Sub-clause 3 was deleted in 2016, see further the amended Cl. 3-15 with its Commentary, and a new sub-clause 3 was provided. The Commentaries were also amended in 2016.
Sub-clause 1 defines safety regulations as “rules concerning measures for the prevention of loss”. A fundamental requirement in order for a rule to have the status of safety regulation is that it is intended to prevent loss. A requirement may sometimes pursue several purposes. If one of them is to prevent casualties or mitigate their effect, then a breach may be relevant under the Plan’s rule. Thus, a class-related requirement will always have the status of safety regulation, as will requirements primarily aimed at preventing oil spills; e.g. marine pollution rules. However, if the requirement is linked to an entirely different purpose (e.g. immigration or customs regulations), it is difficult to envisage a relevant causal connection between a breach of a rule committed by the assured and damage sustained by the ship. Cases like this must come under the rule against illegal undertakings in Cl. 3-16.
The text states that safety regulations can be expressed in four different ways. The first alternative is that the rule is issued by “public authorities”. The term “public authorities” means public authorities in all states providing the rule is binding for the assured and consequently a duty the assured must adhere to. The natural starting point is the regulatory regime of the Flag State. For instance in Norway, the relevant act is the Norwegian Ship Safety and Security Act and requirements laid down by its regulations. In addition to the rules of the Flag State, a shipowner must also comply with requirements that follow from rules and regulations of the company’s country of domicile as well as those that become applicable by reason of the vessel’s location, e.g. while in coastal waters, or a port or while passing through a canal. If a conflict arises between the requirements of a Flag State and requirements originating in another applicable regime, the most stringent will apply with the presumption that this will be binding for the assured. However, it has to be recognised that good faith misunderstandings of which requirements take precedence could arise.
Regulations prescribed by public authorities become binding when they come into force for the insured ship, even if this is after the risk attaches. It can be assumed that adequate advance notice will have been given to the shipowners.
International conventions such as the SOLAS Convention of 1 November 1974 and subsequent amendments are not directly binding for the shipowner, but will become applicable as a safety regulation once adopted into the laws of individual countries. How a rule issued by a public authority has come into existence is in itself not significant. In the case of ND 1973.450 NH RAMFLØY, it was held that a rule set out directly in a statute was a safety regulation under the Plan.
Traditionally, safety regulations provided by public authorities are specific and concrete and provide for described actions to be taken by the shipowners to promote safety. Such provisions may be technical requirements related to design, construction and maintenance, cf. for example in Norway the Ship Safety and Security Act Chapter 3 with accompanying regulations, which incorporate the specific rules found in international conventions like SOLAS, MARPOL, etc.. However, in the last 40 years the focus in international and national safety regulation has shifted from such direct requirements to the establishment of safety management systems. The most important step in this development was the introduction of the International Safety Management (ISM) Code into SOLAS by the 1988 Protocol. The ISM Code can be found in SOLAS Chapter IX, and is included in the national legislation of most flag States, cf. for example for Norway Chapter 2 and the Ship and Security Safety Act.
The approach to safety that underlies the ISM Code emphasises the role of management in establishing procedures and instructions for the safe operation of the vessel. It also recognises that the extent and content of such procedures and instructions must be relative to the operation of the vessel. However, according to 1.4 of the Code there are certain functional requirements that must be addressed:
“Every Company should develop, implement and maintain a safety management system which includes the following functional requirements:
- a safety and environmental-protection policy;
- instructions and procedures to ensure safe operation of ships and protection of the environment in compliance with relevant international and flag State legislation;
- defined levels of authority and lines of communication between, and amongst, shore and shipboard personnel;
- procedures for reporting accidents and non-conformities with the provisions of this Code;
- procedures to prepare for and respond to emergency situations; and
- procedures for internal audits and management reviews.”
A central part of the ISM Code is a requirement for the operating company to obtain a Document of Compliance issued by an appropriate authority. This document must be kept on board each ship and each ship must also obtain a Safety Management Certificate. It is the task of the vetting authority to evaluate whether the specific procedures and instructions adopted are suitable in the context of the shipowners’ or managers’ operations. The vetting authority is the Flag State, or a classification society or other bodies that have been delegated such authority by the Flag State.
The status of the ISM Code with regard to the concept of safety regulation in Cl. 3-22 has caused uncertainty in practice. The previous Commentary stated that it “is the establishment of the safety management system per se that constitutes the safety regulation and not the individual provision.” This implies that the individual policies, instructions and procedures contained in the Safety Management System (SMS) for the ship does not constitute a safety regulation according to Cl. 3-22. Hence, the insurer may not invoke breach of such procedures etc. . This view was followed in ND 2010.164 Oslo FRIENDSHIPGAS. Under the 2016 amendment of the Plan it was discussed whether individual provisions must be seen as part of the ISM regulation and therefore each provision in the system constitutes a safety regulation. However, as the Safety Management System will contain individual policies, instructions and procedures that may vary substantially between different shipowners, this would put a prudent shipowner with a more detailed system in a worse position with regard to the insurance cover than a shipowner who has chosen a less detailed system. It would be contrary to the goal of the ISM regulation if shipowners were induced to establish a less rigid system in order to prevent the risk of losing their insurance cover due to the breach of a safety regulation. It was consequently agreed that the individual instructions and procedures in the SMS do not constitute a safety regulation according to Cl. 3-22.
On the other hand, the duty according to the ISM Code is to “develop, implement and maintain” the Safety Management System. A mere establishment is therefore not enough if the system is not prudently maintained. Further, a repeated breach of the individual instructions or procedures may indicate that the Safety Management System is in reality not implemented or maintained by the management, or that they have failed to supervise the system, cf. further under Cl. 3-25 below. Seen in this perspective, the judgement in ND 2010.164 Oslo “FRIENDSHIPGAS” is too categorical when it states that a breach of the shipowner’s individual manuals neither directly nor indirectly constitutes a breach of a safety regulation according to the Plan. To the extent an individual manual repeatedly is breached by the management, depending on the circumstances in each case such breach may also be considered breach of a safety regulation.
The second alternative in Cl. 3-22, sub-clause 1, is rules “stipulated in the insurance contract”. These words have caused a discussion on whether they include the safety regulations stipulated in the Plan itself, i.e. whether the safety regulations stated in the Plan is considered to be “in the insurance contract”. Such clauses are today for instance found in Cl. 3-22, sub-clauses 2 and 3, Cl. 3-26 and Cl. 18-1 (e). When the insurance contract is based on the Plan, the Plan is a part of the insurance contract and the mentioned safety regulations are thus “stipulated in the insurance contract”. A narrow interpretation of these words would exclude the safety regulations in the Plan from the definition of safety regulations in Cl. 3-22. Traditionally, the Plan did not contain any clauses that were intended to function as safety regulations, but this has changed over the years, cf. the clauses mentioned above. Hence, there is no doubt that these Plan clauses both by their wordings and intent shall be treated as safety regulations according to Cl. 3-22, sub-clause 1. However, to get the status of a safety regulation, it must follow from the wording of the clause and/or a reference to Cl. 3-22 and/or Cl. 3-25 that this is the intent.
In addition, the individual insurance contract can itself contain provisions concerning measures to be taken to ensure the technical and operational safety of the vessel. If these are clear and specific, they will fall within Cl. 3-22.
The third alternative is rules “prescribed by the insurer pursuant to the insurance contract.” Cl. 3-15, sub-clause 2, second sentence, as amended in Version 2016 gives the insurer authority to prescribe safety regulations. Authority for an extremely limited exercise of this power is also found in Cl. 3-28. If the insurer wishes to include powers beyond what is provided by the Plan in order to also have the authority to issue new safety regulations during the insurance period, a specific provision to that effect must be inserted into the individual insurance contract. In practice, this means that the contract must contain written authority and set out clear parameters for subsequent safety regulations. If such parameters or authority is not included in the contract, the insurer must resort to the rules on alteration of the risk. Under these rules, the insurer may only impose new requirements if a situation has arisen that constitutes an alteration of the risk in accordance with Cl. 3-8. If this is the case, the insurer may exercise his right to cancel the contract, and establish a new contractual relationship with new requirements.
The fourth alternative is rules issued “by the classification society”. Cl. 3-14 makes it clear that the insured ship’s class status must be maintained in order for cover to remain in force. However, failure to comply with class requirements does not automatically lead to loss of class. Including class requirements as safety regulations further emphasises the importance of compliance. It also provides insurers with a possible sanction if failure to comply with a class requirement should be the cause of a casualty. Similar to government regulation, orders from classification societies receive the status of safety regulation from the time they are adopted or issued.
The provision in sub-clause 2 emphasises that the requirement of periodic surveys imposed by public authorities or the classification society constitutes a safety regulation under sub-clause 1. The provision is basically superfluous requirements issued by the classification society, including orders to carry out a Continuous Machinery Survey, will automatically constitute a safety regulation under Cl. 3-22, sub-clause 1. However, it is necessary to be able to extend the scope of identification in such cases for breaches of this duty, like the one that applies to “a special safety regulation, laid down in the insurance contract”, cf. Cl.3-25, sub-clause 2. As a safety regulation prescribed in the Plan as mentioned above constitutes a safety regulation “laid down in the insurance contract”, the extended identification rule in Cl. 3-25, sub-clause 2, second sentence, will apply unless the safety regulation itself only refers to Cl. 3-25, sub-clause 1, cf. for instance Cl. 3-26 second sentence and Cl. 18-1 (e) last sub-paragraph. In such case, the safety regulation in the Plan has status as “safety regulation” according to Cl. 3-22, sub-clause 1, but not a “special safety regulation” according to Cl. 3-25, sub-clause 2.
Sub-clause 2, second sentence, imposes a duty on the assured to carry out the survey by the stipulated deadline. A breach of this safety regulation will arise as soon as the deadline is exceeded; no reaction is required on the part of the classification society in the form of a reminder or even withdrawal of class, cf. the above Commentary regarding Cl. 3-14.
If the classification society grants a postponement of a periodic survey, the provision will not be triggered; in such case no breach of any safety regulation will have occurred. However, a postponement must in fact have been granted; it is not sufficient that the classification society would have granted a postponement if the assured had requested it.
The provisions regarding periodic surveys in Cl. 3-22, sub-clause 2, cf. Cl. 3-25, sub-clause 2, are a supplement to Cl. 3-14. The classification society may at any time cancel the class in the event of breach of the duty to carry out periodic surveys, with the result that the insurance cover lapses in its entirety.
Cl. 3-22, sub-clause 3, was amended in 2016. The previous rule concerning the effect of ice class was abolished, see the Commentary to Cl. 3-15. However, a new rule replaces the previous exclusion in Cl. 12-5 (f) for liability for loss due to lubricating oil, cooling water or feed water becoming contaminated. This former exclusion also extended the circle of persons with whom the assured could be identified with to include the master and chief engineer. Sub-clause 3 imposes instead a duty for the assured to ensure that the Safety Management System “includes instructions and procedures for the use and monitoring of lubricating oil, cooling water and boiler feed water.”
The duty under this safety regulation is «to ensure» that the system includes the mentioned instructions and procedures. If the vetting authorities accept these instructions as part of the Safety Management System, the assured has satisfied his duties under the new sub-clause 3. The concept of safety regulation is the same as according to Cl. 3-22, sub-clause 1. This means that the individual instructions and procedures will not constitute a safety regulation as such, but repeated breaches of such instructions and procedures may imply a failure on the part of the management to supervise compliance with the system. Whether the insurer can invoke such failure will depend on whether there was a causative connection between the breach and the loss or damage, and whether the assured had acted negligent, see further under the Commentary to Cl. 3-25.
It can be argued that establishing appropriate instructions and procedures for the matters named in sub-clause 3 is regardless a natural part of any functional SMS. However, the ISM Code is, as noted above, deliberately designed to give shipowners flexibility to develop and tailor a safety system to their specific operation. Experience has shown that losses related to lubricating oil, cooling water and boiler feed water very often arise from the erosion of sound practice at the operational level. These matters are important in preventing not just costly damage to machinery, but also loss of propulsion and the dangers that inevitably follow from it. The deleted provision in Cl. 12-5 (f) addressed this fact by a very concrete rule including a somewhat arbitrary three month time limit. Contrary to this rather stringent approach, the new provision in sub-clause 3 underlines the undisputed fact that ensuring consistency at the operational level is a management function with the SMS being the main tool management has to achieve this. It follows that the person with the overall responsibility for a company’s SMS will be regarded as part of that company’s management, acting on behalf of the assured irrespective of their formal title and place in the organisational hierarchy.
Sub-clause 3 refers to Cl. 3-25, sub-clause 1, and not to sub-clause 2. This means that the extended identification rule in Cl. 3-25, sub-clause 2, does not apply.