- Vessel Grounding Claims Complicated by Cyber Exclusions.
- Cyber Clauses Like LMA5403 Create Legal Uncertainty in H&M Cover.
- GPS Spoofing Poses Rising Risk to Marine Insurance Policies.
The Association of Average Adjusters (AAA) has put out a discussion paper that raises some serious red flags about insurance coverage for vessel groundings that might be tied to GPS spoofing. This is especially concerning for Hull & Machinery (H&M) policies that come with cyber exclusions, reports Smart Maritime Network.
Cyber Threats Blurring Lines in Traditional Marine Risk
The AAA’s Advisory and Dispute Resolution facility has pointed out the growing confusion in marine insurance as cyber threats start to overlap with traditional risks like groundings. The rise of cyber exclusion clauses, particularly LMA5403, has made it trickier to assess claims. “GPS spoofing is where false positioning signals mislead a vessel’s navigation systems giving misreported positions which have the potential to cause a grounding,” said Chris Kilbee, Chair of the AAA.
“A vessel grounding caused, or contributed to, by GPS spoofing would normally be covered under a traditional Hull & Machinery insurance policy but the increasing inclusion of cyber-exclusion clauses has now muddied the waters.”
LMA5403 Wording Raises Legal Uncertainty
The LMA5403 clause excludes losses: “directly or indirectly caused by or contributed to, by or arising from the use or operation, as a means for inflicting harm, of any computer or electronic system.”
The AAA points out that this wording creates a bit of uncertainty. Insurers will have to demonstrate not only that an electronic system was used but also that it was meant to cause harm.
Spoofing Attribution Remains a Complex Challenge
Figuring out the intent behind spoofing is especially tricky in high-risk or politically charged areas. The AAA cautions that just having evidence of spoofing isn’t enough to justify an exclusion; insurers need to establish both a cause-and-effect relationship and malicious intent.
“The additional difficulty in determining whether spoofing was intended to cause harm potentially means that insurers face a much higher bar in evidencing that harm was intended by the spoofing actor. This introduces a significant grey area in claims assessment, where causation, crew conduct, and cyber attribution intersect,” Mr Kilbee added.
Industry Urged to Revisit Policy Wordings
“GPS manipulation is no longer a theoretical risk, and it’s not always clear who is behind it or why. This creates a tension between traditional coverage expectations and the application of broadly drafted cyber exclusions. In this context, stakeholders across the shipping and insurance sectors are encouraged to closely review policy wordings and understand the legal thresholds required to engage or avoid exclusions in the event of a digitally influenced casualty.”
Role of Cyber Buy-Back Clauses in Casualty Cases
The paper highlights the potential significance of cyber buy-back clauses, which can restore coverage even in cases where cyber exclusions are in effect. These clauses could play a crucial role in situations where spoofing is suspected, but pinpointing the source is tricky. The AAA is encouraging both shipowners and insurers to take a fresh look at their policies and grasp the evidentiary requirements that could influence insurance claims related to digital interference.
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Source: Smart Maritime Network
