The vessel was confiscated. It was common ground that the owners were innocent; they had lost their ship through no fault of their own or of their crew.

The insurers denied liability, based on an exclusion from cover of “loss damage liability or expense arising from … arrest restraint detainment confiscation or expropriation … by reason of infringement of any customs … regulations”. The words “arising from” and “by reason of” require causation.