Commentary

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Section 4: Hull insurance - limited cover

  • Clause 20-15. Insurance "against total loss only" (T.L.O.)

    This Clause is identical to Cl. 10-5.

    Insurance “against total loss only” occurs in very special situations, e.g. in connection with the towage of a vessel that is to be sent to the breaker’s yard. In that event the insurer will only be liable for total loss in accordance with the rules in Chapter 11, i.e. where a vessel is lost or so badly damaged that it cannot be repaired, is a constructive total loss, etc.

    Where the vessel is insured against total loss only, the consequence in relation to loss in connection with measures to avert or minimise the loss is that the insurer is only liable for such loss if it is attributable to measures taken to avert a relevant risk of a total loss. This principle follows from the rules in Chapter 4, Section 2, of the Plan, and it is therefore unnecessary to have any special rule on this in Cl. 10-5.

    Where a case of general average has occurred, it is therefore necessary to split up the general average statement and cover the contribution to the extent that it refers to measures taken to avert or minimise the risk of a total loss. Contributions to so-called “common benefit” expenses are never recoverable; expenses in connection with putting into a port of refuge if the vessel has suffered minor engine damage would perhaps be more doubtful.

    If the vessel has been damaged in consequence of an act of general average (or a similar act to save a vessel in ballast), the damage under Cl. 4-10 is recoverable in accordance with the rules relating to particular loss, if such settlement is more favourable for the assured. This rule shall not apply in the event of T.L.O. insurance, given that, in that situation, no indemnity would have been agreed for the damage. The compensation will therefore always be calculated on the basis of the general average rules.

    Furthermore, the rules contained in the general part of the Plan on accessory expenses shall apply. The insurer is liable for interest on the claim according to Cl. 5-4, and for costs in connection with the claims settlement, cf. Cl. 4-5. Furthermore, the insurer is liable for costs of providing security and costs of litigation, cf. Cl. 4-3 and Cl. 4-4, where the providing of security or the litigation is connected with events that would otherwise involve liability, thus primarily in connection with measures to avert a total loss. Costs in excess of the sum insured are recoverable in accordance with Cl. 4-19.

     
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    Clause 20-15. Insurance “against total loss only” (T.L.O.)

    If the insurance is effected “against total loss only”, the insurer is liable for total loss in accordance with the rules in Chapter 11.

  • Clause 20-16. Insurance “against total loss and general average contribution only”

    This Clause is identical to Cl. 10-6 and new for Chapter 20 in the 2023 Version.

    It is necessary under a “pure” total loss insurance to split up each general average statement and only cover the contribution to the extent that it concerns sacrifices that have been made in connection with a relevant risk of a total loss. Similarly, it is necessary in connection with an “assumed general average” to verify whether there was a risk of a total loss when the measures to avert or minimise the loss were taken. This complicates the claims settlements, and the assessment of the degree of risk may cause considerable uncertainty. 

    These difficulties are avoided by insurance in accordance with Cl. 10-6, under which the insurer shall indemnify general average contributions and costs incurred by measures to avert or minimise the loss in the event of an assumed general average to the extent that he would have done so if the insurance had been effected “on full conditions”. The insurer is therefore liable for every general average contribution apportioned to the vessel and every sacrifice made while the vessel is in ballast, regardless of whether or not the measures were aimed at averting a total loss. 

    Otherwise, reference is made to the comments on the preceding Clause.

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    Clause 20-16. Insurance “against total loss and general average contribution only”

    If the insurance is effected “against total loss and general average contribution only”, the insurer is liable for: total loss in accordance with the rules in Chapter 11, general average contributions and loss arising from assumed general average, cf. Cl. 4-7, Cl. 4-8, Cl. 4-9 and Cl. 4-11.

  • Clause 20-17. Insurance “against total loss, general average contribution and collision liability only”

    This Clause is identical to Cl. 10-7 and new for Chapter 20 in the 2023 Version.

    Hull insurance under this Clause covers the same losses as insurance in accordance with the preceding Clause, plus collision liability to third parties, cf. Chapter 13 of the Plan. The insurer’s liability for loss in connection with measures to avert or minimise the loss, litigation costs, etc. will then be extended correspondingly, given that the insurer will be liable for losses resulting from measures taken to avert a collision, which would have resulted in liability to a third party, or to limit the liability for damages.

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    Clause 20-17. Insurance “against total loss, general average contribution and collision liability only”

    If the insurance is effected “against total loss, general average contribution and collision liability only”, the insurer is liable for: total loss in accordance with the rules in Chapter 11, general average contribution and loss arising from assumed general average, cf. Cl. 4-7, Cl. 4-8, Cl. 4-9...

  • Clause 20-18. Insurance “on stranding terms”

    This Clause was moved from previous Cl. 20-16 and amended in Version 2023 to be identical to Cl. 10-8.

    This provision affords the same cover as Cl. 10-7, plus a limited cover against damage and against loss in connection with measures taken to avert such damage. The provision will hardly be of any great significance in connection with ordinary hull insurance, but barges and dories are to a considerable extent insured on stranding terms.

    Sub-clause (d) defines “stranding”. In the event of grounding, it is a condition that the vessel has to be re-floated whether by assistance or its own power. If the vessel has capsized, it must have heeled over to such a degree that the masts are in the water. Thus, the insurance does not cover damage to the vessel if it has heeled over but is supported by a quay, a barge, or the like. However, the costs involved in righting the vessel will be recoverable in such a case, provided that it was an established fact that the stability limit was exceeded and that the vessel would have overturned completely if there had been nothing to support it. In case of fire or explosion, damage in the engine room is excluded from cover, provided that the fire or the explosion occurred there. Such damage is relatively frequent and very comprehensive, and the exclusion is necessary in order to retain insurance on stranding terms as an inexpensive insurance.

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    Clause 20-18. Insurance “on stranding terms”

    If the insurance is effected “on stranding terms”, the insurer is liable for: total loss in accordance with the rules in Chapter 11, general average contribution and loss arising from assumed general average, cf. Cl. 4-7, Cl. 4-8, Cl. 4-9 and Cl. 4-11, liability to third parties in accordance wit...