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Chapter 7: Co-insurance of mortgagees

  • Clause 7-1. Rights of a mortgagee against the insurer

    If the interest covered by the insurance is mortgaged, the insurance also covers the mortgagee’s interest, but the insurer may invoke the rules relating to identification in Cl. 3-36 to Cl. 3-38.

    If the insurer has been notified of the mortgage, the rules contained in Cl. 7-2 to Cl. 7-4 shall apply. If the co-insurers are represented by a claims leader, it is sufficient that such notice is submitted to the claims leader, cf. Cl. 9-2, sub-clause 3 (a). The notice takes effect from the time it reaches the insurer or the claims leader.

    The insurer shall inform the mortgagee that it has been notified about the mortgage as per sub-clause 2 above. If the co-insurers are represented by a claims leader and the claims leader was provided such notification, the claims leader shall convey such information to the mortgagee.

    Any special requirements of the mortgagee to be included in the insurance contract other than the rules contained in Cl. 7-2 to Cl. 7-4 shall not take effect unless and until they are specifically agreed by the insurer. If the co-insurers are represented by a claims leader, the claims leader is authorized to accept such special requirements on behalf of the co-insurers, provided that the special requirements are within customary market practice according to Cl. 9-2, sub-clause 3 (b).

    If a vessel is insured as part of a fleet, each of the vessels thereunder shall be deemed to be separately insured in respect of: (i) amendment or cancellation (cf. Cl. 7-2), and (ii) set-off (cf. Cl. 7-4, sub-clause 6).

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    Clause 7-1. Rights of a mortgagee against the insurer

    The Commentary to this Clause was rewritten in 2016. In the 2023 revision, sub-clauses 2 and 3 were amended, new sub-clauses 4 and 5 were added, and the Commentary to sub-clause 1 was amended. Sub-clause 1 states that the mortgagee's interest is automatically covered. As explained above in the...

  • Clause 7-2. Amendments and cancellation of the insurance

    If the insurance contract has been amended or cancelled, the rights of the mortgagee shall not be affected unless the insurer has given the mortgagee specific notice of not less than fourteen days. However, this shall not apply to war risks insurance, cf. Cl. 15-8, sub-clause 1, second sentence.

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    Clause 7-2. Amendments and cancellation of the insurance

    The Commentary to this Clause was rewritten in 2016. The first sentence of the provision states that amendments to or cancellation of the insurance contract may not be invoked against the mortgagee unless the mortgagee has been notified by the insurer. This expands somewhat the mortgagee's...

  • Clause 7-3. Handling of claims, claims adjustments, etc.

    Decisions required in respect of casualties, adjustments, claims against third parties or provision of security for loss or liability covered under the insurance may be made without the participation of the mortgagee.

    The right to compensation for a total loss may not be waived, wholly or in part, to the detriment of the mortgagee.

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    Clause 7-3. Handling of claims, claims adjustments, etc.

    Sub-clause 1 was amended in the 2023 revision. The common practice in marine insurance is that handling of claims etc. is carried out by the person effecting the insurance or the assured who operates the vessel. It would be inefficient and administrative burdensome to involve the mortgagee in eve...

  • Clause 7-4. Payment of compensation

    In the event of a total loss, the mortgagee's interests take priority. 

    Compensation for loss from a single casualty exceeding 5 % of the sum insured, or as otherwise agreed, shall, in the absence of consent from the mortgagee, only be paid by the insurer upon presentation of a receipted invoice for repairs carried out. If the vessel is insured with two or more insurers against the same perils, this restriction applies to the combined payments from the insurers.

    Compensation under Cl. 12-1, sub-clause 4, and Cl. 12-2, may not be paid without the consent of the mortgagee.

    Compensation for loss of time may not be paid without the consent of the mortgagee who has a mortgage on the vessel's freight income.

    Liability to a third party covered by the insurance may only be settled upon presentation of a receipt from the third party. If the claims leader has provided security as per Cl. 7-3, sub-clause 1, Cl. 9-7, sub-clause 2 applies.

    In the absence of the mortgagee's consent, the insurer may only set off claims which have arisen out of the insurance contract relating to the vessel in question and which have fallen due in the course of the last two years prior to the settlement of a claim.

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    Clause 7-4. Payment of compensation

    The Clause was amended in the 2023 revision. Sub-clause 1 gives the mortgagee «priority» in the event of total loss of a vessel, provided that the insurer is notified about the mortgage cf. Cl. 7-1, sub-clause 2. According to Cl. 7-1, sub-clause 2, the provision applies regardless who made the...