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Chapter 12: Damage

  • Clause 12-1. Main rule concerning liability of the insurer

    If the ship has been damaged without the rules relating to total loss being applicable, the insurer is liable for the costs of repairing the damage in such a manner that the ship is restored to the condition it was in prior to the occurrence of the damage.

    Liability arises as and when the repair costs are incurred.

    If the repairs have resulted in special advantages for the assured because the ship has been strengthened or the equipment improved, a deduction from the compensation shall be made limited to the additional costs caused by the strengthening or the improvement.

    If complete repairs of the damage are impossible, but the ship meets technical and operational safety requirements and may be made fit for its intended use by less extensive repairs, the insurer is, in addition to the repair costs, liable for the depreciation in value. If complete repairs of the damage will result in unreasonable costs, the insurer may demand that his liability be limited to the costs of the less extensive repairs, plus the depreciation in value.

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    Clause 12-1. Main rule concerning liability of the insurer

    The text itself has not been amended in the 2013 Plan, but some amendments have been made to the Commentary. This Clause contains the substantive main rules concerning the extent of the insurer’s liability for repair costs and supersedes the relevant Nordic Insurance Contracts Acts to the effect...

  • Clause 12-2. Compensation for unrepaired damage

    Even if repairs have not been carried out, the assured may claim compensation for the damage when the insurance period expires.

    Compensation is calculated on the basis of the estimated reduction in the market value of the ship due to the damage at the time of expiry, but shall not exceed the estimated costs of repairs. Estimated common expenses are not recoverable, except for 50 % of estimated dock and quay hire.

    The insurer is not liable for unrepaired damage if the ship becomes a total loss or qualifies for condemnation under Cl. 11-3 before the insurance terminates. This also applies if the total loss is not covered under this insurance.

    In the event of a transfer of ownership of the ship, the assured may transfer claims for known damage to the new owner.

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    Clause 12-2. Compensation for unrepaired damage

    This Clause was amended in the 2007 version. It was further amended in the 2010 version. According to relevant Nordic Insurance Contracts Acts (Nordic ICAs), the main rule is that the assured is entitled to full compensation for his economic loss, regardless of whether or not the damage is...

  • Clause 12-3. Inadequate maintenance, etc.

    The insurer is not liable for costs incurred in renewing or repairing a part or parts of the hull, machinery or equipment which were in a defective condition as a result of wear and tear, corrosion, rot, inadequate maintenance and the like.

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    Clause 12-3. Inadequate maintenance, etc.

    Sub-clause 2 was deleted in the 2007 version. The Clause otherwise corresponds to earlier versions of the 1996 Plan. The Commentary was also amended in the 2007 version in connection with the amendments to Cl. 3-22. The provision regulates the extent to which the assured is entitled to compensati...

  • Clause 12-4. Error in design, etc.

    If the damage is a result of error in design or faulty material, the insurer is not liable for the costs of renewing or repairing the part or parts of the hull, machinery or equipment which were not in proper condition, unless the part or parts in question had been approved by the classification society.

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    Clause 12-4. Error in design, etc.

    Introduction The scope of cover for parts suffering from errors in design and faulty material was extended in the 1996 Plan to apply to the whole vessel and not just parts of the main engine. Additional clarifications were introduced to the Commentary to Cl. 12-4 in connection with the 2007 versi...

  • Clause 12-5. Losses that are not recoverable

    The insurer is not liable for:

    • crew's wages and maintenance and other ordinary expenses connected with the running of the ship during the period of repair, unless this is specially agreed,
    • expenses of shifting, storing and removal of cargo,
    • accommodation of passengers,
    • objects which must normally be replaced several times during the expected life of the ship and which are and have been used for mooring, towing and the like, unless the loss is a consequence of the ship having sunk, or is attributable to collision, fire or theft. The same applies to tarpaulins,
    • zinc slabs, magnesium slabs and the like fitted for protection against corrosion.
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    Clause 12-5. Losses that are not recoverable

    Sub-clause (f) was deleted in 2016. Cl. 176 of the 1964 Plan contained a number of limitations in the hull insurer’s liability for damage to the ship. Furthermore, the Special Conditions contained provisions relating to bottom painting, which replaced Cl. 176 (d) and relating to loss resulting fr...

  • Clause 12-6. Deferred repairs

    If the repairs have not been carried out within five years after the damage was discovered, the insurer is not liable for any increase in the cost of the work that is incurred later.

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    Clause 12-6. Deferred repairs

    The provision corresponds to Section 177 of the 1964 Plan. The provision was amended in the 2002 version. In the 1996 version, the rule was formulated as an absolute time-limit for carrying out repairs, setting the time-limit at five years after the damage occurred, cf. Cl. 12-6, first sentence, ...

  • Clause 12-7. Temporary repairs

    The insurer is liable for the costs of necessary temporary repairs when permanent repairs cannot be carried out at the place where the ship is located.

    If temporary repairs of the damaged object are carried out in other cases, the insurer is liable for costs up to the amount he saves through the postponement of the permanent repairs, or up to 20 % p.a. of the agreed insurable hull value for the time the assured saves, if the latter amount is higher.

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    Clause 12-7. Temporary repairs

    This Clause corresponds to Cl. 178 of the 1964 Plan, Cefor I.7 and PIC Cl. 22. Sub-clause 1 is identical to Cl. 178 of the 1964 Plan and imposes full liability on the insurer for “necessary temporary repairs”. Temporary repairs are “necessary” when permanent repairs cannot be carried out in a...

  • Clause 12-8. Costs incurred in expediting repairs

    If the assured, in order to limit his loss of time, expedites repairs of the damaged object by extraordinary measures, the insurer's liability for the costs thereby incurred is limited to 20 % p.a. of the agreed insurable hull value for the time saved by the assured. The time saved for the assured and the liability of the insurer are to be calculated collectively in relation to all repairs that are carried out concurrently.

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    Clause 12-8. Costs incurred in expediting repairs

    This Clause corresponds to Cl. 179 of the 1964 Plan, Cefor I.7 and PIC Cl. 5.22. The Commentary was amended in the 2010 version. The Clause is based on the view of the loss-of-time problem which was discussed in the preceding sub-clause. When the assured takes extraordinary measures to save time...

  • Clause 12-9. Repairs of a ship that is condemnable

    If a ship is repaired despite the fact that the conditions for condemnation are met, the insurer's liability is limited to the sum insured plus additional costs under Cl. 4-19, if applicable, but with the deduction of the value of the wreck.

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    Clause 12-9. Repairs of a ship that is condemnable

    This Clause is identical to Cl. 180 of the 1964 Plan. The provision is intended as a defence for the insurer if the assured insists on making repairs. If the assured repairs the ship because the insurer refused to approve a claim for condemnation, or the parties agree that repairs are expedient,...

  • Clause 12-10. Survey of damage

    Before any damage is repaired, it shall be surveyed by a representative of the assured and a representative of the insurer.

    The representatives shall submit survey reports, in which they describe the damage and state their opinions as regards the probable cause of each individual item of damage, the time of its occurrence and the costs of repair.

    If one of the parties so requires, the representatives shall, before the damage is repaired, submit preliminary reports in which they give an approximate estimate of the costs of repairs.

    If there is disagreement between the representative of the assured and the representative of the insurer, the parties may appoint an umpire who shall give a reasoned opinion of the questions submitted to him. If the parties cannot agree on the choice of an umpire, he shall be appointed by a Nordic average adjuster.

    Neither the assured nor the insurer may petition for a judicial valuation of the damage, unless this is required by the laws of the relevant country.

    If the assured, without compelling reasons, has the ship repaired without any survey being held or without notifying the insurer of such survey, he has, in addition to the burden of proof under Cl. 2-12, the burden of proving that the damage is not attributable to causes not covered by the insurance.

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    Clause 12-10. Survey of damage

    This Clause corresponds to Cl. 181 of the 1964 Plan. Sub-clause 4 was amended in the 2010 version. Sub-clauses 1-3 are identical to the 1964 Plan and concern survey of damage and the submission of survey reports by the parties’ representatives prior to repairs. In practice, sub-clauses 1 and 2...

  • Clause 12-11. Invitations to tender

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

    If the time taken to obtain tenders exceeds ten days as from the date the invitation to submit tenders is sent out, the insurer is liable to compensate the loss of time at the rate of 20 % p.a. of the agreed insurable hull value during the excess period.

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    Clause 12-11. Invitations to tender

    This Clause is identical to Cl. 182 of the 1964 Plan. Sub-clause 1, first sentence gives the insurer the right to demand that tenders be obtained. If the insurer is aware of the casualty, it must be his duty to clarify with the assured whether or not he will demand invitations to tender. If he...

  • Clause 12-12. Choice of repair yard

    The tenders received shall, for the purpose of comparison, be adjusted by the costs of removal being added to the tender amount.

    The assured decides which yard shall be used, but the insurer's liability for the costs of repairs and removal is limited to an amount corresponding to the amount that would have been recoverable if the lowest adjusted tender had been accepted, with an addition of 20 % p.a. of the agreed insurable hull value for the time the assured saves by not choosing that tender.

    If the assured, because of special circumstances, has justifiable reason to object to the repairs being carried out at one of the yards that have submitted tenders, he may demand that the tender from that yard be disregarded.

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    Clause 12-12. Choice of repair yard

    This Clause is identical to Cl. 183 of the 1964 Plan. According to sub-clause 1 , the tenders received shall be adjusted by adding the costs of removal when ascertaining which tender is in actual fact the lowest. It is a basic rule in Norwegian hull insurance that it is the assured himself who...

  • Clause 12-13. Removal of the ship

    Subject to the limitation that follows from Cl. 12-12, the insurer is liable for the costs of moving the ship to the repair yard, including wages and maintenance for necessary crew, bunkers and similar direct expenses in connection with the running of the ship during the period of time involved. If the removal results in costs savings for the assured, a corresponding amount shall be deducted.

    If another insurer has expressly disclaimed liability during the removal in accordance with Cl. 3-20, the insurer who is liable for the damage to the ship shall also be liable for any loss that arises during or in consequence of the removal, and which would otherwise have been recoverable from the other insurer.

    The insurer may disclaim any liability during the removal in accordance with Cl. 3-20.

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    Clause 12-13. Removal of the ship

    This Clause corresponds to Cl. 184 of the 1964 Plan. The Commentary was amended in the 2007 version. The removal of the ship to the repair yard constitutes part of the repairs, and the costs of the removal must therefore be covered by the insurer, cf. sub-clause 1 . The costs of removal first and...

  • Clause 12-14. Apportionment of common expenses

    If expenses have been incurred which are common to repair work for which the insurer is liable and work which is not covered by the insurance, these expenses shall be apportioned on the basis of the cost of each category of work. However, dry dock charges and quay rental shall be apportioned on the basis of the time that the recoverable and the non-recoverable work would have required if each category of work had been carried out separately.

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    Clause 12-14. Apportionment of common expenses

    Cl. 12-14 was slightly amended in 2016, and the Commentary was largely rewritten to reflect current adjusting practice. The Clause regulates the apportionment of repair expenses that are common to more than one category of work effected during a stay at a single port or place of repairs. Accordin...

  • Clause 12-15. Ice damage deductions

    Damage due to striking against or contact with ice - excluding collision with icebergs on the open sea - is recoverable subject to a deduction stated in the insurance contract. To this shall be added the deductible referred to in Cl. 12-18, sub-clause 1.

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    Clause 12-15. Ice damage deductions

    The second sentence was added in 2016. For the sake of clarity, the new sentence emphasizes that the ice damage deduction comes in addition to the general deductible under Cl. 12-18, sub-clause 1. In line with the general deductible provision in Cl. 12-18 and other clauses of similar nature, it i...

  • Clause 12-16. Machinery damage deductions

    Damage to machinery and accessories and to pipelines and electrical cables outside the machinery is recoverable subject to deductions as set out in the insurance contract. To this shall be added the deductible referred to in Cl. 12-18, sub-clause 1.

    However, no machinery damage deduction shall be made if the damage is a consequence of:

    • the ship having been involved in a grounding, collision or striking,
    • the engine room having been completely or partly flooded,
    • fire or explosion originating outside the engine room.
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    Clause 12-16. Machinery damage deductions

    The word “grounding” was added in letter (a) and a mere editorial amendment was made to letter (c) of sub-clause 2 in the 2013 Plan. Cl. 12-16 provides for a machinery damage deduction in addition to the standard deductible which the parties can activate by agreeing on the amount to be deducted,...

  • Clause 12-17. Compensation without deductions

    The following are recoverable without deductions according to Cl. 12-15 and
    Cl. 12-16:

    • loss recoverable under Cl. 12-1, sub-clause 4, Cl. 12-11, sub-clause 2, and Cl. 12-13,
    • unused spare parts that are damaged or lost,
    • temporary repairs.
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    Clause 12-17. Compensation without deductions

    This Clause corresponds to Cl. 188 of the 1964 Plan. Certain losses are covered without deductions. This applies to depreciation in value under Cl. 12-1, sub-clause 4, normal loss of time under Cl. 12-11, sub-clause 2, costs of removal under Cl. 12-13, unused spare parts and temporary repairs. In...

  • Clause 12-18. Deductible

    For each casualty the amount stated in the insurance contract shall be deducted.

    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 a single casualty.

    Costs in connection with the claims settlement, cf. Cl. 4-5, and loss arising from measures to avert or minimise the loss, see Cl. 4-7 to Cl. 4-12, are recoverable without any deductible.

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    Clause 12-18. Deductible

    In Cl. 189, sub-clause 1, of the 1964 Plan the deductible (formerly “the franchise”) was set at one-thousandth of the sum insured, however, not less than NOK 1,000 and not more than NOK 10,000. The Special Conditions left the deductible to the parties’ negotiations, however, and this approach has...

  • Clause 12-19. Basis for calculation of deductions according to Clauses 12-15 to 12-18 and Clause 3-15

    Deductions under Cl. 3-15, sub-clause 2, Cl. 12-15, Cl. 12-16 and Cl. 12-18 are calculated on the basis of the full amount of compensation according to the Plan and the insurance conditions before deductions under any of these sections are made.

    Deductions are also made if damage to the ship is recoverable under Cl. 4-7, cf. Cl. 4-12, sub-clause 1.

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    Clause 12-19. Basis for calculation of deductions according to Clauses 12-15 to 12-18 and Clause 3-15

    This Clause corresponds to Cl. 190 of the 1964 Plan. Sub-clause 1 is identical to the 1964 Plan, but a reference to Cl. 3-15, sub-clause 2, which contains a new deduction provision relating to the situation where a ship proceeds beyond conditional trading areas, has been introduced. The provision...