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Chapter 10: General rules relating to the scope of the hull insurance

  • Clause 10-1. Objects insured

    In 2016 the word “supplies” in sub-clause 2 (a) was replaced by “provisions”. The reason was that the word “supplies” is too wide and may unintentionally expand the scope of the exception from cover under the hull insurance.

    The heading has been changed in connection with the extension of the scope of the Plan to include also bunkers and lubricating oil, cf. sub-clause 1 (c) and below.

    Sub-clause 1 states the objects covered by hull insurance. Sub-clause 1 (a) and (b) distinguish between “ship”, “equipment” and “spare parts”. “The ship” comprises the hull as well as the machinery. “Equipment” is a collective term for loose objects that accompany the ship in its trade, but which cannot be deemed to be part of it, e.g. radio and radar equipment, search lights, loose shifting beams, furniture and other fixtures and fittings. The prerequisite for covering equipment and spare parts under the ship’s hull insurance is nevertheless that they are normally on board, cf. the term ”on board”, which indicates that the object in question shall be on board for an indefinite or prolonged period of time. Objects brought on board while the ship is in port and taken ashore when the ship is leaving, such as a fork-lift truck to be used during loading and discharging, are therefore not covered whilst on board, cf. ND 1972.302 NV Balblom, notwith­standing the fact that the object is used only on board this one particular ship.

    As under the 1964 Plan, ownership is irrelevant. The hull insurance also covers equipment and spare parts that the owner has borrowed, rented or bought with a seller’s lien or similar encumbrances. This means that an owner does not have to take out a separate property insurance for equipment that he does not own, but for which he bears the risk. Under the 1964 Plan, reference was made to “retention of ownership”. However, the concept “purchase with retention of owner­ship” has been superseded in Norwegian law by “purchase with a seller’s lien”. The term “or similar encumbrances” has been incorporated in order to cover similar systems under the laws of other countries. According to the Plan, the cover of third parties’ interests also includes spare parts; this is new in relation to the 1964 Plan.

    The fact that the relevant objects are automatically included in the ship’s hull insurance nevertheless does not mean that the ownership interest or the mortgagee interest is automatically co-insured under the insurance. If a third party is to acquire status as a co-assured, this has to be agreed specifically, cf. Cl. 8-1. A third party’s rights will in that event be determined by the provisions in Cl. 8-1 et seq. Chapter 7 does not apply where the mortgage rights only concern equipment or spare parts.

    Under Norwegian law, the provision relating to the cover of third parties’ interests is of little practical importance concerning the purchase of equipment or spare parts with a seller’s lien. Under Section 45 of the Norwegian Maritime Code, mortgages and other encumbrances on ships that shall or may be entered in the ship’s register shall also comprise equipment which is on board or which has been temporarily removed. No special encumbrances on such equipment can be created. For ships that are insured on the Plan’s conditions for ocean-going vessels, this provision accordingly rules out seller’s liens on the equipment, cf. Brækhus: Omsetning og Kreditt 2 (Sales and credit), pp. 173-174. Actual leasing of ship’s equipment is accepted, however, provided the notice period satisfies the requirements of the law, cf. the six-month time-limit stipulated in Section 45, second sub-clause, of the Norwegian Maritime Code. Thus, in the event of such short-term leasing, the rule relating to the cover of third parties’ interests may become relevant. This rule may also be practical when it comes to the cover of ships where the flag State’s laws open the door to a separate provision of security in the equipment.

    New equipment or new spare parts will be included in the ship’s hull insurance from the time the object concerned “is swung over the railing” to be placed on board.

    Sub-clause 1 (c) is new and extends the cover in relation to the 1964 Plan to also comprise bunkers and lubricating oil on board. The extension represents a harmonisation in relation to Anglo-American marine insurance conditions, cf. MIA schedule I, no. 15. It is first and foremost of significance where bunkers and lubricating oil are lost or contaminated in connection with a major casualty. If the casualty merely results in loss of bunkers and/or lubricating oil, the fact is that the economic loss will rarely exceed the deductible. If the owner wants an extended cover in respect of these consumer articles, he will therefore either have to take out a separate insurance, or agree on a lower deductible for them.

    The cover in sub-clause 1 (c) concerns bunkers and lubricating oil. However, the assumption is that they belong to the ship’s owner. Bunkers belonging to a time-charterer or another third party is not covered by the ship’s hull insurance unless the person concerned is co-insured under Cl. 8-1. Such status as a co-assured party must be reflected in the insurance contract, cf. Cl. 8-1 and above concerning equipment, etc. The loss of bunkers will not be covered if the owner of the bunkers, etc. is not co-insured.

    Sub-clause 2 lists the objects that are excluded from hull cover and which may have to be covered by an insurance for fishing vessels, cf. Chapter 17, Sections 4 and 5, or some other separate insurance.

    Firstly, provisions, deck accessories and other articles intended for consumption are excluded. Paint will be a typical example of “other articles intended for consumption” in the same way as zinc and magnesium blocks, etc. for protection against corrosion were excluded under the 1964 Plan, cf. Cl. 176 (k) of the 1964 Plan, which stated this explicitly. However, as mentioned, it follows from sub-clause 1 that the hull insurance now covers bunkers and lubrication oil.

    The exclusion of articles intended for consumption does not comprise objects that are fixtures on the ship, even if they are of such a nature that they have to be replaced fairly often; fixed ceilings in the holds, insulation and other fixed installations in connection with the carriage of cargo are thus covered by the insurance.

    Secondly, in concordance with the 1964 Plan, boats and whaling, sealing and fishing tackle are excluded. However, even if a boat is used for one of those purposes, it will be covered by the insurance if it was under any circumstances required to be on board as a lifeboat.

    Thirdly, the Plan excludes “loose objects exclusively intended for securing or protecting the cargo”. The exclusion is limited to objects that are merely necessary in order for the cargo to arrive in as good a condition as possible. If, on the other hand, the objects are also intended for the protection and safety of the ship, they are covered by the hull insurance. Thus, loose ceilings which protect the cargo against dampness from the ship’s side, and dunnage, which prevents the various types of cargo and units from damaging each other during the voyage, qualify as equipment that falls outside the scope of the hull insurance. However, hull insurance will cover objects such as hatches, tarpaulins and loose bulkheads which are used for the carriage of bulk cargoes. Similarly, hull insurance will also cover objects which must be regarded more as a means of rationalising the transport operation than as a protection of the cargo, such as fork-lift trucks used in the hold. However, the prerequisite is that the objects constitute “equipment” as defined in sub-clause 1 of the provision, cf. above and ND 1972.302 NV Balblom.

    Finally, loose containers intended for the carriage of cargo are excluded from the hull cover. According to the Commentary on the 1964 Plan, such containers were covered by the hull insurance, but this solution was abandoned in the Special Conditions. Such containers must in any event be covered by property insurance during the period of time that they are on shore and not just temporarily removed from the ship, cf. Cl. 10-2, which makes it unnecessary to cover them under the ship’s hull insurance as well.

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    Clause 10-1. Objects insured

    The insurance covers: the ship, equipment on board and spare parts for the ship and its equipment, provided that the equipment or spare parts belong to the assured or have been borrowed, leased or purchased with a vendor's lien or similar encumbrance, bunkers and lubricating oil on board. The...

  • Clause 10-2. Objects, etc. temporarily removed from the ship

    This Clause was amended in the 2013 Plan. Sub-clauses 2 and 3, which concerned insurance of fishing vessels and freighters, where then moved to the new Cl. 17-7A.

    Sub-clause 1 corresponds to the 2010  Plan and establishes an extensive cover for objects that are temporarily removed from the ship. This becomes applicable in connection with loading and discharging, routine overhauling of special equipment, and when machinery or equipment is sent to special repair yards. The practical significance of the provision is limited, however, because the value of the objects in question will often be lower than the deductible, cf. above regarding bunkers and lubricating oil.

    The provision must be seen in conjunction with Cl. 10-1. The text has therefore been amended slightly in order to include the extension of the scope of cover in Cl. 10-1, sub-clause 1 (c). Insurance of objects removed from the vessel is linked to “objects referred to in Cl. 10-1, sub-clause 1”. This must be interpreted to mean that it covers everything mentioned there, including bunkers and lubricating oil, even if these are not normally referred to as “objects”. The prerequisite for cover under Cl. 10-2 is that the relevant object has been on board, and that the intention is to put it back on board after it has been ashore, cf. ND 1972.302 NV Balblom. New equipment on its way to the ship from the manufacturer is therefore not covered by the hull insurance, cf. what is stated in Cl. 10-1 concerning conditions for the inclusion of new equipment in the ship’s hull cover. Nor does the cover extend to joint stocks of spare parts maintained by an owner for several of his ships.

    It is a further condition that the objects are removed in connection with the operation of the ship or due to repairs, rebuilding, etc. Fork-lift trucks and other objects which accompany the ship will therefore have to be indemnified by the hull insurer if they are damaged whilst ashore in connection with loading or discharging. However, the hull insurance will not cover objects which are stored ashore while the ship is laid up, since in that situation they have no connection with the running of the ship.

    There are no limits as to the distance the objects may be sent, provided that they are brought back on board again before the ship’s departure. An object that is sent to a special repair yard will therefore be covered by the hull insurance during transport as well as during the stay at the repair yard.

    The insurance of objects removed from the vessel is subject to the absolute condition that the objects are brought on board again before the ship’s departure from the port in question. If the ship is repaired in the port, “departure” must be interpreted to mean that the ship, after completed repairs, commences a voyage. If, as part of the repair work, a ship is towed or sails under its own steam to a repair yard in another port, the insurance will not cease to be in effect for the objects, etc. which are ashore. Nor does the insurance terminate if the intention was to bring the object back on board again before departure, but where this was prevented, e.g. due to delayed repairs or transport of the object, cf. the wording “are intended to be put back on board”. However, it is a prerequisite that the objects are put back on board “before” departure: the hull insurance therefore does not cover objects, etc. which were brought ashore for repairs or the like while the ship is making a round-voyage.

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    Clause 10-2. Objects, etc. temporarily removed from the ship

    The insurance also covers objects referred to in Cl. 10-1, sub-clause 1, which are temporarily removed from the ship in connection with the running of the ship or on account of repairs, reconstruction or similar work, provided that the objects are intended to be put back on board before departure.

  • Clause 10-3. Loss due to ordinary use

    This Clause is identical to Cl. 150 of the 1964 Plan.

    The provision reflects a central principle of insurance law, viz. that the insurance shall only cover unforeseeable or unpredictable losses.

    The Clause excludes from the insurance cover certain losses which are regarded as regular operating expenses and which must therefore be borne by the owner. What constitutes a “normal consequence of the use of the ship and its equipment” is a question of discretion that must be decided on the basis of traditional solutions. The deciding factor is that the assured has deliberately used the ship in a manner or in a trade where damage is foreseeable. Examples of non-recoverable damage are foreseeable stevedore damage and foreseeable contact damage sustained in connection with navigation through locks or in a shallow river. On the other hand, damage will be recoverable if the ship strikes a rock in the river, or suffers a major collision with a lock wall. The same must apply if the ship, whilst carrying an isolated cargo of sulphur, sustains extensive and extraordinary corrosion damage.

    Traditionally, heavy-weather damage has in practice been kept outside the scope of Cl. 10-3, even if it is in certain trades quite foreseeable that the ship will over a certain period of time sustain heavy-weather damage of a certain extent, cf. ND 1990.50 Hov R.V.S. Takis H, concerning the corresponding Swedish provision.

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    Clause 10-3. Loss due to ordinary use

    The insurer is not liable for loss that is a normal consequence of the use of the ship and its equipment.

  • Clause 10-4. Insurance "on full conditions"

    This Clause is identical to Cl. 151 of the 1964 Plan.

    Insurance “on full conditions” means that the assured has the full normal cover that follows from the rules of the Plan relating to hull insurance. Any limitations to this cover must be agreed specifically. On the other hand, “full conditions” does not imply that the insurer shall indemnify each and every incident of damage in full, in view of the fact that the normal cover includes rules which in some cases provide for substantial deductions, cf. Cl. 12-15 to Cl. 12-19 and Cl. 13-4.

    Most ships will be insured on “full conditions”. The mortgagees will normally not accept that a mortgaged ship is insured on less comprehensive conditions. The deductible may nevertheless vary.

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    Clause 10-4. Insurance "on full conditions"

    Unless otherwise agreed, the hull insurer is liable for total loss, damage and collision liability in accordance with Chapters 11 to 13.

  • Clause 10-5. Insurance “against total loss only” (T.L.O.)

    This Clause is identical to Cl. 152 of the 1964 Plan.

    Insurance “against total loss only” occurs in very special situations, e.g. in connection with the towage of a ship that is to be sent to the breaker’s yard. In that event the insurer will only be liable for total loss in accordance with the rules in Chapter 11, i.e. where a ship is lost or so badly damaged that it cannot be repaired, is a constructive total loss, etc.

    Where the ship is insured against total loss only, the consequence in relation to loss in connection with measures to avert or minimise the loss is that the insurer is only liable for such loss if it is attributable to measures taken to avert a relevant risk of a total loss. This principle follows from the rules in Chapter 4, Section 2, of the Plan, and it is therefore unnecessary to have any special rule on this in Cl. 10-5.

    Where a case of general average has occurred, it is therefore necessary to split up the general average statement and cover the contribution to the extent that it refers to measures taken to avert or minimise the risk of a total loss. Contributions to so-called “common benefit” expenses are never recoverable; expenses in connection with putting into a port of refuge if the ship has suffered minor engine damage would perhaps be more doubtful.

    If the ship has been damaged in consequence of an act of general average (or a similar act to save a ship in ballast), the damage under Cl. 4-10 is recoverable in accordance with the rules relating to particular loss, if such settlement is more favourable for the assured. This rule shall not apply in the event of T.L.O. insurance, given that, in that situation, no indemnity would have been agreed for the damage. The compensation will therefore always be calculated on the basis of the general average rules.

    Furthermore, the rules contained in the general part of the Plan on accessory expenses shall apply. The insurer is liable for interest on the claim according to Cl. 5-4, and for costs in connection with the claims settlement, cf. Cl. 4-5. Furthermore, the insurer is liable for costs of providing security and costs of litigation, cf. Cl. 4-3 and Cl. 4-4, where the providing of security or the litigation is connected with events that would otherwise involve liability, thus primarily in connection with measures to avert a total loss. Costs in excess of the sum insured are recoverable in accordance with Cl. 4-19.

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    Clause 10-5. Insurance "against total loss only" (T.L.O.)

    If the insurance is effected "against total loss only", the insurer is liable for total loss in accordance with the rules in Chapter 11.

  • Clause 10-6. Insurance “against total loss and general average contribution only”

    This Clause is identical to Cl. 153 of the 1964 Plan.

    As mentioned in the preceding clause, it is necessary under a “pure” total-loss insurance to split up each general average statement and only cover the contribution to the extent that it concerns sacrifices that have been made in connection with a relevant risk of a total loss. Similarly, it is necessary in connection with an “assumed general average” to verify whether there was a risk of a total loss when the measures to avert or minimise the loss were taken. This complicates the claims settlements, and the assessment of the degree of risk may cause considerable uncertainty.

    These difficulties are avoided by insurance in accordance with Cl. 10-6, under which the insurer shall indemnify general average contributions and costs incurred by measures to avert or minimise the loss in the event of an assumed general average to the extent that he would have done so if the insurance had been effected “on full conditions”. The insurer is therefore liable for every general average contribution apportioned to the ship and every sacrifice made while the ship is in ballast, regardless of whether or not the measures were aimed at averting a total loss.

    Otherwise, reference is made to the comments on the preceding clause.

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    Clause 10-6. Insurance "against total loss and general average contribution only"

    If the insurance is effected "against total loss and general average contribution only", the insurer is liable for: total loss in accordance with the rules in Chapter 11, general average contributions and loss arising from assumed general average, cf. Cl. 4-7, Cl. 4-8, Cl. 4-9 and Cl. 4-11.

  • Clause 10-7. Insurance “against total loss, general average contribution and collision liability only”

    This Clause is identical to Cl. 154 of the 1964 Plan.

    Hull insurance under this Clause covers the same things as insurance in accordance with the preceding clause, plus collision liability to third parties, cf. Chapter 13 of the Plan. The insurer’s liability for loss in connection with measures to avert or minimise the loss, litigation costs, etc. will then be extended correspondingly, given that he will be liable for losses resulting from measures taken to avert a collision, which would have resulted in liability to a third party, or to limit the liability for damages.

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    Clause 10-7. Insurance "against total loss, general average contribution and collision liability only"

    If the insurance is effected "against total loss, general average contribution and collision liability only", the insurer is liable for : total loss in accordance with the rules in Chapter 11, general average contribution and loss arising from assumed general average, cf. Cl. 4-7, Cl. 4-8, Cl. 4-...

  • Clause 10-8. Insurance "on stranding terms"

    This Clause is identical to Cl. 155 of the 1964 Plan.

    This provision affords the same cover as Cl. 10-7, plus a limited cover against damage and against loss in connection with measures taken to avert such damage. The provision will hardly be of any great significance in connection with ordinary hull insurance, but barges and dories are to a considerable extent insured on stranding terms.

    Sub-clause (d) defines “stranding”. In the event of grounding, it is a condition that the ship is unable to re-float by its own means. If the ship has capsized, it must have heeled over to such a degree that the masts are in the water. Thus, the insurance does not cover damage to the ship if it has heeled over but is supported by a quay, a barge, or the like. However, the costs involved in righting the ship will be recoverable in such a case, provided that it was an established fact that the stability limit was exceeded and that the ship would have overturned completely if there had been nothing to support it. In case of fire or explosion, damage in the engine room is excluded from cover, provided that the fire or the explosion occurred there. Such damage is relatively frequent and very comprehensive, and the exclusion is necessary in order to retain insurance on stranding terms as an inexpensive insurance.

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    Clause 10-8. Insurance "on stranding terms"

    If the insurance is effected "on stranding terms", the insurer is liable for: total loss in accordance with the rules in Chapter 11, general average contribution and loss arising from assumed general average, cf. Cl. 4-7, Cl. 4-8, Cl. 4-9 and Cl. 4-11, liability to third parties in accordance wit...

  • Clause 10-9. Duration of voyage insurance

    This clause is identical to Cl. 156 of the 1964 Plan.

    Hull insurance is normally effected for a specific period of time, and the provision will consequently not be of any great practical significance.

    When deciding whether discharging “is proceeding with reasonable speed”, the issue of whether the assured has due grounds for withholding the cargo on board the ship, e.g. for the purpose of enforcing payment of the freight, must also be taken into consideration. As long as it can be regarded as a commercially justifiable part of the voyage to have the cargo on board, the voyage insurance will remain in effect. However, the assured may not let the ship assume the function of becoming a semi-permanent warehouse.

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    Clause 10-9. Duration of voyage insurance

    A voyage insurance attaches from the moment the ship starts loading cargo or ballast. If the ship is neither to load cargo nor ballast, the insurance attaches from the moment the ship weighs anchor or slips its moorings in order to sail. The insurance remains in effect until the ship has discharg...

  • Clause 10-10. Extension of the insurance

    Sub-clause 1 was amended in the 2007 version in accordance with the amendments to the rules regarding seaworthiness and safety regulations in Cl. 3-22. The Clause otherwise corresponds to earlier versions of the 1996 Plan.

    Under sub-clause 1 in the earlier versions, the insurance was to be extended if the ship upon expiry of the insurance period had damage for which the insurer was liable and which affected its seaworthiness. In the 2007 version the rules on seaworthiness were removed. In accordance with the Norwegian Ship Safety and Security Act, use is now made instead of the wording “technical and operational safety”, cf. in that respect Cl. 3-23, sub-clause 1. The wording “to make the ship seaworthy” in sub-clause 1 has therefore been replaced by “to make the ship compliant with technical and operational safety requirements”. The reason for the rule is to avoid difficult questions of causation if new casualties occur before the situation has again become “normalised”. Moreover, salvage, removal, repairs, etc. as part of dealing with the earlier casualty entail an additional risk which should be borne entirely by the insurer who is liable for the casualties.

    The wording “upon expiry of the insurance period” must be interpreted here as meaning expiry of the agreed insurance period regardless of whether an insurance period of one year or more than one year has been agreed upon, compare Cl. 1-5, sub-clause 4, which explicitly mentions the provisions under which a multi-year insurance contract must be divided up into one-year periods. The present provision is not included.

    The extension of the insurance is automatic; no action is required by the parties. It remains in effect until the ship has arrived at the first place where permanent repairs may be carried out and the damage has been repaired, if the repairs are carried out at that location. If the ship is instead moved to a different port for repairs, the question of insurance has to be clarified before the removal.

    The extension of the insurance is subject to the condition that the ship is in actual fact repaired. If it is laid up with unrepaired damage, both parties shall have the right to terminate the insurance contract as soon as it is established that the conditions for applying sub-clause 1 of this provision have not been met.

    Under sub-clause 2, first sentence, the time of commencement of a new insurance shall be adjusted in accordance with the extension of the old insurance. Pursuant to Cl. 1-5, the old insurance will remain in effect until 2400 hours on the day the repairs are completed, and the new insurance will consequently take effect as of the same time. If, however, the ship leaves the port of repairs earlier in the day, it would be reasonable to let the new insurance take effect as of departure, cf. sub-clause 2, second sentence.

    The question of an extension of the insurance also becomes relevant where the ship, on expiry of the insurance period, is reported missing or abandoned, and is later recovered without the conditions for claiming for a total loss being met. This question is regulated in Cl. 11-8.

    Under Cl. 6-4, the insurer may demand an additional premium when the insurance is extended under this sub-clause.

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    Clause 10-10. Extension of the insurance

    If, upon expiry of the insurance period, the ship has sustained damage for which the insurer is liable and which is of such a nature that repairs are necessary to make the ship compliant with technical and operational safety requirements, the insurance is extended until the ship has dropped ancho...

  • Clause 10-11. Liability of the insurer if the ship is salvaged by the assured

    This Clause corresponds to Cl. 159 of the 1964 Plan.

    Under Section 442, second sub-clause, of the Norwegian Maritime Code, a salvage award may be claimed even if the salvaging ship and the salvaged ship belong to the same owner. The rule allows the crew to claim their share of the salvage award under Section 451, second sub-clause, of the Norwegian Maritime Code, but it probably also allows the owner to claim a salvage award from his insurer. There is good reason to state the rule explicitly in the Plan, however.

    Cl. 159 of the 1964 Plan concerned salvage or “assistance”. The assistance concept, however, has been deleted from the Norwegian Maritime Code, and has therefore also been deleted from the Plan.

    The provision applies, according to its wording, only when the salvage operation is performed by a vessel. If, however, the salvage operation is carried out in a different way, e.g. by the use of a crane on shore, and a third party would have been entitled to a salvage award in such a situation, it would be logical to apply Cl. 10-11 by analogy.

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    Clause 10-11. Liability of the insurer if the ship is salvaged by the assured

    If the ship is salvaged by another vessel belonging to the assured, the insurer is liable as if the salvage operation had been carried out by a third party.

  • Clause 10-12. Reduction of liability in consequence of an interest insurance

    This Clause corresponds to Cl. 160 of the 1964 Plan, Cefor I.13 and PIC Cl. 5.28.

    Under Cl. 160 of the 1964 Plan, the hull insurer’s liability was reduced if the assured received compensation under a hull-interest insurance in an amount that exceeded 25% of the agreed hull value. For freight-interest insurance, there was a similar provision in the Special Conditions, cf. Cefor I.13 and PIC Cl. 5.28. The limitation was applied in order to prevent a major part of the hull cover from being shifted to the separate total loss insurances. This might undermine the premium foundation of the ordinary hull insurance, at the same time as an excessive total sum insured might also conceivably create a temptation for the assured to cause an insurance event. Finally, the limitation had a certain connection with the condemnation rules, because the condemnation limit is basically decided by the proportion of the costs of repairs to the agreed insurable hull value, at the same time as condemnation under the hull insurance triggers the interest insurance. Thus, in the event of a low agreed hull value and high interest insurance, the assured would apparently be able to obtain a high aggregate total loss cover in case of relatively modest damage to the ship. Admittedly, the latter case is countered by the fact that the condemnation rule establishes that if the market value is higher than the agreed value, it shall be incorporated into the condemnation formula instead of the agreed value. Moreover, a low agreed insurable hull value and high interest insurance may also be unfortunate, for other reasons, for the owner because there is a risk that the agreed insurable hull value is not sufficient to cover partial damage to the ship. Thus, if the ship’s market value is 100, the agreed insurable hull value 50 and the interest insurances 50, the owner will be without cover for partial damage between 51 and the condemnation limit of 80.

    In this light, the Plan affirms the rule from the 1964 Plan and the Special Conditions prohibiting interest insurance for more than a certain percentage of the agreed insurable hull value. Neither the hull interest insurance nor the freight interest insurance may be worded so that the assured under the relevant insurance may receive an indemnity which represents more than 25% of the agreed value in connection with the hull insurance against the same peril.

    Elimination of the excess portion of the total loss interest insurance would be sufficient to enforce the prohibition. Such a rule has been laid down in Cl. 14-4, sub-clause 2. It is, however, conceivable that total loss interest insurance is not effected on Plan Conditions and that it is consequently not subject to this reduction rule. In such situations the hull insurer needs a reaction against violations of the prohibition, viz. a right to reduce his liability. Such a rule is contained in Cl. 10-12.

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    Clause 10-12. Reduction of liability in consequence of an interest insurance

    If the assured receives compensation under a hull interest insurance or a freight interest insurance, and the amount paid under the respective insurances exceeds 25 % of the agreed insurable value applicable to the hull insurance against the same perils, the hull insurer's liability is reduced...