The Clause corresponds to Cl. 19-2, but as opposed to Cl. 19-2 is focusing also on attachment of the insurance. Sub-clause 1, first sentence, presupposes that the attachment date of the insurance is expressly set out in the insurance contract. If not, the default position of Cl. 1-5, sub-clause 1, will apply so that the insurance attaches immediately when the parties have agreed on the terms. If only the date of attachment is agreed and not the exact hour, Cl. 1-5, sub-clause 2, will apply so that the insurance attaches at 00:00 UTC on that date.
Depending on the individual project insured, it may not be anything of substance to insure at the agreed attachment date. That will be the case if the project is to build a new MOU and the insurance attaches before any construction work has begun or any procurement has been made. If the assured has purchased a tanker or other vessel or unit for conversion, he should insure such unit under the construction risks insurance from the moment the risk is transferred from the seller to the assured. He can achieve this by agreeing an appropriate attachment date for the insurance comprising such procurement. For each component, equipment and materials manufactured or procured for the project the insurance will attach from the time the risk is transferred to the assured. This may be at different times depending on the terms of the contracts entered into between the assured and the sellers, suppliers, contractors of each component etc. Often the risk will be transferred only when the contractor or supplier has completed its obligations under the contract, e.g. when the component, part or equipment is completed and delivered to the assured. However, the risk may be transferred at an earlier stage during construction, or the assured may have agreed to carry the risk throughout the construction period. If the assured has entered into several contracts with different contractors or suppliers, each contract must be treated individually in this respect as various components, parts or equipment may attach under the insurance at different times.
MOUs in operation prior to the commencement of the Project will normally be covered under ordinary insurances for MOUs in operation. If the assured owns and operates the MOU, there may not be any transfer of risk if the assured maintains the ownership and the risk of the MOU also during the construction period. Unless the operation insurance shall cover the MOU during the construction period, the assured must agree with his insurers the date when the operation insurance shall be terminated and the MOU shall be covered under the construction risks insurance. The same applies if the assured owns and operates a vessel which will be converted to an MOU. It is recommended that the assured ensures that the latter insurance attaches when the operating insurance contract is cancelled or expires to avoid any double insurance or gap between the operating insurance and the construction risks insurance. In case of double insurance, whether intended or not, Cl. 2-6 and Cl. 2-7 applies.
Sub-clause 2 set aside Cl. 1-5, sub-clause 3. The first sentence states that the insurance remains in effect until the date stipulated as the completion of the project. The parties must agree which date shall be set as completion date. Normally this would be the delivery date agreed in the contract between the assured and his contractor, or in the contract between the assured and the field operator, whichever is the latter, ref. Cl. 18-81 above. If the project is delayed, the second sentence entails that the insurance automatically remains in effect until the actual completion date, provided the Project is not delayed more than nine months. The assured must pay an additional premium for the extension period calculated pro rata of the premium agreed for the initial insurance period, unless the parties have agreed in advance the premium for the extension period. If delivery takes place before the stipulated delivery date, the assured may be entitled to a return of premium, cf. Cl. 6-5.
It is conceivable that the operation insurance intended to apply after completion comes into force before the construction risks insurance terminates when the construction risks insurance is extended. In that event, the rules relating to double insurance shall apply, cf. Cl. 2-6 and Cl. 2-7.
If the completion is delayed beyond the nine months’ extension period, the parties must negotiate new terms for continuation of the insurance.