Section 4: Loss of hire insurance

• Clause 18-43. Main rules regarding the liability of the insurer

  This Clause was new in the 2013 Plan and was amended in the 2019 and in the 2023 Version. The Clause is verbatim the same as Cl. 16-1. Reference is made to the Commentary to Cl. 16-1.

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  Clause 18-43. Main rules regarding the liability of the insurer

  The insurance covers the assured’s loss of income due to the MOU being wholly or partially deprived of income -earning activity as a consequence of damage to the MOU which is recoverable under the conditions of the Plan, or which would have been recoverable if no deductible had been agreed, see C...

• Clause 18-44. Total loss

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-2. Reference is made to the Commentary to Cl. 16-2.

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  Clause 18-44. Total loss

  The insurer shall not be liable for loss of income resulting from a casualty which entitles the assured to compensation for total loss under the hull insurance in effect. If no hull insurance is in effect the assessment shall be based on Chapter 18, Section 2-2 of the Plan .

• Clause 18-45. Main rule for calculating compensation

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-3. Reference is made to the Commentary to Cl. 16-3.

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  Clause 18-45. Main rule for calculating compensation

  Compensation shall be determined on the basis of the time during which the MOU has been deprived of income -earning activity  (loss of time) and the loss of income per day (the daily amount). Loss of time that occurred prior to the events described in Cl. 18-43 shall not be recoverable.

• Clause 18-46. Calculation of the loss of time

  This Clause was new in the 2013 Plan and was amended in the 2019 and in the 2023 Version. The Clause is verbatim the same as Cl. 16-4. Reference is made to the Commentary to Cl. 16-4.

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  Clause 18-46. Calculation of the loss of time

  Loss of time shall be stipulated in days, hours and minutes. A period of time during which the assured has only partially been deprived of income shall be converted into a corresponding period of total loss of income.

• Clause 18-47. The daily amount

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-5 apart from the words “area of operation” which are added to sub-clause 2. Reference is made to the Commentary to Cl. 16-5. The Commentary is amended accordingly.

  This Clause lays down rules for calculating the daily amount under open insurance contracts. As mentioned in the Commentary to Cl. 18-45, cf. Cl. 16-3, the “daily amount” is the insurable value of the assured’s loss of income per day. In practice, the daily amount is almost invariably agreed as per the presumption in Cl. 18-48. The provision in Cl. 18-47 is therefore primarily applicable in cases where the agreement “is opened” in accordance with Cl. 18-56, sub-clause 2.

  Sub-clause 1 was amended in 2023 by deleting the words “The assured’s loss of income per day”. There is no need to repeat that the daily amount is the same as the loss of income per day as this is already stated in Cl. 18-45. Also, the word “fixed” is amended to “determined”. The Clause states that the daily amount shall be determined on the basis of the amount of gross hire per day less the costs saved per day due to the MOU’s not being in regular operation. The hire per day poses no difficulty when the MOU is under a time charter. In the case of a lump sum contract of the MOU, the agreed hire must be divided by the number of days that would normally be required for the contract works and any necessary mobilisation or subsequent mobilisation periods. In both cases, the hire according to the contract of offshore work/operation in force when the loss of time occurs is decisive.

  Sub-clause 2 prescribes the daily amount in cases where the MOU is not employed under a contract when the period of interrupted operations begins. This rule provides for an objective calculation of loss for practical legal purposes: It can be very difficult to decide how the MOU would have been employed if it had not been out of operation.

  To avoid the difficulties of deciding which course of action the assured would have chosen, the daily amount in such cases is determined on the basis of “the average hire for MOUs of the type and size and area of operation concerned” for the period during which the MOU is deprived of income. The term “average rates of hire” means a “weighted average”; account must be taken of how long each rate has been in effect. In practice, this can be achieved by dividing the period of interrupted operation into shorter periods during which rates of hire were relatively constant and calculating the compensation for each individual period. If rates for long-term charters and spot charters differ, compensation must be based on an average in these cases, too.

  The reference to “area of operation concerned” means that only the charter rates in the area where the MOU is or otherwise would have taken up work during the time when the interruption for repairs took place, e.g. Norwegian sector of the North Sea or U.S. Gulf of Mexico. If charter rates in a “new” area are to be considered account needs to be taken to the MOU’s state of readiness to take up work in another area within which regulations would require the MOU to undergo significant works or even modifications to be allowed to enter and operate in the “new” area. If such preparation works will require such works that will constitute “simultaneous works” as per Cl. 18-54, the charter rate in the area that the MOU is leaving shall be used for the period of time that will be equivalent to the preparation works, and the period beyond such preparation works the charter rate within the “new” area when calculating the “weighted average”.  The reference to the MOU being “unchartered” does not cover the situation where a contract of work lapses due to a casualty covered by the insurance. This situation must be evaluated in accordance with sub-clause 1.

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  Clause 18-47. The daily amount

  The daily amount shall be determined on the basis of the amount of hire per day under the current contract of employment, less such expenses as the assured saves or ought to have saved due to the MOU being out of regular employment. If the MOU is unchartered, the daily amount shall be calculated ...

• Clause 18-48. Agreed daily amount

  This Clause was new in the 2013 Plan and was amended in 2023. The Clause is verbatim the same as Cl. 16-6. Reference is made to the Commentary to Cl. 16-6. The Commentary was amended accordingly, including a more detailed elaboration regarding agreed daily amount.

  This Clause regulates the agreed daily amount and states that “The daily sum insured stated in the insurance contract, cf. Cl. 18-43, sub-clause 3, shall be deemed to constitute an agreed daily amount (insurable value) unless the circumstances clearly indicate otherwise”. The Clause was rewritten in 2023 to be more consistent with Cl. 2-2 and by adding a clear reference to the daily sum insured that is stated in the insurance contract as per Cl. 18-43, sub-clause 3. Although no material amendment is intended, the presumption in the wording is made clearer and emphasises the use of the principle of agreed daily amount. As mentioned under Cl. 18-47, the daily amount is in practice almost invariably agreed; the reason for doing so is to avoid difficulties in calculating the daily amount under an open loss-of-hire insurance. Under Cl. 2-2, an agreement of the daily amount means that the insurable value is fixed “by agreement between the parties … at a certain amount”. If it is clearly stated in the text of the insurance contract that the daily amount is agreed, the matter is straight forward.

  In practice, however, insurance contracts often merely state the amount the insurer is to pay for each day of time lost, the sum insured per day. This may be an agreed daily amount, but it is also conceivable that only the sum insured per day is stated. In this connection, Cl. 18-48 lays down an important rule by presuming that the daily amount is an agreed daily amount (insurable value). In other words, the daily amount stated in the insurance contract represents both the sum insured per day and the insurable value per day, meaning that the agreed value is fully insured. However, if “circumstances clearly indicate otherwise”, the result may be different.

  Both the assured and the insurer may invoke the presumed agreement of the daily amount. For the insurer, this is primarily relevant in the case of under-insurance, i.e. when the agreed daily amount is lower than the real loss of income per day. In such case, the agreement will limit the assured’s claim for compensation. However, the agreement may also be relevant when the rules of Cl. 18-53 are applied and when there is a question of seeking recourse against a third party who is responsible for the loss of income. Under Cl. 18-53 the agreed daily amount will be decisive when calculating the savings the insurer makes as a result of the extraordinary measures taken to expedite repairs. 

  If the amount is so much lower than the real loss per day that there can be no question of any rounding-off or rough calculation of the loss, the insurance contract should be treated as an open insurance contract. The provision has been worded with this in mind. If, for instance, the gross hire per day is USD 50,000, and the assured has effected a loss of hire insurance for USD 20,000 per day, one can safely say that “the circumstances clearly indicate” that the amount is a sum insured per day, not an agreed daily amount: thus there is an open insurance contract with under-insurance.

  Naturally, there is nothing to preclude combining under-insurance with agreement. In our example, for instance, it may be agreed that the insurance contract is to cover USD 20,000 of an agreed daily amount of USD 30,000. In terms of settlement, it would be an advantage if the apportionment ratio pursuant to Cl. 5-13, sub-clause 2, first sentence, is fixed at the ratio between the insured daily amount and the agreed daily amount. It would therefore be expedient to have separate spaces on the first page of the insurance contract for “sum insured per day” and “agreed daily amount”.

  In the offshore sector there may be instances when the insured daily amount is fixed at a certain amount and the MOU only earns a part of that amount when the operation is interrupted. Certain MOUs may have contracts where the charter hire payable is tied to defined levels of output from the operation, e.g. feet of well drilled per day or quantum of production throughput. Particularly in contracts for FPSOs there may be scaled rates of hire payable dependent on the volumes of throughput, particularly in the early phase of production when the volume gradually increases as new wells are tied in for production. In such circumstances there will be over-insurance and the insurance contract will operate as an open insurance contract.

  The system of agreed insurable values is well established in hull insurance. MOU values change constantly, and it can often be difficult to establish what an MOU is really worth at a particular point in time - there is clearly a need to fix the value in advance. In loss of hire insurance, the situation appears to be slightly different; in this case the exact amount of hire of which the assured is deprived will often be known, and an agreement that exceeds the hire amount is likely to be perceived as excessive compensation for the assured’s actual loss. Nevertheless, the system of agreed insurable values has been maintained without exception. If it is evident that a loss of time has occurred, cf. Cl. 18-45, and the daily amount has been agreed, the assured must be paid the amount agreed for the number of (full) days during which the MOU is out of operation. This applies irrespective of income rates for the insured MOU having fluctuated since inception of the insurance contract when the daily amount was agreed. In practice there is a fair degree of freedom for the assured to nominate a daily amount which suits its view of and future plans for income-earning activity of the insured MOU, even if the daily amount should exceed the current income rates in the market at the time of inception of the insurance contract, and irrespective of future fluctuations in income rates in the market. The only exception from the system of agreed insurable values are where the assured has given misleading information about matters that are relevant for the agreement, cf. Cl. 2-3, sub-clause 1. To ensure that the insurer has a proper basis to agree on the agreed daily amount, the assured shall provide sufficient information concerning the MOU's potential income and the duration of the contract (charterparty/contract of affreightment). Thus, it is important that the assured and the insurer establish a mutual understanding of the basis of how the daily amount is arrived at. It is for the assured to provide all relevant information about the income-earning capacity of the insured MOU in a historical, current and potential future perspective as a basis for the daily amount as nominated by the assured and agreed to by the insurer. It would be preferable if the parties could «formalise» such understanding by expressing it in writing through their correspondence or otherwise. If the MOU is supposed to trade in a fluctuating freight market, the parties ought to act proactively by agreeing specifically mutual consultation at regular intervals in order for the assured to update the income-earning capacity information, with a view to possible future change in the daily amount if the updated information so would require within the parameters of the original understanding.

  It follows from Cl. 18-56, sub-clause 1, that the agreed daily amount shall not apply to loss of time during repairs which commences after the insurance period expires, if the actual loss of income per day calculated pursuant to Cl. 18-47 is less during this period. This provision is at times set aside in individual insurance contracts. It should be noted that departure from Cl. 18-56 requires specific agreement to this effect, for instance by positively stating that the rule in Cl. 18-56, sub-clause 1, shall not apply. Introduction of words like “fixed and agreed” or, if relevant, “chartered or unchartered” are not sufficient to depart from Cl. 18-56.

  If the insured MOU is chartered under a contract for consecutive works, the agreement must be based on the average gross hire per day that the MOU would have earned if all the works had been completed in the normal way. It may then be relevant to deduct from the gross hire an amount for costs that will be saved if the MOU must dock for repairs. There are numerous uncertain factors in this calculation. The uncertainty is even greater for MOUs operating under spot charters. In general, it can be said that the greater the degree of uncertainty in the calculations, the more important it is that the daily amount be agreed in advance.

  It is conceivable that, after the expiry of the contracts of work on which the agreement was based, the MOU is chartered on even more advantageous conditions. In such case, the agreement still has significance, since it always constitutes the maximum limit for the insurer’s liability.

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  Clause 18-48. Agreed daily amount

  The daily sum insured stated in the insurance contract , cf. Cl. 18-43, sub-clause 3, shall be deemed to constitute an agreed daily amount (insurable value) unless the circumstances clearly indicate otherwise.

• Clause 18-49. Deductible period

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause corresponds to Cl. 16-7. Reference is made to the Commentary to Cl. 16-7.  Sub-clause 1 is verbatim the same as Cl. 16-7, sub-clause 1. In sub-clause 2 the words “or location” is added as MOUs seldom enters ports but rather more often moves between locations. Sub-clause 3 is included to suit the normal modus of operation of MOUs, which is to operate stationary on a field. Damage caused by heavy weather occurring as a result of the same atmospheric disturbance whilst the MOU is stationary at one location shall be regarded as one single casualty and only one deducible period shall be drawn for the resulting loss of hire, cf. sub-clause 2 of Cl. 18-33.

  Sub-clause 3 of Cl. 16-7 is not included in Cl. 18-49 as separate deducible period for machinery damage is not common in loss of hire insurance for MOUs. Cl. 12-16 on machinery deduction is not included in Section 2 either, cf. Commentary to Cl. 18-32. 

  Sub-clause 1, first sentence is rewritten by amending “loss of time” to “time lost” and reorganizing the reference to Cl. 18-46. These amendments are for simplification only and result in no material change. The Clause provides that a deductible period, stated in the insurance contract, shall be established for each casualty. The provision provides a number of rules for calculating the deductible period. The number of days must therefore be fixed in the insurance contract. This is linked to the fact that the number of deductible days is a key factor when fixing the premium and therefore an important element of the negotiations between the assured and the insurer. Thus, the deductible period is agreed in each individual case.

  A separate deductible period is applied for each casualty; this is in accordance with the other deductible provisions, cf. Cl. 18-33 and Cl. 18-38. However, if one and the same casualty leads to a number of separate delays, e.g. delay at the place where the casualty occurred, delay in connection with temporary repairs and delay during permanent repairs, then only one deductible period shall be applied for the aggregate of all the delays. The term “casualty” in Chapter 18, Section 4, means an event that gives rise to the right to claim under loss of hire insurance in accordance with Cl. 18-43, i.e. also events mentioned in Cl. 18-43, sub-clause 2, but which do not result in any damage to the MOU. As far as the wording “each casualty” is concerned, reference is made to the Commentary on Cl. 18-33, cf. Cl. 12-18 and Cl. 4-18 with its guidance and examples. 

  A key feature of the deductible under loss of hire insurance is that it is agreed as a period of time, and not as a monetary amount (as is the case under hull insurance). This means that in practice a new casualty will not necessarily trigger an additional deductible period for the assured: If two casualties are repaired simultaneously the two deductible periods may run in parallel.

  In practice that would mean that if the deductibles for two casualties happen to coincide 100%, then it does not matter whether there are one or two casualties as far as the deductible is concerned, as the deductibles for both casualties will be exhausted at the same point in time. However, if there has been a certain loss of time for one casualty only, before repairing simultaneously with another casualty at a later stage, then the deductible period for the two casualties will be allocated (wholly or partly) to different periods.

  The question whether there are one or more casualties is also important if the sum insured per casualty may be exhausted. An example will illustrate: After a recoverable engine breakdown, repairs lasted for 80 days in excess of the deductible. The assured had taken out loss of hire insurance with 14 days deductible and 90 days cover per casualty. Later in the same policy year, major damage re-occurred due to an error by the repairers, and another 70 days were lost for repairs. If this is considered as one casualty, there would be only 10 days left of the 90 days cover, and the assured would not have claim for 60 days of repairs. However, if the second breakdown would be considered a separate casualty, then due to the automatic reinstatement clause, a new 90 days limit would be available, and (70 days less deductible) 56 days in respect of the second breakdown could be claimed under the loss of hire insurance.

  According to sub-clause 1, first sentence, the deductible period runs “from the commencement of the loss of time”. This will be the time the assured is without income due to the MOU being deprived of income-earning activity. This might be a later point in time than the occurrence of the “casualty”. If, for instance, the MOU should touch a protrusion on the sea bed but continue its voyage immediately at normal speed, there is no loss of time and therefore obviously the deductible period does not run. On the other hand, if inspection reveals that bottom damage occurred and that they necessitate a lengthy stay in a repair yard a loss of time occurs and the deductible period begins to run accordingly. Neither will the loss of time commence if the MOU is out of operation in case the assured maintains income under the contract, e.g. in relation to “maintenance days” under the contract, cf. the Commentary to Cl. 16-1.

  The rule that the deductible period begins to run at the commencement of the loss of time also means that the deductible period is to be placed at the beginning of the period of lost time. This also applies where the loss of time runs during several separate periods. The deductible period is therefore not to be apportioned pro rata between the various periods. On this point, the rule in loss of hire insurance differs from the rule applied in hull insurance where the deductible is apportioned pro rata between the expenses to be covered by the insurer.

  The placement in time of the deductible period can have the following consequences for the settlement:

  Firstly, it is significant in relation to the rule of apportionment in Cl. 18-54 regarding simultaneous repairs. It will be a distinct advantage for the assured to have owner’s work (i.e. works that are not covered by insurance) carried out during the deductible period; the assured does not receive any loss of hire compensation for this period in any event. On the other hand, if owner’s work is carried out during a period of time that is covered by the loss of hire insurer, the result is that the assured may only claim 50 % of the compensation that he would have received if only repairs covered by the insurance had been carried out, see Cl. 18-54, sub-clause 1.

  Secondly, the placement in time of the deductible period may become significant where the daily amount pursuant to Cl. 18-47, sub-clause 2, or Cl. 18-56, sub-clause 2, is lower for the last repair period than for the first. In this case, the assured may not demand that the deductible period be placed during the last period so as to enable him to receive compensation for correspondingly more days at the highest daily amount.

  Thirdly, the placement in time of the deductible period may become significant when apportioning costs of measures to avert or minimise loss and extra costs incurred to save time, cf. Cl. 4-12, sub-clause 2, and Cl. 18-53, sub-clause 3. Insofar as such costs are incurred in saving time during the deductible period, they must be covered by the assured, cf. further information in the Commentary on Cl. 18-53, sub-clause 3.

  Finally, the placement in time of the deductible period may become significant when apportioning claims for reimbursement pursuant to Cl. 5-13 and Cl. 18-58.

  The first sentence also states that the deductible period is to be calculated in accordance with the rule in Cl. 18-46, second sentence. This corresponds with the 1996 Plan. If the MOU is only partly deprived of income, the deductible period lasts until the loss of time, converted into a period of total loss of income, has reached the agreed number of days. This means that if an equipment or plant casualty causes an MOU to operate at half capacity for 100 days and the deductible period has been fixed at 45 days, the deductible period lasts for 90 days, reckoned from the time of the casualty. The same applies where the loss of time resulting from a casualty is spread over several periods, separated by periods in which the MOU is in full operation. In such cases, only the days with (full) loss of time are counted. The deductible period does not expire until the fixed number of days is reached. This, however, only applies when the MOU is capable to continue its normal operations at reduced capacity following a casualty. If the owners negotiate that the MOU is utilized for other operation during the deductible period, such work shall not be taken into consideration in this context.

  Sub-clause 1, third sentence, states that loss of time during the deductible period is not covered by the insurer. 

  Sub-clause 2 states that damage which is due to heavy weather or the MOU’s sailing through ice, and which occurred during the period of time between the MOU’s departure from one port or location and its arrival at the next, is to be regarded as one casualty. The provision is identical to Cl. 12-18, sub-clause 2.

  The reason for the rule is the technical difficulties that might easily arise in connection with settlement if an attempt was made to categorise heavy weather damage, damage caused by ice, etc. sustained during one and the same voyage as separate casualties. However, the rule is of far less importance in loss of hire insurance than in hull insurance. As mentioned in the Commentary on sub-clause 1, instances of damage that occur during one and the same voyage will normally all be repaired at the same time. Even if the various instances of damage are ascribed to several different casualties, both the deductible period and the delay will coincide for them all; for settlement purposes, therefore, the result is the same as if all the damage had been regarded as one casualty.

  Sub-clause 3 was new in the 2013 Plan and corresponds with Cl. 18-33, sub-clause 2, and provides that all loss or damage resulting from the same atmospheric disturbance whilst the MOU is stationary at one location shall be regarded as one casualty subject to one deductible. What “atmospheric disturbance” means is explained in the commentaries to Cl. 18-33. 

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  Clause 18-49. Deductible period

  Each casualty shall be subject to a deductible period which shall run from the commencement of the loss of time and last until the time lost is equivalent to the deductible period stated in the insurance contract , calculated in accordance with the rule in Cl. 18-46. Loss of time in the deductibl...

• Clause 18-50. Survey of damage

  This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-8. Reference is made to the Commentary to Cl. 16-8.

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  Clause 18-50. Survey of damage

  The provision of Cl. 18-27 shall apply correspondingly.

• Clause 18-51. Choice of repairer

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-9. Reference is made to the Commentary to Cl. 16-9.

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  Clause 18-51. Choice of repairer

  The insurer may demand that tenders for repairs be obtained from repairers of the insurer’s choice. If the assured does not obtain such tenders, the insurer may do so. For the purpose of comparison, the repair time for tenders received, converted into monetary expense using the applicable daily...

• Clause 18-52. Move to the repair location, etc.

  This Clause was new in the 2013 Plan and is nearly verbatim the same as Cl. 16-10, but the words “class of works” has been replaced by “category of work”. Reference is made to the Commentary to Cl. 16-10 which was amended in 2023.

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  Clause 18-52. Move to the repair location, etc.

  Loss of time during move to the repair location shall be attributed to the category of work that necessitated the move. If move to the repair location was necessary for more than one category of work, the time of the move shall be apportioned in accordance with the time that each category of work...

• Clause 18-53. Extra costs incurred in order to avert or minimise loss

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-11. Reference is made to the Commentary to Cl. 16-11.

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  Clause 18-53. Extra costs incurred in order to avert or minimise loss

  The insurer shall be liable for extra costs incurred in connection with temporary repairs and in connection with extraordinary measures taken in order to avert or minimise loss covered by the insurance, insofar as such extra costs are not recoverable under the hull insurance in effect. Chapter 4,...

• Clause 18-54. Simultaneous works

  This Clause was new in the 2013 Plan and corresponds to Cl. 16-12 with exception of two sentences to sub-clause 1. The Clause was substantially amended in the 2023 Version, and previous sub-clauses 1 to 3 is replaced by a new sub-clause 1. The two sentences that deviate from Cl. 16-12 has become sub-clause 2. Sub-clause 3 corresponds with previous sub-clause 4, and has only a minor amendment necessitated by re-arranging the previous sub-clauses 1-3 into the new sub-clause 1. The material changes are however rather limited, see further below.

  The provision regulates the liability of the loss of hire insurer in cases where repairs that are covered by the insurance are carried out simultaneously with work that is covered by another loss of hire insurance and/or not covered by any loss of hire insurance such as work relating to classification or modifications.

  When repairs relating to one or more casualties (under one or more loss-of-hire insurance contracts) are carried out at the same time as work for the assured’s account (e.g. work in connection with periodic classification surveys), the loss of time during the stay at the repair yard will in actual fact be due to several concurrent causes of damage. In the absence of other provisions, the loss in such cases must be apportioned between the assured and the various insurers in accordance with the rule of apportionment in Cl. 2-13. However, this type of solution is unsatisfactory from a technical legal standpoint because it will entail numerous decisions that are made largely on a discretionary basis. In order to avoid these problems, therefore, more clear-cut rules of apportionment have traditionally been applied in the loss-of-hire conditions. The rules of apportionment in Cl. 18-54 are based as a starting point on such principles as applies to Cl. 16-12, with the result that the causation rules in Cl. 2-13 are set aside in two respects:

  Firstly, by applying relatively simple criteria, Cl. 18-54 (and Cl. 16-12) prescribes when simultaneous repairs are to be regarded as concurrent causes of the loss of time, and when one of the repairs is to be regarded as the only cause. In this way, difficult and, to some extent, subtle questions of causation are avoided. Secondly, Cl. 18-54 (and Cl. 16-12) fixes the exact proportions to be used when apportioning the time lost among the various repairs; it is therefore unnecessary to use the discretionary rule of apportionment in Cl. 2-13.

  These two departures from the main rule considerably simplify the issue. The fact that the provisions may occasionally give one of the parties an unwarranted advantage is of little significance compared to the substantial advantages achieved for the settlement process.

  Sub-clause 1, was substantially amended in the 2023 Version. Previously, sub-clause 1 regulated repair work covered under this insurance simultaneously with work not covered under any loss of hire insurance (commonly described as “owner’s work”), sub-clause 2 regulated simultaneous repairs of two casualties covered under this insurance with unparallel deductible periods, and sub-clause 3 regulated simultaneous repairs of casualties covered under different insurances and also owners’ work, if any. However, some aspects of the wording prior to the 2023 Version have been criticized for being difficult to understand, leading to the amendments introduced in the 2023 Version.

  Sub-clause 1 now regulates all types of simultaneous repairs, i.e. repairs of a casualty covered under this insurance in combination with any of the following shall each be regarded as concurrent causes:
  - repairs of any other casualty covered by this or another loss of hire insurance, cf. no. 1, and/or
  - owner’s work of a nature as specified in no. 2.

  From the assured’s perspective however, the apportionment of repair time between several casualties will usually not be of a concern, as the time (in excess of the deductible period) in any event will be covered in full under either of them, subject to policy limits. On the other hand, the assured will consider it important to know in which circumstances a proportion of the time will have to be borne by the assured, and pursuant to sub-clause 1 (a) to (c), an apportionment is to be made between the assured and the insurer when specified owner’s work is carried out at the same time as casualty work. Owner’s maintenance work which is not falling within the categories of work defined in letters (a) to (c) shall never be subject to any apportionment pursuant to Cl. 18-54.

  Letter (a) sets out that owner’s work in order to fulfil a requirement issued by a classification society is subject to apportionment. This applies regardless of whether the classification requirement was issued in connection with a periodic survey, and the time limit for complying with the requirement need not have expired. However, it is a condition that the classification society has issued a requirement; repairs which the classification society has recommended or advised making, without actually imposing a requirement, do not fall within the scope of letter (a), although they might conceivably fall within the scope of one of the other categories of owners work in letters (b) or (c).

  Letter (b) sets out two types of work that is also subject to apportionment, i.e. work
  - “to enable the MOU to meet technical and operational safety requirements”, cf. in that respect the wording in Cl. 3-23, and/or
  - “necessary … to perform its contractual obligations”. This covers both freight contracts and other types of assignment, such as a contract for a research project. Examples of repairs that are necessary in order to perform a contract of affreightment and the like are the replacement of hatch coamings and the application of a new coating in cargo tanks.
  

  Letter (c) provides that work related to reconstruction of the MOU is also subject to apportionment. Reconstruction of a MOU would typically include major conversion projects or projects such as conversion of a main engine from one fuel type to another (e.g. from diesel to gas), battery installations or e.g. a scrubber installation in order to comply with requirements for low sulphur emissions.

  Sub-clause 1, items i) to iii) set out how the apportionment is to be made in the various combinations of simultaneous repairs. Item i) deals with the common time for repairing more than one casualty where the deductible period has been expired for all casualties, with no owners work being effected. It is now provided that such time shall be apportioned equally between the casualties, which applies irrespective of which policy period they fall under. This is an amendment from versions prior to the 2023 Version, where a 50/50 apportionment was applied between repairs falling under different policy periods. E.g. if there (prior to the 2023 Version) were two casualties covered under the 2021 policy repaired simultaneously with one casualty covered under the 2022 policy period, 25% would be allocated to each of the 2021 casualties, and 50% to the 2022 casualty. Under the 2023 Version, 1/3rd of the time shall be allocated to each of the three casualties.

  Item ii) regulates common time falling outside the deductible period of all casualties (if more than one), but is effected simultaneously with owner’s work as per no. 2 above, then “half of such common time shall be apportioned equally between the casualties”, the other half being allocated to owner’s work and disallowed. The most frequent situation is however that there is only one casualty repaired simultaneously with owners’ work, and then half of the common time is allocated to that casualty. The apportionment is based on an equal shares principle: the insurer shall pay compensation for half of the common repair time in excess of the deductible period. This is in accordance with the solution in the 1996 Plan. The said principle may be justified by the argument that the common repair time is assumed to be utilised equally effectively by both parties, and that it is therefore reasonable to share liability for the loss of time during this period equally; furthermore, this type of 50/50 rule is very easy to apply in practice. Two numerical examples can illustrate the rule of apportionment in relation to the deductible:
  1. In the case of common repair time totaling 40 days and a deductible period of 14 days, which begins to run when the MOU arrives at the repair yard, the insurer will pay compensation for:
  1/2 (40-14) days = 13 days of common repair time.
  2. In the case of common repair time totaling 40 days and a deductible period of 30 days, 20 of which have been spent in bringing the MOU to the repair yard, the insurer will pay compensation for:
  1/2 (40-10) days = 15 days of common repair time. 

  The provision is based on the assumption that work that is fully covered by insurance is carried out simultaneously with work which is not covered at all. However, it is conceivable that damage and the repairs relating to it have been caused by a concurrence of several perils, only some of which are covered by the insurance. In such a case, the rules of apportionment in Cl. 2-13 to Cl. 2-15 will apply in addition to the rules of apportionment in Cl. 16-12. First the loss of hire insurer’s liability must be calculated, assuming that the damage in its entirety has been caused by one of the perils insured against, after which its liability must be reduced in accordance with the rules of apportionment pursuant to Cl. 2-13 to Cl. 2-15. A simple numerical example: casualty work and owner’s work, which if carried out separately would have taken 80 and 60 days, respectively, are carried out simultaneously in a total of 80 days. The casualty was the result of the kind of combination of marine and war perils that makes the rule of equal apportionment in Cl. 2-14 in fine applicable. If the deductible period under the loss of hire insurance against marine perils is 20 days, the insurer’s liability will be as follows: 
  Of the common repair time in excess of the deductible, i.e. 40 days, half is recoverable pursuant to this sub-clause = 20 days.
  Further time to complete casualty work = 20 days.
  Had the damage been caused solely by marine perils, the insurer would have been liable for = 40 days.
  Pursuant to the rules of Cl. 2-14 in fine, however, the insurer is only liable for half the loss = 20 days.
  

  No problems arise when repairs relating to two casualties, both of which are covered by the insurance, are carried out simultaneously, provided the deductible periods for both casualties also run in parallel; in such case the assured must only carry one (common) deductible period, but also only receives compensation once for the loss of time in excess of the deductible period. It is conceivable, however, that the deductible period for one casualty expires before that of the other. Apportionment and allowance of common time falling within deductible for one of more casualties, but outside the deductible period for other casualties, are dealt with under item iii) which provides that half of such common time shall be apportioned equally between the casualties where the deductible has expired, whether or not work referred to in sub-clause 1, item 2 has been effected simultaneously. This can be illustrated by the following example: the MOU sustains machinery damage in February and must call at a port of refuge to carry out temporary repairs. The prolongation of the voyage and the stay at the port of refuge total 14 days, which is also the deductible period. In March of the same year, the MOU suffers heavy weather damage, the extent of which is ascertained during a stay at a repair yard in June. During this stay, permanent repairs of both casualties are completed; carried out separately, it would have taken 40 days to repair the machinery damage and 20 days to repair the heavy weather damage. Thus the common repair time is 20 days. In the case of the machinery damage, the deductible period had expired when repairs were commenced; the entire period of repair is therefore recoverable. As far as the heavy weather damage is concerned, on the other hand, the first 14 days of the repair period are the deductible period, and only six days are recoverable. Pursuant to item iii), the 50/50 rule in this case must apply to the first 14 days. The rule can be justified by the need for consistency: like owner’s work, work during the deductible period must normally be carried out in the assured’s own time and, as mentioned above, it is unreasonable to make the insurance more expensive by giving the assured “free time” to carry out owner’s work that just happens to be carried out at the same time as work covered by insurance. In accordance with this solution, the insurer is only liable for half of the time lost as long as the deductible period for the second casualty continues to run.

  The last part of item iii) “…whether or not work referred to in sub-clause 1, item 2 has been effected simultaneously” means that the maximum the assured must cover is half the common repair time, and the assured must not have to bear a further 1/4 in case owners’ work is effected during the period dealt with under item iii).
  

  For the rare situation that LOH coverage is apportioned over layers e.g. a bottom layer on 14/90/90 basis, and an excess layer on 104/90/90 basis, then the intention is clearly that the deductible period under the excess layer shall be deemed to be exhausted at the same point in time as when the bottom layer coverage ceases.

  Sub-clause 2 provides that works under letters a) to c) which would not have deprived the MOU from income if it had been carried out separately shall not be taken into account for apportionment pursuant to sub-clause 1. The reason is that MOUs will to a much larger extent carry out not only ordinary maintenance work, but also letters (a) to (c) work while they are offshore and still earn hire wholly or in part. This means that the assured may carry out e.g. classification work simultaneously with casualty work without any apportionment of the common time if the classification work could have been carried out separately without loss of income. It will be a question of fact whether the classification work was of such nature that it could have been carried out without loss of income. If not, the 50/50 apportionment shall be applied on the common time. If the owner’s work delays the casualty work, sub-clause 3 of Cl. 18-54 applies also on how the delay shall be apportioned between the casualty- and owner’s work.

  It was considered whether the principle adopted in sub-clause 2 should be applied in the insurers favour in those cases where the casualty work is deferred to a period when the MOU is out of service due to owner’s work. It was, however, agreed that it is in both the insurers as well as the assured’s long term interests to encourage the owner to defer the casualty work to a convenient time rather than risk to impose on the insurer an unnecessary loss by repairing casualty work at once. The obligation to mitigate loss according to Cl. 3-30 cf. Cl. 3-31 would of course limit the owner’s possibilities to impose an unnecessary loss on the insurer. But all the same it was felt prudent to supplement the potential contentious Cl. 3-30 with an economic incentive for the owner to defer casualty work whenever prudent to a convenient time and still get compensated half the common time according to the first sentence of sub-clause 2.

  However, the new third sentence of sub-clause 2 provides that if casualty damage are discovered or occurs during a period when the MOU would have been deprived of income if works under letters a) to c) had been carried out separately, time for repairs carried out simultaneously with scheduled works under letters a) to c) shall not be compensated. The third sentence of sub-clause 2 only applies if casualty work is repaired simultaneously with the same scheduled works under letter a) to c) during which the casualty work was discovered or occurred. If the casualty work so discovered or occurred are deferred to a subsequent period when other scheduled works under letters a) – c) are carried out, then what is written above on deferred casualty work shall apply, cf. also in this regard Cl. 3-30.

  Sub-clause 3 corresponds with the previous sub-clause 4, only slightly amended to refer to application of the rules set out in “sub-clause 1” only, where there previously was reference to sub-clauses 1 – 3. The main rule in the first sentence can most easily be explained by an example: during a stay at a repair yard, both extensive casualty repairs and various work for owner's account are carried out. The total time spent at the yard is 98 days. The casualty repairs continue during the entire stay, while the owner’s work is completed after 50 days. It would appear, therefore, that there are 50 days of common repair time, and if a deductible period of 14 days has been agreed, pursuant to the rules in the first sub-clause the owner itself should have to carry the loss of time for 14 + 1/2 (50-14) days = 32 days.

  However, the provision requires that an important correction be made. One must ascertain how much time each category of work would have required if it had been carried out separately. In many cases, it will be found that, had this been done, the work would have been completed earlier. In our example, it may be found that the work for owner’s account would only have taken 30 days if carried out separately. There may be various reasons why more time is lost when repairs are made simultaneously: a deliberate reduction of the pace of the owner’s work in order to achieve a better overall utilisation of the time required for casualty repairs, or limited capacity or technical problems may result in simultaneous repairs taking more time than if each category of work had been carried out separately. Owners’ work would be a separate “category”, and each casualty would be a separate “category” of work in this respect, which also applies e.g. under Cl. 16-10. This represents a small material change, as the solution prior to the 2023 Version was that all casualties falling under one policy was deemed to be one category.
  

  It is not reasonable that delays of this nature should be borne in full by the interest affected. On the contrary, the basic principle must be that each category of work should only be allocated the amount of time that would have been required if they had been carried out separately. The apportionment principles in sub-clause 1 must also be seen as presupposing such a correction. It is only where both parties can make full use of the time without any hindrance from the other party that it can be said that they have had equal benefit and should thus each bear half of the loss of time. If the owner’s work in our example would only have taken 30 days if carried out separately, while the casualty repairs would in any event have taken 98 days, the owner must bear 14 + 1/2 (30-14) days = 22 days of lost time.

  When it has been decided that the lesser number of days that would have been required in a particular case is to be used instead of the actual time used, it is also necessary to decide how dates for this lesser number of days are to be fixed. Fixing the dates of the relevant periods is necessary both in relation to the rules concerning the deductible period and apportionment in the event of simultaneous repairs, and when establishing the daily amount and when pursuing any claim against a third party, cf. here the Commentary above to Cl. 16-7 regarding the equivalent problem of placing the deductible period in time. The natural solution is to assume that the work was performed continuously from the time it was started until the expiry of the number of days that the work would presumably have taken if carried out separately, cf. the first sentence of sub-clause 3.

  However, the second sentence of sub-clause 3 contains an important supplementary rule: it is presumed that all categories of work are commenced at the same time, i.e. on the arrival of the ship at the repair yard. This presumption must prevail even for work which has been postponed in the overall plan for the progress of the work and which may not have been started at all during the initial period at the yard; this postponement is merely a practical adjustment between the various categories of work. By way of contrast, a clear example of different starting points in time would be where a MOU suffers a casualty while it is in dock to carry out classification surveys; the casualty repairs cannot, of course, be assumed to have begun before the casualty occurred. The reverse situation may also arise: a MOU is in a yard to repair a major casualty; after the work has been in progress for some time, the owner decides to undertake certain rebuilding work during the remaining portion of the MOU's stay at the yard. Calculations must also be based on different starting points in time if an unknown casualty is discovered some time after work has begun on repairing other casualty damage. In this case, a new deductible period must be calculated from the time when the new casualty is discovered. 

  The third sentence regulates the situation where each category of work would have taken less time if carried out separately than the total number of days that the MOU was at the repair yard. The previous example can be adjusted slightly to illustrate this point: it is assumed that the casualty work would also have taken less time if carried out separately, e.g. 90 days instead of the 98 days actually required. Thus, two categories of work which would have required 30 and 90 days, respectively, if carried out separately, take 98 days when carried out in parallel. In other words, the repair time has been prolonged by 8 days as a result of the simultaneous repairs. It would not be fair to allocate all 8 days to a single category of work. They should be apportioned between both categories according to the number of days each would have required if carried out separately. In our example, the 8 days must thus be apportioned in the ratio of 30:90; 3/12, i.e. 2 days, are allocated to owner’s work and 9/12, i.e. 6 days, to the casualty work. These shares must be allocated in their entirety to the category concerned; they are not part of the apportionment in accordance with sub-clauses 1 and 2. Thus the total loss of time to be borne by the assured will in this case be:

  14 + 1/2 (30-14) + 2 days = 24 days,
  while the following would be allocated to casualty repair work:
  1/2 (30-14) + (90-30) + 6 days = 74 days.

  The reason for apportioning a delay caused by several categories of work being effected simultaneously is that the assured as well as the insurer usually will benefit from effecting simultaneous repairs. Cl. 16-12 generally provides for apportionment of the “common advantage” by effecting such simultaneous repairs. However, it should be noted that the assured is free to effect certain types of work without any deduction of claim (see sub-clause 1 above). The assured may e.g. also be able to complete its own work within expiry of the deductible period (when no apportionment is to be made in any event). Therefore, a situation may arise whereby the full period of repairs (less deductible) is claimable even if several categories of work have been effected simultaneously. The fourth sentence was therefore added in the 2016 Version in order to make it clear that the insurer’s liability in any event is limited to what would be claimable in case the category of work for which it is liable had been carried out separately.
  The following may illustrate the problem: In the example above the net claim after apportioning the delay is 74 days. If damage repairs had been carried out separately there would not have been any 8 days delay, and the claim would have been 90 days less 14 days = 76 days. Therefore the insurer has in fact benefited from the simultaneous repairs even if it covers its share of the delay.

  On the other hand, if we adjust the deductible in the example to be 30 days, the situation would have been different. If applying the apportionment of delay, the claim would have been 90 days less 30 days deductible (owner’s work would have been completed within the deductible period, therefore no apportionment of simultaneous repairs) + share of delay 6 days = 66 days. However, it is clearly unreasonable that the insurer’s liability should increase because of the decision to effect owner’s work simultaneously with damage repairs. Therefore, the fourth sentence makes it clear that insurer can limit its liability to what would have been payable in case damage repairs had been carried out separately, viz. 90 days less deductible 30 days = 60 days.
  

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  Clause 18-54. Simultaneous works

  If repair work resulting from a casualty covered under this loss of hire insurance is carried out simultaneously with: repair work resulting from any other casualty covered under this or another loss of hire insurance, and/or work which is not covered under any loss of hire insurance, but which i...

• Clause 18-55. Loss of time after completion of repairs

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause corresponds to Cl. 16-13, but letters (b) and (d) are not deemed relevant to MOUs and are therefore not included in Cl. 18-55. Reference is made to the Commentary to Cl. 16-13, letter (a), Cl. 18-55 is for the purpose of cover unamended even though the language is adapted to suit the modus of operation of MOUs. Letter (b) is amended as compared to Cl. 16-13 letter (c).

  Sub-clause 1, first sentence is amended from “After repair have been completed, the insurer shall only be liable for loss of time:” to “The insurer is not liable for loss of time after completion of repairs, except for loss of time:”. This is no material amendment, however the wording now explicitly limits the insurer’s liability for loss of time that occurs after repairs have been completed. According to the main rule in Cl. 18-43 and Cl. 18-45 regarding calculation of compensation, the insurer would have been fully liable for loss lost after completion of repairs to the extent that this loss of time was a result of the casualty.

  The insurer therefore would have to pay compensation for loss of time until the MOU was again gainfully employed, as well as any loss of time resulting from the termination of the contract of work. Thus Cl. 18-55 involves a limitation on the liability that follows from Cl. 18-43 and Cl. 18-45 in respect of time lost after completion of repairs. In accordance with sub-clause 1, first sentence, the insurer is only liable for such loss of time in the cases that are specifically mentioned in letters (a) and (b); in all other cases the liability of the loss of hire insurer ceases when the repairs have been completed.

  Letter (a) is amended from “until the MOU can resume the activity that it was engaged in under the contract of employment that was in force at the time of the casualty” to “until the MOU can resume the employment under the contract that was in force at the time of the casualty”. This is only a simplification of the wording with no material amendments. This provision deals with the situation where the MOU, after completion of repairs, is to continue to operate under the contract that was in effect at the time of the casualty; in such case, the insurer is liable for time lost until the MOU has resumed its former employment. The provision applies irrespective of the type of contract concerned. Contractual obligations that are not set out in an actual contract must be regarded as equivalent to such a contract in this connection. If, on the other hand, the contract is cancelled due to the MOU’s stay at a repair location, the insurer is only liable for the time lost up to the completion of repairs unless cover is provided under letter (b).

  Letter (b) regulates loss of time for MOUs that do not return to the location at which the casualty occurred but moves to another location, either to commence new operations that it was scheduled to move to after the completion of the operations it was engaged in at the time of the casualty irrespective of whether the MOU actually completed those operations, or to take up work under a new contract of works that was concluded prior to “the commencement of the move to the repair location”. These words are new as compared to Cl. 16-13 letter (c) which only compensates loss of time after completion of repairs if the contract was entered into prior to the occurrence of the casualty. A contract may be legally binding and therefore concluded even if the contract is not formalized in a written agreement duly executed and signed by the parties. A mere letter of intent, however, will not satisfy the requirement of a binding contract pursuant to letter (b).

  The next location may be in a different direction from the repair location than the location at which the casualty occurred, but the insurer’s liability will be limited to the time to move in the new direction for a distance equal to the distance return to the casualty location would have represented.

  Loss of time after completion of repairs covers both the situation where the MOU remains in the repair yard for a while after repairs have been completed and while the MOU moves to a location to resume its normal activity. However, loss of time due to the fact that the MOU is unable to find employment immediately after repairs have been completed is not covered. Such loss of time may in certain cases be said to be a consequence of the repairs and hence also a consequence of the damage that was repaired. However, the dominant cause of the loss of time will be the market conditions, or possibly decisions made by the assured, and it is therefore natural that the loss should not be covered.

  To the extent that loss of time after completion of repairs falls within one of the provisions in letters (a) to (b), sub-clause 2 provides that this loss of time shall be subject to the same rules as removal to repair yard in Cl. 18-52, see further the Commentary on this provision.

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  Clause 18-55. Loss of time after completion of repairs

  The insurer is not  liable for loss of time after completion of repairs, except for loss of time :  until the MOU can resume the employment under the contract that was in force at the time of the casualty, or while the MOU moves back to an equidistant position to where it  without the casualty...

• Clause 18-56. Repairs carried out after expiry of the insurance period

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-14. Reference is made to the Commentary to Cl. 16-14.

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  Clause 18-56. Repairs carried out after expiry of the insurance period

  Loss of time that commences after expiry of the insurance period shall be recoverable in accordance with the rules of Cl. 18-47, even if the daily amount is an agreed amount pursuant to Cl. 18-48, if this results in a lower compensation. The insurer shall not be liable for loss of time that...

• Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner

  This Clause was new in the 2013 Plan and was amended in the 2023 Version. The Clause is verbatim the same as Cl. 16-15. Reference is made to the Commentary to Cl. 16-15.

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  Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner

  Where a transfer of ownership has been postponed as a consequence of a damage or an event recoverable under Cl. 18-43 , the insurer shall be liable for the assured’s loss of interest on the sales amount based on the interest rate in Cl. 5-4, sub-clause 3, as well as for wages and maintenance of t...

• Clause 18-58. Relationship to other insurances and general average

  This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-16. Reference is made to the Commentary to Cl. 16-16 which was amended in 2023.

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  Clause 18-58. Relationship to other insurances and general average

  The rules as to subrogation in Cl. 5-13 of the Plan shall apply correspondingly to: the assured’s right to claim compensation for loss of time and  operating costs during removal to a repair location under Cl. 18-28  or Cl. 18-30 of the Plan, or equivalent provisions in other conditions  applicab...