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.