Part One: Rules common to all types of insurance
- Chapter 1: Introductory provisions
Chapter 2: General rules relating to the scope of the insurance
Section 1: Insurable interest and insurable value
- Clause 2-1. Insurance unrelated to any interest
- Clause 2-2. Insurable value
- Clause 2-3. Agreed insurable value
- Clause 2-4. Under-insurance
- Clause 2-5. Over-insurance
- Clause 2-6. Liability of the insurer when the interest is also insured with another insurer
- Clause 2-7. Recourse between the insurers where the interest is insured with two or more insurers
Section 2: Perils insured against, causation and loss
- Clause 2-8. Perils covered by an insurance against marine perils
- Clause 2-9. Perils covered by an insurance against war perils
- Clause 2-10. Perils insured against when no agreement has been made as to what perils are covered by the insurance
- Clause 2-11. Causation. Incidence of loss
- Clause 2-12. Main rule relating to the burden of proof
- Clause 2-13. Combination of perils
- Clause 2-14. Combination of marine and war perils
- Clause 2-15. Losses deemed to be caused entirely by war perils
- Clause 2-16. Loss attributable either to marine or war perils
- Clause 2-17. Sanction limitation and exclusion
- Section 1: Insurable interest and insurable value
Chapter 3: Duties of the person effecting the insurance and of the assured
- General remarks
Section 1: Duty of disclosure of the person effecting the insurance
- Clause 3-1. Scope of the duty of disclosure
- Clause 3-2. Fraudulent misrepresentation
- Clause 3-3. Other failure to fulfil the duty of disclosure
- Clause 3-4. Innocent breach of the duty of disclosure
- Clause 3-5. Cases where the insurer may not invoke breach of the duty of disclosure
- Clause 3-6. Duty of the insurer to give notice
- Clause 3-7. Right of the insurer to obtain particulars from the vessel's classification society, etc.
Section 2: Alteration of the risk
- Clause 3-8. Alteration of the risk
- Clause 3-9. Alteration of the risk caused or agreed to by the assured
- Clause 3-10. Right of the insurer to cancel the insurance
- Clause 3-11. Duty of the assured to give notice
- Clause 3-12. Cases where the insurer may not invoke alteration of the risk
- Clause 3-13. Duty of the insurer to give notice
- Clause 3-14. Loss of the main class
- Clause 3-15. Trading areas
- Clause 3-16. Illegal undertakings
- Clause 3-17. Suspension of insurance in the event of requisition
- Clause 3-18. Notification of requisition
- Clause 3-19. Suspension of insurance while the vessel is temporarily seized
- Clause 3-20. Removal of the vessel to a repair yard
- Clause 3-21. Change of ownership
- Section 3: Safety regulations
- Section 4: Measures to avert or minimise loss, etc.
- Section 5: Casualties caused intentionally or negligently by the assured
- Section 6. Identification
Chapter 4: Liability of the insurer
- Section 1: General rules relating to the liability of the insurer
Section 2: Costs of measures to avert or minimise the loss, including salvage awards and general average
- Clause 4-7. Compensation of the costs of measures to avert or minimise loss
- Clause 4-8. General average
- Clause 4-9. General average apportionment where the interests belong to the same person
- Clause 4-10. Damage to and loss of the object insured
- Clause 4-11. Assumed general average
- Clause 4-12. Costs of particular measures taken to avert or minimise loss
- Section 3: Liability of the assured to third parties
- Section 4: The sum insured as the limit of the liability of the insurer
Chapter 5: Settlement of claims
Section 1: Claims adjustment, interest, payments on account, etc.
- Clause 5-1. Duty of the assured to provide information and documents
- Clause 5-2. Claims adjustment
- Clause 5-3. Rates of exchange
- Clause 5-4. Interest on the compensation
- Clause 5-5. Disputes concerning the adjustment of the claim
- Clause 5-6. Due date
- Clause 5-7. Duty of the insurer to make a payment on account
- Clause 5-8. Payment on account when there is a dispute as to which insurer is liable for the loss
- Section 2: Liability of the assured to third parties
Section 3: Claims by the assured for damages against third parties
- Clause 5-13. Right of subrogation of the insurer to claims by the assured for damages against third parties
- Clause 5-14. Waiver of claim for damages
- Clause 5-15. Duty of the assured to assist the insurer with information and documents
- Clause 5-16. Duty of the assured to maintain and safeguard the claim
- Clause 5-17. Decisions concerning legal proceedings or appeals
- Clause 5-18. Salvage award which entails compensation for loss covered by the insurer
- Section 4: Right of the insurer to take over the object insured upon payment of a claim
- Section 5: Limitation, etc.
- Section 1: Claims adjustment, interest, payments on account, etc.
Chapter 6: Premium
- Clause 6-1. Payment of premium
- Clause 6-2. Right of the insurer to cancel the insurance in the event of non-payment of premium
- Clause 6-3. Premium in the event of total loss
- Clause 6-4. Additional premium when the insurance is extended
- Clause 6-5. Reduction of premium
- Clause 6-6. Reduction of premium when the vessel is laid up or in similar situations
- Clause 6-7. Claim for a reduction of premium
- Chapter 7: Co-insurance of mortgagees
Chapter 8: Co-insurance of third parties
- Clause 8-1. Rights of third parties against the insurer
- Clause 8-2. Protection of third parties against subrogation claims from the insurer
- Clause 8-3. Application of the rules in Chapter 3 and Clause 5-1
- Clause 8-4. Amendments and cancellation of the insurance contract
- Clause 8-5. Handling of claims, claims adjustment, etc.
- Clause 8-6. Other insurance
- Clause 8-7. Independent co-insurance of mortgagees or named third parties
Chapter 9: Relations between the claims leader and co-insurers
- Clause 9-1. Definitions
- Clause 9-2. The right of the claims leader to act on behalf of the co-insurers
- Clause 9-3. Lay-up plan
- Clause 9-4. Notification of a casualty
- Clause 9-5. Salvage
- Clause 9-6. Removal and repairs
- Clause 9-7. Provision of security
- Clause 9-8. Disputes with third parties
- Clause 9-9. Claims adjustment
- Clause 9-10. Insolvency of a co-insurer
- Clause 9-11. Interest on the disbursements of the claims leader
Part Two: Hull insurance
Chapter 10: General rules relating to the scope of the hull insurance
- Clause 10-1. Objects insured
- Clause 10-2. Objects, etc. temporarily removed from the vessel
- Clause 10-3. Loss due to ordinary use
- Clause 10-4. Insurance "on full conditions"
- Clause 10-5. Insurance “against total loss only” (T.L.O.)
- Clause 10-6. Insurance “against total loss and general average contribution only”
- Clause 10-7. Insurance “against total loss, general average contribution and collision liability only”
- Clause 10-8. Insurance "on stranding terms"
- Clause 10-9. Duration of voyage insurance
- Clause 10-10. Extension of the insurance
- Clause 10-11. Liability of the insurer if the vessel is salvaged by the assured
- Clause 10-12. Reduction of liability in consequence of an interest insurance
Chapter 11: Total loss
- Clause 11-1. Total loss
- Clause 11-2. Salvage attempts
- Clause 11-3. Condemnation
- Clause 11-4. Condemnation in the event of a combination of perils
- Clause 11-5. Request for condemnation
- Clause 11-6. Removal of the vessel
- Clause 11-7. Missing or abandoned vessel
- Clause 11-8. Extension of the insurance when the vessel is missing or abandoned
- Clause 11-9. Liability of the insurer during the period of clarification
Chapter 12: Damage
- Clause 12-1. Main rule concerning liability of the insurer
- Clause 12-2. Compensation for unrepaired damage
- Clause 12-3. Inadequate maintenance, etc.
- Clause 12-4. Error in design, etc.
- Clause 12-5. Losses that are not recoverable
- Clause 12-6. Deferred repairs
- Clause 12-7. Temporary repairs
- Clause 12-8. Costs incurred in expediting repairs
- Clause 12-9. Repairs of a vessel that is condemnable
- Clause 12-10. Survey of damage
- Clause 12-11. Invitations to tender
- Clause 12-12. Choice of repair yard
- Clause 12-13. Removal of the vessel
- Clause 12-14. Apportionment of common expenses
- Clause 12-15. Ice damage deductions
- Clause 12-16. Machinery damage deductions
- Clause 12-17. Compensation without deductions
- Clause 12-18. Deductible
- Clause 12-19. Basis for calculation of deductions according to Clauses 12-15 to 12-18 and Clause 3-15
- Chapter 13: Liability of the assured arising from collision or striking
- Chapter 10: General rules relating to the scope of the hull insurance
Part Three: Other insurances for ocean-going vessels
Chapter 14: Separate insurances against total loss
- Clause 14-1. Insurance against total loss and excess collision liability (hull interest insurance)
- Clause 14-2. Insurance against loss of long-term freight income (freight interest insurance)
- Clause 14-3. Common rules for separate insurances against total loss
- Clause 14-4. Limitations on the right to effect separate insurances against total loss
Chapter 15: War risks insurance
- Section 1: General rules relating to the scope of war risks insurance
- Section 2: Termination of the insurance
- Section 3: Trading areas
- Section 4: Total loss
- Section 5: Damage
- Section 6: Loss of hire
- Section 7: Owner’s liability, etc. (P&I)
- Section 8: Occupational injury insurance, etc.
Chapter 16: Loss of hire insurance
- Clause 16-1. Main rules regarding the liability of the insurer
- Clause 16-2. Total loss
- Clause 16-3. Main rule for calculating compensation
- Clause 16-4. Calculation of the loss of time
- Clause 16-5. The daily amount
- Clause 16-6. Agreed daily amount
- Clause 16-7. Deductible period
- Clause 16-8. Survey of damage
- Clause 16-9. Choice of repair yard
- Clause 16-10. Removal to the repair yard, etc.
- Clause 16-11. Extra costs incurred in order to avert or minimise loss
- Clause 16-12. Simultaneous repairs
- Clause 16-13. Loss of time after completion of repairs
- Clause 16-14. Repairs carried out after expiry of the insurance period
- Clause 16-15. Liability of the insurer when the vessel is transferred to a new owner
- Clause 16-16. Relationship to other insurances and general average
- Chapter 14: Separate insurances against total loss
Part Four: Other insurances
Chapter 17: Insurance for fishing vessels
Section 1: General provisions
- Clause 17-1. Scope of application
- Clause 17-2. Renewal of the insurance/Ref. Clause 1-5
- Clause 17-3. Trading areas for fishing vessels/Ref. Clause 3-15
- Clause 17-4. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8
- Clause 17-5. Safety regulations/Ref. Clause 3-22 and Clause 3-25
- Clause 17-6. Savings to the assured
Section 2: Hull insurance
- Clause 17-7. The relationship to Chapters 10-13
- Clause 17-7A. Fixed equipment temporarily removed from the vessel
- Clause 17-8. Change of the open or agreed insurable value/Ref. Clause 2-2 and Clause 2-3
- Clause 17-9. Damage to lifeboats, fishing, whaling and sealing tackle and catch/Ref. Clause 4-7 to Clause 4-12 and Clause 4-16
- Clause 17-10. Hull and freight-interest insurance/Ref. Clause 10-12
- Clause 17-11. Condemnation/Ref. Clause 11-3
- Clause 17-12. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1
- Clause 17-13. Limited cover of damage to machinery
- Clause 17-14. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12
- Clause 17-15. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18
- Clause 17-16. Collision liability for fishing vessels/Ref. Clause 13-1
- Clause 17-17. Collision liability/Ref. Clause 13-1
- Section 3: Hull insurance - extended cover
Section 4: Catch and equipment insurance - standard cover
- Clause 17-19. Objects insured
- Clause 17-20. Insurable value
- Clause 17-21. Extraordinary handling costs
- Clause 17-22. Excluded perils/Ref. Clause 2-8
- Clause 17-23. Deck cargo
- Clause 17-24. Total loss
- Clause 17-25. Damage to or loss of catch
- Clause 17-26. Damage to other objects
- Clause 17-27. Survey of damage
- Clause 17-28. Deductible
- Section 5: Supplementary cover for nets and seines in the sea
Section 6: Loss of hire insurance for fishing vessels
- General comments
- Clause 17-33. Relationship to Chapter 16
- Clause 17-34. Liability of the insurer/applies instead of Clause 16-1
- Clause 17-35. Total loss/applies instead of Clause 16-2
- Clause 17-36. Calculation of compensation for fishing vessels/Ref. Clause 16-3
- Clause 17-37. The daily amount for fishing vessels/applies instead of Clause 16-5
- Clause 17-38. Agreed daily amount for fishing vessels/applies instead of Clause 16-6
Chapter 18: Insurance of mobile offshore units (MOUs)
- Section 1: General rules relating to the scope of the insurance
Section 2: Hull insurance
Section 2-1: General rules relating to the scope of the H&M insurance
- Clause 18-2. Objects insured
- Clause 18-3. Objects temporarily removed or separated etc. from the MOU
- Clause 18-4. Loss due to ordinary use
- Clause 18-5. Extension of the insurance
- Clause 18-6. Liability of the insurer if the MOU is salvaged by the assured
- Clause 18-7. Reduction of liability in consequence of an interest insurance
Section 2-2: Total loss
- Clause 18-8. Total loss
- Clause 18-9. Salvage attempts
- Clause 18-10. Condemnation
- Clause 18-11. Condemnation in the event of a combination of perils
- Clause 18-12. Request for condemnation
- Clause 18-13. Removal of the MOU
- Clause 18-14. Missing or abandoned MOU
- Clause 18-15. Extension of the insurance when the MOU is missing or abandoned
- Clause 18-16. Liability of the insurer during the period of clarification
Section 2-3: Damage
- Clause 18-17. Main rule concerning liability of the insurer
- Clause 18-18. Compensation for unrepaired damage
- Clause 18-19. Inadequate maintenance
- Clause 18-20. Error in design, etc.
- Clause 18-21. Losses that are not recoverable
- Clause 18-22. Damage to the drill string
- Clause 18-23. Deferred repairs
- Clause 18-24. Temporary repairs
- Clause 18-25. Costs incurred in expediting repairs
- Clause 18-26. Repairs of an MOU that is condemnable
- Clause 18-27. Survey of damage
- Clause 18-28. Invitations to tender
- Clause 18-29. Choice of repairers
- Clause 18-30. Removal for repairs
- Clause 18-31. Apportionment of common expenses
- Clause 18-32. Ice damage deductions
- Clause 18-33. Deductible
- Clause 18-34. Basis for calculation of deductions according to Clauses 18-32, 18-33 and 3-15
- Section 2-4: Liability of the assured arising from collision or striking
- Section 2-1: General rules relating to the scope of the H&M insurance
Section 3: Separate insurances against total loss
- Clause 18-39. Insurance against total loss and excess collision liability (hull interest insurance)
- Clause 18-40. Insurance against loss of long-term freight income (freight interest insurance)
- Clause 18-41. Common rules for separate insurances against total loss
- Clause 18-42. Limitations on the right to insure separately against total loss
Section 4: Loss of hire insurance
- Clause 18-43. Main rules regarding the liability of the insurer
- Clause 18-44. Total loss
- Clause 18-45. Main rule for calculating compensation
- Clause 18-46. Calculation of the loss of time
- Clause 18-47. The daily amount
- Clause 18-48. Agreed daily amount
- Clause 18-49. Deductible period
- Clause 18-50. Survey of damage
- Clause 18-51. Choice of repairer
- Clause 18-52. Move to the repair location, etc.
- Clause 18-53. Extra costs incurred in order to avert or minimise loss
- Clause 18-54. Simultaneous works
- Clause 18-55. Loss of time after completion of repairs
- Clause 18-56. Repairs carried out after expiry of the insurance period
- Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner
- Clause 18-58. Relationship to other insurances and general average
Section 5: War risks insurance
- Section 5-1: General rules relating to the scope of war risks insurance
- Section 5-2: Termination of the insurance
- Section 5-3: Areas of operation
- Section 5-4: Total loss
- Section 5-5: Damage
- Section 5-6: Loss of hire
- Section 5-7: Owner’s liability, etc. (P&I)
- Section 5-8: Occupational injury insurance, etc.
Section 6: Construction risks insurance
- Section 6-1: General rules relating to the scope of construction risks insurance
Section 6-2: Loss of or damage to the MOU
- Clause 18-87. Objects insured/Ref Clause 18-2
- Clause 18-88. Insurable value
- Clause 18-89. Compensation in the event of a total loss/Ref. Clause 4-1
- Clause 18-90. Total Loss/Ref. Section 2-2
- Clause 18-91. Damage/Ref. Section 2-3
- Clause 18-92. Error in design, etc.
- Clause 18-93. Costs incurred in order to save time/Ref. Clauses 18-24, 18-28 and 18-29
- Section 6-3: Supplementary covers
Chapter 19: Builders’ risks insurance
Section 1: Common provisions
- Clause 19-1. Perils covered/Ref. Clause 2-8, cf. Clause 2-10
- Clause 19-2. Insurance period/Ref. Clause 1-5
- Clause 19-2A. Premium in the event of total loss
- Clause 19-3. Co-insurance/Ref. Clause 8-1
- Clause 19-4. Transfer of the building contract/Ref. Clause 3-21
- Clause 19-5. Place of insurance
- Clause 19-6. The sum insured as the limit of the liability of the insurer/Ref. Clause 4-18 and Clause 4-19
- Clause 19-7. Escalation of the sum insured
- Clause 19-8. Deductible
Section 2: Loss of or damage to the subject-matter insured
- Clause 19-9. Objects insured/Ref. Clause 10-1
- Clause 19-10. Insurable value
- Clause 19-11. Total loss in the event of condemnation
- Clause 19-12. Total loss where the yard’s obligation to deliver no longer applies
- Clause 19-13. Compensation in the event of a total loss/Ref. Clause 4-1
- Clause 19-14. Damage/Ref. Chapter 12
- Clause 19-15. Limitation of the insurer’s liability/Ref. Clause 12-1
- Clause 19-16. Compensation for unrepaired damage/Ref. Clause 12-2
- Clause 19-17. Costs incurred in order to save time/Ref. Clause 12-7, Clause 12-11 and Clause 12-12
- Section 3: Indemnification of additional costs incurred in an unsuccessful launching and costs of wreck removal
- Section 4: Liability insurance
Section 5: Supplementary covers
- Clause 19-22. Applicable rules
- Clause 19-23. Insurance of additional costs in connection with rebuilding and/or building of a new subject-matter insured
- Clause 19-24. Insurance of the yard’s liability for the buyer’s interest claim for instalments paid
- Clause 19-25. Insurance of the yard’s loss of interest in the event of late delivery
- Clause 19-26. Insurance of the yard’s daily penalties in the event of late delivery
- Clause 19-27. Towage and removal of the subject-matter insured
- Section 6: Supplementary cover for war risks
Chapter 20: Insurance for vessels with trading certificates
- Section 1: Common provisions
Section 2: Hull insurance
- Clause 20-6. The relationship to Chapters 10-13
- Clause 20-7. Hull and freight-interest insurance/Ref. Clause 10-12
- Clause 20-8. Condemnation/Ref. Clause 11-3
- Clause 20-9. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1
- Clause 20-10. Limited cover of damage to machinery
- Clause 20-11. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12
- Clause 20-12. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18
- Clause 20-13. Collision liability/Ref. Clause 13-1
- Section 3: Hull insurance - extended cover
- Section 4: Hull insurance - limited cover
Chapter 21: Liability insurance
- Clause 21-1. Scope of application
- Clause 21-2. Renewal of the insurance/Ref. Clause 1-5
- Clause 21-3. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8
- Clause 21-4. Savings to the assured
- Clause 21-5. Perils covered
- Clause 21-6. Liability for personal injury
- Clause 21-7. Liability for property damage
- Clause 21-8. Liability for description
- Clause 21-9. Liability for the misdelivery of goods
- Clause 21-10. General average contributions
- Clause 21-11. Liability for removal of wrecks
- Clause 21-12. Liability for special salvage compensation
- Clause 21-13. Liability for bunker oil pollution damage and damage to the environment
- Clause 21-14. Stowaways
- Clause 21-15. Liability for fines, etc.
- Clause 21-16. Liability for social benefits for the crew
- Clause 21-17. Travel expenses for replacement crew
- Clause 21-18. Expenses for disinfection and quarantine
- Clause 21-19. Limitation due to other insurance, etc.
- Clause 21-20. Safety regulations/Ref. Clause 3-22 and Clause 3-25
- Clause 21-21. Assured's fault
- Clause 21-22. The insurer's rights in the event of liability
- Clause 21-23. Liability for loss that occurred during other transport, etc.
- Clause 21-24. Limitation of liability for fishing vessels
- Clause 21-25. Limitation of the insurer's liability for measures to avert or minimise loss
- Clause 21-26. The sum insured as a limit to the insurer's liability
- Clause 21-27. Deductible
- Chapter 17: Insurance for fishing vessels
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Section 1: General rules relating to the liability of the insurer
Clause 4-1. Total lossView Clause Go to Plan page
This Clause is identical to Cl. 62 of the 1964 Plan.
The provision establishes the traditional principle in insurance law that the assured, in the event of a total loss, is entitled to claim the sum insured, however, not in excess of the insurable value. In the event of a total loss, the insurer’s liability is thus subject to a double limitation: it can neither exceed the sum insured nor the insurable value. The sum insured is the amount for which the interest is insured, and on the basis of which premium is calculated. The sum insured does not, however, say anything about the value of the interest insured; this value is determined by the “insurable value”. The insurable value is set at the full value of the interest at the inception of the insurance, cf. Cl. 2-2, or by agreement between the parties about the agreed insurable value, cf. Cl. 2-3. Normally, the insurable value will have been agreed and will be identical to the sum insured, cf. Cl. 2-2, sub-clause 2. In that case the insurer will, in the event of a total loss, pay the valuation amount.
However, it is important to keep the concepts of sum insured and insurable value apart in the insurance contract, and the insurance contract should therefore specify both the insurable value and the sum insured. If only one value is given, for example, a “sum insured”, this may create uncertainty as to whether this value shall apply both as the agreed insurable value and as the sum insured, or whether the intention is merely to state the sum insured. In the latter event, the sum insured must be evaluated in relation to an open insurable value under Cl. 2-2. This will entail under-insurance (with a pro-rata reduction of the compensation) if the insurable value is higher than the “sum insured”, cf. Cl. 2-4, and over-insurance if the “sum insured” is higher, cf. Cl. 2-5. However, in hull insurance for ocean-going vessels it is presumed that where only one value is given in the insurance contract, the intention is to state both the agreed insurable value and the sum insured.
The question as to what events will entitle the assured to compensation for total loss must be resolved in the conditions for the special types of insurance. In hull insurance the question also arises as to what will happen when the vessel, before it becomes a total loss, has sustained damage which has not been repaired. This matter has been resolved in Cl. 11-1, sub-clause 2, cf. also Cl. 5-22.
Total losses occur only in those types of insurance that cover an asset belonging to the assured (hull insurance, freight insurance). In a situation where the insurer covers the assured’s future obligations (cover of collision liability under the hull insurance), it will merely be a question of the liability of the insurer being limited to the sum insured, and only if a sum insured has been agreed.
No general rule can be laid down relating to the insurer’s liability for damage and other partial loss: liability will depend entirely on the conditions of the individual types of insurance.
Clause 4-2. General financial loss and loss resulting from delayView Clause Go to Plan page
This Clause is identical to Cl. 63 of the1964 Plan.
The question concerning the interest insured will normally be regulated under the individual type of insurance. However, it should also be addressed in the general part of the Plan for pedagogical reasons.
The provision reflects the fact that the marine insurer’s liability is normally limited to losses consisting of destruction or reduction in value of the actual interest insured. Consequential losses sustained by the assured as a result of the casualty are not recoverable. However, the Clause merely indicates a general principle, and must in many situations be read in conjunction with the liability rules in the chapters relating to the particular types of insurance.
The exception for “general financial loss” is aimed at any general loss the assured may suffer in his trade as a result of a casualty. The casualty may result in his being forced to reorganise his business or to re-route other vessels, whereby his earnings are reduced or his administration and operating expenses are increased. Such losses are not recoverable.
The other main group of non-recoverable losses are losses arising from the delay of the insured vessel caused by the casualty. The term “loss of time” is aimed at the assured’s operating expenses and his loss of freight. However, the Plan provides a special rule for compensation on a number of points in this respect as well, see Cl. 12-11 and Cl. 12-13 relating to loss of time in connection with the invitation to submit tenders and operating expenses during removal of the vessel to a repair yard, Cl. 12-7, Cl. 12-8 and Cl. 12-12 which, in different contexts, take into consideration the loss of time which the assured suffers as a result of the casualty, and the rules relating to the special types of insurance aimed at covering loss of time, in particular Chapter 16.
The terms “loss due to unfavourable trade conditions” and “loss of markets” contemplate the situation where the vessel, due to a casualty, will miss the opportunity to benefit from favourable trade conditions and can only be put into service in a lower freight market. Losses of this nature are never recoverable. To avoid any misunderstanding, the limitation of liability is extended to comprise also “similar losses resulting from delays”.
Clause 4-3. Costs of providing security, etc.View Clause Go to Plan page
Under Cl. 5-12, the insurer is not obliged to provide security for claims brought by a third party against the assured, which are covered by the insurance. However, if the assured incurs expenses in order to obtain such security, these must, according to the first sentence, be recoverable as expenses incurred due to the casualty. That the expenses must be “reasonable” implies inter alia that the assured cannot claim compensation of the costs incurred by providing security for amounts which clearly and considerably exceed the third party’s claim. Cl. 5-7 allows the assured, under certain conditions, the right to demand payment on account. Thus, before providing security for a third party’s claim, he must submit to the insurer the question of whether the claim should be met by a payment on account. If he has failed to do so, the insurer will not be liable for the costs in connection with the provision of security, cf. second sentence.
If it is uncertain whether the insurer is liable for an invoice from the repair yard, the insurer is not obliged to make any payment on account under Clause 5-7. If the shipowner in such situations does not have money to pay the repair invoice, it may have to provide a bank guarantee pending a settlement from the insurer. If the insurer later proves to be liable, the question arises as to whether the insurer must also pay the commission on the bank guarantee. In practice, the provision has been interpreted to mean that it only concerns costs in connection with the provision of security for liability to third parties. However, during the revision of the Plan, there was general agreement that the insurer should have an obligation to cover costs in the above-mentioned situation as well. If the shipowner had raised a loan and paid the repair yard in cash, the insurer would have had to pay the interest on the compensation under the rules set out in the insurance contract. To be consistent, it seems reasonable that in such an event, the insurer must also pay the costs of providing security. However, it is not necessary to amend the provision in order to authorize this solution; it is covered by the wording as it was in the 1964 Plan.
If owner’s repairs are carried out concurrently with casualty repairs, the commission must be apportioned on a proportional basis. If some of the work is paid for in cash, while a bank guarantee is provided for the balance, the cash portion as well as the guarantee must be apportioned according to the proportion of owner’s repairs/deductible to the amount for which the insurer is liable.
Clause 4-4. Costs of litigationView Clause Go to Plan page
There may be doubt as to who shall bear the litigation costs in the event of a dispute between the assured and the insurer as to whether a case against a third party shall be taken to court. In such situations, several insurers with conflicting interests will normally be interested in the question. Cl. 5-11 is an attempt to resolve the difficulties that may arise in such cases.
Clause 4-5. Costs in connection with a claimView Clause Go to Plan page
This Clause was amended in the 2019 Version.
Sub-clause 1 covers all costs incurred after the casualty which are necessary in order to establish whether any recoverable loss has occurred and, if so, its extent, or which are necessary in order to secure any recourse against third parties. Thus the insurer shall pay costs in connection with the necessary factual investigation and damage surveys. The same applies to costs in connection with the conduct of a vessel’s protest and maritime accident inquiry, provided that these measures are attributable to a casualty which resulted, or could have resulted, in recoverable losses. The provision does not distinguish between costs incurred by the insurer or the assured. The assured’s surveyor is, however, covered by sub-clause 2.
A requirement for cover of costs is that there has been a casualty which may result in a claim under a particular insurance cover. If for example the object insured does not function as intended, the hull insurer will not cover cost of technical investigations if the conclusion is that there is no damage and that the malfunction or errors were caused by some inherent defects, or simply not fit for purpose. The same must apply even if there has been an external event with an increased risk of damage but no damage has occurred. Say that the insured object has been exposed to heavy weather and it is decided to check whether the object has suffered any damage, such investigations must be considered as part of the normal operation of the object and the cost have to be covered by the assured if no damage is found. If technical inspections are carried out on various individual and independent parts of the object, and one or more of these parts are found damaged, the costs should be apportioned as per Cl. 4-6. An external event may constitute a “casualty” where inspection costs might be covered in full even if no damage is found. The typical example is a grounding incident where the insurer will cover a dive survey even if no damage is found.
There might be situations where costs incurred shall be considered as repair costs even if considered in isolation they have the character of determining the extent of damage. That is the situation if in parallel with repairs adjacent areas or connected interdependent parts are dismantled and checked for damages. E.g., if it is likely that there might be consequential damages to the gear following a damage to a propeller blade of a thruster, costs of dismantling the thruster for investigation should be considered as repair costs even if no other damage is found. The same solution applies if the class due to the characteristics of a grounding incident require that the vessel should be docked.
Even if the extent of damage has been ascertained it might be necessary to conduct further technical investigation regarding the cause of damage. If the cause, however, is sufficiently established to conclude that the loss is recoverable under the insurance, further investigations into the root cause will as a starting point be for owner’s account. Such further investigations might be required by third parties or be necessary to upgrade the insured object to avoid this kind of damage in the future. If further investigations into the root cause are necessary for the purpose of recourse against a third party, such costs may still be covered by the insurance as recovery costs.
This provision will also cover costs of obtaining expert opinions in order to clarify technical or legal questions, for example, an opinion to document the cause of a corrosion damage or expert assistance on a specific legal question. Costs incurred by the assured by engaging legal or technical consultants in a dispute with the insurer will not be covered. However, if the dispute ends up in litigation, the applicable procedural law will regulate recovery of legal costs.
Sub-clause 2 covers the assured’s surveyor. This provision has according to long-standing and uniform practice been subject to a relatively strict interpretation.
Costs connected with the assured’s surveyor/technical consultant are only recoverable if the insurer has been given the opportunity to participate in the survey, and the insurer’s liability is normally limited to the costs of one surveyor/technical consultant engaged by or from the shipowner’s company. However, in complex or large cases with extensive workload for the assured’s surveyor/technical consultant, the costs of more than one surveyor/technical consultant is recoverable. The insurer’s liability for costs of the surveyor/technical consultant is furthermore limited to the time the repairs take plus travel and maintenance expenses in connection with travelling to and from the place of repairs. The costs will be covered even if repairs are carried out at the home town of the owners’ surveyor/technical consultant, but the costs will of course be limited to the time attending the vessel for repairs. Costs in connection with the settlement of the repair invoice are also recoverable, but planning of repairs before the vessel’s arrival and administration costs are not.
As regards other costs, the insurer does not cover internal costs or the costs of hiring someone to draw up the statement of claim or retaining legal or expert assistance to draft the claim submission to the insurer. Internal costs and costs for external assistance that should have been obtained internally should not be recoverable.
Nevertheless, the recovery of costs in connection with the claims settlement is subject to the condition either that it is clear in advance that the claim exceeds the deductible, or at least that there is reasonable doubt whether the claim will exceed the deductible.
Sub-clause 3 introduces no material changes. In previous versions the basis for cover of costs relating to handling and adjusting the claim was encompassed by the wording “costs of establishing the loss and calculating the compensation”. The provision establishes that the insurance covers costs of handling the claim as well as drawing up the adjustment. ”Costs” in this provision includes both expenses and fees for the services provided. The provision does not distinguish between work contracted to a third party or carried out with the claims leader’s internal resources. It might also be that the management and handling of the claim is carried out by the insurer and the adjusting is outsourced to a third party or vice versa.
In the event of what is known as “aggregate deductibles” the assured will, in addition to the ordinary deductible per loss, bear a risk for a certain period. Under certain such clauses the assured must cover any damage occurring within the stated period of time until the amount of damage exceeds the amount of the aggregate deductible. In that event, until the entire aggregate deductible has been “consumed”, it may be alleged that the casualties occurring are not relevant to the insurance. This is not correct, however: an overview of the casualties occurring is needed in order to know when the aggregate deductible has been exhausted and the insurer’s liability arises. Accordingly, the insurer should cover costs in connection with survey and claims settlements for such casualties, even if the insurer, due to the aggregate deductible, does not incur any liability for the actual loss.
Clause 4-6. Costs in connection with measures relating to several interestsView Clause Go to Plan page
The provision confirms the principle of apportionment when costs are incurred in connection with measures relating to several interests. The principle of pro rata apportionment is of great practical significance for litigation costs and costs in connection with the claims settlement. In a collision case both the hull insurer and the P&I insurer will often be interested on the side of the assured; in that event the litigation costs shall be apportioned taking into account the maximum amounts for which the two insurers may be held liable as a result of the legal proceedings. Likewise, the counterclaims filed by the assured in the proceedings will partly accrue to the assured and partly to its hull insurer. The costs involved in the pursuit of the counterclaims will then have to be apportioned between them in proportion to their interests in the litigation.
According to practice, the term “several interests” does not comprise the assured’s uninsured interests, for example in the form of under-insurance or deductible. If the assured has such uninsured interests, the insurers will cover the costs in their entirety without making any apportionment. This nevertheless does not apply to costs associated with the pursuit of a counterclaim; the counterclaim shall be apportioned between the assured and the insurer, depending on the proportion of the insured to the uninsured interests, and the costs must then be apportioned in the same proportion.
In practice, exceptions have also been made from the principle that regard shall not be had to uninsured interests if it is a question of large deductibles in the form of layers of insurance held by the assured. Even if the point of departure should be that no apportionment is to be made over such uninsured interests, regardless of how large they are, it must be correct to distribute the costs between the insurer who is liable for the deductible and the other insurers if the deductible is insured.
The rule of apportionment in Cl. 4-6 applies regardless of whether it should prove later that the claim is lower than the deductible. In such cases the assured’s claim will not be recoverable as such, but its costs will be recoverable in full, cf. Cl. 12-18, sub-clause 3, which provides that these costs are recoverable without any deductible. However, if it is already clear from the start that the loss or liability is lower than the deductible, the insurer will not be liable for the costs.
Cl. 12-14 contains a special rule relating to the apportionment of accessory costs of repairs.