This Clause corresponds to Cl. 18-2 of the 1996 Plan but was edited in the 2013 Plan.
This provision is divided into two and patterned on Cl. 10-1 and Cl. 10-2. Cl. 18-2 regulates the objects of the insurance, while the cover of objects removed from the MOU is contained in Cl. 18-3.
Sub-clause 1 (a) provides that the insurance first and foremost covers the MOU stated in the insurance contract. The types of MOUs which are normally covered under this Chapter are described in further detail in the commentaries to Cl. 18-1.
Damage to or loss of the MOU will first and foremost affect the owner, and he is the primary assured. Any mortgagees are automatically co-assured under the rules in Chapter 7. However, a number of other persons will be co-assured under the insurance contract, see Cl. 18-1, sub-clause (i)(1), and Chapter 8 of the Plan. The owner will also normally be the person effecting the insurance. However, insurance under Chapter 18 can also be effected by others, e.g. a bare-boat charterer or manager. In those cases the owner will normally be co-assured.
As a rule, a separate insurance will be effected for each individual MOU, but several MOUs may also be insured collectively. If the same insurance contract is to cover several MOUs, an (agreed) insurable value will be stated for each MOU. A natural interpretation of such agreement is that each MOU shall be regarded as being insured separately. A corresponding interpretation is natural where separate insurable values are agreed for equipment, machinery, etc.
The fact that individual MOUs s (possibly parts of an MOU) are insured separately will in the first place be of significance in the event of a total loss. It will be sufficient that the conditions for compensation for total loss (e.g. the condemnation conditions) are met for the individual insured object. The same applies to Cl. 6-3 on premium in the event of total loss. Furthermore, a deductible according to Cl. 18-34 shall be calculated separately for each insured object.
According to sub-clause 1 (b), which has been amended from earlier versions of the 1996 Plan, the insurance also covers machinery, equipment, plant and spare parts for structure, machinery and equipment. The term “spare parts” concords with the conception in practice that equipment included spare parts.
Point (1) of sub-clause 1 (b) has been rewritten in the 2013 Plan in accordance with Cl. 10-1 and modified for MOUs. The provision establishes that only machinery, equipment, plant and spare parts which belong to the assured, or which have been borrowed, leased or purchased with a sales lien or similar encumbrance, are covered. The provision reflects the fact that equipment used in the petroleum industry often has different owners; it may belong to the owner of the MOU, the licensee for whom the MOU is carrying out contract work/operation, a charterer of the MOU or an independent contractor. Often certain parts of the equipment will belong to one party, while other parts of the equipment will belong to others.
The term “assured” automatically includes anyone who is co-assured under the insurance. In other words, all equipment on board which is either owned by or in the care, custody or control of the co-insured persons in their capacity of borrower, lessee or purchaser under a vendor’s lien, is covered by the insurance.
If the person operating the MOU leases the equipment and operates the equipment himself, the owner of the equipment will normally be co-assured. By contrast, a firm or a person who or which is subcontracted by the contractor and operates his or its own equipment, e.g. a divers’ firm with its own diving equipment, will normally not have the status of co-assured. If, as an exception, such a firm should have such status, the equipment will be covered under Cl. 18-2 (b). On the other hand, equipment which belongs to the crew or other personnel of contractors, license operator or third parties on-board the MOU will always fall outside the scope of cover.
Point (2) in sub-clause 1 (b) provide cover in general for all machinery and equipment etc. listed under (b) regardless of whether it is on board, above water or subsea or in the well.
Given that all equipment is covered, it goes without saying that this includes drilling equipment, even if this is not explicitly mentioned. The drill string and safety equipment against blow-outs located in the water are therefore also covered. However, the cover of the drill string is subject to important limitations, see Cl. 18-22.
The provision will not cover subsea equipment which are either left on the seabed when the MOU leaves the place of operation, or which are launched in advance of the MOU’s arrival on location unless such equipment is scheduled separately as per Cl. 18-1 (a), paragraphs 2 and 3. Anchors, anchor chains, etc. which are cast in advance are, however, covered under Cl. 18-3, sub-clause 1 (b), and for blow-out preventers an extended cover is given in Cl. 18-3 (c).
Sub-clause (c) is new, but concords with Cl. 10-1, sub-clause 1 (c), according to which the hull insurance covers bunkers and lubricating oil on board.
Sub-clause 2 contains certain limitations of the cover of accessories. Sub-clause 2 (a), in accordance with the principle in Cl. 10-1, sub-clause 2, excludes certain articles of consumption from the scope of cover. The assumption is that such articles will be covered under a special equipment insurance. Sub-clause 2 (b) excludes helicopters from the cover. Helicopters may be covered by the term “equipment … on board” in sub-clause 1 (b), and in the absence of a specific exclusion, they could therefore come within the scope of cover, provided they were owned, etc. by one of the assured. However, the natural solution is for helicopters with equipment and spare parts to be covered under a separate aircraft hull insurance. The exclusion is general and also cover helicopters which land on the MOU due, for instance, to engine problems.
Sub-clause (c) excludes “blueprints, plans, specifications, logs, etc.” including “copies” cf. the term “etc”. The exclusion covers various documents and records which may be of considerable value (in particular the logs kept of drilling operations may contain very valuable information about the geological structure of the seabed and accordingly concerning the probability of finding petroleum in the area. The reason why the documents are nevertheless excluded from cover is partly difficulties in agreeing on their value in terms of money, partly the possibility which the interested parties have of continuously transmitting important data to shore. Much of the logs and data which used to be paper documents are now kept as digitally stored data. The exclusion is equally applicable to such digitally stored data/information; however, the hardware on which such data/information is stored on, including the software, is nevertheless covered but only for the cost of replacement. Costs or recovering digital data/information will thus not be recoverable under the insurance.
Sub-clause 2 (d) excludes mini-submarines and remotely controlled underwater equipment (Remote Operated Vehicles) whilst in operation. This type of equipment is basically covered by sub-clause 1 (b) (2), cf. “under water”. However, the most expedient solution is for such equipment to be covered under a separate insurance, because practice as regards the use of the equipment varies. Submarines, etc. are therefore only covered under the MOU’s insurance up until the time where they may be said to be “in operation”. Normally, the object is deemed to be “in operation” when rigging, lifting, etc. starts. There is in other words no requirement that the object shall be removed from the MOU in order for it to be deemed to be “in operation”.