According to the rules of the Plan, the parties may choose between open and agreed insurable value, cf. Cl. 2-2 and Cl. 2-3. An open insurable value is fixed at the “full value of the interest at the inception of the insurance”, cf. Cl. 2-2. However, an agreed insurable value is fixed by agreement between the parties when the insurance is effected, cf. Cl. 2-3. According to Cl. 2-3, such an agreed insurable value is binding unless the assured has given misleading information about matters that are relevant for the agreement. There are, however, possibilities of demanding a revision of the agreed insurable value in the event of market fluctuations, cf. Cl. 2-3, sub-clause 2.
A common denominator for open and agreed insurable value is thus the fact that in principle there is no basis for taking into account any changes in value after the contract is entered into (unless the right to a revision in Cl. 2-3, sub-clause 2, becomes applicable). However, the value of a fishing vessel is largely contingent on the vessel’s fishing rights, and it is therefore necessary to have a provision that entitles the insurer to take account of changes in such rights. The first sentence imposes a duty of notification on the assured in two situations. The first situation was defined in earlier versions of the Plan as changes in concession conditions. This wording has been amended to “conditions prescribed by public authorities relating to the vessel’s fishing rights”. This amendment was necessitated by changes in fisheries insurance contract, such as the introduction of perpetual fishing rights. Fishing rights now go by a variety of names, such as concessions, structural arrangements, unit quota systems, participation rights, etc., depending on the type of fishing the vessel is engaged in and the size of the vessel. The wording “concession conditions” is therefore no longer adequate to cover changes of relevance to the insurer.
Such changes may have a direct impact on the value of a fishing vessel and create the need for a renegotiation of the agreed insurable value. Similarly, there will in connection with the determination of an open insurable value be a need to take such factors into consideration. In the second situation, the assured shall notify the insurer if he has accepted an offer of a state destruction subsidy which is lower than the agreed insurable value. The state will often offer a subsidy to break up the vessel in order to reduce the fishing fleet. Because it may take some time from when the offer is accepted until the vessel is taken out of service, the assured will need insurance in the interim period. If the assured has accepted an offer for such a subsidy which is lower than the agreed insurable value, it is natural that the insurer is given a right to renegotiate the agreed insurable value. Similarly, it should be possible to take this fact into account in connection with a subsequent calculation of an open insurable value.
The second sentence provides the insurer with a right to demand a reduction of the open or agreed insurable value in cases such as mentioned in the first sentence. This provision thus gives the insurer a possibility of renegotiating the agreed insurable value during the insurance period. If the assured has failed to give the necessary notices, the insurer must nevertheless have the right to set aside the agreed insurable value in a subsequent settlement.
It follows from Cl. 2-4 that the question of under-insurance must be based on the agreed insurable value, even if it is set aside under sub-clause 1. The rule entails that if the agreed insurable value is 5, the real value 2.5, and the sum insured 4, the insurer will be liable for 4/5 of 2.5, i.e. 2.
If the assured has accepted an offer for a state subsidy to break up the vessel, and the vessel is damaged before being broken up, the insurer will be liable in the normal way. In the event of a total loss, the insurer will be liable for total-loss compensation. Such compensation will be deducted from the state subsidy. The same applies if the vessel at the time of condemnation has an unrepaired damage for which the insurer is liable. Damage which has already been repaired and indemnified will, however, not have any influence on the condemnation settlement.
If the parties disagree as to whether there is any reason to reduce the agreed insurable value, or about the size of the reduction, the provisions in Cl. 2-3, sub-clause 3, shall apply. The question will then be decided with final effect by a Nordic average adjuster designated by the assured. The provision shall be applied by analogy if the parties disagree about the significance of the said matters for a subsequent calculation of an open insurable value.
When the parties renegotiate the agreed insurable value, they must also negotiate the possibility of a reduction in premium.