Commentary

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Section 2: Hull insurance

  • General

    Section 2 deals with the standard cover of hull insurance for fishing vessels and freighters (the Coastal Hull Insurance Conditions).  The provisions in Section 2 are supplementary to Part II of the Plan, Chapters 10 to 13, relating to hull insurance. This was previously stated in the Commentary, but has now also been included in the text of the Plan, cf. Cl. 17-7.

    In addition to the provisions in Section 2, this insurance is therefore subject to the common provisions in Section 1 and the provisions in the general part I of the Plan (Chapters 1 to 9) and part II relating to hull insurance (Chapters 10 to 13).

    The system of a standard cover for fishing vessels and freighters and an extended cover for fishing vessels has been retained in that the standard cover is incorporated in Section 2, while the extended cover is incorporated in Section 3. With the exception of a few rules, the provisions of the normal cover are common to fishing vessels and freighters. It is therefore practical to deal with these collectively. As regards the few provisions which only concern one of the types, this will be evident from the actual provision and the Commentary.

    In accordance with the general system of the Plan, the most practical approach is for deductibles and machinery damage deductions to be agreed on an individual basis. Hence, it is sufficient here to apply the rules in Cl. 12-16 and Cl. 12-18. There was also agreement that the new for old deductions were cumbersome and outdated, and that they should therefore be deleted and replaced by machinery damage deductions and deductibles which took into account the age of the vessel and machinery and the sum insured. However, insurance without new for old deductions is conditional on these deductions being compensated for by the other deductions. If the assured is not willing to accept a sufficiently high level of deductible and machinery damage deductions, the insurers must therefore be entitled to incorporate provisions concerning new for old deductions in the individual insurance contract.

  • Clause 17-7. The relationship to Chapters 10 - 13

    The provision states that for hull insurance the rules of Chapters 10 to 13 apply, with such amendments as follow from Cl. 17-7A and Cl. 17-10 to Cl. 17-17 inclusive. Certain amendments in the general rules of the Plan, see Cl. 17-8 and Cl. 17-9, also apply. The reference to Cl. 17-7A is new in the 2013 Plan.

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    Clause 17-7. The relationship to Chapters 10-13

    The rules in Chapters 10-13 shall apply together with the amendments that follow from Cl. 17-7A and Cl. 17-10 to Cl. 17-17.

  • Clause 17-7A. Fixed equipment temporarily removed from the vessel

    This Clause is new in the 2013 Plan. The two sub-clauses used to be found in Cl. 10-2 sub-clause 2 and 3.

    It is an absolute prerequisite for this extended cover that the object has been on board before it was stored ashore. This extension of the insurance applies only to the explicitly stated objects, viz. fixed equipment for fishing vessels. The cover only applies where the insurer is notified before the vessel leaves port about what equipment has been brought ashore, its value and where it is stored in order for it to be covered. Lastly, the only risks this cover of objects removed from the vessel comprises, is fire and burglary through forced entry into a locked storage building or room.

    The term “burglary” is identical to "burglary" as defined in Section 9 of the English Theft Act 1968: “A person is guilty of burglary if

    • he enters any building or part of a building as a trespasser and with intent to commit any such offence as is mentioned in subsection (2) below; or    
    • having entered into any building or part of a building as a trespasser he steals or attempts to steal anything in the building or that part of it or inflicts or attempts to inflict on any person therein any grievous bodily harm.”                                                                                                  

    The cover also has a special safety regulation obliging the assured to store the equipment in a locked storage building or room.

    Sub-clause 2 establishes that in the event of a total loss of the vessel, a deduction shall be made from the total-loss compensation for the value of the stored equipment.

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    Clause 17-7A. Fixed equipment temporarily removed from the vessel

    Where fixed equipment for fishing vessels is temporarily taken ashore, it shall be stored in a locked storage building or room. The insurer is liable for loss resulting from fire and burglary through forced entry into a locked storage building or room. However, this applies only if the insurer is...

  • Clause 17-8. Change of the open or agreed insurable value/Ref. Clause 2-2 and Clause 2-3

    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.

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    Clause 17-8. Change of the open or agreed insurable value/Ref. Clause 2-2 and Clause 2-3

    In addition to Cl. 2-2 and Cl. 2-3 the following shall apply: The assured shall notify the insurer of any changes in conditions prescribed by public authorities relating to the vessel's fishing rights, or if he accepts an offer for a public destruction subsidy which is lower than the open or agre...

  • 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

    The dories, fishing gear and catch have in principle been lifted out of the hull insurance through the exception in Cl. 10-1, sub-clause 2. The insurer is nevertheless in principle liable for damage to such objects if the damage occurs during a measure to avert or minimise loss. Damage to or loss of such objects should, however, be covered by the owner himself on the basis of a “knock-for-knock” line of thought. Where several fishing vessels are operating together, it is foreseeable that equipment will be damaged in various connections. Instead of involving the owner’s own insurance company or that of the party causing the damage in an often difficult insurance settlement with complicated evidentiary problems, it is therefore more expedient to let the owner bear his own damage.

    The provision in Cl. 17-9 therefore explicitly excludes such damage from the cover in cases where it is connected with a measure to avert or minimise loss only applies to fishing vessels and not to freighters.

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    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

    The insurer's liability for costs of measures to avert or minimise loss, cf. Cl. 4-7 to Cl. 4-12, does not cover loss of or damage to the fishing vessel's lifeboats, fishing, whaling and sealing tackle or catch which occurs while these objects are outside the vessel.

  • Clause 17-10. Hull and freight-interest insurance/Ref. Clause 10-12

    Today separate total-loss insurances for fishing vessels and freighters are not normally offered. However, the owners wish to have such an offer. It has therefore been stated explicitly that the hull insurer may consent to the effecting of interest insurance. In that event, the reduction rule will only apply to interest insurances which are larger than what the hull insurer has consented to.

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    Clause 17-10. Hull and freight-interest insurance/Ref. Clause 10-12

    Instead of Cl. 10-12 the following shall apply: If the insured receives compensation under an interest insurance, the hull insurer's liability is reduced correspondingly, unless the hull insurer has consented in advance to such insurance being taken out.

  • Clause 17-11. Condemnation/Ref. Clause 11-3

    The condemnation limit is 90% in relation to Cl. 11-3. A limit of 80% is too advantageous when taking into account that the average age of the fleet is far higher today than 30-40 years ago, that the international marine insurance market relies on a condemnation limit of 100%, and that the value of the concession is part of the insurable value of fishing vessels, at the same time as this value is retained by the assured in a condemnation settlement.

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    Clause 17-11. Condemnation/Ref. Clause 11-3

    Instead of Cl. 11-3, sub-clause 2, first sentence, the following shall apply: The conditions for condemnation are met when casualty damage is so extensive that the costs of repairing the vessel will amount to at least 90 % of the insurable value or of the value of the ship after repairs if the...

  • Clause 17-12. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1

    Sub-clause 1 (a) is first and foremost relevant to insurance of vessels deserving of preservation.

    Sub-clause 1 (b) is not intended to cover more unforeseeable forms of striking against ice, e.g. where an ice floe has drifted out from a branch of a fjord to an open area of water where there is normally no ice.

    Sub-clause 1 (c) excludes caulking of hull and deck. This is typical maintenance work, and it will not be easy to decide to what extent the caulking has in reality been necessitated by the casualty. The exclusion does not cover expenses incurred in caulking those parts of hull and deck which have to be replaced as a result of the casualty. Here the caulking represents a normal cost of renewal of a part of the vessel, and it must therefore be covered.

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    Clause 17-12. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1

    In the event of damage to the hull of vessels which are not built of steel, the insurer is not liable for: distortion of the keel or damage resulting therefrom. The same applies to a depreciation in value caused by the fact that repairs are not carried out, damage resulting from striking against ...

  • Clause 17-13. Limited cover of damage to machinery

    The Commentary to Cl. 17-13 was amended in 2016.

    The Clause provides limited cover for damage to machinery. On the other hand, extended cover for damage to machinery may be effected in accordance with Cl. 17-18.

    The first part of the first sentence specifies that the insurer is “only” liable for the enumerated perils.

    The second part of the first sentence states the perils covered by the insurer. This part of the provision was amended in the 2013 Plan. The damage must be a result of collision, striking, an earthquake, an explosion outside the engine room, fire, or of the vessel having sunk or capsized. The term “engine room” replaces the term ”machinery” in the earlier versions of the Plan. It comprises only the main and auxiliary engine rooms. Further, it is new in the 2013 Plan that the insurer is liable where the vessel has been filled with water as a result of a breach of a hose or a pipe onboard the vessel. The breach may occur on the hose/pipe itself or at any couplings/sockets, provided the hose or pipe couplings/sockets are fitted either in accordance with Nordic Boat Standard or public statutory rules applicable to the vessel. Thus, consequential damage of a leakage which arises suddenly and unexpectedly and is a result of external influence or faulty material will be covered. Such damage is not covered if attributable to a breach of a hose or a pipe that has not been statutory fitted as described above. The insurer will cover that peril provided the breach was not caused by corrosion or age. A breach caused by corrosion or age is a maintenance issue or rather lack of maintenance. It is the duty of the assured to carry out maintenance. The insurer’s liability for “the vessel having sunk or capsized” also applies when the vessel is moored.

     The second sentence stipulates an exception to the rule in the first sentence as regards damage to electronic equipment. If such damage is caused by bad weather and the same casualty causes damage to hull or superstructure, the damage to the electronic equipment shall be covered.

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    Clause 17-13. Limited cover of damage to machinery

    The insurer is only liable for damage to: machinery with accessories, plant machinery used for preparing or processing catch, etc., seine winch, line hauler, trawl winch or other hauling device for fishing gear, fish pumps, etc., pipelines and electric cables outside the machinery, and electronic...

  • Clause 17-14. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12

    The provision excludes the time-loss element in the ordinary hull conditions from the cover under the coastal hull insurance conditions. 

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    Clause 17-14. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12

    The insurer is not liable for costs incurred in connection with: temporary repairs under Cl. 12-7, sub-clause 2, in excess of what he saves by a postponement of the final repairs, the fact that the assured pursuant to the rules in Cl. 12-8 expedites repairs by extraordinary measures in order to...

  • Clause 17-15. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18

    Sub-clause (a) refers to ice damage. This sub-clause was amended in the 2013 Plan. Previous versions of the Plan stated that damage resulting from striking against or contact with ice north of 75° north latitude and the waters of Greenland, including the Strait of Denmark, was covered subject to specified deductions. According to the 2013 Plan the deduction will be the subject of individual negotiations where inter alia the strength of the hull and ice class will be taken into account. According to the Plan, the deduction applies only to partial damage in accordance with the general system of the Plan.

    Sub-clause (b) refers to electronic equipment. The deduction will be the subject of individual negotiations where inter alia the age of the equipment can be taken into account. It is therefore unnecessary to make the size of the deduction dependent on the age of the equipment in the actual Plan text.

    The term “electronic equipment” covers three main groups, viz. radio equipment, fish-finding equipment and navigation equipment.

    Radio equipment includes main transmitters with short-wave and receiver, watch-receivers, AM-VHF telephone monitors, VHF transmitters and receivers, lifeboat transmitters, direction-finding beacons, emergency communication sets for aircraft frequency, receivers and TVs for mess rooms or cabins, walkie-talkie transmitters and receivers, equipment for communication between bridge, engine room, cabins, mess rooms, and deck, and weather map recorders.

    Fish-finding equipment includes sonars, display screens, echo sounders, echo enlargements connected to main sounders, trawl monitors, echo scopes, echo sounders for trawl probes and probe receivers.

    Navigation equipment includes gyrocompasses, autopilots, course controllers, all types of radar, electronic logs for satellite navigators and display screens, radio sounders for AM VXF and WT, satellite navigators, Omega receivers and Loran C receivers.

    In addition to deductions for electronic equipment, the Plan’s rules relating to machinery damage deductions and deductibles, cf. Cl. 12-16 and Cl. 12-18 shall apply. For the sake of clarity, this is repeated in sub-clauses (c) and (d). As regards the basis for calculating the various deductions, Cl. 12-19 applies so that all deductions shall be calculated on the basis of the full amount of compensation according to the Plan before deductions under any of the relevant provisions.

    Given that the normal cover has not allowed for new for old deductions, the age of the vessel and the machinery, possibly also the sum insured, shall be taken into account when determining deductions and deductibles. In the event that the agreed deductions do not compensate for the lack of new for old deductions, the insurer may have to agree on individual new for old deductions.

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    Clause 17-15. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18

    Ice damage deduction, cf. Cl. 12-15: Damage resulting from striking against or contact with ice is covered  subject to the deductions stated in the i nsurance contract . Electronic equipment damage deduction: Damage to electronic equipment is covered subject to the deductions stated in the...

  • Clause 17-16. Collision liability for fishing vessels/Ref. Clause 13-1

    This cover follows Cl. 13-1 as regards general liability for collision and striking. The purpose of this amendment is to ensure that cover includes collision and striking with aquaculture structures, which are not covered under P&I insurance. However, cover for collision has now been generalised. At the same time, however, this cover has been limited with regard to collision with vessels and with fishing, whaling or sealing tackle, cf. below.

    Under sub-clause (a), cover in the event of “collision with or striking against” another vessel is limited to damage caused to the vessel with fixed accessories. Thus the insurance does not cover floating accessories. “Fixed accessories” means equipment which is normally on board, but is not necessarily “nailed down”. Catch, fishing gear and dories which are not lifeboats are examples of objects which do not constitute “fixed accessories”. Loss of catch and other loss of time are also outside the scope of cover. The provision refers to the “knock-for-knock” principle which is mentioned in the Commentary on Cl. 17-9. When several vessels participate in the same fishing team, collisions between the individual vessels and fishing gear, catch and dories which are in the sea are foreseeable. It serves little purpose to use resources on a detailed distribution of liability in such cases. It is therefore assumed that each fishing vessel owner covers damage to his own equipment. A natural extension of such a “knock-for-knock” principle is to exclude such damage from the liability insurance of the person who has caused the damage.

    Under sub-clause (b), the insurer does not cover any liability for collision with or striking against fishing, whaling or sealing tackle in the sea. This limitation is explained by the fact that this liability is covered under P&I conditions. Sub-clause (c) is identical to sub-clause 2 in earlier versions. The provision is a continuation of the “knock-for-knock” principle mentioned above. When several vessels participate in the same fishing team or operate as pair trawlers, it is expedient to further limit the cover, thereby also excluding damage to or loss of the vessel with fixed accessories from the collision liability.

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    Clause 17-16. Collision liability for fishing vessels/Ref. Clause 13-1

    In addition to the limitations in Cl. 13-1, sub-clause 2, the following shall apply: In the event of a collision with or striking against another vessel, the insurer's liability under Cl. 13-1 is limited to damage caused to the vessel with fixed accessories. The insurer does not cover any liabili...

  • Clause 17-17. Collision liability/Ref. Clause 13-1

    The heading and the Clause was amended in 2016 to make it applicable for all types of vessels insured under Chapter 17.  The amended wording is partly mere editorial. Also, by adding the new sentence “By a call is meant arrival, anchoring, working, discharging, loading and leaving”, it is made clear that the insurance does not cover any collision liability to the relevant structure or any fish contained therein during the whole period when the insured vessel is calling at the structure. The previous wording was by some owners read to the effect that the exclusion of cover for collision liability only applied if damage occurred during loading or discharge.

    The provision emphasises that the exclusion also comprises damage to the actual device and shall apply irrespective of what is loaded or discharged. The provision is first and foremost aimed at floating devices which are easily damaged, such as where the vessel runs into an enclosure for fish and the fish escape. In such cases it is difficult or impossible to determine the extent of damage. The application of the provision is not subject to the condition that there is loss of or damage to live fish; the deciding factor is the nature of the device. If there are several independent devices in the same area, however, liability to another device than the one from which loading or discharging shall take place will be covered.

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    Clause 17-17. Collision liability/Ref. Clause 13-1

    In addition to the limitations in Cl. 13-1, sub-clause 2, the following shall apply: The insurer does not cover liability under Cl. 13-1 for damage to or loss of fish or structures for keeping live fish, where the loss or damage occurs in connection with a call at the relevant structure. By a cal...