Commentary

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Chapter 9: Relations between the claims leader and co-insurers

  • General

    An addition was made to the general Commentary in the 2007 version.

    Chapter 9 contains rules relating to the relationship between the claims leader and the co-insurers. In practice, both hull insurances and the separate insurances against total loss are covered with a number of insurers who separately take on a portion of the risk. Each of these partial insurances is based on an independent agreement and the insurers issue separate insurance contracts.

    As a main rule, an owner does not want to negotiate the insurance conditions with each individual insurer, but confines himself to reaching an agreement with one individual insurer (the rating leader), or with a few insurers. Such agreements are normally accepted automatically by the others. The relationship between the rating leader and the other insurers is not regulated in the Plan.

    Additionally, as regards questions which arise during the insurance period - first and foremost questions in connection with casualties, salvage and the claims settlement - one of the insurers (the claims leader) will normally represent all of the insurers vis-à-vis the assured. The basis for this is often contained in what is known as a claims-leader clause. However, the 1964 Plan established a few explicit rules relating to the relationship between the claims leader and the other insurers, and these rules have essentially been retained in the Plan. Cl. 147 of the 1964 Plan, which provided the right to sue the co-insurers at the claims leader’s venue, has, however, been incorporated in Cl. 1-4, sub-clause 1 (c) of the Plan for insurances with a Norwegian claims leader, and in sub-clause 3 for insurances with a foreign claims leader. Furthermore, the claims leader’s authority has been expanded, see first and foremost Cl. 9-3, and new rules have also been introduced relating to the question as to how to deal with the claims leader’s disbursements in the event of the co-insurer’s bankruptcy, and relating to the claims leader’s right to interest on disbursements in Cl. 9-10 and Cl. 9-11, respectively.

    Questions that have not been regulated must, as before, be resolved on the basis of business considerations on a case-to-case basis. In the event of conflicts, it will be necessary to fall back on any agreements that may have been entered into, possibly supplemented with general background law.

    If the insurance has been effected on Plan conditions, the co-insurers will be aware that the claims leader chosen by the assured is authorised to act on their behalf under the rules of Chapter 9.  If they wish to change this authorisation, they may include a “claims leader following clause”. However, the standard clause is not intended for use in combination with Plan conditions.

    The rules contained in this Chapter will only be applicable with respect to co-insurers who have also given insurances on Plan conditions.

  • Clause 9-1. Definitions

    This Clause corresponds to Cl. 139 of the 1964 Plan.

    Sub-clause 1 defines the term “claims leader” as the one who is stated as claims leader in the insurance contract. In practice, “claims leader” is used as the designation of the insurer who is to have contact with the assured in case of a casualty, who is to be in charge of the salvage operation and effect the claims settlement. The powers which under Cl. 9-3 to Cl. 9-9 are conferred on the claims leader are essentially in accordance with what has in practice been deemed to fall within his scope of competence.

    Under English law a distinction is normally made between “rating leader” and “claims leader”. The Norwegian term “hovedassurandør” under the Plan comes closest to “claims leader”.

    Sub-clause 2 deals with the other co-insurers.

    The provisions in Chapter 9 concern all types of insurance covered by the Plan, but they are most relevant for hull insurance. If several types of insurance have been effected for the ship, one claims leader must be designated for each type of insurance. The claims leader for hull insurance therefore only binds the hull insurers, not the insurers who have taken out hull or freight-interest insurance, war-risk insurance or loss-of-hire insurance.

    As the rules in Cl. 10-13 and Chapter 14 show, however, there is a close connection between the ordinary hull insurance and the hull- and freight-interest insurances. It would therefore be practical if the decisions made in the relationship between the assured and the hull insurers were binding to a certain extent on the interest insurers as well. According to Cl. 14-3, sub-clause 4, a certain community has therefore been established between the claims leader under the hull insurance and the interest insurers as well.

    The possibility of entitling the claims leader for hull insurance to bind the loss-of-hire insurer was discussed during the revision, but rejected as inexpedient.

    In exceptional cases, an owner may choose an insurance package with one claims leader for all the insurances. The rules in Chapter 9 shall apply in such cases as well. Normally, the claims leader for the hull insurance will then be designated as the overall claims leader, with the result that he will bind all other insurers, even if he himself merely has a share in the hull cover.

    The rules contained in Chapter 9 are based on the assumption that one of the insurers has explicitly been designated claims leader when the insurance was effected. The assured is thus free to decide whether he wants to cover all parts of the interest with independent insurers, who will in that case not be mutually dependent on each other. If he wants the advantages that the claims-leader arrangement entails, he must therefore designate one of his insurers as the claims leader and notify the other insurers whom he contacts accordingly. It is not a condition that the claims leader knows who the co-insurers are, however, although certain rules will not become effective unless the assured has notified the claims leader about who the co-insurers are, see in particular Cl. 9-4 about notifications of casualties.

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    Clause 9-1. Definitions

    "Claims leader" means the insurer who, at the time the insurance contract is entered into, is identified as claims leader. "Co- insurers"   means other insurers who have accepted a proportion of the insurance of the interest against the same perils and who are directly liable to the assured.

  • Clause 9-2. The right of the claims leader to act on behalf of the co-insurers

    Sub-clause 1 was amended in the 2007 version. The sub-clause is otherwise identical to earlier versions of the 1996 Plan.

    Sub-clause 1, first sentence, establishes the general principle that the claims leader has the right to bind the co-insurers in relation to the assured to the extent that this follows from Cl. 9-3 et seq. The arrangement is based on an extensive relationship of trust between the insurers, and it is therefore emphasised in the second sentence that when acting on behalf of all the insurers, the claims leader shall, as far as possible, take into consideration all the insurers’ interests. Under earlier versions of the 1996 Plan, sub-clause 1, third sentence, he was also required to consult the co-insurers whom he knows of, provided that time permitted and that it was a matter “of importance”. In the Commentary, this provision was followed up with the following wording: “If it turns out that there is a predominant desire among the insurers to resolve the matter in a specific manner, the claims leader is obliged to respect the majority’s point of view. If not, he may become liable for damages vis-à-vis the co-insurers.” This wording is not in keeping with the text of the Plan: the rule was a “should” rule and concerned consultation, not an obligation to take a poll to determine the majority opinion. Both the wording of the Commentary and the provision regarding consultation in the third sentence have given rise to problems in practice. Since the main point is that the claims leader has a duty to look after the interests of the insurers, both the rule on consultation and the statement in the Commentary have been deleted.

    How far the duty to look after the co-insurers’ interests goes must be determined on the basis of past practice and the purpose of the other provisions of Chapter 9. The Commentary on Cl. 9-8 explicitly states that the claims leader must submit questions relating to the institution of legal proceedings or the lodging of an appeal to the co-insurers. The co-insurers are obviously interested in being consulted in such situations and this should not cause any problems in terms of time.

    With regard to the claims adjustment, on the other hand, the basic principle is that it is binding under Cl. 9-9 “provided that it is in accordance with the insurance conditions”. An insurance settlement that is not in accordance with the insurance conditions is, on the other hand, not binding on the co-insurers and thus falls outside the scope of the claims leader’s authority to act on their behalf, cf. also the Commentary on Cl. 9-9.

    Otherwise, in keeping with the purpose of the provisions of Chapter 9 the claims leader normally does not need to consult the co-insurers in order to look after their interests. For instance, some of the point of the authority provided by Cl. 9-3 whereby the claims leader may approve the lay-up plan required under Cl. 3-26 will be lost if the claims leader is required to involve the co-insurers.

    With regard to the claims leader’s authority to make decisions in connection with salvage pursuant to Cl. 9-5, it will normally not be expedient to consult the co-insurers in connection with initiating a salvage operation. On the other hand, it is conceivable that the claims leader should notify the co-insurers before possibly abandoning a salvage operation, and should also keep the co-insurers informed about the salvage operation once it has commenced so that they have an opportunity to abandon the operation by paying the sum insured and limiting their liability for costs in accordance with Cl. 4-21. This applies in any case to more extensive salvage operations. Salvage can lead to great expense for insurers and the co-insurers therefore have a legitimate need to be informed about the situation in order to be able to limit their liability. The insurers who wish to continue the salvage operation may do so, provided the six-month time-limit laid down in Cl. 11-2 has not expired.

    As far as removal and repairs are concerned, as well, the authority of the claims leader under Cl. 9-6 normally allows him to take action without consulting the co-insurers.

    Even if the duty of the claims leader to safeguard the interests of the co-insurers normally does not entail any obligation to consult them, he is of course free to seek advice. It must be left to the discretion of the claims leader whether to consult the co-insurers in connection with questions relating to lay-up plans, salvage operations, removals and repairs.

    Sub-clause 2 contains a rule concerning the authority of the claims leader that is of great importance. If the claims leader has vis-à-vis the assured taken a decision that falls within his scope of authority under Clauses 9-3 to 9-8, the decision will be binding on all co-insurers in relation to the assured.

    This authority shall only apply within the area where the rules contained in this Chapter confer authority on the claims leader. However, there is nothing to prevent a provision in the agreement with the assured to the effect that the claims leader shall have either a wider or a more restricted scope of authority than indicated by the Plan. The extent of this authority will depend on an ordinary interpretation of the agreement. According to the general principles of the law of contract, the steps taken by the claims leader vis-à-vis the assured will be binding, provided they come within the agreed scope of authority, and the assured does not have any reason to believe that the interests of the co-insurers have been disregarded.

    Steps which fall outside the scope of authority will, however, never be binding on the co-insurers, regardless of what the assured might believe about the claims leader’s right to act.

    If the co-insurers wish to reduce the authority that the claims leader has under the rules in this Chapter, they must make an explicit reservation to that effect on the conclusion of the agreement.

    If the claims leader, or one of the other co-insurers, due to special circumstances is prevented from reacting to negligence on the part of the assured or the person effecting the insurance, this will obviously not affect the legal position of the other co-insurers.

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    Clause 9-2. The right of the claims leader to act on behalf of co-insurers

    Unless otherwise agreed, the claims leader is entitled to take the steps referred to in Cl. 9-3 to Cl. 9-9 with binding effect on the co-insurers. In all such cases he shall, as far as possible, take into consideration the interests of all the insurers. Notwithstanding that the claims leader has...

  • Clause 9-3. Lay-up plan

    According to Cl. 3-26, the assured shall if the ship is to be laid up draw up a lay-up plan and submit it to the insurer for his approval. It is not practical to send this plan to all the co-insurers; it must be sufficient that it is approved by the claims leader. Other notifications pursuant to Chapter 3, e.g., if a ship proceeds beyond the trading areas according to Cl. 3-15 must, however, be sent to all insurers.

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    Clause 9-3. Lay-up plan

    The claims leader may approve lay-up plans as required by Cl. 3-26.

  • Clause 9-4. Notification of a casualty

    This Clause was amended in the 2013 Plan.

    Notifications of a casualty may be given to the claims leader with binding effect on the co-insurers, cf. sub-clause 1. It is of great practical importance for the assured that, in the event of a casualty, he can look to the claims leader. If the co-insurers want a stronger position, this must accordingly be agreed separately.

    Sub-clause 2 regulates the claims leader’s obligation to pass on notifications to the co-insurers, unless the assured specifically agree with the claims leader to effect the notification to co-insurers directly or via brokers.

    The provision is formulated as a duty for the claims leader, cf. the word “shall”. However, no sanctions are imposed if the claims leader fails to pass on the information or is unduly delayed in doing so. As the assured according to sub-clause 1 is free of any further duty of notification by having notified the claims leader, any failure from the claims leader to pass on information will be risk of the co-insurers. Consequently, a failure to give notification will not affect the assured’s claim against the co-insurers. If a co-insurer suffers a loss as a result of the failure to give notification, e.g., due to the fact that he does not manage to submit his objections to the claim in time, he may have to claim compensation from the claims leader under the general principles of the law of tort.

    In practice, it will often be the broker who notifies the claims leader of the casualty, and the broker will then normally notify the co-insurers at the same time. If there is an assumption or it has been agreed with the co-insurers that notifications to the co-insurers under sub-clause 2 may be passed on through the assured’s broker, delay on the part of the broker will be the co-insurers’ risk. If they suffer a loss, they will in the event have to lodge a claim against the broker. They cannot recover the loss from the claims leader and refer him to recourse against the broker.

    The Clause is primarily aimed at notification of casualties, cf. Cl. 3-29, the submission of claims for compensation, cf. Cl. 5-23, and demands that the claims adjustment be submitted to an average adjuster, cf. Cl. 5-5. But the provision also becomes significant during the further proceedings in connection with claims settlements. A co-insurer who is within the scope of the sub-clause cannot plead that the assured has forfeited a right by passivity, provided that the assured has vis-à-vis the claims leader done whatever is necessary to maintain his right.

    However, the provision does not apply in relation to Cl. 5-24 relating to limitation. The limitation period must therefore be prevented from running in relation to each individual co-insurer. A different rule would be inexpedient and would in reality have to be based on the assumption that a judgment in an action against the claims leader would also have effect vis-à-vis the co-insurers. Nor is it sufficient to prevent the limitation period from running in relation to the co-insurers that the claims leader grants the assured an extension of the limitation period. However, the assured may stop the period from running by bringing a collective action against all the co-insurers in the venue of the claims leader, cf. Cl. 1-4, sub-clauses 1 (c) and  2.

    In the 2013 Plan it was specified that the duty to pass on information includes “claims advice with estimated costs”. Such information should be presented by the claims leader as soon as possible after the relevant information about the casualty and the costs involved have been established. It is also a duty for the claims leader to follow up with amended claim advices if major changes to the reserves arise.

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    Clause 9-4. Notification of a casualty

    Notifications in connection with a casualty may be given to the claims leader. The claims leader, shall as soon as possible, pass on such notifications to the co-insurers concerned, including claims advice with estimated costs.

  • Clause 9-5. Salvage

    This Clause corresponds to Cl. 142 of the 1964 Plan.

    The provision authorises the claims leader to decide if, and in the event how, a salvage operation shall be conducted, and to decide when to abandon the salvage operation or whether the insurer shall exercise his authority to limit his liability for the salvage costs by paying the sum insured. The claims leader’s authority on this point is in accordance with standard practice.

    Cl. 142 of the 1964 Plan furthermore authorised the claims leader to decide what regulations should be issued in accordance with Cl. 53. This authority to issue regulations has, however, been deleted in the new Plan, and the provision has therefore been deleted.

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    Clause 9-5. Salvage

    The claims leader may take measures with a view to salvage. He may inform the assured that the salvage operation has been abandoned or that the insurers will limit their liability for the costs in accordance with Cl. 4-21.

  • Clause 9-6. Removal and repairs

    This Clause corresponds to Cl. 143 of the 1964 Plan.

    The provision authorises the claims leader to grant requests for removal to a repair yard under Cl. 3-20 and to make decisions concerning repairs.

    The claims leader’s decision-making authority in relation to Cl. 3-20 is new and is based on practical considerations. The decision-making authority relating to repairs, however, is taken from the 1964 Plan and concords with established practice. However, Cl. 143, second sentence, of the 1964 Plan stipulated an exception as regards the question whether the ship was to be repaired at all, or whether the assured’s request for condemnation should be granted. The reason for the exception was that the insurers might have conflicting interests, in particular where the claims leader had granted the owner a loan which he could perhaps only be expected to repay in the event of a total loss. The individual co-insurer had therefore been given an independent right to have the question of condemnation further elucidated by a removal of the ship for a survey under Cl. 166, or by inviting tenders. The provision had to be seen in conjunction with Cl. 43 of the 1964 Plan, which gave the co-insurers the right to limit their liability for damage resulting from the removal by refusing to accept it. In practice, the relationship between insurers who had and insurers who had not approved the removal caused problems: if the removal later proved successful with the result that the ship was not condemned, the question arose as to whether an insurer who had not approved the removal was to benefit from the result of the removal despite the fact that he had not borne any part of the risk associated with it. The co-insurers’ right to make an independent evaluation of the question of removal furthermore raised a communication problem: when the decision regarding a removal was to be taken, all the insurers concerned had to be notified. This could result in delays in a situation where quick decisions were of the essence. In order to prevent such conflicts of interest between the insurers and delays as regards the condemnation decision, the Plan has authorised the claims leader to decide also this question of removal on behalf of all the insurers.

    It follows from Cl. 9-2, cf. Cl. 14-3, that the claims leader’s authority according to Cl. 9-6 applies both in relation to the co-insurers under the hull insurance and in relation to the insurers under the separate total-loss insurances. However, the authority does not apply in relation to the insurers under other insurances. These insurers may therefore demand that the ship be removed according to Cl. 11-6. The co-insurers’ claims leader must in that event have the right to choose whether the hull insurers and the separate total-loss insurers shall participate in the removal or avoid further liability by paying the sum insured, cf. Cl. 4-21.

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    Clause 9-6. Removal and repairs

    The claims leader takes decisions pursuant to Cl. 3-20 and Cl. 12-10 to Cl. 12-13. If the assured has requested a condemnation of the ship, the claims leader will also decide whether the ship shall be moved in accordance with Cl. 11-6.

  • Clause 9-7. Provision of security

    This provision corresponds to Cl. 144 of the 1964 Plan.

    Sub-clause 1 regulates the claims leader’s right to commission from the co-insurers upon the provision of security. Under Cl. 5-12 the insurer does not have any obligation to provide security for the assured’s liability to third parties. However, in practice the hull insurer will to a large extent provide security for the assured’s liability for salvage awards and collision compensation whenever required in order to prevent an arrest of the insured ship. Such security will normally be provided by the claims leader. The 1964 Plan did not contain any rules relating to commission for the claims leader when he in this manner in the interests of all the insurers provided a guarantee for collision liability vis-à-vis the person suffering the loss or for salvage awards vis-à-vis the salvors. However, it was accepted in practice that the claims leader was entitled to a commission, and this practice has now been explicitly established in the Plan. The commission is set at 1% and is charged once and for all, not on a per annum basis.

    The claim for commission is subject to the condition that the guarantee is provided in “the interest of all the insurers”. This will be the case if the person suffering the loss or the salvor demands a bank guarantee, and the claims leader is required to provide a guarantee vis-à-vis the bank because the assured is unable to obtain a guarantee himself against ordinary commission, cf. in this respect former practice.

    Sub-clause 2 corresponds to Cl. 144, sub-clause 1, of the 1964 Plan, but has been somewhat simplified. The provision discusses the effect of the claims leader informing the co-insurers that he has provided security for the assured’s liability for collision compensation or salvage award. Such notification deprives the assured of his position as creditor as regards cover of the liability invoked against him. If a co-insurer who has received such notification pays compensation in connection with the liability directly to the assured, he risks having to pay all or part of the amount again to the claims leader to the extent that the latter’s provision of guarantee has become effective.

    Sub-clause 3 corresponds to Cl. 144, sub-clause 2 of the 1964 Plan and limits the co-insurer’s right to plead a set-off when security has been provided. As mentioned in the Commentary on Cl. 7-4, the insurer has the right to set off any claims against the assured in respect of insurances on Plan conditions. This applies to outstanding premiums as well as to any other claims arising from the insurance contract. Unless otherwise agreed, a co-insurer’s right to plead a set-off against the assured may also be exercised against the claims leader when the guarantee has become effective and the claims leader has a right of recourse. However, according to the Plan, the co-insurer’s right is subject to the condition that he has reserved the right to plead a set-off prior to the provision of security. In practice, the claims leader will normally decide the question regarding security alone, which means that a co-insurer cannot expect to have the opportunity to make a reservation in connection with a notification of the provision of security according to Cl. 9-7. Accordingly, a co-insurer who wants at all times to be certain that his claims against the assured can be set off must keep the claims leader continuously informed of the magnitude of his claim.

    It is only against the claims leader that the right to plead a set-off may be forfeited. If the assured himself covers the liability and the guarantee is released, the co-insurer may, of course, plead a set-off. Sub-clause 3 applies to all types of claims arising out of the insurance contract, including claims pertaining to other vessels.

    It is conceivable that a creditor directs his claim against another ship that belongs to the assured, and that the claims leader for the ship to which the liability pertains provides security in order to obtain the release of the other ship. The rules in this sub-clause shall also apply to such a situation, given that no express condition has been stipulated to the effect that the purpose of providing security is to prevent the arrest of the insured ship.

    The rules shall only apply, however, where the provision of security concerns a claim of the type described in this Clause, i.e. collision liability and salvage award. If the claims leader has provided security for a claim of a different type, e.g., a repair yard’s outstanding claim, the co-insurers have an unconditional right to plead a set-off without making any special reservation in accordance with sub-clause 3.

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    Clause 9-7. Provision of security

    If the claims leader has, on his own and the co-insurers' behalf, provided a guarantee or counterguarantee for the assured's liability arising from collision, striking or salvage, he may claim a commission of 1 % of the guarantee amount. If an open guarantee is provided, the commission shall be...

  • Clause 9-8. Disputes with third parties

    This Clause is identical to earlier versions of the 1996 Plan. The Commentary was amended in the 2007 Version in accordance with the amendment to Cl. 9-2.

    The claims leader should also be empowered to represent all the co-insurers in the event of legal proceedings against a third party. The Clause authorises him to make the necessary decisions in connection with the legal proceedings and may be invoked vis-à-vis the courts as a basis for a general power-of-attorney to conduct the case. According to earlier versions of the 1996 Plan, “the question of commencing legal proceedings or lodging appeals will constitute ‘matters of importance’ and, as there will in those situations always be time for discussions among the insurers, it will invariably be the duty of the claims leader to submit the questions to those co-insurers of whom he is aware, cf. Cl. 9-2”. This statement is not accurate now that the duty to consult the co-insurers has been revoked. It also follows from the rule prescribed in Cl. 9-2 that the claims leader has a duty to look after the interests of all the insurers that he must consult the co-insurers concerning the institution of legal proceedings or the lodging of appeals.

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    Clause 9-8. Disputes with third parties

    If a third party makes a claim against the assured which is covered by the insurance, or if the assured has a claim for damages to which the insurers are subrogated, the claims leader shall decide questions concerning the institution of legal proceedings, appeals and amicable settlements.

  • Clause 9-9. Claims adjustment

    The provision establishes that it is the claims leader who is responsible for the claims adjustment. In accordance with established practice, this is binding on the co-insurers, provided that it is in accordance with the insurance conditions. This implies that the claims leader’s discretionary decisions are binding, provided that the discretion is deemed to have been exercised within the framework of the conditions. If, on the other hand, he, for example, includes as recoverable a loss which, according to a correct interpretation of the Plan and the insurance contract, must be considered to be excluded, the co-insurers will not be bound. The co-insurers must also be entitled to contest a discretionary decision if the discretion has been exercised in such a manner that it must in reality be regarded as a departure from the conditions in favour of the assured.

    In practice, the claims leader’s authority is sometimes specified in a “claims-leader clause”. In such clauses, the claims leader’s authority will often be extended in relation to Cl. 9-9, e.g. to also cover “settlements” or “compromised total loss settlements”. An extension of the claims leader’s authority has been regarded as a market question which must be solved in the individual insurance, and not through a general extension of the scope of Cl. 9-9.

    If there is no such claims-leader clause, agreed settlements fall outside the scope of the claims leader’s authority under Cl. 9-9. An agreed settlement might, for instance, entail payment of a large amount in cash compensation in cases where the ship does not qualify for condemnation (in English often called “compromised” or “arranged total loss” under Cl. 11-3 of the Plan or the insurance conditions. Such settlements are not “in accordance with the insurance conditions” and are therefore not binding on the co-insurers. In such cases, the claims leader therefore acts at his own risk. Therefore, if the claims leader is to get the co-insurers to agree to such settlements, he must consult them. If they agree, the settlement will also be binding on the co-insurers. If not, each individual insurer is free to do as he pleases as far as his own share of the insurance cover is concerned.

    In connection with the claims settlement, the question may arise of whether the insurers can or should invoke the provisions of Chapter 3 of the Plan regarding breaches of the duty of disclosure, alteration of the risk, breach of safety regulations, etc. This type of decision lies outside the scope of the claims leader’s authority, and the co-insurers will therefore not be bound by the views of the claims leader. In practice, the claims leader and the co-insurers will often discuss the question and come to an agreement as to the stance that they wish to adopt in relation to the assured. If, however, they do not agree, a majority of the insurers cannot be binding on a minority. Any disagreement regarding the facts or the application of the law must, in the customary way, be brought before the courts in accordance with the provision regarding jurisdiction in Cl. 1-4 of the Plan or be decided by arbitration if arbitration has been agreed in advance or is agreed in connection with the dispute.

    A judgment in favour of the insurers is only binding on the insurers who are a party to the case. Insurers who have made full or partial payment as part of a compromise settlement with the assured will be bound by this agreement regardless of the outcome of the judgment. Similarly, a judgment in favour of the assured will not affect agreements that have already been concluded. The assured may not claim any additional settlement from insurers with whom he has entered into compromise agreements even if the latter entail payments that are lower than what the court has found to be correct.

    Should the concluded agreements be contested by the assured or the insurer in accordance with the ordinary rules on the invalidity of agreements, a dispute concerning the validity of the agreement would have to be the subject of separate negotiations and court decisions.

    Even if the assured is represented by a broker, and the claims leader has communicated with the co-insurers through the broker, the insurers may communicate with one another directly without going through the assured and the broker. In difficult cases involving important principles or of financial significance, the claims leader will often seek to establish a direct dialogue with the co-insurers.

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    Clause 9-9. Claims adjustment

    The claims leader shall see to it that a claims adjustment is drawn up. The adjustment is binding on co-insurers, provided that it is in accordance with the insurance conditions.

  • Clause 9-10. Insolvency of a co-insurer

    This Clause was amended in the 2013 Plan.

    The provision regulates the risk of a co-insurer becoming insolvent when the claims leader has had disbursements, part of which the co-insurer should have paid.

    According to the first sentence, the assured bears the risk of a co-insurer’s insolvency if the claims leader has had disbursements on behalf of the assured. This concords with what has been assumed in practice, and may be justified by considerations of consequences. If no claims leader had been appointed, the assured would have had to bear the risk of the co-insurer’s insolvency, because the other co-insurers would merely have had pro-rata liability in proportion to their share of the insurance. This would have applied both to the actual payment of compensation and to the disbursements which were made by the assured to third parties in connection with the claims settlement, and which were recoverable under the insurance, e.g., disbursements for survey. The claims-leader system should not give a different result in an insolvency situation. The system indicates that the assured is the claims leader’s principal, which means that under general rules of contract law he is liable for disbursements made by the claims leader on his behalf.

    Disbursements made by the claims leader on behalf of all the co-insurers, on the other hand, are in principle no concern of the assured’s. In that event, it must therefore be the joint risk of all the insurers if one of the co-insurers becomes insolvent. The second sentence was amended in the 2013 Plan and establishes now that the insolvent co-insurer’s share of these disbursements shall be shared pro rata by the claims leader and the other co-insurers. If it turns out that another of the co-insurers becomes insolvent his share shall then be shared pro rata between the claims leader and the solvent co-insurers, and so on. In legal terminology in the Nordic countries such distribution of liability is called principal pro rata, and subsidiary joint and several.

    The provision raises the question of the distinction between disbursements made on behalf of the assured and disbursements made on behalf of all the insurers. Disbursements related to the claims leader’s consideration of, e.g. questions regarding salvage award, collision liability or grounding liability, are made on behalf of the assured. The same applies to the guarantee commissions. These are disbursements which might just as well have been made by the assured himself, but which the claims leader has undertaken on his behalf as a service. The same must apply to expenses for technical or legal assistance, and for that part of the claims leader’s claim for a fee that is tied to an average adjustment, if any. The rest of the claims leader’s fee claim in connection with the claims adjustment and expenses for survey is, however, claims or disbursements on behalf of all the insurers. If the claims leader leaves it to an average adjuster to make a claims adjustment in accordance with Cl. 5-2, the average adjuster’s fee must also be no concern of the assured’s.

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    Clause 9-10. Insolvency of a co-insurer

    If a co-insurer is insolvent, the assured shall cover his proportion of expenses incurred by the claims leader on behalf of the assured. The insolvent co-insurer’s share of expenses incurred by the claims leader on behalf of all of the insurers shall be shared pro rata by the claims leader and th...

  • Clause 9-11. Interest on the disbursements of the claims leader

    In practice, the claims leader will often make disbursements on behalf of all the insurers, e.g. for surveys. Accordingly, there is a need for a rule which entitles him to charge interest on these disbursements. For disbursements made by the claims leader on behalf of the assured, the duty of the co-insurer to pay interest is in actual fact already implicit in the assured’s right to interest under Cl. 5-4. However, it has sometimes been difficult in practice to gain acceptance for this view in the international insurance market. The provision therefore explicitly establishes that the duty to pay interest also applies to disbursements made by the claims leader on behalf of the assured.

    It is the duty of the claims leader to show loyalty as regards the recovery of outstanding disbursements. If the insurance contract interest rate according to Cl. 5-4 is for a period of time higher than the market rate, he may not sit on the claim in order to thus increase the interest payable by the co-insurers.

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    Clause 9-11. Interest on the disbursements of the claims leader

    The claims leader is entitled to charge interest on disbursements he has made on behalf of all of the insurers or the assured. Cl. 5-4 shall apply correspondingly.