Commentary

Scroll to the top

Section 5: Limitation, etc.

  • General

    Section 5 concerns questions relating to limitation. It follows from Section 28 of the Norwegian Limitations Act of 18 May 1979 No. 18 (Foreldelsesloven) that the parties may not, before the claim has arisen, agree on longer limitation periods than the law provides. The provision covers agreements on the commencement of the limitation period as well as the duration and interruptions of the period. The regulation of these questions in the new Plan must therefore not result in longer limitation periods in relation to the insurer than that what would follow from Section 3, subsection 1 of the Limitations Act, which provides that a claim becomes statute-barred three years from the earliest date when the claimant is entitled to satisfaction of his claim. However, Section 30 of the Limitations Act opens the door for special regulation in special legislation, and such special regulation is contained in ICA Section 8-6. The Norwegian Insurance Contracts Act (ICA) Section 8-6 is not a mandatory provision in marine insurance for ocean-going vessels. However, if the regulation in the Norwegian ICA on this point is departed from, the mandatory protection of the insurer in the Limitations Act will nevertheless become applicable.

    In the Plan it was decided to adopt the rules of the Norwegian ICA as a basis in this area. This entails a number of amendments and simplifications in relation to the rules of the 1964 Plan. Cl. 107 of the 1964 Plan relating to time-limit for notification of casualty has been retained, but amended. Cl. 108 of the 1964 Plan contained a rule relating to time-limits for taking legal action where the insurer had refused the claim. In that event, the claim became time-barred if the assured had not taken legal action or demanded that the dispute be submitted to an average adjuster under Cl. 87 within one year of receiving the insurer’s notification of the refusal. If the dispute was submitted to an average adjuster, and his opinion was not in favour of the assured, the claim became time-barred, unless the assured had taken legal action within six months of receiving notification of the average adjuster’s decision. At the same time Cl. 110 of the Plan indicated that the limitation period would not commence while the dispute was pending before the average adjuster. This solution may have been in violation of the Limitations Act with the result that the assured ran the risk of the claim becoming time-barred under the Limitations Act before the time-limit under Cl. 108 had expired, if more than two years had elapsed between the casualty and the insurer’s refusal. This could come as quite a surprise for the owner, and the rule has therefore been deleted.

    Cl. 109 of the 1964 Plan contained a provision relating to an extension of the time-limit on account of hindrance on the part of the assured. This problem is currently regulated in Section 10, subsections 2 and 3, of the Limitations Act. Through a reference to the Limitations Act in Cl. 107, sub-clause 3, the former Cl. 109 has therefore become superfluous. This provision has therefore also been deleted.

    The real limitation rules were contained in Cl. 110 (three years’ limitation) and Cl. 111 (ten years’ limitation ) of the 1964 Plan. These provisions have now been combined into a single limitation rule.

  • Clause 5-23. Time-limit for notification of a casualty

    This Clause was amended in the 2013 Plan to adapt the Plan to its future application in Denmark, Finland and Sweden. The provision does not contain any actual limitation rule, but a passivity rule which supplements Cl. 3-29 and Cl. 3-31.

    According to sub-clause 1, notice of the casualty shall be given to the insurer within six months of the assured, the master or the chief engineer of the ship becoming aware of it. Under the Norwegian ICA Section 8-5, first paragraph, however, the time-limit is one year. This longer time limit applies to marine insurance under Finnish Conditions. It was therefore discussed whether the time limit should be extended to one year also under Cl. 5-23, but the other Nordic representatives were in agreement that six month time limit for notification of a claim under the insurance contract is more than ample for the assured. Due to the assured’s duty of notification under Cl. 3-29, it will only rarely occur that the insurer has not been notified at an earlier stage. At the same time the purpose of the time-bar rules, viz. to prevent the assured from delaying notification in order to destroy evidence, thereby making it more difficult for the insurer to refuse the claim, indicates that the time-limit should be short. The six-month time-limit has therefore been retained.

    The time-limit commences from the moment “the assured, the master or the chief engineer of the ship” became aware of the casualty. This is a wider group of people that the assured will be identified with than what follows from Cl. 3-36.

    A failure by the assured to notify the insurer of a casualty will often be due to the fact that he has not himself received any notification of the casualty from the master. Such failure will under Cl. 3-36 be regarded as a fault committed by the master in connection with his service as a seaman, which cannot be invoked by the insurer. This provision entails greater possibilities for identification in that the assured bears the risk of the master or chief engineer of the ship failing to give notification.

    The words “the chief engineer of the ship” must be read literally. In the coastal trade the chief engineer will often be replaced by an “engine man”. The knowledge of an engine man is not sufficient to trigger the time-limit under Cl. 5-23.

    The time-limit commences from awareness of “the casualty”. When the insurer becomes liable for the assured’s liability to a third party, “the casualty” is the actual event causing the damage. The assured must notify the insurer of this event within six months, provided that he had reasonable grounds for believing that a claim for damages would be brought against him.

    Sub-clause 2 stipulates an absolute time-limit for notification of 24 months regarding anything other than hull damage below the light waterline. If this rule should have an unfortunate consequence in a particular situation, Section 36 of the Norwegian Contracts Act may become applicable.

    In all other respects to limitation the limitations act in the state where the insurance contract was entered into shall apply. The limitations acts of the Nordic countries are as follows: the Danish Act: Lov om forældelse af fordringer of 6 June 2007, the Finnish Act: Lag om preskription av skulder of 15 August 2003, the Norwegian Act: Lov om foreldelse av fordringer (foreldelsesloven) of 18 May 1979 and the Swedish Act: Preskriptionslag of 29 January 1981.

    View ClauseGo to Plan page

    Clause 5-23. Time-limit for notification of a casualty

    The assured loses his right to claim compensation if notice of the casualty is not given to the insurer within six months of the assured, the master or the chief engineer of the ship becoming aware of it. In any event the assured loses his right to claim compensation other than for hull damage...

  • Clause 5-24. Limitations

    The provision was amended in the 2013 Plan. According to the 1996 Plan, the limitation period was running even if the claim was pending before the average adjuster.  This provision conformed to the Norwegian Limitation Act, which is mandatory for the benefit of the debtor, cf. Section 28. The regulation in Denmark is similar.

    The regulation in Finnish and Swedish law is different. According to Chapter 19 Section 1, paragraph 2 of the Swedish Maritime Code the limitation period stops running when a claim is referred to the Official Average Adjuster. The same rule applies in Finnish law, cf. Chapter 19 Section 1, paragraph 7 sub-paragraph 6 of the Finnish Maritime Code. Such provision is not possible to include in the Nordic Plan due to the mandatory limitation regulation in Norway and Denmark. However, sub-clause 3 provides a new special duty of notification for the insurer so that the assured shall get a warning before the insurer invoke limitation, cf. further below. 

    If the insurance is divided among several co-insurers, the assured has to prevent the limitation period from running vis-à-vis all the co-insurers, cf. the Commentary on Cl. 9-4.

    The main rule concerning limitation is contained in sub-clause 1, first and second sentences, which stipulate that the limitation period is three years from the end of the calendar year during which the assured acquired the necessary knowledge of the facts on which the claim is based. The term “acquired the necessary knowledge of the facts on which the claim is based” is taken from the Norwegian Insurance Contracts Act (ICA) and must be interpreted to mean that it is sufficient for the assured to know that a claim exists - he is not required to have knowledge about its extent. The assured therefore cannot plead that he does not possess the necessary knowledge merely because the claim is pending before an average adjuster. On the other hand, the Plan must be interpreted such that the assured must understand that he has a claim. The limitation period will therefore not start running until the assured becomes aware of the fact that the damage has been caused by an incident that is covered by the insurance. It is also important to emphasize that the insurer will often recognize - explicitly or tacitly - that the assured has a claim, at the same time as there is uncertainty, and perhaps disagreement, concerning its magnitude. In that event, the recognition of the existence of a claim of the assured will in itself be sufficient to prevent the limitation period from running. Accordingly, if, for example, the ship’s damage following a casualty has been surveyed and temporarily repaired, and an estimate has been made of the costs of postponed permanent repairs, this must be interpreted as a recognition on the part of the insurer of the assured’s claim, unless he makes explicit reservations against any liability at all.

    Sub-clause 1, third sentence, stipulates an absolute limitation period of 10 years, and concords with Cl. 111 of the 1964 Plan, and relevant Nordic ICAs.

    The provision in sub-clause 1 must, as far as hull insurance is concerned, be seen in conjunction with the rule relating to a five-year time-limit for repairs of damage, cf. Cl. 12-6. This is not a real limitation rule, because it implies that also the insurer’s liability for costs that he has in actual fact accepted will cease. In practice, it will nevertheless to a large extent have the same effect.

    The reference to the rules relating to limitation of the assured’s liability for damages in sub-clause 2 is taken from the Norwegian ICA Section 8-6, second paragraph. While the insurer’s liability under the Norwegian ICA becomes time-barred under the same rules as those applicable to the assured’s liability for damages, the assumption in the Plan is that this shall only apply if the rules relating to the assured’s liability for damages provide a longer limitation period than the ordinary limitation rules. This specification is bound up with the special limitation rules in Chapter 19, notably Section 501, of the Norwegian Maritime Code. Of particular relevance in relation to hull insurance is Section 501, subsection 3 relating to claims for compensation arising from collision, which become time-barred two years from the day the damage was caused. If the claim against the insurer became time-barred at the same time as this claim for damages, this would result in a shorter limitation period than the ordinary one, whilst the purpose of the provision in the Norwegian ICA was to allow the assured to benefit from a possibly longer limitation period for the claim for compensation.

    If the limitation period for the assured’s claim for compensation is equal to or longer than the ordinary limitation period, the limitation period for the insurance claim will run in parallel with the limitation period for the claim for compensation. If the assured receives and pays the claim from the claimant immediately before it becomes time-barred, he risks that the claim against the hull insurer becomes time-barred before he has had time to lodge a claim against him. However, neither the Norwegian ICA nor the Limitations Act opens the door to introducing any further time-limits for the assured in this situation.

    Sub-clause 3 conforms to the Norwegian ICA Section 8-6, third sub-paragraph. NSA wanted a provision stating that the limitation period would be interrupted if the claim was submitted to an average adjuster. The consequence would then be that the claim could not be time-barred whilst it was pending before the average adjuster. Such provision was contained in the 1964 Plan Cl. 108 first sub-clause. It was, however, deleted in the 1996 Plan because it was considered to be contrary to the rules in the Norwegian Limitation Act, cf. above. The result was that the claim under the 1996 Plan could be time barred during the period it was under adjustment, which could come as a total surprise for the assured. In order to protect the assured against this result, it was decided that the insurer should notify the assured if he wanted to invoke limitation for a claim that had been notified to the insurer within the time-limit for notification provided in Cl. 5-23. This rule offers the assured a better protection than he has according to the Norwegian Limitation Act. However, the Norwegian Limitation Act Section 30 limit the application of the Act to questions concerning limitation that are not regulated in special legislation, and thus implies that special provisions concerning limitation in the Norwegian ICA take precedence over the rules in the Norwegian Limitation Act. As the new provision in sub-clause 3 conforms to the mandatory regulation in the Norwegian ICA Section 8-6, it is presumed that it will take precedence over the rules in the Norwegian Limitation Act.

    As referred to in the Commentary to Cl. 5-23 the limitations act in the state where the insurance contract was entered into shall apply in all other respects to limitation.

    View ClauseGo to Plan page

    Clause 5-24. Limitation

    The assured's claim for compensation becomes time-barred after three years. The limitation period commences at the end of the calendar year during which the assured acquired the necessary knowledge of the facts on which the claim is based. The claim becomes time-barred in any event at the latest...

  • Clause 5-25. Rules regarding claims notice and limitation for insurance contracts subject to Finnish law and jurisdiction

    This Clause was new in the 2013 Plan.

    Sub-clause 1 corresponds to Cl. 90, sub-clause 1, of the Finnish Marine Hull Insurance Conditions 2001 (English Version), but slightly rewritten to fit the terminology of the Plan. Sub-clause 2 corresponds to said Cl. 90, sub-clause 2. Sub-clause 3 corresponds to Cl. 91 of the said Finnish conditions. The parties’ costs for preparing the case for the Finnish Average Adjuster are not covered under sub-clause 3.