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Chapter 7: Co-insurance of mortgagees

  • Clause 7-1. Rights of a mortgagee against the insurer

    If the interest covered by the insurance is mortgaged, the insurance also covers the mortgagee's interest, but the insurer may invoke the rules relating to identification in Cl. 3-36 to Cl. 3-38.

    If the insurer has been notified of the mortgage, the rules contained in Cl. 7-2 to Cl. 7-4 shall apply. The notice takes effect from the time it reaches the insurer.

    The insurer shall advise the mortgagee that the mortgage has been noted and of the effects that this has for the rights of the mortgagee under the insurance.

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    Clause 7-1. Rights of a mortgagee against the insurer

    The Commentary to this Clause was rewritten in 2016. Sub-clause 1  states that the mortgagee's interest is automatically covered.  The mortgagee is co-assured even though notice is not given pursuant to sub-clause 2. The consequence of failure to give such notice is simply that the mortgagee will...

  • Clause 7-2. Amendments and cancellation of the insurance

    If the insurance contract has been amended or cancelled, the rights of the mortgagee shall not be affected unless the insurer has given him specific notice of not less than fourteen days. However, this shall not apply to war risks insurance, cf. Cl. 15-8, sub-clause 1, second sentence.

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    Clause 7-2. Amendments and cancellation of the insurance

    The Commentary to this Clause was rewritten in 2016. The first sentence of the provision states that amendments to or cancellation of the insurance contract may not be invoked against the mortgagee unless he has been notified by the insurer. This expands somewhat the mortgagee's protection in...

  • Clause 7-3. Handling of claims, claims adjustments, etc.

    Decisions required in respect of casualties, adjustments or claims against third parties may be made without the participation of the mortgagee.

    The right to compensation for a total loss may not be waived, wholly or in part, to the detriment of the mortgagee.

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    Clause 7-3. Handling of claims, claims adjustments, etc.

    The Commentary to this Clause was rewritten in 2016. Sub-clause 1 reflects the situation in marine insurance where it is most practical for the person effecting the insurance or the assured who is responsible for the operation of the ship, to have authority to negotiate the settlement of the clai...

  • Clause 7-4. Payment of compensation


    In the event of a total loss, the mortgagee's interests take priority. 

    Compensation for loss from a single casualty exceeding 5 % of the sum insured shall, in the absence of consent from the mortgagee, only be paid by the insurer upon presentation of a receipted invoice for repairs carried out.
    If the ship is insured with two or more insurers against the same perils, this restriction applies to the combined payments from the insurers.

    Compensation under Cl. 12-1, sub-clause 4, and Cl. 12-2, may not be paid without the consent of the mortgagee.

    Compensation for loss of time may not be paid without the consent of the mortgagee who has a mortgage on the ship's freight income.

    Liability to a third party which is covered by the insurance may only be settled upon presentation of a receipt from the third party.

    In the absence of the mortgagee's consent, the insurer may only set off claims which have arisen out of the insurance contract relating to the ship in question and which have fallen due in the course of the last two years prior to the settlement of a claim.

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    Clause 7-4. Payment of compensation

    The Commentary to this Clause was rewritten in 2016. Sub-clause 1 gives the mortgagee priority in the event of total loss. Parties other than the owner may also be entitled to compensation. Hence, the rule states that the mortgagee is given priority against all other possible claimants under the...