A discussion paper from the Association of Average Adjusters (AAA) has raised fresh concerns over insurance coverage for vessel groundings linked to GPS spoofing amid growing reliance on cyber exclusion clauses in Hull & Machinery (H&M) policies.
While groundings are traditionally considered insurable marine perils, even when navigation errors are involved, emerging cyber threats are challenging this assumption. At the core of the issue is how modern H&M policies interpret cyber-related losses, particularly through the lens of exclusions like LMA5403, now widely adopted by the marine insurance market.
“Where GPS spoofing has contributed to a grounding, this would normally be covered,” said AAA chair Chris Kilbee (pictured above). “But with cyber exclusions now common, we’re entering a grey zone - especially when the loss involves electronic manipulation.”
GPS spoofing is the practice of manipulating or tricking a GPS receiver by broadcasting false signals. LMA5403 excludes losses “directly or indirectly caused by or arising from the use or operation, as a means for inflicting harm, of any computer or electronic system.” This wording forces a complex legal and factual analysis to determine whether GPS spoofing falls within the scope of the clause.
Insurers seeking to deny cover must show that spoofing was used intentionally to cause harm, a burden of proof that could be difficult to make. According to the AAA, this creates uncertainty in claims outcomes and could lead to disputes over causation, crew conduct and cyber attribution.
Meanwhile, the insurance implications are significant. Policyholders may believe they are protected for traditional risks, like grounding, but unknowingly face gaps in coverage if a cyber element is involved. This is particularly pressing for shipowners operating in politically sensitive or high-risk regions where electronic interference is more likely.
In response, some insurers are offering cyber buyback clauses, allowing policyholders to reinstate cover excluded under LMA5403 for an additional premium. These endorsements are becoming an essential consideration for owners and brokers seeking to manage cyber-related marine exposures.
“Cyber manipulation is no longer a theoretical concern,” Kilbee said. “Policyholders need to review wordings carefully and understand where exclusions may apply - even in scenarios that would historically have triggered a straightforward marine claim.”
The AAA’s paper underscored a broader tension between traditional marine insurance frameworks and the evolving threat landscape. As cyber risks increasingly intersect with physical loss events, clarity in coverage terms, and proactive risk management, will be critical for both insurers and insureds.
