The Plan

Scroll to the top

Chapter 16: Loss of hire insurance

  • Clause 16-1. Main rules regarding the liability of the insurer

    The insurance covers loss due to the ship being wholly or partially deprived of income as a consequence of damage to the ship which is recoverable under the conditions of the Plan, or which would have been recoverable if no deductible had been agreed, see Cl. 12-18. If the hull insurance has been effected on conditions other than those of the Plan, and these conditions have been accepted in writing by the insurer, the rules in Chapters 10 - 12 of the Plan shall be replaced by the corresponding conditions of the insurance concerned when assessing whether the damage is recoverable.

    The insurance also covers loss due to the ship being wholly or partially deprived of income:

    • because it has stranded,
    • because it is prevented by physical obstruction (other than ice) from leaving a port or a similar limited area, or
    • as a consequence of measures taken to salvage or remove damaged cargo,
      or
    • as a consequence of an event that is allowed in general average pursuant to the 1994 York-Antwerp Rules.
    View CommentaryGo to full Commentary page

    Clause 16-1. Main rules regarding the liability of the insurer

    This provision was amended in the 2003 version. The Commentary was amended in the 2013 Plan. Sub-clause 1, first sentence, contains the main rules regarding the insurer’s liability under the loss-of-hire insurance, which require “damage to the ship” that “is recoverable under the terms of the...

  • Clause 16-2. Total loss

    The insurer shall not be liable for loss of time resulting from a casualty which gives the assured the right to compensation for total loss under Chapter 11 of the Plan or under the corresponding conditions in the hull insurance that applies to the ship pursuant to Cl. 16-1, sub-clause 1, second sentence.

    View CommentaryGo to full Commentary page

    Clause 16-2. Total loss

    This Clause was amended in the 2003 version. The provision states a fundamental principle of loss-of-hire insurance: the insurance does not cover loss of time resulting from the total loss of the ship. Such loss of time can occur in two different connections. Firstly, considerable time may elapse...

  • Clause 16-3. Main rule for calculating compensation

    Compensation shall be determined on the basis of the time during which the ship has been deprived of income (loss of time) and the loss of income per day (the daily amount). Loss of time that occurred prior to the events described in Cl. 16-1 shall not be recoverable.

    View CommentaryGo to full Commentary page

    Clause 16-3. Main rule for calculating compensation

    The first sentence states the main rule for calculating compensation, and provides that compensation is to be determined on the basis of the time during which the ship has been out of operation and the loss of income per day. The method of calculation indicated must be used even when the loss of...

  • Clause 16-4. Calculation of the loss of time

    Loss of time shall be stipulated in days, hours and minutes. A period of time during which the ship has only partially been deprived of income shall be converted into a corresponding period of total loss of income.

    The insurer's liability for loss of time resulting from any one casualty, and for the total loss of time resulting from all casualties occurring during the insurance period, shall be limited to the sum insured per day multiplied by the number of days of indemnity per casualty and altogether stated in the insurance contract.

    View CommentaryGo to full Commentary page

    Clause 16-4. Calculation of the loss of time

    Sub-clause 2 was amended in the 2003 version, but the amendment was purely editorial and entailed no substantive changes. This provision supplements Cl. 16-3, and lays down further rules for calculating loss of time once the extent of the time lost has been established. Additional supplementary...

  • Clause 16-5. The daily amount

    The assured's loss of income per day (the daily amount) shall be fixed at the equivalent of the amount of freight per day under the current contract of affreightment less such expenses as the assured saves or ought to have saved due to the ship being out of regular employment.

    If the ship is unchartered, the daily amount shall be calculated on the basis of average freight rates for ships of the type and size concerned during the period in which the ship is deprived of income.

    View CommentaryGo to full Commentary page

    Clause 16-5. The daily amount

    The provision lays down rules for calculating the daily amount under open policies, i.e. policies that do not specify any agreed value for the daily amount. As mentioned in the Commentary on Cl. 16-3, the “daily amount” is the insurable value of the assured’s loss of income per day. In practice,...

  • Clause 16-6. Agreed daily amount

    If it is stated in the insurance contract that loss of time shall be compensated for by a fixed amount per day, this amount shall be regarded as an agreed daily amount unless the circumstances clearly indicate otherwise.

    View CommentaryGo to full Commentary page

    Clause 16-6. Agreed daily amount

    In 2016 the word “assessed” was replaced with “agreed” corresponding with the amendment to Cl. 2-3.  The provision regulates the agreed daily amount. As mentioned under Cl. 16-5, the daily amount is usually agreed ; the reason for doing so is to avoid difficulties in calculating the daily amount...

  • Clause 16-7. Deductible period

    Each casualty shall be subject to a deductible period which shall run from the commencement of the loss of time and last until the loss of time, calculated in accordance with the rule in Cl. 16-4, sub-clause 1, second sentence, is equivalent to the deductible period stated in the insurance contract. Loss of time in the deductible period is not recoverable.

    Damage caused by heavy weather or navigating in ice which has occurred during the period between departure from one port and arrival at the next one shall be regarded as one casualty.

    If a separate deductible period for damage to machinery has been agreed on, Cl. 12-16 shall apply correspondingly.

    View CommentaryGo to full Commentary page

    Clause 16-7. Deductible period

    Sub-clause 3 was amended in the 2007 version. The Clause is otherwise identical to the 2003 version. Sub-clause 1 has been simplified, but the substantive content is unchanged. The first sentence of sub-clause 1 provides that a deductible period, stated in the insurance contract , shall be...

  • Clause 16-8. Survey of damage

    The provisions of Cl. 12-10 shall apply correspondingly to this insurance.

    View CommentaryGo to full Commentary page

    Clause 16-8. Survey of damage

    The provision refers to the rules for survey of damage in Cl. 12-10 of the Plan. The reference also applies even if the hull insurance has been effected on conditions other than those of the Plan with the written consent of the insurer. Consequently, any survey rules in the differing standard...

  • Clause 16-9. Choice of repair yard

    The insurer may require that tenders for repairs be obtained from repair yards of his choice. If the assured does not obtain such tenders the insurer may do so.

    If, due to special circumstances, the assured has reasonable grounds to object to the repairs being carried out by one of the repair yards that has submitted a tender, he may require that the tender from that yard be disregarded.

    The assured shall decide which yard is to be used. However, the liability of the insurer shall be limited to the loss of time under the tender that would have resulted in the least loss of time among the tenders for which the assured would have been able to claim compensation under the hull insurance. If the assured chooses this repair yard, the claim shall be settled on the basis of the actual time lost, even if this is greater than that specified in the tender. If the hull insurance has been effected on conditions other than those of the Plan, and these conditions have been accepted in writing by the insurer, the liability of the insurer shall be limited to the loss of time under the tender that would have resulted in the least loss of time plus half of any additional loss of time that may occur.

    View CommentaryGo to full Commentary page

    Clause 16-9. Choice of repair yard

    Sub-clause 3 was amended in the 2003 version. This provision regulates the right of the assured to choose a repair yard and the consequences his choice of yard has for the extent of the loss-of-hire insurer’s liability. Sub-clauses 1 and 2 concern the invitation of tenders on which to base the...

  • Clause 16-10. Removal to the repair yard, etc.

    Loss of time during removal to the repair yard shall be attributed to the category of repairs that necessitated the removal.

    If removal to the repair yard was necessary for more than one category of repairs, the removal time shall be apportioned in accordance with the time that each category of work would have required if carried out separately. Removal time that falls within the deductible period shall not be apportioned.

    The rules of  sub-clauses 1 and 2 shall also apply to loss of time during surveys, while obtaining tenders, during tank cleaning, while waiting to commence repairs or due to other similar measures that were necessary in order to carry out the repairs.

    View CommentaryGo to full Commentary page

    Clause 16-10. Removal to the repair yard, etc.

    The wording of this Clause was amended in the 2013 Plan. The terms “class of repairs” and “class of work” has been replaced with “category of repairs” and “category of work” in order to make the Plan´s use of terms consistent. The provision regulates the insurer’s liability for loss of time in...

  • Clause 16-11. Extra costs incurred in order to save time

    The insurer shall be liable for extra costs incurred in connection with temporary repairs and in connection with extraordinary measures taken in order to avert or minimise loss of time covered by the insurance, insofar as such extra costs are not recoverable from the hull insurer. If the hull insurance has been effected on conditions other than those of the Plan, and these conditions have been accepted in writing by the insurer, the rules of Cl. 16-1,  sub-clause 1, second sentence, shall apply.

    The insurer shall not, however, be liable for such costs in excess of the amount he would have had to pay if such measures had not been taken.

    If time is saved for the assured, he shall bear a share of the extra costs that is proportionate to the time saved for his account.

    View CommentaryGo to full Commentary page

    Clause 16-11. Extra costs incurred in order to save time

    The title was changed from “Costs” to “Extra costs” in the 2003 version , in order to specify that the costs must essentially be of an extraordinary nature. The Commentary on sub-clause 1 was amended in the 2013 Plan. This provision regulates the liability of the loss-of-hire insurer for costs...

  • Clause 16-12. Simultaneous repairs

    If repairs covered under this insurance are carried out simultaneously with work which is not covered under any loss of hire insurance, but which:

    • is carried out to fulfil classification requirements, or
    • is necessary to enable the ship to meet technical and operational safety requirements or perform its contractual obligations, or
    • is related to the reconstruction of the ship,

    the insurer shall pay compensation for half of the time common to both categories of repair in excess of the deductible period.

    If repairs resulting from two casualties, both of which are covered under this insurance, are carried out simultaneously, the rule in sub-clause 1 shall apply correspondingly for the time that is within the deductible period of one casualty, but not within the deductible period of the other casualty.

    If repairs covered under this insurance and work covered under other loss of hire insurance are carried out simultaneously, the insurer shall pay compensation for half of the repair time common to both categories of work in excess of the deductible period. This also applies where repairs under the other insurance contract are carried out within the deductible period under this insurance contract. Furthermore, if work which is not covered under any loss of hire insurance but which falls within the scope of sub-clause 1 is carried out simultaneously, the insurer shall only pay compensation for one fourth of the common repair time which exceeds the deductible period.

    When applying the rules set out in sub-clauses 1-3, each category of work shall be deemed to have lasted for the number of days the work would have required if each category of work had been carried out separately, reckoned from the time the work started. Unless the circumstances clearly indicate another point in time, all categories of work shall be deemed to have started on the ship's arrival at the yard. Any delay which might occur due to several categories of work being carried out simultaneously shall be attributed to all categories in proportion to the number of days each category would have required if carried out separately, reckoned from the time the work started. However, the insurer’s liability shall not exceed the amount that would have been payable if the category of work for which he is liable had been carried out separately.

    View CommentaryGo to full Commentary page

    Clause 16-12. Simultaneous repairs

    Sub-clause 4 was amended in 2016 . Sub-clause 1 (b) was amended in the 2007 version. The provision is otherwise identical to the 2003 version, in which minor amendments in sub-clauses 2 and 3 were made, former sub-clause 1 (c) was deleted, while former sub-clause 1 (b) was split up into sub-claus...

  • Clause 16-13. Loss of time after completion of repairs

    After repairs have been completed, the insurer shall only be liable for loss of time:

    • until the ship can resume the voyage or activity that it was engaged in under the contract of affreightment that was in force at the time of the casualty,
    • until ships which are employed in liner trade or in another way follow a fixed route or operate in a defined geographical area can resume their activity,
    • while the ship sails to the first port of loading under a contract of affreightment that was entered into with binding effect prior to the casualty,
    • until passenger ships can resume their activity, but for a period not exceeding fourteen days.


    Cl. 16-10 shall apply correspondingly to loss of time after completion of repairs.

    View CommentaryGo to full Commentary page

    Clause 16-13. Loss of time after completion of repairs

    Sub-clause 1 (b) was amended in the 2013 Plan. This provision limits the insurer’s liability for loss of time that occurs after repairs have been completed. According to the main rule for calculating loss of time set out in Cl. 16-4, the insurer would have been fully liable for time lost after...

  • Clause 16-14. Repairs carried out after expiry of the insurance period

    The insurer shall not be liable for loss of time resulting from a stay at a repair yard that commences more than two years after expiry of the insurance period.

    Loss of time resulting from a stay at a repair yard which commences after expiry of the insurance period shall be recoverable in accordance with the rules of Cl. 16-5, even if the daily amount is an agreed amount pursuant to Cl. 16-6, if this results in lower compensation.

    View CommentaryGo to full Commentary page

    Clause 16-14. Repairs carried out after expiry of the insurance period

    It follows from Cl. 2-11, sub-clause 1, that the decisive criterion as regards the insurer’s liability is whether the peril “strikes” during the insurance period; if so, the insurer is also liable for any loss that occurs later. If, for instance, the insured ship is subject to a collision or...

  • Clause 16-15. Liability of the insurer when the ship is transferred to a new owner

    When damage to the ship is repaired in connection with a transfer of ownership, the insurer shall not be liable for time that would in any event have been lost in connection with the said transfer. If the transfer has to be postponed due to repairs covered by this insurance, the insurer shall be liable for the assured's loss of interest in accordance with the rules of Cl. 5-4, even though the ship would not have earned income during the postponement.

    The insurer's liability pursuant to sub-clause 1 shall not exceed the compensation calculated on the basis of the sum insured per day and:

    • the period of time by which the transfer was postponed, or
    • the time it must be estimated that the buyer will take to repair the ship,

    less the agreed deductible period. The deductible period is calculated in consecutive days even if the loss of interest differs from the sum insured per day. No compensation may be claimed under Cl. 16-13 in these cases.

    The assured's claim against the insurer may not be transferred to a new owner.

    View CommentaryGo to full Commentary page

    Clause 16-15. Liability of the insurer when the ship is transferred to a new owner

    Sub-clause 2 was amended in the 2010 version. Sub-clause 2 in the 1996 version was deleted in the 2003 version. Sub-clause 1 has not been amended and regulates the situation where damage to the ship is repaired in connection with the ship’s transfer to a new owner. In this case, the basic princip...

  • Clause 16-16. Relationship to other insurances and general average

    The rules as to subrogation in Cl. 5-13 of the Plan shall apply correspondingly to:

    • the assured's right to claim compensation for loss of time and operating costs during removal to a repair yard under Cl. 12-11 or Cl. 12-13 of the Plan, or equivalent provisions in other conditions applicable to the ship's hull insurance, and
    • any right the assured might otherwise have to claim compensation for the loss from another insurer or in general average.
    View CommentaryGo to full Commentary page

    Clause 16-16. Relationship to other insurances and general average

    This provision has not been amended. However, amendments were made on points of substance in the Commentary in the 2010 version. It follows directly from Cl. 5-13 that the loss-of-hire insurer is subrogated to the assured’s claim against any third party who is liable for the loss of time for whic...