Section 6. Identification

• General remarks

  The rules on the duty of disclosure and duty of care are aimed directly at the person effecting the insurance and the assured, respectively. However, there will often be other persons who act on behalf of the person effecting the insurance or the assured. The person effecting the insurance and the assured will often be different people or companies, and there may also be several assureds covered under one insurance contract. The difficult question which then arises is to what extent the insurer may invoke against the person effecting the insurance or the assured, errors or negligence committed by someone else, i.e. to what extent are the assured and the person effecting the insurance to be identified with their helpers, employees etc.

  The issue of identification must, in principle, be kept separate from the issue of who is the person effecting the insurance or the assured. If a limited liability company is stated as being the person effecting the insurance or the assured, actions taken by the management (Board of Directors/Chief Executive Officer) of that company will be deemed to be actions of the company itself; the company management is the company. By contrast, the issue of whether action taken by other persons in the company can prejudice the position of the company is one of identification; those employees are not the company.

  Problems of identification in marine insurance arise in four different relationships:

  1. Identification between the person effecting the insurance and its servants

   

  The 1964 Plan contained no direct regulation of the issue of identity between the person effecting the insurance and his servants, although Cl. 61 had a general reference to "general rules of law" with respect to problems of identification which were not directly regulated in the Plan. The rule also applied to identification between the person effecting the insurance and his servants.

  Identification between the person effecting the insurance and his servants is not regulated in the relevant Nordic Insurance Contracts Acts (Nordic ICAs), either, although the Commentary states that general principles of contract law are to apply.

  During the revision, there was agreement that the issue of identification between the person effecting the insurance and his servants was not to be regulated specifically in the Plan. In marine insurance, this problem will arise particularly when the insurance contract is entered into through a broker, and then primarily in the area of the duty to disclose, cf. Cl. 3-1; for further details, see the Commentary on that provision. The main rule is that the person effecting the insurance must simply accept that he will identified with the broker; if the broker makes a mistake during the conclusion of the contract, for example, by not forwarding information from the person effecting the insurance to the insurer, then the person effecting the insurance will have to bear any consequences that follow.

  In all other respects, the issue of identification between the person effecting the insurance and his servants must be resolved according to general principles of contract law. The starting proposition is that if the person effecting the insurance uses an agent during the conclusion of the contract, there will be full identification between the person effecting the insurance as principal and the agent. This will apply regardless of whether it is an employee from the organisation of the person effecting the insurance who enters into the contract with the insurer (internal identification), or whether the contract is entered into by an organisation other than the shipowner, e.g., charterer's organisation (external identification).

  2. Identification between the assured and its servants

  In the 1964 Plan, identification between the assured and his servants was regulated generally in Cl. 59 with respect to the vessel's master and crew. The Plan also contained special rules, for example Cl. 18, sub-clause 2, Cl. 49, sub-clause 2 and Cl. 52, sub-clause 2. In addition, Cl. 175 on limitation of liability for damage resulting from inadequate maintenance, etc., meant that the assured had to accept that his position would be affected if the master or crew were responsible for lack of maintenance. In other cases, it became necessary to fall back on the reference to general rules of law in Cl. 61.

  The relevant Nordic Insurance Contracts Acts contain a complete regulation of these matters, applies to commercial insurance, and opens up the possibility of identification with specified persons or groups, provided they are stated specifically in the contract. This means that in marine insurance of merchant vessels, one is free to regulate the issue of identity in the insurance conditions. The Nordic ICAs assume, however, that no identification may take place beyond what is stated in the contract. Consequently, there can be some doubt in marine insurance as to how far identification can be taken if it is not specifically regulated in the insurance conditions.

  During the Plan revision, there was agreement that the specific rule on the crew and master in Cl. 59 of the 1964 Plan should be retained, see Cl. 3-36, sub-clause 1 of the new Plan. At the same time, the broad reference to general rules of law in Cl. 61 of the 1964 Plan is no longer sufficient. Given the current regulation in Nordic ICAs, it is uncertain whether there are any "general rules of law" on the matter anymore. Accordingly, the Plan must go further in setting out which servants the assured must accept that he will be identified with. Cl. 3-36, sub-clause 2, attempts to resolve this.

  3. Identification between the assured and the person effecting the insurance

  The issue of identification between the assured and the person effecting the insurance was not regulated explicitly in the 1964 Plan, but the Commentary stated that there was to be full identification between the assured and the person effecting the insurance in areas where sanctions were linked to negligence on the part of the person effecting the insurance (duty of disclosure/premium) . In addition, Cl. 129 contained a specific rule for situations where the object insured was in the custody of the person effecting the insurance: the rules on the duties of the assured then applied to the person effecting the insurance, and a co-insured third party was to be identified with the latter.

  In the Norwegian Insurance Contracts Acts (ICA) the starting premise is the opposite: there is to be no identification between the assured and the person effecting the insurance. Exceptions are possible, however.

  During the Plan revision, there was a wish to retain the 1964 Plan solution on this point. Since the Norwegian ICA now has another approach, it was found most expedient to incorporate express authority for identification on this point as well, cf. Cl. 3-38. Co-insured third parties are covered by the references in Cl. 7-1 and Cl. 8-1 of the 1996 Plan.

  4. Identification of assureds inter se

  The 1964 Plan had no general rule governing the relationship between assureds, although Cl. 60 contained a rule on identification between the assured and co-owners of the insured vessel. In addition, Chapter 7 (primarily Cl. 129) and Chapter 8 (primarily Cl. 134, sub-clause 1) contained rules on identification between the assured and third parties and mortgagees, respectively. The issue of identification, in other cases, had to be resolved through a reference to general rules of law as provided for in Cl. 61.

  The relevant Nordic Insurance Contracts Acts (Nordic ICAs) have solved the identification problem by taking as a starting point that co-assureds are not to be identified with each other, although some exceptions are also possible here.

  As mentioned earlier, since the new Norwegian ICA has come into force, some uncertainty prevails as to what general rules of law are. Accordingly, during the Plan revision it was necessary to undertake a general regulation of identification between assureds. The decision was made to group the relationship of assureds inter se and between the assured and co-owners under a common rule, see Cl. 3-37. This approach implies that the provision also regulates the relationship between the party who has the decision-making authority for the operation of the vessel and a mortgagee or other co-insured third party. To prevent any possible misunderstanding references to the rules governing identification have been made in Cl. 7-1 and Cl. 8-1.

• Clause 3-36. Identification of the assured with its servants

  This Clause corresponds to Cl. 59 and Cl. 61 of the 1964 Plan. The Commentary on the first sub-clause was amended in the 2010 version.

  Sub-clause 1 sets out the important principle that there shall be no identification with the master or crew in respect of faults or negligence committed "in their service as seafarers". The provision corresponds to Cl. 59 of the 1964 Plan. The background for the provision is that faults or negligence committed by the master and crew are one of the risks for which the shipowner should have unconditional marine insurance cover. The wording "faults or negligence ... in connection with their service as seafarers" indicate the contrast with errors touching on the commercial functions which the vessel's master may sometimes carry out on behalf of the shipowner. Identification issues with respect to commercial errors must be resolved using the general rule in sub-clause 2. The crucial factor will then be whether the master or crew have been given decision-making authority in matters of material significance for the insurance. However, insofar as the error is committed "in connection with their service as seafarers", it is of no import whether it is the master or the crew who have been entrusted with the authority. For example, if, pursuant to Section 19 of the Norwegian Ship Safety and Security Act, a number of duties have been imposed on the master with regard to vessel safety, the master shall, among other things, ensure that the vessel is loaded and ballasted in a safe and proper manner, that the vessel has safe and proper watchkeeping arrangements and that the navigation of the vessel and the keeping of vessel books are done in accordance with statutory and regulatory requirements. Negligence relating to such duties is regarded as a “fault committed in connection with service as seafarers”, which means that there will not be identification with the master and the crew. The same will apply if authority has been delegated to the master in relation to implementation of safety regulations, unless the specific identification rule in Cl. 3-25, sub-clause 2 applies. Faults and negligence relating to delivery of cargo in a general average situation are discussed in greater detail in the Commentary on Cl. 5-16.

  Technological advances have brought a steady improvement in possibilities for communication between the shipowner’s organisation on land and personnel on board. As long as the master or crew have acted according to instructions from the organisation on land or with its consent, any error or negligence must be assessed as though it was committed by the organisation on land itself. If the insurer does not manage to provide the proof to the contrary, it must be assumed that the error or negligence has been committed by the people on board.

  The provision applies to any insurance taken out under Plan conditions, and thus also includes war risks insurance. Errors on the part of the crew will normally be judged to be a marine risk, making the issue of identification under a war risks insurance less relevant. However, if an error on the part of the crew must be judged as an element of war risk because the error is very closely associated with the war risk or consists in a misjudgement of this risk, cf. above under Cl. 2-9, the question of identification in relation to the war risk insurer as well will arise.

  Sub-clause 2 of Cl. 3-36 corresponds to Cl. 61 of the 1964 Plan. While the latter provision applied to both the relationship between the assured and its servants and the relationship between the person effecting the insurance and its servants, sub-clause 2 of Cl. 3-36 only aims to regulate the relationship between the assured and its servants, cf. the wording "against the assured".

  The provision states that the assured shall be identified with "any organisation or individual to whom the assured has delegated decision-making authority concerning functions of material significance for the insurance, provided that the fault or negligence occurs in connection with the performance of those functions". The purpose of the provision is to state what is regarded as established law by specifying in somewhat more detail how far identification is carried in current marine insurance. There is no intention to introduce any material changes to the rules that have applied so far.

  The criterion for identification is that decision-making authority has been delegated “concerning functions of material significance for the insurance". Delegation of decision-making authority denotes the power to act on behalf of the assured in the area in question. Authority will usually be indicated on the organisation chart, but this is not a condition. Nor is there any requirement that the power has been delegated expressly. De facto delegation is sufficient if the organisation or person in question in reality has the crucial decision-making authority.

  Whether the delegation involves "functions of material significance for the insurance" must be determined in each individual case. It was not believed expedient to attempt to set out precisely which persons or organisations the assured is to be identified with. Vessel operations are organised in a wide variety of ways, ranging from limited partnerships in which the owners are not involved in operations at all and have organised everything in separate companies, to large, professional shipping companies which take care of all or most operational functions. There are also big differences in how operational responsibility is placed internally in individual companies. Most shipowners have a central operational organisation on land, but some have a small land-based organisation with wide-ranging powers delegated to the superintendent level. In some cases, there may also be shipowners with a small land-based operational organisation or none at all, where the captain is given wide-ranging powers in relation to the operation of the vessel. This need not be blameworthy: modern management philosophy places great emphasis on decentralisation of the management function, and in some cases it may be natural to make the vessel's officers part of the management. One consequence of this is that it becomes impossible to make a general rule that there shall (or shall not) be identification with certain groups of persons or companies.

  The criterion for identification in sub-clause 2 is based on the view that the shipowner must be free to organise vessel operations as it sees fit, but that the assured must bear the consequences of the management model chosen. If the assured chooses to delegate a large portion of the management to others, the assured must also accept responsibility for faults or negligence committed by the organisations or persons in question within the area of authority they have been given. The determining factor in relation to identification then becomes who has real authority in areas which are of significance for the insurance. "Functions of material significance for the insurance" refers to all types of management function regardless of whether they are grouped together or exist separately. If the operations are organised through a separate management company or similar entity which has the overall responsibility for the vessel's technical/nautical and commercial operation, then of course the assured must be identified with the manager. Likewise, if the management function is divided into technical, nautical and commercial operations, there must be identification in relation to the person who has been given responsibility for the different functions, insofar as these functions are of material significance for the insurance. The same will be true for the person or company who is responsible for crewing.

  If the individual management function is split up as well, it becomes more difficult to pinpoint what will trigger identification. On the one hand, it is clear that the assured may not avoid liability by dividing up management functions into as many units as possible. Here, as elsewhere, the assured must take responsibility for the management model chosen. On the other hand, not each and every element of the management responsibility will constitute a basis for identification, for example, if a subordinate employee in the company is given responsibility for an operational function on one occasion. The borderline for identification in these types of cases must be drawn based on practice under the 1964 Plan. As mentioned earlier, the intention is not to open the door to a greater degree of identification than is usual practice today, but rather to try and set out somewhat clearer guidelines. Accordingly, the approaches adopted in case law in recent years must stand. In ND 1973.428 NH HAMAR KAPP-FERGEN, the company was identified with its manager and general manager who, on behalf of the company, were to arrange for the vessel to be laid up and for supervision during the lay-up period. The same approach was adopted in ND 1991.214 MIDNATSOL, where the holding company was identified with a board member/assistant who had authority to arrange for supervision while the vessel was laid up for refitting.

  Identification applies in relation to "organisations or individuals". The provision thus encompasses identification both externally and internally, although the most relevant in practice is external identification. External identification refers to all cases where authority of importance for the insurance is entrusted to organisations other than the assured's own, e.g. where one or more central operational functions are transferred to other companies.

  Internal identification refers to cases where the assured must be identified with those persons in his own organisation who have authority to make decisions concerning matters which are important for the insurance. This implies that whether or not there is identification is a relative matter: a technical inspector will not usually have sufficient authority for him to be identified with the assured, but it is possible if the land-based organisation is limited in certain areas.

  The provision must also be read in relation to sub-clause 1 with respect to internal identification. The starting premise in relation to the master and crew is that there shall be no identification in respect of faults or negligence committed in connection with their service as seafarers, cf. above.

  The approaches which have crystallised in practice under Cl. 59 of the 1964 Plan will thus set a limit for the application of Cl. 3-36, sub-clause 2, of the new Plan. There will not usually be identification with the master or crew in other areas, either, although exceptions may be envisaged where the shipowner has no land-based organisation having authority for the area in question, and has thus left management functions of material significance for the insurance with the captain. In that case, it would seem obvious that the shipowner must be identified with the captain to the extent he or she makes mistakes in the performance of those functions.

  Another condition for identification is that the error be committed in connection with the exercise of the delegated authority. cf. the wording "provided that the fault or negligence occurs in connection with the performance of these functions". This means that it is necessary to distinguish between faults or negligence committed in the exercise of the delegated authority, and faults or negligence committed in the performance of other tasks. The assured must accept being identified with a senior employee who has responsibility for organising supervision for a laid-up vessel and if the employee is at fault, cf. ND 1973.428 NH HAMAR KAPP-FERGEN. There will not be identification, however, if the same employee commits an isolated error while personally carrying out supervision, cf. ND 1973. 428 NH HAMAR KAPP-FERGEN, where the Supreme Court left the question open. In other words, identification presupposes that the error is committed during the performance of management functions on behalf of the assured.

  Moreover, identification will only arise in the relationship between the assured who has responsibility for the operation of the vessel and the party to whom the assured hands over decision-making authority. The provision does not resolve the issue of identity between a mortgagee or other co-insured third parties and the assured who is responsible for the operation of the vessel. In other words, identification applies only downwards in the organisational hierarchy linked to the operation of the vessel, and not laterally among several parties because of their status as assureds under the insurance contract. Identity between assureds is regulated in Cl. 3-37. On the other hand it follows from the provision that delegation of the kind referred to in Cl. 3-36 also has effect in relation to other assureds, cf. below.

  As mentioned earlier, the purpose of Cl. 3-36 is to continue the approach taken under the 1964 Plan. The intention is not, however, to "freeze" development. The provision is aimed at resolving the questions which have been relevant under the 1964 Plan and which have been raised during the revision. Development may lead to other types of identification problems arising than those referred to, which might make some modification of the rules necessary.

  View Clause Go to Plan page

  Clause 3-36. Identification of the assured with its servants

  The insurer may not invoke against the assured faults or negligence committed by the vessel's master or crew in connection with their service as seafarers. The insurer may invoke against the assured faults and negligence committed by any organisation or individual to whom the assured has delegate...

• Clause 3-37. Identification of two or more assureds with each other and of the assured with a co-owner

  This Clause corresponds to Cl. 60, Cl. 129 and Cl. 134, sub-clause 2 of the 1964 Plan.

  The provision regulates faults and negligence committed by the assured or co-owners of the insured vessel and, to a certain extent, brings together and expands on Cl. 60, Cl. 129 and Cl. 134, sub-clause 2 of the 1964 Plan. It also has its counterpart in relevant Nordic Insurance Contracts Acts (Nordic ICAs).

  Unlike Cl. 3-36, which concerns identification between the assured and his servants, Cl. 3-37 regulates the issue of identification between several assureds, and between the assured and co-owners of the vessel.

  The provision deals with the issue of identification in relation to any assured, cf. the wording "against the assured". It makes no difference what kind of right in the vessel provides the basis for acquiring status as an assured. The provision thus encompasses Cl. 60 of the 1964 Plan, which regulated identification in relation to insured co-owners, Cl. 129, which regulated identification in relation to co-insured third parties, and Cl. 134, sub-clause 2, which regulated identification in relation to mortgagees. The approach in relation to mortgagees and other co-insureds has been retained as a matter of form through references in Cl. 7-1 and Cl. 8-1.

  The starting point for the first sentence is that there is to be no identification in respect of faults or negligence of "another assured or co-owner of the insured vessel". The phrase "another assured" must be read as referring to any other assured than the assured who is claiming under the insurance contract. The phrase "co-owner" refers to another owner than the insured owner; in relation to a co-insured mortgagee the rule must be read as referring to any owner. The special rule governing faults or negligence of the assured's "co-owners in the insured vessel" is necessary because the owner/co-owner might not be an assured. This can happen when the shipowner is organised as a shipping partnership or a limited partnership and where the company, as opposed to the co-owners, are listed as assured. Faults or negligence on the part of a co-owner will not then be those of the assured.

  The purpose of the basic rule is to protect all (other) assureds in cases where the fault or negligence is committed by a co-owner or an assured who does not have overall decision making authority in relation to the operation of the insured vessel, cf. the second sentence regarding identification if the party concerned has such authority. It would be quite extraordinary and unusual for a co-owner/co-assured who does not have such authority to intervene in the operation of the vessel and it does not seem reasonable that the other assureds should suffer for faults he might commit in such a situation.

  On the other hand if the other assured or co-owner is the person with ultimate authority in relation to the insured vessel, then identification shall apply in relation to other assureds, cf. the second sentence. The rule is a generalisation of the rule in Cl. 60 of the 1964 Plan which applied to faults and negligence on the part of the assured's co-owners only. Cl. 60 only applied directly to the assured. However, the same result applied for mortgagees since Cl. 134, sub-clause 2 provided that the mortgagee should be identified with the owner. In relation to other co-assureds, the rule in Cl. 37 replaces the rule in Cl. 129 of the 1964 Plan which provided that they were to be identified with the person effecting the insurance if the vessel was in his custody.

  The criterion for identification is that the assured or co-owner has "decision-making authority for the operation of the vessel". The criterion is taken from Cl. 60 of the 1964 Plan, but there the requirement was that the co-owner be a "manager". The wording "decision-making authority for the operation of the vessel" means the ultimate decision-making authority for the vessel. Unlike Cl. 129 of the 1964 Plan, there is no requirement that the error be committed by someone who has the vessel in its "custody". The relevant authority will often be with the owner, cf. the rule in Cl. 134, sub-clause 2 of the 1964 Plan, but this is not necessarily the case. The crucial factor will be who has the ultimate authority to decide how the operation is to be organised and resources allocated. When persons or organisations with that authority commit a fault it is natural that there be identification in relation to all assureds: the assured or co-owner responsible has been charged with taking care of the interests of the group and has been entrusted with the formal competence to act on behalf of all. As regards the co-owner, this type of approach is also necessary to avoid a situation where the organisational form of the shipowner is the determining factor in the identification issue. Parties having status as assureds should all be in the same position, regardless of whether the shipowner is organised as a limited liability company and leaves the management to a manager, or there is a holding company in which one of the partners is responsible for the operation of the vessel.

  Unlike Cl. 3-36, which deals with cases where several person or organisations may have been given authority resulting in identification downwards through the organisational hierarchy, the decision-making authority under Cl. 3-37 is concerned with the situation where one person or organisation has the overall or ultimate authority. If operational responsibility is shared, the crucial factor will be who has organised the division, and who has the ultimate responsibility for allocation of resources between the persons or organisations responsible.

  The identification provision in Cl. 3-37 must be read in light of Cl. 3-36. If an assured who has the overall decision-making authority for the operation of the vessel delegates authority to other organisations or persons, that assured must accept being identified with them provided that the conditions under Cl. 3-36, sub-clause 2, are met. At the same time, each of the other assureds must accept being identified with the assured who has decision-making authority pursuant to Cl. 3-37. There must also be identification pursuant to Cl. 3-37 when the fault was not committed by the person exercising the authority itself, but by a party with whom it must be identified pursuant to Cl. 3-36. This means that there will be identification with all assureds in all cases where errors are committed by persons or organisations who have authority in relation to functions of importance for the insurance and the conditions for identification under Cl. 3-36, sub-clause 2 are fulfilled.

  The connection between Cl. 3-36, sub-clause 2 and Cl. 3-37 relates prima facie only to assureds and not to co-owners, since the provision in Cl. 3-36 only regulates identification between the assured and his servants. If, however, a situation were to arise where the co-owner had decision-making authority for the operation of the vessel, including authority to delegate authority to others, then it would be natural to apply Cl. 3-36, sub-clause 2, by analogy so that the owner in question is identified with his servants/helpers who have committed the fault. Any other approach would give rise to a fortuitous advantage for the other assureds.

  It is sufficient for identification under Cl. 3-37 that an assured or co-owner has the necessary overall decision-making authority. Unlike Cl. 3-36, Cl. 3-37 does not require that errors of the person responsible occur in connection with the exercise of the authority in question. This difference becomes particularly evident if the person or organisation responsible makes a mistake in a connection other than the exercise of authority which is of material significance for the insurance cover. In that case, there will not be identification under Cl. 3-36, but there may be identification under Cl. 3-37 if the person or organisation committing the error has overall responsibility for the operation of the vessel. This approach concords with Cl. 60 of the 1964 Plan, under which it was sufficient that the co-owner in question was "the vessel's manager"; there was no requirement that the person or organisation was acting within its sphere of authority.

  View Clause Go to Plan page

  Clause 3-37. Identification of two or more assureds with each other and of the assured with a co-owner

  The insurer may not invoke against the assured faults or negligence committed by another assured or a co-owner of the insured vessel , or anyone with whom they may be identified under Cl. 3-36, sub-clause 2, unless the relevant assured or co-owner has overall decision-making authority for the...

• Clause 3-38. Identification of the assured with the person effecting the insurance

  As mentioned earlier, the 1964 Plan contained no rules on identification between the person effecting the insurance and the assured. However, the system of the Plan did provide that there was to be full identification between the person effecting the insurance and the assured, an approach that has been retained in the new Plan. Negligence that might be committed by the person effecting the insurance would relate primarily to the duty to give correct information and to pay the premium. Negligence relating to these matters may be invoked against anyone insured under the contract. The same will apply if the negligence is committed by a servant of the person effecting the insurance, for example, an agent charged with the task of entering into the agreement with the insurer on behalf of the person effecting the insurance. This is not stated explicitly, but follows from general rules of contract law.

  The assured also has a duty of disclosure in one situation, cf. Cl. 8-2 concerning third parties who are expressly named in the insurance contract. In that case, however, there will not be automatic identification in relation to the other assureds if this one assured breaches his duty of disclosure, cf. Cl. 8-2, sub-clause 2. Identification of this type will only take place if the criteria stated in Cl. 3-37 are met, i.e. that the named co-assured is the party who has overall decision-making authority for the operation of the vessel.

  The relationship to mortgagees and other co-insured third parties is dealt with through the references in Cl. 7-1 and Cl. 8-1.

  View Clause Go to Plan page

  Clause 3-38. Identification of the assured with the person effecting the insurance

  The insurer may invoke against the assured faults or negligence committed by the person effecting the insurance.