Section 5: Casualties caused intentionally or negligently by the assured

• The rules in this Section deal with cases where a casualty has been caused by an intentional or negligent act of the assured. The rules are virtually identical to the provisions in the 1964 Plan: intentional acts of the assured are dealt with in Cl. 3-32, while Cl. 3-33 deals with gross negligence. There is no rule that deals in general terms with cases where the insured event is caused by ordinary negligence on the part of the assured. The insurer thus remains entirely liable for the loss. This concords with the relevant Nordic Insurance Contracts Acts.

  Sections 3 and 4 also deal with negligence on the part of the assured, but the rules in those Sections regulate cases where the negligence of the assured relates to certain specific obligations, namely, negligent breach of safety regulations and gross negligence in breach of the duty to notify and to take measures to avert or minimise the loss. When the rules in this Section are applied to an event which has been caused by the negligence of the assured, the question is not one of whether there has been a breach of a special obligation. Instead one must consider whether the assured’s conduct generally was grossly negligent in relation to the occurrence of the damage.

• Clause 3-32. Intent

  This Clause is identical to Cl. 55 of the 1964 Plan and corresponds to the relevant Nordic Insurance Contracts Acts (Nordic ICAs).

  The provision confirms the traditional principle in insurance law to the effect that the insurer is not liable if the assured has intentionally brought about the event insured against. The Norwegian ICA Section 4-9, first paragraph, second sentence, has relaxed the principle somewhat by allowing for partial liability if the conduct has been intentional but without fraudulent intent. The provision reflects a wish to protect the person effecting the insurance, and is not applicable to marine insurance.

  The question of whether the assured acted intentionally must primarily be considered in the same manner as in criminal law. Intent will be present when the assured deliberately brings about the casualty so as to receive indemnity under the insurance contract, i.e. fraudulent intent, and when the assured realises that his conduct will, on a balance of probabilities, bring about the casualty. The concept of intent will also encompass the situation where the assured foresaw the occurrence of the casualty as a possible consequence of his conduct and accepted the risk of that consequence (i.e. was willing to accept it as part of the bargain).

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  Clause 3-32. Intent

  If the assured has intentionally brought about the casualty,  it has no claim against the insurer.

• Clause 3-33. Gross negligence

  This Clause is identical to Cl. 56 of the 1964 Plan and corresponds to the relevant Nordic Insurance Contracts Acts (Nordic ICAs).

  The Clause regulates cases where the assured brings about the casualty through gross negligence. Gross negligence lies somewhere between ordinary negligence and intent. Ordinary negligence occurs when the assured has not acted as a competent and reasonable person would have done in an equivalent situation. Gross negligence is a more specific form of negligence: the deviation between the conduct of the assured and the relevant norm is more pronounced. In case law, the courts have found gross negligence in the following cases: ND 1971.350 NH KARI-BJØRN, ND 1976.132 Gulating TUVA, and ND 1977.138 OSLO.

  Both the Plan and the Nordic ICAs apply a progressive reduction of the insurance cover when the casualty has been caused by gross negligence. The Norwegian ICA Section 4-9, second paragraph, sets out a number of factors which are to be specifically taken into account in assessing the reduction: the degree of fault, the course of events relating to the damage, whether the assured was in a state of self-induced intoxication, and circumstances generally. Cl. 3-33 of the Plan refers simply to "the degree of fault and circumstances generally". "Circumstances generally" is such a wide-ranging expression that it includes the other factors listed in the relevant Nordic ICAs. In deep-water hull insurance, it will be especially the "course of events relating to the damage" which will be of significance for the reduction of the insurer’s liability. The factor of "self-induced intoxication" is more relevant to coastal hull insurance, but can also become relevant for deep-water hull cover, especially if there has been a delegation of the vessel owning functions which entails that the assured must be identified with the vessel's captain or officers, cf. Cl. 3-36. "Intoxication" means that intoxicating substances have influenced the user in such a way that he or she acts in a way other than would have been the case had he or she not consumed the intoxicating substances. It is not possible to link the definition of "intoxication" to a set alcohol percentage in the blood, as is done, for example, in Section 22 of the Norwegian Road Traffic Act (veitrafikkloven). A review must be made in each case of the effect of the intoxicating substance on the individual to determine whether the assured acted while intoxicated. It is thus possible to be "under the influence" within the meaning of the Road Traffic Act without being "intoxicated" within the meaning of the Plan.

  If one of the subordinates of the assured, be it someone in the shipowner's management staff or one of the people on board, has caused the casualty through an error which must be deemed gross negligence, a decision must be made using the rules in Chapter 3, Section 6 of the Plan as to whether the insurer may invoke the error against the assured. Errors committed by the master or crew in their service as seamen on the insured vessel can never be invoked by the insurer, cf. Cl. 3-36, sub-clause 1. Moreover, the result will depend on whether decision-making authority has been delegated in areas which are of material significance for the insurance, cf. Cl. 3-36, second sub-clause. Cases where the error has been committed on board another of the assured's vessels than the one covered by the insurance, are dealt with under the "sister vessel rule" in Cl. 4-16.

  In cases where the owner works as master or a member of the crew on board, it was assumed on page 59 of the Commentary on the 1964 Plan that the courts would take account of the special position of the assured in their application of the discretionary scaling-down provided for in Cl. 56 of the 1964 Plan relating to gross negligence. The assured was thus to be awarded full or nearly full indemnity when there was no reason to suspect that the casualty was intentionally brought about. This assumption has been used in practice: see, for example, ND 1971.350 NH KARI-BJØRN; and the intention has been to maintain this approach in the Plan.

  If the assured has brought about the casualty through ordinary negligence, the insurer will always be fully liable, cf. the corresponding rule in the relevant Nordic ICAs. This will not apply, however, when the negligence can be brought under the scope of other rules, e.g., the rules on breach of safety regulations. In cases where the gross negligence has related to a breach of a safety regulation, the courts have had a tendency in connection with insurance for small vessels to apply the rules on gross negligence instead of the rules on breach of safety regulations. The rationale has probably been that the rules on gross negligence offer the possibility for a discretionary reduction of cover, while the sanction for breaching a safety regulation is loss of cover in its entirety. It would be unfortunate if the same sort of tendency were to spread to deep-water hull insurance.

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  Clause 3-33. Gross negligence

  If the assured has brought about the casualty through gross negligence, any liability of the insurer shall be determined based on the degree of fault and circumstances generally.

• Clause 3-34. Right of the insurer to cancel the insurance

  This Clause corresponds to Cl. 57 of the 1964 Plan and the relevant Nordic Insurance Contracts Acts (Nordic ICAs).

  Sub-clause 1, first sentence gives the insurer the right to cancel the insurance without notice if the assured has intentionally brought about or attempted to bring about the event insured against, while the second sentence sets the period of notice at 14 days if the assured has brought about the casualty through gross negligence. The provision in sub-clause 1 is unmodified, apart from the seven-day notice period for gross negligence being increased. The period of notice in the first sentence, which in reality allows for an element of punishment, has been maintained, even though the Nordic ICAs have no special rules for this type of situation.

  The provision in sub-clause 2 is new, and gives the insurer an expanded right of cancellation if the assured intentionally brings about the casualty: the insurer may cancel all insurance arrangements with the assured. This corresponds to the rule on fraudulent breach of the duty of disclosure, cf. above regarding Cl. 3-2, second sub-clause; the rationale is the same.

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  Clause 3-34. Right of the insurer to cancel the insurance

  If the assured has intentionally brought about or tried to bring about a casualty, the insurer may cancel the insurance without notice. If the assured has caused a casualty through gross negligence, the insurer may cancel the insurance by giving fourteen days' notice. If the assured has...

• Clause 3-35. Circumstances precluding the application of Clauses 3-32 to Clause 3-34

  This Clause corresponds to Cl. 58 of the 1964 Plan And the relevant Nordic Insurance Contracts Acts (Nordic ICAs).

  The provision lists a number of cases where the assured will not lose cover despite having brought about the casualty intentionally or negligently. The 1964 Plan also contained a sub-clause (c), which only became relevant for war risks insurance and which has been deleted as it was unnecessary.

  Sub-clause (a) applies when the assured has a mental disorder or is otherwise incapable of judging his own actions. The provision corresponds to the Norwegian ICA Section 4-9, fifth sub-clause, although the formulation is somewhat different.

  An exception from sub-clause (a) will nonetheless apply if the abnormal state of mind is due to "self-induced intoxication". This type of rule is necessary to make it clear that self-induced intoxication is never an excuse. In addition, as mentioned under the Commentary on Cl. 3-33, self-induced intoxication can have consequences for the assessment of whether there has been gross negligence, and for the discretionary reduction of liability.

  Sub-clause (b) corresponds to the Norwegian ICA Section 4-13, but is formulated somewhat differently due to the reference to Cl. 3-12. The reference means that the assured has an unconditional right to expose the object insured to any peril for the purpose of saving human life, and that, "during the voyage" the assured may risk the object insured for the purpose of salvaging goods of material value. In the latter case, of course, one must consider the nature of goods the assured attempted to salvage when deciding whether or not the action was justifiable. The thing the assured attempted to salvage must normally have a fairly substantial value. But if the assured was under a pardonable delusion, the action must be accepted.

  Under general legal principles, the insurer will have a right of recourse against the owner (insurer) of the goods that benefited from the salvage. If the vessel sustains damage to salvage its own cargo, the insurer will have a right of recourse against the goods owner (goods insurer) if the shipowner would not have been liable for the damage to the cargo. In these types of situation, the action will usually be aimed at saving both vessel and goods, in which case the rules on general average in Chapter 4, Section 2, will come into play.

  A relevant provision in this connection is Cl. 4-12, sub-clause 2 of this Plan, which sets out the rules to be applied when the assured has taken measures to avert or minimise the loss which are aimed simultaneously at averting loss for more than one of his insurers.

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  Clause 3-35. Circumstances precluding the application of Clauses 3-32 to 3-34

  The rules contained in Cl. 3-32 to Cl. 3-34 shall not apply: if the assured on account of a mental disorder or other abnormal state of mind - self-induced intoxication excepted - was unable to judge its own actions, if the assured has caused the casualty under circumstances referred to in Cl. 3-1...