MARINE INSURANCE FRAUDS
Carl Smit
The last few decades have seen a marked increase in occurrences of international
economic fraud, and the shipping world has not by any means been excluded from
these trends. The marine insurance underwriter has emerged as one of the primary
targets of international maritime fraud, and a study on this topic is therefore urgently
required in order to identify some of the primary problem areas and to provide
publicity in respect of an otherwise unexplored world.

One of the most common occurrences of fraud in respect to insurance claims appear
to be that of the wilful casting away of a vessel by the ship-owner, such a vessel
inevitably being grossly over-insured. The headings under which the fraudulent
assured will base a claim for compensation will inevitably be that of loss caused by
perils of the seas or by barratry. A discussion relating to the onus of proof in these
matters as well as the issue of causation is required.

Another fashionable method of defrauding the underwriter is the presentation of
fraudulent documentation to substantiate either a fraudulent claim, or an
exaggerated one. It must also be noted that the occurrence of fraudulent claims will
not take place in a vacuum, and will depend to a large degree on such factors as
international market conditions, wars, sanctions, and civil disturbances. There is also
evidence to suggest a sinister hand behind the scene, exploiting situations and
people for its own benefit. The name of this phenomenon is that of organised crime,
operating far beyond the reach of the law and across national boundaries.

The point of departure is that of English law, since as result of the South African
colonial heritage, English marine insurance law has greatly moulded and shaped
South African law. But, as will be seen, the law to be applied in South African marine
insurance matters will probably be that of Roman-Dutch law. In addition, any
contemporary research on this topic must of necessity contain reference to the
amazing fraud of the super tanker.

Other issues which could not escape discussion include that of flags of convenience
and the issue of international criminal prosecutions. On the latter, a study of the
findings of the Roskill report has been included, as well as the English law
commission recommendations regarding issues of jurisdiction. A brief overview of the
American RICO legislation was also necessary.

The hope is expressed that this thesis will bring clarity to a very difficult area of
research, to an otherwise closed book. The role of organised crime syndicates cannot
ever be under-emphasised, and education and publicity on this topic, regardless how
humble, is of the utmost importance.

TABLE OF CONTENTS
TABLE OF BOOKS
TABLE OF ARTICLES
TABLE OF CASES
TABLE OF STATUTES:
1. AUSTRALIA
2. ENGLAND
3. GERMANY
4. NETHERLANDS
5. SOUTH AFRICA
6. UNITED STATES OF AMERICA
TABLE OF CONVENTIONS
MISCELLANEOUS
PART 1
INTRODUCTION
Chapter 1 INTRODUCTION

Chapter 2 INTRODUCING MARITIME FRAUD
(A) Defining maritime fraud
(B) Setting the scene
(C) Current trends
(D) Identifying frauds with respect to insurance claims
(E) Conclusion

Chapter 3 THE SALEM
(A) The background facts
(B) The decision of the Court of the first instance
(C) The findings of the Court of appeal
(D) The House of Lords
(E) Conclusion

Chapter 4 OTHER FACTORS INCIDENTAL TO INSURANCE CLAIMS
(A) Introduction
(B) Organised crime
(C) The phenomenon called deviation
(D) Documentary frauds
(E) The effect of containerisation
(F) Conclusion

Chapter 5 WHICH LAW APPLIES?
(A)Introduction
(B) Historical background
(C) The Admiralty Jurisdiction Regulation Act
(D) Conclusion

PART II
FRAUDULENT INSURANCE CLAIMS

Chapter 6 WILFUL MISCONDUCT

Chapter 7 THE FRAUDULENT ASSURED
(A) Introduction
(B) Perils of the seas
(C) Barratry: Background
(D) The master and the mariners
(E) The wrongful act
(F) The wilful act
(G) The prejudice of the owner
(H) Non-complicity of the ship-owner
(I) Onus and the order for ship's papers
(J) Who can step into the ship-owners shoes?
(K) Causation
(L) Conclusion

Chapter 8 THE POSITION IN ROMAN-DUTCH LAW
(A) Introduction
(B) Historical background
(C) Legislative intervention
(D) Marine insurance fraud preventative measures
(E) Deviation
(F) Conclusion

PART III
ENFORCEMENT

Chapter 9 FACTORS IMPEDING PREVENTION AND ENFORCEMENT
(A) Problems defined and highlighted
(B) The value of interstate cooperation
(C) Conclusion

Chapter 10 THE IMPORTANCE OF THE MARITIME FLAG
Chapter 11 TRANSNATIONAL CRIMES
(A) Territorial Jurisdiction
(B) Jurisdiction over the high seas
(C) Conclusion

Chapter 12 INITIATIVES IN THE BATTLE AGAINST MARITIME FRAUD
(A) Introduction
(B) The new insurance policy
(C) English law commission recommendations pertaining to
issues of jurisdiction
(D) The role of the Racketeer Influenced Corrupt Organisations
Act of 1970
(E) Fraud investigation initiatives
(F) Conclusion

PART IV
CONCLUSION

Chapter 13 CONCLUSION


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