Commentary

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Section 4: Loss of hire insurance

  • Clause 18-43. Main rules regarding the liability of the insurer

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-1. Reference is made to the Commentary to Cl. 16-1.

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    Clause 18-43. Main rules regarding the liability of the insurer

    The insurance covers loss due to the MOU being wholly or partially deprived of income as a consequence of damage to the MOU which is recoverable under the conditions of the Plan, or which would have been recoverable if no deductible had been agreed, see Cl. 18-33. If the H&M insurance has been...

  • Clause 18-44. Total loss

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-2. Reference is made to the Commentary to Cl. 16-2.

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    Clause 18-44. Total loss

    The insurer shall not be liable for loss of time resulting from a casualty which gives the assured the right to compensation for total loss under Chapter 18 of the Plan or under the corresponding conditions in the H&M insurance that applies to the MOU pursuant to Cl. 18-43, sub-clause 1, second...

  • Clause 18-45. Main rule for calculating compensation

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-3. Reference is made to the Commentary to Cl. 16-3.

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    Clause 18-45. Main rule for calculating compensation

    Compensation shall be determined on the basis of the time during which the MOU has been deprived of income (loss of time) and the loss of income per day (the daily amount). Loss of time that occurred prior to the events described in Cl. 18-43 shall not be recoverable.

  • Clause 18-46. Calculation of the loss of time

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-4. Reference is made to the Commentary to Cl. 16-4.

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    Clause 18-46. Calculation of the loss of time

    Loss of time shall be stipulated in days, hours and minutes. A period of time during which the MOU has only partially been deprived of income shall be converted into a corresponding period of total loss of income. The insurer’s liability for loss of time resulting from any one casualty, and for t...

  • Clause 18-47. The daily amount

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-5 apart from the words “area of operation” which are added to sub-clause 2. Reference is made to the Commentary to Cl. 16-5.

    This Clause lays down rules for calculating the daily amount under open insurance contracts, i.e. insurance contracts that do not specify any agreed value for the daily amount. As mentioned in the Commentary on Cl. 18-45, cf. Cl. 16-3, the “daily amount” is the insurable value of the assured’s loss of income per day. In practice, the daily amount is usually agreed. The provision in Cl. 18-47 is therefore primarily applicable in cases where the agreement “is opened” in accordance with Cl. 18-56, sub-clause 2.

    Sub-clause 1 states that the daily amount shall be fixed at the equivalent of the calculated gross hire per day less the costs saved per day due to the MOU’s not being in regular operation. The hire per day poses no difficulty when the MOU is under a time charter. In the case of a lump sum contract of the MOU, the agreed hire must be divided by the number of days that would normally be required for the contract works and any necessary mobilisation or subsequent mobilisation periods. In both cases, the hire according to the contract of offshore work/operation in force when the loss of time occurs is decisive.

    Sub-clause 2 prescribes the daily amount in cases where the MOU is not employed under a contract when the period of interrupted operations begins. This rule provides for an objective calculation of loss for practical legal purposes: It can be very difficult to decide how the MOU would have been employed if it had not been out of operation.

    To avoid the difficulties of deciding which course of action the assured would have chosen, the daily amount in such cases is fixed at “the average hire for MOUs of the type and size and area of operation concerned” for the period during which the MOU is deprived of income. The term “average rates of hire” means a “weighted average”; account must be taken of how long each rate has been in effect. In practice, this can be achieved by dividing the period of interrupted operation into shorter periods during which rates of hire were relatively constant and calculating the compensation for each individual period. If rates for long-term charters and spot charters differ, compensation must be based on an average in these cases, too.

    The reference to “area of operation concerned” means that only the charter rates in the area where the MOU is or otherwise would have taken up work during the time when the interruption for repairs took place, e.g. Norwegian sector of the North Sea or U.S. Gulf of Mexico. If charter rates in a “new” area are to be considered account needs to be taken to the MOU’s state of readiness to take up work in another area within which regulations would require the MOU to undergo significant works or even modifications to be allowed to enter and operate in the “new” area. If such preparation works will require such works that will constitute “simultaneous works” as per Cl. 18-54, the charter rate in the area that the MOU is leaving shall be used for the period of time that will be equivalent to the preparation works, and the period beyond such preparation works the charter rate within the “new” area when calculating the “weighted average”.  The reference to the MOU being “unchartered” does not cover the situation where a contract of work lapses due to a casualty covered by the insurance. This situation must be evaluated in accordance with sub-clause 1.

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    Clause 18-47. The daily amount

    The assured’s loss of income per day (the daily amount) shall be fixed at the equivalent of the amount of hire per day under the current contract of employment, less such expenses as the assured saves or ought to have saved due to the MOU being out of regular employment. If the MOU is unchartered...

  • Clause 18-48. Agreed daily amount

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-6. Reference is made to the Commentary to Cl. 16-6.

    This Clause regulates the agreed daily amount. As mentioned under Cl. 18-47, the daily amount is usually agreed; the reason for doing so is to avoid difficulties in calculating the daily amount under an open loss-of-hire insurance. Under Cl. 2-2, an agreement of the daily amount means that the insurable value is fixed “by agreement between the parties … at a certain amount”. If it is clearly stated in the text of the insurance contract that the daily amount is agreed, the matter is straight forward.

    In practice, however, insurance contracts often merely state the amount the insurer is to pay for each day of time lost. This may be an agreed daily amount, but it is also conceivable that only the sum insured per day is stated. In this connection, Cl. 18-48 lays down an important rule of presumption: if the insurance contract states “that the loss of income shall be compensated for by a fixed amount per day, this amount shall be regarded as an agreed daily amount unless the circumstances clearly indicate otherwise”. In such case, the amount will also be the sum insured per day; in other words, the agreed value is fully insured.

    Both the assured and the insurer may invoke the agreement. For the insurer, this is primarily relevant in the case of under-insurance, i.e. when the agreed daily amount is lower than the real loss of income per day. In such case, the agreement will limit the assured’s claim for compensation. However, the agreement may also be relevant when the rules of Cl. 18-53 are applied. Under Cl. 18-53 the agreed daily amount will be decisive when calculating the savings the insurer makes as a result of the extraordinary measures taken to expedite repairs. As far as recourse against a third party is concerned, it must be proven to the insurer that the agreed daily amount represents the full loss, and that it therefore is not appropriate to apply the rule of apportionment laid down in Cl. 5-13, sub-clause 2.

    If the amount is so much lower than the real loss per day that there can be no question of any rounding-off or rough calculation of the loss, the insurance contract should be treated as an open insurance contract. The provision has been worded with this in mind. If, for instance, the gross hire per day is USD 50,000, and the assured has effected a loss of hire insurance for USD 20,000 per day, one can safely say that “the circumstances clearly indicate” that the amount is a sum insured per day, not an agreed daily amount: thus there is an open insurance contract with under-insurance.

    Naturally, there is nothing to preclude combining under-insurance with agreement. In our example, for instance, it may be agreed that the insurance contract is to cover USD 20,000 of an agreed daily amount of USD 30,000. In terms of settlement, it would be an advantage if the apportionment ratio pursuant to Cl. 5-13, sub-clause 2, first sentence, is fixed at the ratio between the insured daily amount and the agreed daily amount. It would therefore be expedient to have separate spaces on the first page of the insurance contract for “sum insured per day” and “agreed daily amount”.

    In the offshore sector there may be instances when the insured daily amount is fixed at a certain amount and the MOU only earns a part of that amount when the operation is interrupted. Certain MOUs may have contracts where the charter hire payable is tied to defined levels of output from the operation, e.g. feet of well drilled per day or quantum of production throughput. Particularly in contracts for FPSOs there may be scaled rates of hire payable dependent on the volumes of throughput, particularly in the early phase of production when the volume gradually increases as new wells are tied in for production. In such circumstances there will be over-insurance and the insurance contract will operate as an open insurance contract.

    The system of agreed insurable values is well established in hull insurance. MOU values change constantly, and it can often be difficult to establish what an MOU is really worth at a particular point in time - there is clearly a need to fix the value in advance. In loss of hire insurance, the situation appears to be slightly different; in this case the exact amount of hire of which the assured is deprived will often be known, and an agreement that exceeds the hire amount is likely to be perceived as excessive compensation for the assured’s actual loss. Nevertheless, the system of agreed insurable values has been maintained without exception. If it is evident that a loss of time has occurred, cf. Cl. 18-45, and the daily amount has been agreed, the assured must be paid the amount agreed for the number of (full) days during which the MOU is out of operation. The only exception from this rule is where the assured has given misleading information about matters that are relevant for the agreement, cf. Cl. 2-3, sub-clause 1. The insurer must therefore ensure that the assured provides enough information concerning the MOU’s potential earnings to give the insurer a basis for evaluating whether the agreement is correct when the insurance contract is effected. This also applies to the question of the duration of the charter party or contract of works; so that account can be taken when fixing the agreed daily amount of the possibility of the contract of work lapsing.

    It follows from Cl. 18-56, sub-clause 2, that the agreed daily amount shall not apply to time lost during repairs that are carried out after the insurance period expires, if the actual loss of income per day calculated pursuant to Cl. 18-47 is less during this period. This provision is sometimes set aside in individual insurance contracts. As a rule, this is only done by adding the words “fixed and agreed” or, if relevant, “chartered or unchartered”. If the parties to the insurance contract have a common understanding that the purpose of this addition is to nullify Cl. 18-56, sub-clause 2, it is of course binding on both parties. However, not all insurers take this view of the provision, in which case it is highly uncertain whether such an addition is sufficient to set aside Cl. 18-56, sub-clause 2. If this is the intention, the setting aside should be formulated more clearly.

    If the insured MOU is chartered under a contract for consecutive works, the agreement must be based on the average gross hire per day that the MOU would have earned if all the works had been completed in the normal way. It may then be relevant to deduct from the gross hire an amount for costs that will be saved if the MOU must dock for repairs. There are numerous uncertain factors in this calculation. The uncertainty is even greater for MOUs operating under spot charters. In general, it can be said that the greater the degree of uncertainty in the calculations, the more important it is that the daily amount be agreed in advance.

    It is conceivable that, after the expiry of the contracts of work on which the agreement was based, the MOU is chartered on even more advantageous conditions. In such case, the agreement still has significance, since it always constitutes the maximum limit for the insurer’s liability.

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    Clause 18-48. Agreed daily amount

    If it is stated in the insurance contract that loss of time shall be compensated for by a fixed amount per day, this amount shall be regarded as an agreed daily amount unless the circumstances clearly indicate otherwise.

  • Clause 18-49. Deductible period

    This Clause was new in the 2013 Plan and corresponds to Cl. 16-7. Reference is made to the Commentary to Cl. 16-7.  Sub-clause 1 is verbatim the same as Cl. 16-7, sub-clause 1. In sub-clause 2 the words “or location” is added as MOUs seldom enters ports but rather more often moves between locations. Sub-clause 3 is included to suit the normal modus of operation of MOUs, which is to operate stationary on a field. Damage caused by heavy weather occurring as a result of the same atmospheric disturbance whilst the MOU is stationary at one location shall be regarded as one single casualty and only one deducible period shall be drawn for the resulting loss of hire, cf. sub-clause 2 of Cl. 18-33.

    Sub-clause 3 of Cl. 16-7 is not included in Cl. 18-49 as separate deducible period for machinery damage is not common in loss of hire insurance for MOUs. Cl. 12-16 on machinery deduction is not included in Section 2 either, cf. Commentary to Cl. 18-32. 

    Sub-clause 1, first sentence provides that a deductible period, stated in the insurance contract, shall be established for each casualty. The provision provides a number of rules for calculating the deductible period. The number of days must therefore be fixed in the insurance contract. This is linked to the fact that the number of deductible days is a key factor when fixing the premium and therefore an important element of the negotiations between the assured and the insurer. Thus the deductible period is agreed in each individual case.

    The term “casualty” here means an event that gives rise to the right to claim under loss of hire insurance in accordance with Cl. 18-43, i.e. also events which are mentioned in Cl. 18-43, sub-clause 2, but which do not result in damage to the MOU.

    A separate deductible period is applied for each casualty; this is in accordance with the other deductible provisions in the Plan, cf. Cl. 18-33 and Cl. 18-38. However, if one and the same casualty leads to a number of separate delays, e.g. delay at the place where the casualty occurred, delay in connection with temporary repairs and delay during permanent repairs, then only one deductible period shall be applied for the aggregate of all the delays. As far as the wording “each casualty” is concerned, reference is made to the Commentary on Cl. 18-33, cf. Cl. 12-18 and Cl. 4-18. In loss of hire insurance, the question of whether there has been one or more casualties will probably seldom be acute, because the deductible periods for several more or less contemporaneous casualties will coincide unless parts of the deductible periods have been consumed prior to the joint repair period commences. For example, one of the casualties may have involved salvage operation and temporary repairs which may have consumed part of the deductible period applicable to that casualty.

    According to sub-clause 1, second sentence, the deductible period runs “from the commencement of the loss of time”. If, for instance, the MOU should touch a protrusion on the sea bed but continue its voyage immediately at normal speed, there is no loss of time nor does any deductible period run. However, if inspection reveals that bottom damage occurred and that they necessitate a lengthy stay in a repair yard, on the other hand, a loss of time occurs. In this case, the deductible period begins to run in parallel with the loss of time. 

    The rule that the deductible period begins to run at the commencement of the loss of time also means that the deductible period is to be placed at the beginning of the period of lost time. This also applies where the loss of time runs during several separate periods. The deductible period is therefore not to be apportioned pro rata between the various periods. On this point, the rule in loss of hire insurance differs from the rule applied in H&M insurance where the deductible is apportioned pro rata between the expenses to be covered by the insurer.

    The placement in time of the deductible period can have the following consequences for the settlement:

    Firstly, it is significant in relation to the rule of apportionment in Cl. 18-54 regarding simultaneous repairs. It will be a distinct advantage for the assured to have owner’s work (i.e. works that are not covered by insurance) carried out during the deductible period; the assured does not receive any loss of hire compensation for this period in any event. On the other hand, if owner’s work is carried out during a period of time that is covered by the loss of hire insurer, the result is that the assured may only claim 50 % of the compensation that he would have received if only repairs covered by the insurance had been carried out, see Cl. 18-54, sub-clause 1.

    Secondly, the placement in time of the deductible period may become significant where the daily amount pursuant to Cl. 18-47, sub-clause 2, or Cl. 18-56, sub-clause 2, is lower for the last repair period than for the first. In this case, the assured may not demand that the deductible period be placed during the last period so as to enable him to receive compensation for correspondingly more days at the highest daily amount.

    Thirdly, the placement in time of the deductible period may become significant when apportioning costs of measures to avert or minimise loss and extra costs incurred to save time, cf. Cl. 4-12, sub-clause 2, and Cl. 18-53, sub-clause 3. Insofar as such costs are incurred in saving time during the deductible period, they must be covered by the assured, cf. further information in the Commentary on Cl. 18-53, sub-clause 3.

    Finally, the placement in time of the deductible period may become significant when apportioning claims for reimbursement pursuant to Cl. 5-13 and Cl. 18-58.

    The second sentence also states that the deductible period is to be calculated in accordance with the rule in Cl. 18-46, sub-clause 1, second sentence. This corresponds with the 1996 Plan. If the MOU is only partly deprived of income, the deductible period lasts until the loss of time, converted into a period of total loss of income, has reached the agreed number of days. This means that if an equipment or plant casualty causes an MOU to operate at half capacity for 100 days and the deductible period has been fixed at 45 days, the deductible period lasts for 90 days, reckoned from the time of the casualty. The same applies where the loss of time resulting from a casualty is spread over several periods, separated by periods in which the MOU is in full operation. In such cases, only the days with (full) loss of time are counted. The deductible period does not expire until the fixed number of days is reached. This, however, only applies when the MOU is capable to continue its normal operations at reduced capacity following a casualty. If the owners negotiate that the MOU is utilized for other operation during the deductible period, such work shall not be taken into consideration in this context.

    Sub-clause 1, third sentence, states that loss of time during the deductible period is not covered by the insurer. This is in accordance with the 1996 Plan.

    Sub-clause 2 states that damage which is due to heavy weather or the MOU’s sailing through ice, and which occurred during the period of time between the MOU’s departure from one port or location and its arrival at the next, is to be regarded as one casualty. The provision is identical to Cl. 12-18, sub-clause 2.

    The reason for the rule is the technical difficulties that might easily arise in connection with settlement if an attempt was made to categorise heavy weather damage, damage caused by ice, etc. sustained during one and the same voyage as separate casualties. However, the rule is of far less importance in loss of hire insurance than in hull insurance. As mentioned in the Commentary on sub-clause 1, instances of damage that occur during one and the same voyage will normally all be repaired at the same time. Even if the various instances of damage are ascribed to several different casualties, both the deductible period and the delay will coincide for them all; for settlement purposes, therefore, the result is the same as if all the damage had been regarded as one casualty.

    Sub-clause 3 was new in the 2013 Plan and corresponds with Cl. 18-33, sub-clause 2, and provides that all loss or damage resulting from the same atmospheric disturbance whilst the MOU is stationary at one location shall be regarded as one casualty subject to one deductible. What “atmospheric disturbance” means is explained in the commentaries to Cl. 18-33.  

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    Clause 18-49. Deductible period

    Each casualty shall be subject to a deductible period which shall run from the commencement of the loss of time and last until the loss of time, calculated in accordance with the rule in Cl. 18-46, sub-clause 1, second sentence, is equivalent to the deductible period stated in the insurance...

  • Clause 18-50. Survey of damage

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-8. Reference is made to the Commentary to Cl. 16-8.

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    Clause 18-50. Survey of damage

    The provision of Cl. 18-27 shall apply correspondingly to this insurance.

  • Clause 18-51. Choice of repairer

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-9. Reference is made to the Commentary to Cl. 16-9.

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    Clause 18-51. Choice of repairer

    The insurer may require that tenders for repairs be obtained from repairers of his choice. If the assured does not obtain such tenders, the insurer may do so. If, due to special circumstances, the assured has reasonable grounds to object to the repairs being carried out by one of the repairers th...

  • Clause 18-52. Move to the repair location, etc.

    This Clause was new in the 2013 Plan and is nearly verbatim the same as Cl. 16-10, but the words “class of works” has been replaced by “category of work”. Reference is made to the Commentary to Cl. 16-10.

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    Clause 18-52. Move to the repair location, etc.

    Loss of time during move to the repair location shall be attributed to the category of work that necessitated the move. If move to the repair location was necessary for more than one category of work, the time of the move shall be apportioned in accordance with the time that each category of work...

  • Clause 18-53. Extra costs incurred in order to save time

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-11. Reference is made to the Commentary to Cl. 16-11.

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    Clause 18-53. Extra costs incurred in order to save time

    The insurer shall be liable for extra costs incurred in connection with temporary repairs and in connection with extraordinary measures taken in order to avert or minimise loss of time covered by the insurance, insofar as such extra costs are not recoverable from the hull insurer. If the H&M...

  • Clause 18-54. Simultaneous works

    This Clause was new in the 2013 Plan and corresponds to Cl. 16-12. In addition to some editorial amendments substantive amendments were done in 2013 Plan compared to Cl. 16-12 by adding two new sentences to sub-clause 1. The Commentary to Cl. 16-12 is relevant also to Cl. 18-54 and is therefore referred to, but below the reason for and the effect of the substantive amendments is put into the right context and explained.

    The provision regulates the liability of the loss-of-hire insurer in cases where repairs that are covered by the insurance and work that is not covered by it are carried out at the same time. The latter may be relevant to a loss-of-hire insurance for an earlier or later year, or it may be work that is not covered by any insurance, e.g. work relating to classification or modifications.

    When repairs relating to one or more casualties (under one or more loss-of-hire insurance contracts) are carried out at the same time as work for the assured’s account (e.g. work in connection with periodic classification surveys), the loss of time during the stay at the repair yard will in actual fact be due to several concurrent causes of damage. In the absence of other provisions, the loss in such cases must be apportioned between the assured and the various insurers in accordance with the rule of apportionment in Cl. 2-13. However, this type of solution is unsatisfactory from a technical legal standpoint because it will entail numerous decisions that are made largely on a discretionary basis. In order to avoid these problems, therefore, more clear-cut rules of apportionment have traditionally been applied in the loss-of-hire conditions. The rules of apportionment in Cl. 18-54 are based as a starting point on such principles as applies to Cl. 16-12, with the result that the causation rules in Cl. 2-13 are set aside in two respects:

    Firstly, by applying relatively simple criteria, Cl. 18-54 (and Cl. 16-12) prescribes when simultaneous repairs are to be regarded as concurrent causes of the loss of time, and when one of the repairs is to be regarded as the only cause. In this way, difficult and, to some extent, subtle questions of causation are avoided. Secondly, Cl. 18-54 (and Cl. 16-12) fixes the exact proportions to be used when apportioning the time lost among the various repairs; it is therefore unnecessary to use the discretionary rule of apportionment in Cl. 2-13.

    These two departures from the main rule considerably simplify the issue. The fact that the provisions may occasionally give one of the parties an unwarranted advantage is of little significance compared to the substantial advantages achieved for the settlement process.

    Pursuant to sub-clause 1 (a) to (c), an apportionment is to be made between the assured and the insurer when specified owner’s work is carried out at the same time as casualty work. Owner’s maintenance work which is not falling within the categories of work defined in letters (a) to (c) shall never be subject to any apportionment pursuant to Cl. 18-54.

    In accordance with sub-clause 1, first sentence, the apportionment is to be made on the basis of an equal shares principle: the insurer shall pay compensation for half of the common repair time in excess of the deductible period. The said principle presupposes that the common work time is utilized equally effectively by both parties, and that it is therefore equitable to share the loss of time during this period equally; furthermore, this type of 50/50 rule is very easy to apply in practice.

    This reasoning is generally relevant also to MOUs, but compared to vessels carrying goods and/or passengers, MOUs will to a much larger extent carry out not only ordinary maintenance work, but also letters (a) to (c) work while they are offshore and still earn hire wholly or in part.

    Hence, a new second sentence was added to sub-clause 1 providing that works under letters a) to c) which would not have deprived the MOU from income if it had been carried out separately shall not be taken into account for apportionment pursuant to the first sentence of sub-clause 1. This means that the assured may carry out e.g. classification work simultaneously with casualty work without any apportionment of the common time if the classification work could have been carried out separately without loss of income. It will be a question of fact whether the classification work was of such nature that it could have been carried out without loss of income. If not, the 50/50 apportionment shall be applied on the common time. If the owner’s work delays the casualty work, sub-clause 4 of Cl. 18-54 applies also on how the delay shall be apportioned between the casualty- and owner’s work.

    It was considered whether the principle adopted in the new second sentence of sub-clause 1 should be applied in the insurers favour in those cases where the casualty work is deferred to a period when the MOU is out of service due to owner’s work. It was, however, agreed that it is in both the insurers as well as the assured’s long term interests to encourage the owner to defer the casualty work to a convenient time rather than risk to impose on the insurer an unnecessary loss by repairing casualty work at once. The obligation to mitigate loss according to Cl. 3-30 cf. Cl. 3-31 would of course limit the owner’s possibilities to impose an unnecessary loss on the insurer. But all the same it was felt prudent to supplement the potential contentious Cl. 3-30 with an economic incentive for the owner to defer casualty work whenever prudent to a convenient time and still get compensated half the common time according to the first sentence of sub-clause 1.

    However, the new third sentence of sub-clause 1 provides that if casualty damage are discovered or occurs during a period when the MOU would have been deprived of income if works under letters a) to c) had been carried out separately, time for repairs carried out simultaneously with scheduled works under letters a) to c) shall not be compensated. The third sentence of sub-clause 1 only applies if casualty work is repaired simultaneously with the same scheduled works under letter a) to c) during which the casualty work was discovered or occurred. If the casualty work so discovered or occurred are deferred to a subsequent period when other scheduled works under letters a) – c) are carried out, then what is written above on deferred casualty work shall apply, cf. also in this regard Cl. 3-30.

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    Clause 18-54. Simultaneous works

    If repairs covered under this insurance are carried out simultaneous with work which is not covered under any loss of hire insurance, but which: is carried out to fulfil classification requirements, or is necessary to enable the MOU to meet technical and operational  safety requirements or perfor...

  • Clause 18-55. Loss of time after completion of repairs

    This Clause was new in the 2013 Plan and is corresponding to Cl. 16-13, but letters (b) and (d) are not deemed relevant to MOUs and are therefore not included in Cl. 18-55. Reference is made to the Commentary to Cl. 16-13, letter (a) of Cl. 18-55 is for the purpose of cover unamended even though the language is adapted to suit the modus of operation of MOUs. Letter (b) is amended as compared to Cl. 16-13 letter (c).

    This provision limits the insurer’s liability for loss of time that occurs after repairs have been completed. According to the main rule for calculating loss of time set out in Cl. 18-46, the insurer would have been fully liable for time lost after completion of repairs to the extent that this loss of time was a result of the casualty.

    The insurer therefore had to pay compensation for loss of time until the MOU was again gainfully employed, as well as any loss of time resulting from the termination of the contract of work. Thus Cl. 18-55 involves a limitation on the liability that follows from Cl. 18-46 in respect of time lost after completion of repairs. In accordance with sub-clause 1, first sentence, the insurer is only liable for such loss of time in the cases that are specifically mentioned in letters (a) and (b); in all other cases the liability of the loss-of-hire insurer ceases when the repairs have been completed.

    Letter (a) deals with the situation where the MOU, after completion of repairs, is to continue to operate under the contract of works that was in effect at the time of the casualty; in such case, the insurer is liable for time lost until the MOU has resumed its former employment. The provision applies irrespective of the type of contract of works concerned. Contractual obligations that are not set out in an actual contract of works must be regarded as equivalent to such a contract in this connection. If, on the other hand, the contract of works is cancelled due to the MOU’s stay at a repair location, the insurer is only liable for the time lost up to the completion of repairs unless cover is provided under letter (b).

    Letter (b) regulates loss of time for MOUs that do not return to the location at which the casualty occurred but moves to another location, either to commence new operations that it was scheduled to move to after the completion of the operations it was engaged in at the time of the casualty irrespective of whether the MOU actually completed those operations, or to take up work under a new contract of works that was concluded prior to “the commencement of the move to the repair location”. These words are new as compared to Cl. 16-13 letter (c) which only compensates loss of time after completion of repairs if the contract was entered into prior to the occurrence of the casualty. A contract may be legally binding and therefore concluded even if the contract is not formalized in a written agreement duly executed and signed by the parties. A mere letter of intent, however, will not satisfy the requirement of a binding contract pursuant to letter (b).

    The next location may be in a different direction from the repair location than the location at which the casualty occurred, but the insurer’s liability will be limited to the time to move in the new direction for a distance equal to the distance return to the casualty location would have represented.

    Loss of time after completion of repairs covers both the situation where the MOU remains in the repair yard for a while after repairs have been completed and while the MOU moves to a location to resume its normal activity. However, loss of time due to the fact that the MOU is unable to find employment immediately after repairs have been completed is not covered. Such loss of time may in certain cases be said to be a consequence of the repairs and hence also a consequence of the damage that was repaired. However, the dominant cause of the loss of time will be the market conditions, or possibly decisions made by the assured, and it is therefore natural that the loss should not be covered.

    The reference in sub-clause 2 to Cl. 18-52 is made in respect of its sub-clause 2, second sentence, which establishes that removal time occurring during the deductible period is not to be apportioned, cf. the Commentary on Cl. 18-52.

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    Clause 18-55. Loss of time after completion of repairs

    After repairs have been completed, the insurer shall only be liable for loss of time:  until the MOU can resume the activity that it was engaged in under  the contract of employment that was in force at the time of the  casualty, or  while the MOU moves back to an equidistant position to where it...

  • Clause 18-56. Repairs carried out after expiry of the insurance period

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-14. Reference is made to the Commentary to Cl. 16-14.

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    Clause 18-56. Repairs carried out after expiry of the insurance period

    The insurer shall not be liable for loss of time resulting from a stay at a repair location that commences more than two years after expiry of the insurance period. Loss of time resulting from a stay at a repair location which commences after expiry of the insurance period shall be recoverable in...

  • Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-15. Reference is made to the Commentary to Cl. 16-15.

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    Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner

    When damage to the MOU is repaired in connection with a transfer of ownership, the insurer shall not be liable for time that would in any event have been lost in connection with the said transfer. If the transfer has to be postponed due to repairs covered by this insurance, the insurer shall be...

  • Clause 18-58. Relationship to other insurances and general average

    This Clause was new in the 2013 Plan and is verbatim the same as Cl. 16-16. Reference is made to the Commentary to Cl. 16-16.

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    Clause 18-58. Relationship to other insurances and general average

    The rules as to subrogation in Cl. 5-13 of the Plan shall apply correspondingly to: the assured’s right to claim compensation for loss of time and  operating costs during removal to a repair location under Cl. 18-28  or Cl. 18-30 of the Plan, or equivalent provisions in other conditions  applicab...