Part One: Rules common to all types of insurance
- Chapter 1: Introductory provisions
Chapter 2: General rules relating to the scope of the insurance
Section 1: Insurable interest and insurable value
- Clause 2-1. Insurance unrelated to any interest
- Clause 2-2. Insurable value
- Clause 2-3. Agreed insurable value
- Clause 2-4. Under-insurance
- Clause 2-5. Over-insurance
- Clause 2-6. Liability of the insurer when the interest is also insured with another insurer
- Clause 2-7. Recourse between the insurers where the interest is insured with two or more insurers
Section 2: Perils insured against, causation and loss
- Clause 2-8. Perils covered by an insurance against marine perils
- Clause 2-9. Perils covered by an insurance against war perils
- Clause 2-10. Perils insured against when no agreement has been made as to what perils are covered by the insurance
- Clause 2-11. Causation. Incidence of loss
- Clause 2-12. Main rule relating to the burden of proof
- Clause 2-13. Combination of perils
- Clause 2-14. Combination of marine and war perils
- Clause 2-15. Losses deemed to be caused entirely by war perils
- Clause 2-16. Loss attributable either to marine or war perils
- Clause 2-17. Sanction limitation and exclusion
- Section 1: Insurable interest and insurable value
Chapter 3: Duties of the person effecting the insurance and of the assured
- General remarks
Section 1: Duty of disclosure of the person effecting the insurance
- Clause 3-1. Scope of the duty of disclosure
- Clause 3-2. Fraudulent misrepresentation
- Clause 3-3. Other failure to fulfil the duty of disclosure
- Clause 3-4. Innocent breach of the duty of disclosure
- Clause 3-5. Cases where the insurer may not invoke breach of the duty of disclosure
- Clause 3-6. Duty of the insurer to give notice
- Clause 3-7. Right of the insurer to obtain particulars from the vessel's classification society, etc.
Section 2: Alteration of the risk
- Clause 3-8. Alteration of the risk
- Clause 3-9. Alteration of the risk caused or agreed to by the assured
- Clause 3-10. Right of the insurer to cancel the insurance
- Clause 3-11. Duty of the assured to give notice
- Clause 3-12. Cases where the insurer may not invoke alteration of the risk
- Clause 3-13. Duty of the insurer to give notice
- Clause 3-14. Loss of the main class
- Clause 3-15. Trading areas
- Clause 3-16. Illegal undertakings
- Clause 3-17. Suspension of insurance in the event of requisition
- Clause 3-18. Notification of requisition
- Clause 3-19. Suspension of insurance while the vessel is temporarily seized
- Clause 3-20. Removal of the vessel to a repair yard
- Clause 3-21. Change of ownership
- Section 3: Safety regulations
- Section 4: Measures to avert or minimise loss, etc.
- Section 5: Casualties caused intentionally or negligently by the assured
- Section 6. Identification
Chapter 4: Liability of the insurer
- Section 1: General rules relating to the liability of the insurer
Section 2: Costs of measures to avert or minimise the loss, including salvage awards and general average
- Clause 4-7. Compensation of the costs of measures to avert or minimise loss
- Clause 4-8. General average
- Clause 4-9. General average apportionment where the interests belong to the same person
- Clause 4-10. Damage to and loss of the object insured
- Clause 4-11. Assumed general average
- Clause 4-12. Costs of particular measures taken to avert or minimise loss
- Section 3: Liability of the assured to third parties
- Section 4: The sum insured as the limit of the liability of the insurer
Chapter 5: Settlement of claims
Section 1: Claims adjustment, interest, payments on account, etc.
- Clause 5-1. Duty of the assured to provide information and documents
- Clause 5-2. Claims adjustment
- Clause 5-3. Rates of exchange
- Clause 5-4. Interest on the compensation
- Clause 5-5. Disputes concerning the adjustment of the claim
- Clause 5-6. Due date
- Clause 5-7. Duty of the insurer to make a payment on account
- Clause 5-8. Payment on account when there is a dispute as to which insurer is liable for the loss
- Section 2: Liability of the assured to third parties
Section 3: Claims by the assured for damages against third parties
- Clause 5-13. Right of subrogation of the insurer to claims by the assured for damages against third parties
- Clause 5-14. Waiver of claim for damages
- Clause 5-15. Duty of the assured to assist the insurer with information and documents
- Clause 5-16. Duty of the assured to maintain and safeguard the claim
- Clause 5-17. Decisions concerning legal proceedings or appeals
- Clause 5-18. Salvage award which entails compensation for loss covered by the insurer
- Section 4: Right of the insurer to take over the object insured upon payment of a claim
- Section 5: Limitation, etc.
- Section 1: Claims adjustment, interest, payments on account, etc.
Chapter 6: Premium
- Clause 6-1. Payment of premium
- Clause 6-2. Right of the insurer to cancel the insurance in the event of non-payment of premium
- Clause 6-3. Premium in the event of total loss
- Clause 6-4. Additional premium when the insurance is extended
- Clause 6-5. Reduction of premium
- Clause 6-6. Reduction of premium when the vessel is laid up or in similar situations
- Clause 6-7. Claim for a reduction of premium
- Chapter 7: Co-insurance of mortgagees
Chapter 8: Co-insurance of third parties
- Clause 8-1. Rights of third parties against the insurer
- Clause 8-2. Protection of third parties against subrogation claims from the insurer
- Clause 8-3. Application of the rules in Chapter 3 and Clause 5-1
- Clause 8-4. Amendments and cancellation of the insurance contract
- Clause 8-5. Handling of claims, claims adjustment, etc.
- Clause 8-6. Other insurance
- Clause 8-7. Independent co-insurance of mortgagees or named third parties
Chapter 9: Relations between the claims leader and co-insurers
- Clause 9-1. Definitions
- Clause 9-2. The right of the claims leader to act on behalf of the co-insurers
- Clause 9-3. Lay-up plan
- Clause 9-4. Notification of a casualty
- Clause 9-5. Salvage
- Clause 9-6. Removal and repairs
- Clause 9-7. Provision of security
- Clause 9-8. Disputes with third parties
- Clause 9-9. Claims adjustment
- Clause 9-10. Insolvency of a co-insurer
- Clause 9-11. Interest on the disbursements of the claims leader
Part Two: Hull insurance
Chapter 10: General rules relating to the scope of the hull insurance
- Clause 10-1. Objects insured
- Clause 10-2. Objects, etc. temporarily removed from the vessel
- Clause 10-3. Loss due to ordinary use
- Clause 10-4. Insurance "on full conditions"
- Clause 10-5. Insurance “against total loss only” (T.L.O.)
- Clause 10-6. Insurance “against total loss and general average contribution only”
- Clause 10-7. Insurance “against total loss, general average contribution and collision liability only”
- Clause 10-8. Insurance "on stranding terms"
- Clause 10-9. Duration of voyage insurance
- Clause 10-10. Extension of the insurance
- Clause 10-11. Liability of the insurer if the vessel is salvaged by the assured
- Clause 10-12. Reduction of liability in consequence of an interest insurance
Chapter 11: Total loss
- Clause 11-1. Total loss
- Clause 11-2. Salvage attempts
- Clause 11-3. Condemnation
- Clause 11-4. Condemnation in the event of a combination of perils
- Clause 11-5. Request for condemnation
- Clause 11-6. Removal of the vessel
- Clause 11-7. Missing or abandoned vessel
- Clause 11-8. Extension of the insurance when the vessel is missing or abandoned
- Clause 11-9. Liability of the insurer during the period of clarification
Chapter 12: Damage
- Clause 12-1. Main rule concerning liability of the insurer
- Clause 12-2. Compensation for unrepaired damage
- Clause 12-3. Inadequate maintenance, etc.
- Clause 12-4. Error in design, etc.
- Clause 12-5. Losses that are not recoverable
- Clause 12-6. Deferred repairs
- Clause 12-7. Temporary repairs
- Clause 12-8. Costs incurred in expediting repairs
- Clause 12-9. Repairs of a vessel that is condemnable
- Clause 12-10. Survey of damage
- Clause 12-11. Invitations to tender
- Clause 12-12. Choice of repair yard
- Clause 12-13. Removal of the vessel
- Clause 12-14. Apportionment of common expenses
- Clause 12-15. Ice damage deductions
- Clause 12-16. Machinery damage deductions
- Clause 12-17. Compensation without deductions
- Clause 12-18. Deductible
- Clause 12-19. Basis for calculation of deductions according to Clauses 12-15 to 12-18 and Clause 3-15
- Chapter 13: Liability of the assured arising from collision or striking
- Chapter 10: General rules relating to the scope of the hull insurance
Part Three: Other insurances for ocean-going vessels
Chapter 14: Separate insurances against total loss
- Clause 14-1. Insurance against total loss and excess collision liability (hull interest insurance)
- Clause 14-2. Insurance against loss of long-term freight income (freight interest insurance)
- Clause 14-3. Common rules for separate insurances against total loss
- Clause 14-4. Limitations on the right to effect separate insurances against total loss
Chapter 15: War risks insurance
- Section 1: General rules relating to the scope of war risks insurance
- Section 2: Termination of the insurance
- Section 3: Trading areas
- Section 4: Total loss
- Section 5: Damage
- Section 6: Loss of hire
- Section 7: Owner’s liability, etc. (P&I)
- Section 8: Occupational injury insurance, etc.
Chapter 16: Loss of hire insurance
- Clause 16-1. Main rules regarding the liability of the insurer
- Clause 16-2. Total loss
- Clause 16-3. Main rule for calculating compensation
- Clause 16-4. Calculation of the loss of time
- Clause 16-5. The daily amount
- Clause 16-6. Agreed daily amount
- Clause 16-7. Deductible period
- Clause 16-8. Survey of damage
- Clause 16-9. Choice of repair yard
- Clause 16-10. Removal to the repair yard, etc.
- Clause 16-11. Extra costs incurred in order to avert or minimise loss
- Clause 16-12. Simultaneous repairs
- Clause 16-13. Loss of time after completion of repairs
- Clause 16-14. Repairs carried out after expiry of the insurance period
- Clause 16-15. Liability of the insurer when the vessel is transferred to a new owner
- Clause 16-16. Relationship to other insurances and general average
- Chapter 14: Separate insurances against total loss
Part Four: Other insurances
Chapter 17: Insurance for fishing vessels
Section 1: General provisions
- Clause 17-1. Scope of application
- Clause 17-2. Renewal of the insurance/Ref. Clause 1-5
- Clause 17-3. Trading areas for fishing vessels/Ref. Clause 3-15
- Clause 17-4. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8
- Clause 17-5. Safety regulations/Ref. Clause 3-22 and Clause 3-25
- Clause 17-6. Savings to the assured
Section 2: Hull insurance
- Clause 17-7. The relationship to Chapters 10-13
- Clause 17-7A. Fixed equipment temporarily removed from the vessel
- Clause 17-8. Change of the open or agreed insurable value/Ref. Clause 2-2 and Clause 2-3
- Clause 17-9. Damage to lifeboats, fishing, whaling and sealing tackle and catch/Ref. Clause 4-7 to Clause 4-12 and Clause 4-16
- Clause 17-10. Hull and freight-interest insurance/Ref. Clause 10-12
- Clause 17-11. Condemnation/Ref. Clause 11-3
- Clause 17-12. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1
- Clause 17-13. Limited cover of damage to machinery
- Clause 17-14. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12
- Clause 17-15. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18
- Clause 17-16. Collision liability for fishing vessels/Ref. Clause 13-1
- Clause 17-17. Collision liability/Ref. Clause 13-1
- Section 3: Hull insurance - extended cover
Section 4: Catch and equipment insurance - standard cover
- Clause 17-19. Objects insured
- Clause 17-20. Insurable value
- Clause 17-21. Extraordinary handling costs
- Clause 17-22. Excluded perils/Ref. Clause 2-8
- Clause 17-23. Deck cargo
- Clause 17-24. Total loss
- Clause 17-25. Damage to or loss of catch
- Clause 17-26. Damage to other objects
- Clause 17-27. Survey of damage
- Clause 17-28. Deductible
- Section 5: Supplementary cover for nets and seines in the sea
Section 6: Loss of hire insurance for fishing vessels
- General comments
- Clause 17-33. Relationship to Chapter 16
- Clause 17-34. Liability of the insurer/applies instead of Clause 16-1
- Clause 17-35. Total loss/applies instead of Clause 16-2
- Clause 17-36. Calculation of compensation for fishing vessels/Ref. Clause 16-3
- Clause 17-37. The daily amount for fishing vessels/applies instead of Clause 16-5
- Clause 17-38. Agreed daily amount for fishing vessels/applies instead of Clause 16-6
Chapter 18: Insurance of mobile offshore units (MOUs)
- Section 1: General rules relating to the scope of the insurance
Section 2: Hull insurance
Section 2-1: General rules relating to the scope of the H&M insurance
- Clause 18-2. Objects insured
- Clause 18-3. Objects temporarily removed or separated etc. from the MOU
- Clause 18-4. Loss due to ordinary use
- Clause 18-5. Extension of the insurance
- Clause 18-6. Liability of the insurer if the MOU is salvaged by the assured
- Clause 18-7. Reduction of liability in consequence of an interest insurance
Section 2-2: Total loss
- Clause 18-8. Total loss
- Clause 18-9. Salvage attempts
- Clause 18-10. Condemnation
- Clause 18-11. Condemnation in the event of a combination of perils
- Clause 18-12. Request for condemnation
- Clause 18-13. Removal of the MOU
- Clause 18-14. Missing or abandoned MOU
- Clause 18-15. Extension of the insurance when the MOU is missing or abandoned
- Clause 18-16. Liability of the insurer during the period of clarification
Section 2-3: Damage
- Clause 18-17. Main rule concerning liability of the insurer
- Clause 18-18. Compensation for unrepaired damage
- Clause 18-19. Inadequate maintenance
- Clause 18-20. Error in design, etc.
- Clause 18-21. Losses that are not recoverable
- Clause 18-22. Damage to the drill string
- Clause 18-23. Deferred repairs
- Clause 18-24. Temporary repairs
- Clause 18-25. Costs incurred in expediting repairs
- Clause 18-26. Repairs of an MOU that is condemnable
- Clause 18-27. Survey of damage
- Clause 18-28. Invitations to tender
- Clause 18-29. Choice of repairers
- Clause 18-30. Removal for repairs
- Clause 18-31. Apportionment of common expenses
- Clause 18-32. Ice damage deductions
- Clause 18-33. Deductible
- Clause 18-34. Basis for calculation of deductions according to Clauses 18-32, 18-33 and 3-15
- Section 2-4: Liability of the assured arising from collision or striking
- Section 2-1: General rules relating to the scope of the H&M insurance
Section 3: Separate insurances against total loss
- Clause 18-39. Insurance against total loss and excess collision liability (hull interest insurance)
- Clause 18-40. Insurance against loss of long-term freight income (freight interest insurance)
- Clause 18-41. Common rules for separate insurances against total loss
- Clause 18-42. Limitations on the right to insure separately against total loss
Section 4: Loss of hire insurance
- Clause 18-43. Main rules regarding the liability of the insurer
- Clause 18-44. Total loss
- Clause 18-45. Main rule for calculating compensation
- Clause 18-46. Calculation of the loss of time
- Clause 18-47. The daily amount
- Clause 18-48. Agreed daily amount
- Clause 18-49. Deductible period
- Clause 18-50. Survey of damage
- Clause 18-51. Choice of repairer
- Clause 18-52. Move to the repair location, etc.
- Clause 18-53. Extra costs incurred in order to avert or minimise loss
- Clause 18-54. Simultaneous works
- Clause 18-55. Loss of time after completion of repairs
- Clause 18-56. Repairs carried out after expiry of the insurance period
- Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner
- Clause 18-58. Relationship to other insurances and general average
Section 5: War risks insurance
- Section 5-1: General rules relating to the scope of war risks insurance
- Section 5-2: Termination of the insurance
- Section 5-3: Areas of operation
- Section 5-4: Total loss
- Section 5-5: Damage
- Section 5-6: Loss of hire
- Section 5-7: Owner’s liability, etc. (P&I)
- Section 5-8: Occupational injury insurance, etc.
Section 6: Construction risks insurance
- Section 6-1: General rules relating to the scope of construction risks insurance
Section 6-2: Loss of or damage to the MOU
- Clause 18-87. Objects insured/Ref Clause 18-2
- Clause 18-88. Insurable value
- Clause 18-89. Compensation in the event of a total loss/Ref. Clause 4-1
- Clause 18-90. Total Loss/Ref. Section 2-2
- Clause 18-91. Damage/Ref. Section 2-3
- Clause 18-92. Error in design, etc.
- Clause 18-93. Costs incurred in order to save time/Ref. Clauses 18-24, 18-28 and 18-29
- Section 6-3: Supplementary covers
Chapter 19: Builders’ risks insurance
Section 1: Common provisions
- Clause 19-1. Perils covered/Ref. Clause 2-8, cf. Clause 2-10
- Clause 19-2. Insurance period/Ref. Clause 1-5
- Clause 19-2A. Premium in the event of total loss
- Clause 19-3. Co-insurance/Ref. Clause 8-1
- Clause 19-4. Transfer of the building contract/Ref. Clause 3-21
- Clause 19-5. Place of insurance
- Clause 19-6. The sum insured as the limit of the liability of the insurer/Ref. Clause 4-18 and Clause 4-19
- Clause 19-7. Escalation of the sum insured
- Clause 19-8. Deductible
Section 2: Loss of or damage to the subject-matter insured
- Clause 19-9. Objects insured/Ref. Clause 10-1
- Clause 19-10. Insurable value
- Clause 19-11. Total loss in the event of condemnation
- Clause 19-12. Total loss where the yard’s obligation to deliver no longer applies
- Clause 19-13. Compensation in the event of a total loss/Ref. Clause 4-1
- Clause 19-14. Damage/Ref. Chapter 12
- Clause 19-15. Limitation of the insurer’s liability/Ref. Clause 12-1
- Clause 19-16. Compensation for unrepaired damage/Ref. Clause 12-2
- Clause 19-17. Costs incurred in order to save time/Ref. Clause 12-7, Clause 12-11 and Clause 12-12
- Section 3: Indemnification of additional costs incurred in an unsuccessful launching and costs of wreck removal
- Section 4: Liability insurance
Section 5: Supplementary covers
- Clause 19-22. Applicable rules
- Clause 19-23. Insurance of additional costs in connection with rebuilding and/or building of a new subject-matter insured
- Clause 19-24. Insurance of the yard’s liability for the buyer’s interest claim for instalments paid
- Clause 19-25. Insurance of the yard’s loss of interest in the event of late delivery
- Clause 19-26. Insurance of the yard’s daily penalties in the event of late delivery
- Clause 19-27. Towage and removal of the subject-matter insured
- Section 6: Supplementary cover for war risks
Chapter 20: Insurance for vessels with trading certificates
- Section 1: Common provisions
Section 2: Hull insurance
- Clause 20-6. The relationship to Chapters 10-13
- Clause 20-7. Hull and freight-interest insurance/Ref. Clause 10-12
- Clause 20-8. Condemnation/Ref. Clause 11-3
- Clause 20-9. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1
- Clause 20-10. Limited cover of damage to machinery
- Clause 20-11. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12
- Clause 20-12. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18
- Clause 20-13. Collision liability/Ref. Clause 13-1
- Section 3: Hull insurance - extended cover
- Section 4: Hull insurance - limited cover
Chapter 21: Liability insurance
- Clause 21-1. Scope of application
- Clause 21-2. Renewal of the insurance/Ref. Clause 1-5
- Clause 21-3. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8
- Clause 21-4. Savings to the assured
- Clause 21-5. Perils covered
- Clause 21-6. Liability for personal injury
- Clause 21-7. Liability for property damage
- Clause 21-8. Liability for description
- Clause 21-9. Liability for the misdelivery of goods
- Clause 21-10. General average contributions
- Clause 21-11. Liability for removal of wrecks
- Clause 21-12. Liability for special salvage compensation
- Clause 21-13. Liability for bunker oil pollution damage and damage to the environment
- Clause 21-14. Stowaways
- Clause 21-15. Liability for fines, etc.
- Clause 21-16. Liability for social benefits for the crew
- Clause 21-17. Travel expenses for replacement crew
- Clause 21-18. Expenses for disinfection and quarantine
- Clause 21-19. Limitation due to other insurance, etc.
- Clause 21-20. Safety regulations/Ref. Clause 3-22 and Clause 3-25
- Clause 21-21. Assured's fault
- Clause 21-22. The insurer's rights in the event of liability
- Clause 21-23. Liability for loss that occurred during other transport, etc.
- Clause 21-24. Limitation of liability for fishing vessels
- Clause 21-25. Limitation of the insurer's liability for measures to avert or minimise loss
- Clause 21-26. The sum insured as a limit to the insurer's liability
- Clause 21-27. Deductible
- Chapter 17: Insurance for fishing vessels
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Section 1: General rules relating to the scope of the insurance
Clause 18-1. Scope of application and applicable rulesView Clause Go to Plan page
This provision was amended in 2016.
The first sentence establishes that the rules in Part One shall apply unless specifically amended under this Clause. It is no longer deemed necessary to state in cl. 18-1 that Chapter 18 only applies to the extent it is set out in the insurance contract. The 1996 Commentary to the previous Cl. 18-1 stated that “there is no clear distinction between ordinary vessels that are insured under the general hull insurance conditions of the Plan, Chapters 10 to 13, and offshore structures that are insured in accordance with Chapter 18”. Developments since 1996 have demonstrated that insurance of conventional trading and passenger vessels is a complete different risk from insurance of MOUs. The insurance market is today very much aware of the different risks involved and will know when they are insuring MOUs which appropriately should be covered on the basis of Chapter 18. If the parties should have forgotten to expressly incorporate Chapter 18 in an insurance for MOUs covered on the basis of the Plan, the presumption must be that the insurance is intended to be on the basis of Chapter 18 unless it is apparent from the wording or implied terms that the parties did not so intend.
MOUs are not defined in the Plan but in practice, however, Chapter 18 will first and foremost be used for vessels and other mobile installations that are used for the exploration for, exploitation or storage of natural resources offshore, or in support of such activity. The designation of the insurance as an insurance of “mobile offshore units” means that it accordingly covers both various forms of vessels operating on the continental shelf and various forms of mobile units. It is irrelevant whether the unit is designed like a vessel and is a vessel (e.g. a drilling vessel or a Floating Production Storage and Offloading vessel “FPSO” or a Floating Production Storage vessel “FPS”), or if it falls outside the normal concept of a vessel, e.g. jack-up or semi-submersible units.
The heading of Chapter 18 contains the word “mobile”. This means Chapter 18 is not intended to be used for fixed or stationary installations, e.g. platforms resting on poles rammed into the seabed. Other types of stationary facilities, e.g. pipelines are not intended to be insured on the basis of Chapter 18. However, Chapter 18 is not based on any such absolute distinction between mobile and stationary facilities or structures. The stationary platforms and structures which were the solutions for offshore field developments up until mid 1990s are no longer the chosen concept for new developments, particularly in frontier areas where there is no existing infrastructure in place, and when the field is in deep water. Newer fields have therefore been developed with floating MOUs connected to various equipment placed on the seabed. This underwater equipment may also belong to the owner of the MOU and is then normally comprised by the insurance of the MOU. Chapter 18 has been amended as appropriate to adapt to applying also to such underwater equipment belonging to the MOU. Traditional fixed installations are for the most part owned by the licence owners and insured under their comprehensive energy insurance arrangements. By fixed installations are thus meant steeljacket or concrete gravity base installations which are placed in the field to be used throughout the life of the field. However, there is no point in drawing a sharp distinction between a mobile and a fixed installation. The parties must evaluate together which insurance conditions that are best suited for insuring their interests.
Cl. 18-1 (a) Insurable value/Sum insured/Ref. Cl. 2-2 and Cl. 2-3
In previous versions, Cl. 18-1, letter (a), sub-clause 1, stated that the sum or sums insured shall be deemed to constitute the assessed insurable value(s) unless circumstances indicated otherwise. This provision was in 2016 made general and moved to Cl. 2-2, sub-clause 2, and thus deleted in Cl. 18-1 letter (a). As a consequence, the remaining sub-clauses were renumbered.
Cl. 18-1 (a) sub-clause 1 now opens for the parties to agree separate sums insured for the MOU and disconnectable equipment. The reason is that owners of certain MOUs, in particular FPSOs, may also own subsea equipment which isdisconnectable from the unit, and left behind on the offshore field location when the MOU is temporarily away from the location. Such equipment, consisting of flexible risers, umbilicals, mooring lines and a buoy, can often represent significant values. When the MOU and such subsea equipment are disconnected and the MOU is away from the field they are no longer exposed to common risks of loss or damage as would be the case when together at the field location. A serious loss to the MOU or the subsea equipment whilst disconnected may render the damaged unit/equipment condemnable if only the value of the unit or the subsea equipment is taken into consideration and not the combined values.
Cl. 18-1 (a) sub-clause 2 provides that when the parties have agreed to insure with separate values, the insurance operates as separate insurances for the MOU and the disconnectable equipment respectively.
Cl. 18-1 (a) sub-clause 3 provides that when the MOU is within the field at which it is to operate, the MOU and its equipment are considered one insured object with the combined scheduled values as the sums insured.
Cl. 18-1 (b) Perils insured against/Ref. Cl. 2-8 and Cl. 2-9
Cl. 18-1, letter (b), sub-clause 2, was added in 2016.
Cl. 18-1, letter (b), sub-clause 1, contains a limitation in the cover of perils and must be seen in conjunction with the rules relating to perils insured in Cl. 2-8 to Cl. 2-10. The Plan has two main types of perils: “marine perils”, cf. Cl. 2-8, and “war perils”, cf. Cl. 2-9. The rules in Chapter 18 are applicable to insurance against marine perils, as well as to insurance against war perils. If no special agreement concerning perils insured against has been made, under Cl. 2-10 the insurance will only cover “marine perils”. There is obviously nothing to prevent one and the same insurance contract covering marine perils as well as war perils.
An insurance “against marine perils” shall be an “all risk” insurance from the outset: The insurance covers all perils to which the interest is exposed, unless specific exclusions are stated. The exclusions from marine perils appear from Cl. 2-8 (a) to (e). The exclusion in Cl. 18-1 (b) comes as an addition to these exclusions.
By contrast, an insurance against war perils only covers “named perils”, i.e. the war risks insurance only covers the perils “named” in Cl. 2-9. Cl. 18-1, letter (b), is a relevant exclusion also under a war risks insurance if the blow-out and thus the need for drilling a relief well should have its root cause in a “named” war peril as defined in Cl. 2-9.
The provision in Cl. 18-1 letter (b), sub-clause 1, must also be seen in conjunction with the limitations of the perils insured against which follow from Section 2 of Chapter 18 on H&M insurance, in particular the exclusion for loss due to ordinary use in Cl. 18-4 (cf. Cl. 10-3), and the exclusions for damage due to inadequate maintenance in Cl. 18-19 (cf. Cl. 12-3), and error in design, etc., in Cl. 18-20 (cf. Cl. 12-4).
The background for the provision is the risk of blow-outs, i.e. uncontrolled ejecting of drilling fluid through the drilling hole and into the sea or the air, followed by uncontrolled emission of oil, gas or fluid from the well and into the sea or the air caused by a pressure from the underground. Such blow-out may be followed by ignition of the well fluids and explosion and fire. Blow-outs will often need to be stopped by the drilling of a relief well. It is perfectly conceivable that an insured drilling unit may be requested to drill one or more such wells in order to assist another unit/installation, and it may, depending on the prevailing circumstances, be natural, or even necessary, for such a request to be complied with. Commercial vessels in distress threatening life, environment and property requiring emergency salvage or rescue operations are a natural parallel. For the insured unit to embark on a salvage operation will very often represent a relevant alteration of the risk under the hull insurance, cf. Cl. 3-8 and Cl. 3-9. However, according to Cl. 3-12, sub-clause 2, the insurer automatically covers the added risk involved in “measures taken for the purpose of saving human life” or by “the insured vessel salvaging or attempting to salvage vessels or goods during the voyage”. A salvage operation which consists in the drilling of a relief well is, however, considered a high risk operation. The risk to the salvaging unit is not comparable to a salvage operation in commercial shipping. It is first and foremost the licensees'/operator’s interests which are at stake: the risk of the oil well being destroyed and the risk of extensive pollution liability, etc. The consideration of mutuality which may be said to be the background for Cl. 3-12, sub-clause 2, in ordinary hull insurance is missing here. The provision therefore excludes this special “salvage risk” from the perils insured against. This obviously does not preclude the possibility of having the risk covered under a separate agreement, possibly subject to an additional premium.
The exclusion for the drilling of a relief well must apply, even if the drilling is ordered by the authorities. It is therefore irrelevant for the insurer’s liability whether it is the operator who decides that a relief well shall be drilled, or whether the operator is acting on the instructions of the authorities.
Earthquake and volcanic eruption are not excluded perils.
Cl. 18-1, letter (b), sub-clause 2, makes it clear that construction risks insurances pursuant to Section 6 also cover strike and lock-out in the same way as construction risks covered pursuant to Chapter 19, cf. Cl. 19-1, see further the Commentary to Cl. 19-1.
Cl. 18-1 (c) Alteration of the risk/Ref. Cl. 3-8
Storage and use of explosives or radioactive material is a normal occurrence during operations on the Continental Shelf and therefore constitutes a foreseeable risk, which the insurer can calculate when entering into the contract.
Cl. 2-8 relating to marine perils contains no limitation concerning damage resulting from the storage or use of explosives. Explosion, fire and other damage resulting from such storage or use must therefore be covered in the normal way, unless the assured has breached any of the obligations in Chapter 3. However, Cl. 2-8 (e) nos. 1 to 4 contain general exclusions for various types of nuclear-related risks. If the storage or use of radioactive material causes radiation, radioactive contamination or any other nuclear-related risk as specified in these provisions, resulting loss or damage will therefore fall outside the scope of cover. The same applies to insurance against war risks, see Cl. 2-9, sub-clause 2 (b), nos. 1 - 4.
Cl. 18-1 (d). Loss of the main class/Ref. Cl. 3-14
This sub-clause (d) corresponds to Cl. 3-14 with some amendments to adapt to normal modus of operations for MOU. The heading and wording of Cl. 3-14 was amended in the 2013 Plan emphasising that Cl. 3-14 applies only to loss of the main class as opposed to loss of optional additional class notations. The wording of sub-clause (d) is amended in the same way. See further the Commentary to Cl. 3-14.
Sub-clause (d) expressly states that the insurance does not terminate until the on-going operation can be terminated in accordance with applicable regulations and the field operator’s consent and arrives at the nearest safe port in accordance with the insurer’s instructions. Thus it is safeguarded that the assured is protected by the insurance until he safely can terminate the on-going operation and bring the MOU to a for the MOU safe port as instructed by the insurer. If the class can be restored while the MOU is on the field or off-shore, there should not normally be any need for the insurer to require the assured to bring the MOU into port. But if the insurer all the same should require surveying the MOU in port, the insurance will continue until the MOU has arrived at the port designated by the insurer.
Cl. 18-1 (e). Safety regulations/Ref. Cl. 3-22 and Cl. 3-25
A new no. (3) was added to sub-clause 1 in 2016. This is relevant for construction risks insurance covered pursuant to Section 6. A corresponding relevant amendment to sub-clause 2 was made.
Sub-clause 1 no. (1) provides that the well to which the MOU is connected shall be equipped with blow-out preventer(s) (BOP) or other well pressure control equipment which are wellhead safety devices used to prevent pressure build-up in the well from extending up to the MOU when the primary barriers in the well fail to contain the formation pressure under control and thus prevent surface blow-outs. As mentioned in the Commentary to Cl. 18-4, a blow-out may occur when the drilling reaches a subsurface formation which contains oil, gas or other fluid under higher pressure than the hydrostatic pressure of the drilling fluid in the well. The formation fluids will then flow into the well bore and mix with the drilling fluid and increase the pressure in the well and push up through the hole and via the MOU and into the environment, unless it is stopped by a blow-out preventer. A surface blowout will also involve the risk that the oil or gas may ignite with extensive fire and explosion damage as a result. Some types of loss resulting from such a blow-out will, according to their nature, fall outside the scope of cover under Chapter 18, inter alia liability for personal injury and liabilities in connection with oil spilled into the sea. The MOU itself may be damaged or become a total loss as a result of a surface blow-out. Losses of this nature are normally covered under Chapter 18, subject to the exceptions which follow from sub-clause (f), cf. also sub-clause (b). It is therefore of the utmost importance for the insurers that all reasonable measures are taken in order to prevent a blow-out. Most important of all in this connection is the use of blow-out preventers.
Offshore petroleum activities are subject to extensive safety regimes through public authorities regulations stipulate that drilling, well work-over and production operations shall be carried out in a safe manner.
The requirement is that the well, to which the MOU is connected, shall be equipped with pressure control device on the top of the well when this is actually feasible. The deciding factor as to when the wellhead safety device shall be installed must therefore be what follows from “standard practice”. The same requirement applies to the procedures for the installation, the number and the testing of the device. “Standard practice” means the practice that is common within the offshore industry for the type of well drilling, work-over or production operation and shall as a minimum be in accordance with the requirements of the relevant regulatory authority. As regards the reference to “standard issue” it means that the wellhead safety device shall be of the type which is common for the type of well and operation with the adequate pressure rating as the actual or expected well pressure will require.
Sub-clause 1 no. (2) contains safety regulations in respect of moves of MOUs. Prior to move, the assured must prepare a move plan, which shall be approved by the claims leader. If an operation manual exists which has been approved by the classification society or regulatory or flag state authorities, it may be used as a basis for the move plan. If no such manual exists, the insurer is entitled to demand that technical expertise be brought in to evaluate the move plan and physical arrangements associated with the move.
The move plan shall be adhered to during the move and serves as a special safety regulation under Cl. 3-25, sub-clause 2, cf. sub-clause (b), second sentence.
Sub-clause 1 no. 2 (a) limits the requirement for a separate move plan to such MOUs that do not move by own propulsion but require assistance of other vessels, tugs, heavy-lift vessels and the like to move. The market practice has developed that for shorter moves within a confined area which are routinely carried out specific move plans do not have to be submitted to the claims leader for approval and in such cases an agreed distance of move is agreed as between insurers and the assured. A panel of approved marine warranty surveyors to review move plans and give recommendations are often written into the insurance contracts.
Sub-clause 1 no. 2 (b) is new and in response to the development of new practice in the deep water drilling industry to move the MOU over shorter distances without pulling up the whole length of the riser string and the BOP before moving the MOU. Although the newer MOUs are specially equipped to move with riser and BOP hanging under the MOU, insurers consider the operation may represent an increased risk and require such moves to be specially reviewed and approved. Shorter moves between wells within the same offshore field, often within the industry referred to as “well-hopping” which are done routinely, do not require specific move plans to be prepared for each move provided, however, that the MOU is technically equipped to do such move with riser and BOP suspended. Insurers’ main concern about such operations, in addition to the MOU’s capability to move with the riser and BOP suspended, is the increased fatigue stresses that the riser string is exposed to during such moves. The move plan shall in particular contain due consideration of the remaining fatigue life in the riser system before the move, the stresses during the move and remaining fatigue life after the move. Another concern is the risk of grounding or striking seabed infrastructure of any kind, for which the sailing route shall be part of the move plan with minimum clearances to be defined and approved by claims leader, an appointed warranty surveyor or other technical expert approved by the claims leader.
If the move entails a change of the area of operation, both parties may demand an adjustment of the premium according to Cl. 18-1, sub-clause (h).
Sub-clause 1 no. (3) is applicable for construction risks covered pursuant to Section 6. Under this provision the assured is obliged to appoint a surveyor, approved by the claims leader, to review the project plan and procedures for moves and lifts and, when applicable, offshore installation of components or modules. The surveyor shall draw up an initial risk assessment on the basis of his initial review. The claims leader is granted the authority to approve the surveyor on behalf of all participating co-insurers. On the basis of the surveyor’s initial risk assessment, the claims leader is authorised to approve the further scope of survey that is deemed required from the insurers’ point of view to identify the risks involved in the various phases of and operations during the project. If the project in the view of the claims leader does not require any such survey, the claims leader may, on behalf of all participating co-insurers, waive the right to demand such survey.
The claims leader may for certain operations, subject to the further scope of survey, demand that the surveyor shall issue a certificate of approval when he is satisfied with the preparations for the particular operation, e.g. a heavy lift involving risk for substantial damage if something goes wrong. If the assured commences the operation in question before the certificate of approval is issued, he will be in breach of the safety regulation.
Sub-clause 2 of Cl. 18-1, letter (e), provides that the regulations in sub-clause 1 no. (3) shall be regarded as safety regulations. With regard to no. (3), as opposed to nos. (1) and (2), it is expressly referred to Cl. 3-25, sub-clause 1. This is done to make it clear that for breach of the regulations in no. (3), the ordinary rules of identification under Cl. 3-36 to Cl. 3-38 shall apply and not the extended identification pursuant to Cl. 3-25, sub-clause 2, which is applicable for breach of the regulations in nos. (1) and (2).
Cl. 18-1 (f). Measures to avert a blow-out, etc./Ref. Cl. 4-7 to Cl. 4-12
The provision limits the insurer’s liability for costs incurred in controlling blow-outs and cratering, or fire in connection with a blow-out.
As regards the term “blow-out” reference is made to the Commentary on Cl. 18-1 (e) sub-clause (1). “Cratering” is an after-effect of a blow-out in that a submarine crater is formed in the subsoil around the well due to uncontrolled flow of oil, gas or fluid in the well. If oil or gas is suddenly released in large quantities, the pressure conditions in the subsoil may change to such an extent that the area around the oil well collapses so that an underwater crater is formed. For an MOU resting on the sea bottom (a totally submersible or jack-up structure) such “cratering” may result in the foundation being pulled away with the result that the MOU loses its stability and topples.
Blow-out and cratering of a well, possibly accompanied by fire, will first and foremost be a great concern for the licensees and the exposure they face from such incident. There will be a risk of the loss of human life and economic assets, in addition to a major potential pollution liability. Extensive measures will be initiated to get the flow of oil, gas or other fluid under control and stopped. The licensees are the ones who bear the liability for any pollution emanating from the well fluids, etc., and they are the ones to suffer the loss of or damage to the well. Where an MOU is brought into the efforts to fight a blow-out, etc., the regard for the safety of the actual MOU will often merely be a collateral motive. If the Plan’s rules were to be applied in full in such cases, this would require a discretionary allocation of the overall loss in connection with the well control operation among the interests at stake for the owner and the licensees, cf. Cl. 4-12, sub-clause 2. Only the portion attributed to the owner would be recoverable from the hull insurer. However, it would not be easy to carry out such an apportionment, first and foremost because the values of the assets at stake for the licensees (including the potential oil pollution liability) are difficult to estimate. Given that Cl. 18-1 sub-clause (f) excludes this item from cover; the owner has a strong incentive to secure an agreement with the licensees (in practice the operator) to the effect that they shall cover the costs of averting or minimising the loss in connection with a blow-out, etc., in full. This is also in concordance with the allocation of risk normally used in offshore contracts.
Only measures aimed at gaining control of a blow-out, etc., are covered by the provision. If a fire has broken out on board the MOU as a result of a blow-out, the costs (possibly salvage award) incurred in connection with the firefighting or the towing of the MOU away from the area of danger, will have to be covered by the insurer under the rules in clauses 4-7 et seq. of the Plan.
Sub-clause 2 states that loss or damage to the insured MOU is not excluded by virtue of this exclusion. Such loss or damage will be recoverable in accordance with the terms and conditions as otherwise applicable.
Cl. 18-1 (g) The limit of liability of the insurer/Ref. Cl. 4-18
Sub-clause (g) is repeating to a large extent verbatim what is provided in Cl. 4-18, but a cap of USD 500,000,000 is put on the cover for costs of preventive measures. Sub-clause (g) is spelling out that it is the cover under the hull insurance that is governed by the Clause. Cover under other types of insurances, namely Loss of Hire insurance (Section 4), and War Risks (Section 5) will be governed by Cl. 4-18 to the extent it is not deviated from in these Sections.
MOUs with sum insured under the hull insurance of USD 500,000,000 or less will still have available two times the sum insured. If costs of preventive measures exhaust the separate sum insured available for such costs, they may as before be compensated under the sum insured under the hull insurance provided that this sum is not consumed by the damage to or loss of the MOU. For MOUs with a sum insured higher than the limit, costs of preventive measures will be limited to USD 500,000,000, but if this amount is consumed there may of course still be available an un-used part of the sum insured under the hull insurance. If this sum insured is e.g. USD 750,000,000 and the costs of repair only amounts to USD 500,000,000, there will be available to cover costs of preventive measures the remaining un-used USD 250,000,000 under the hull insurance. In this example there will be available altogether USD 750,000,000 to cover costs of preventive measures (USD 500,000,000 limit on costs of preventive measures + USD 250,000,000 from un-used portion of the hull insurance).
Sub-clause 2 provides for in the same way as Cl. 4-18 that a third separate sum insured shall be available to cover collision liability according to Cl. 18-36 to 18-38. According to Cl. 18-37 this sum insured corresponds to the sum insured under the hull insurance, but it is now also capped at USD 500,000,000 or for 50% of the sum insured whichever is the greater amount, see further the Commentary to Cl. 18-37.
Thus for MOUs with sum insured under the hull insurance of USD 500,000,000 or less, there will be as before available up to three times the sum insured under the hull insurance. But for MOUs with sum insured under the hull insurance of e.g. USD 1,000,000,000, there will now be two times the sum insured available.
The reason for introducing these capped/reduced limits is that for MOUs with high values it binds up too much capacity to insure/reinsure an exposure of three times the sum insured. Even if the risk of reaching the theoretical maximum exposure is remote, reinsurers charge premium for making such capacity available. Typically salvage costs are by law limited to 100% of the salved values, which are the values in damaged condition. In serious salvage cases the salved values are therefore normally significantly lower than the insured values as the MOU will have suffered serious damage in order to need salvage assistance. Besides, the salvage awards for values in the hundreds of millions of USD, will never reach 100% of the salved values. Even in complicated and long lasting salvage operations for high value vessels or MOUs, salvage awards will only in rear cases reach as high as 50 % of the salved values. For practical purposes it is inconceivable that anybody will use as much as USD 500,000,000 in costs of preventive measures.
The same reasoning goes for collision liability. Normally the assured will be entitled to limit liability to sums below USD 500,000,000, and it binds up capacity and costs unnecessary premium to reinsure liability of this magnitude. Besides, collision liability is also covered under the hull interest insurance, cf. Cl. 18-39 (b) with a separate sum insured equal to the sum insured under the hull interest insurance, see further the Commentary to Cl. 18-39.
If an assured should be required by contract to cover more than USD 500,000,000 for costs of preventive measures and collision liability, the assured must get such excess cover on individual basis.
Cl. 18-1 (h) The area of operation/Ref. Cl. 3-15
This Clause was amended in 2016.
Sub-clause 1 provides that the area of operation is worldwide within the ordinary trading area as defined in Cl. 3-15, sub-clause 1, unless otherwise agreed in the insurance contract. If the assured wishes to operate the MOU in an excluded or conditional trading area, cf. the Appendix to Cl. 3-15, the assured must notify the insurer in accordance with Cl. 3-15. Any such operation will be subject to Cl. 3-15. However, the maximum ¼ deduction pursuant to Cl. 3-15, sub-clause 3, first sentence, is increased to USD 1,000,000. If the insurer is entitled to any further deduction according to Cl. 3-15, sub-clause 3, last sentence, such deduction comes in addition to the ¼ deduction maximised at USD 1,000,000.
Sub-clause 2 is edited to fit to the new sub-clause 1 so that if the area of operation shall not be worldwide within the ordinary trading area, but restricted to e.g. a smaller area or one or more specific fields, such area of operation must be set out in the insurance contract. The same goes, of course, if the area of operation shall be within any excluded or conditional trading area.
The description may be relatively narrow, e.g. associated with a field, e.g. Ekofisk, or a larger area, e.g. the North Sea or the Gulf of Mexico. If the assured changes the area of operation set out in the insurance contract, this may, depending on the circumstances, represent an alteration of the risk according to Cl. 3-8. The change from one field in the North Sea to another, e.g. from Ekofisk to Statfjord, will normally not represent an alteration of the risk. If, however, the new area of operation is considerably further away, e.g. from the North Sea to the Gulf of Mexico, the consideration may be different, in particular if the move shall take place during a period with a high weather risk, or where it involves an MOU that has to be towed (wet or dry) and the towage is considered particularly risky. If the change of the area of operation represents an alteration of the risk the insurer is entitled to cancel the insurance, cf. Cl. 3-10. If the assured has failed to give notice of the change, and a casualty occurs, the insurer is also free from liability provided that he can prove that he would not have accepted the insurance if he had known about the change. If, however, the insurer would have accepted the insurance even if he had known of the change, but would have agreed different conditions, he will be liable if the casualty was not caused by the change, cf. Cl. 3-9.
If the insurance contract does not set out the area of operation, the MOU may operate all over the world within the trading area, cf. sub-clause 1 and Cl. 3-15. The move of the MOU from one area of operation to another will in that event not represent an alteration of the risk, as long as the MOU remains within the ordinary trading area. However, it follows from Cl. 18-1 sub-clause (e), (2) that a move of the MOU by other means than by its own propulsion or with its riser and BOP suspended shall be made in accordance with a removal plan approved by the claims leader. This applies irrespective of whether or not the area of operation is stated in the insurance contract. In the event of a breach of this safety regulation, the insurer may be free from liability according to Cl. 3-25.
Sub-clause 2, first sentence, imposes a duty on the assured to notify the insurer if the MOU is to change its area of operation set out in the insurance contract. If several areas of operation have been agreed, a move between these areas of operation does not give rise to any duty to notify the insurer, but will still require approval according to sub-clause (e), see above. Sub-clause 2, first sentence, does not stipulate any sanctions if the assured fails to give notice of the move of the MOU to an area of operation outside the area agreed with the insurer. However, if the insurer is entitled to charge an additional premium, he may do so retroactively once he gets to know about the move.
A change of the area of operation may decrease the risk for the insurer. Hence, the second sentence entitles both parties to demand an adjustment of the premium in the event of a change of the area of operation, while the third sentence establishes that in the event of an increase in premium, the insurer must notify the person effecting the insurance not later than 14 days after the insurer has received notice of the changed area of operation.
Cl. 18-1 (i) Co-insurance and waiver of subrogation of third parties
An insurance effected on the basis of the Plan automatically also covers a mortgagee’s interest, cf. Cl. 7-1. However, other third parties’ interests are not covered, unless specifically agreed, cf. Cl. 8-1. In connection with the insurance of offshore MOUs there is, however, a need for a more extensive cover of third parties’ interests than what follows from Chapters 7 and 8.
To the extent that a co-insured third party has ownership interests or other economic interests in the capital value of the insured MOU, a co-insurance will, in addition to protection against subrogation, also afford him insurance cover of the said economic interest. That the said persons have such ownership interests is in particular relevant in connection with various types of equipment covered under the insurance of the MOU. Where the relevant third parties do not have such economic interest, it is the protection against subrogation, and not full scope of the co-insurance cover, which will be the entire purpose of the co-insurance. The need for protection against subrogated claims is related to the fact that the party in question is in such a position that he risks causing damage to the MOU. At the same time the contract between the owner of the damaged object and the person causing the damage will normally contain mutual hold harmless and indemnity provisions, commonly referred to as “knock-for-knock” principle, which means that it is the owner, and not the person causing the damage, who shall cover the damage. The owner has in other words waived the right to hold the contractor, charterer, etc., liable for damage which they may cause to the MOU. The basis of the “knock-for-knock” principle is, however, that the insurer is not entitled to be subrogated to the assured’s claim against the person causing the damage in recourse proceedings, cf. Section 4-3 of the Norwegian Compensatory Damages Act and Cl. 5-13 of the Plan. Protection against subrogation under the insurance therefore becomes an important part of the “knock-for-knock” regulation.
During the revision of the Plan it was found expedient to distinguish between those situations where there was merely a need for protection against subrogated claims, and those situations where there was a need for more extensive co-insurance status. This has been done by sub-clause 1 regulating the protection against subrogated claims, while sub-clause 2 regulates co-insurance.
According to sub-clause 1, the insurer waives the right of subrogation against any person causing damage who has contractually disclaimed liability for damage to the MOU and reserved the right to protection against recourse from the insurer. The protection against subrogated claims has in other words been given those persons causing damage who have, on a contractual basis, been given an undertaking that the insurer shall not be entitled to claim against them, and is not given to any specifically named groups of persons. In this way the insurance contract comes in as an extension of the “knock-for-knock” agreements entered into concerning the use of the structure or the equipment in offshore operations. Often the protection against recourse will benefit typically contractors, charterers, or licensees in the area of operation in question. However, the protection may also be extended to others, e.g. another contractor/supplier engaged by the licensees (the operator) to carry out certain services or work in connection with the MOU or other field operations, units or installations within the same field license.
The provision stipulates the condition that the relevant contractual regulation, where the person causing the damage disclaims liability and reserves the right to protection against recourse, “is regarded as customary in the activities in which the MOU is involved”. Implicit in this condition is first and foremost that protection against recourse shall only be reserved for those groups of persons who normally obtain such protection under the contractual system used in the petroleum industry. The question as to what is “customary” must be evaluated, both in relation to the type of activities in question, and in relation to the geographical area where the MOU is located. In many areas petroleum activities will normally be based on a “knock-for-knock” principle with extensive and relatively clear and unambiguous rules as to who shall be covered by the regulation. However, it is also conceivable that there are areas where such regulation is not customary, in which event this must be decisive. Reference is furthermore made to the Commentary on Cl. 4-15 concerning unusual or prohibited contractual conditions.
The provision does not state who must have entered into the contract with the person causing the damage. This has been done deliberately. The protection against subrogated claims may be set out in different contracts in the contractual pyramid frequently encountered in the petroleum industry, at the same time as these contracts may have been entered into by different groups of persons. The crucial point is that the person causing the damage is, through such a contract, ensured protection against any subrogated claims from the insurer, and not who is his contracting partner under this contract. The protection for the insurer lies in the fact that the protection against subrogation of the person causing the damage shall be in accordance with customary contractual regulation in the industry, see above. If the insurer wants a narrower protection against subrogation, he will have to stipulate this in the insurance contract.
The provision is worded as a traditional “waiver-of-subrogation” and may appear, on the plain reading of its wording, to be an absolute waiver of the insurer’s right of subrogation. However, such far-reaching exclusion of liability will not be valid. A person causing damage may not disclaim liability for his own intentional or grossly negligent acts under Nordic countries´ laws, cf. e.g. Section 36 of the Norwegian Contracts Act. In reality, it is therefore Cl. 3-33 of the Plan which will determine the limit of the insurer’s right of subrogation, ref. Commentary to sub-clause 3 below.
Sub-clause 2 regulates the co-insurance question. However, also here it was decided to tie the insurer’s obligation directly to the persons who on a contractual basis have been given the right to co-insurance under the insurance of the MOU, and not to defined groups of persons. This ensures that the co-insurance satisfies contractual obligations, and at the same time prevents the status of a co-assured being given to groups of persons who in reality have no need for, nor any expectation of, such cover.
Where a co-insurance is tied to contractual obligations, it is no condition for co-insurance that the co-assured has an economic interest in the insured MOU. It is conceivable that a contract presupposes co-insurance protection also of groups of persons without such economic interests, e.g. a drilling contractor who has no ownership interest in the MOU or any part of the associated equipment. In that event, the full co-insurance protection under Cl. 18-1, sub-clause (i)(2), would not give the co-assured very much more than the limited protection against subrogation according to sub-clause 1. However, often the co-assureds will have such ownership interests, e.g. by owning the equipment they are going to use themselves. As mentioned in Cl. 18-2, sub-clause 1 (b), such equipment will be covered by the insurance, regardless of ownership. In that event, the co-assured has a direct insurance against damage to his own property.
The co-insurance may also be of significance in connection with the cover of collision liability. If an MOU is chartered on bare-boat conditions, a collision liability will lie with the charterer in his capacity as manager and operator, i.e. employer of the crew of the MOU. Provided that the owner of the MOU is required to co-insure the bare-boat charterer, such liability will be covered under a hull insurance effected by the owner.
The normal situation will be that the owner of the MOU will act as the person effecting the insurance when an MOU is insured. In that event, he also has status as assured. The provision in sub-clause 2 will in such cases first and foremost be significant for the charterer, including bare-boat charterers, contractors and sub-contractors engaged by the owner. The provision will also encompass the interests of the licensees, including the operator and their contractors who are contracted to perform services on-board in direct connection with the MOU operations, provided that they have in contracts with the owner or others in the chain of contracts with the owner have reserved the right to co-insurance under the insurance of the MOU. If, in exceptional cases, the insurance is effected by a charterer, contractor/sub-contractor or licensee/operator, the owner of the MOU will in the same way be co-insured, provided he has a contractual right to status as co-assured under the insurance.
As in sub-clause 1, sub-clause 2 stipulates a prerequisite that the contractual regulation of a co-insurance must be “customary in the activities in which the MOU is involved”. In relation to the co-insurance protection it is, however, not sufficient to have a liability regulation based on a “knock-for-knock” principle. The contracts must in addition normally contain a requirement for co-insurance protection of the relevant group of persons. This question will first and foremost be significant where the relevant co-assured has an economic interest in objects covered by the insurance. If no such interest exists, he will normally be sufficiently protected through the waiver of subrogation in sub-clause 1.
Sub-clause 2, second sentence, contains a subsidiarity regulation and establishes that the co-assured’s cover under the insurance of the MOU is subsidiary to any insurance effected by the co-assured himself. One of the purposes of the co-insurance clauses in contracts is to avoid double-insurance. If the co-assured has nevertheless taken out a separate insurance against the same risks, there is no reason why the loss, damage or liabilities shall also be covered under the insurance of the MOU.
Co-insurance under sub-clause 2 follows the rules in Chapter 8.
The new sub-clause 3 in the 2013 Plan regulates that the subrogation protection and co-insurance rights of third parties under this Clause shall under no circumstances be any broader than what has been agreed under the relevant contracts under which such rights and protections accrued. This means that the third-party who is protected by the waiver of subrogation or has status as co-assured, does not have wider protection or rights against the insurers than he has against the owner of the MOU under the contracts or at law.