Part One: Rules common to all types of insurance
- Chapter 1: Introductory provisions
Chapter 2: General rules relating to the scope of the insurance
Section 1: Insurable interest and insurable value
- Clause 2-1. Insurance unrelated to any interest
- Clause 2-2. Insurable value
- Clause 2-3. Agreed insurable value
- Clause 2-4. Under-insurance
- Clause 2-5. Over-insurance
- Clause 2-6. Liability of the insurer when the interest is also insured with another insurer
- Clause 2-7. Recourse between the insurers where the interest is insured with two or more insurers
Section 2: Perils insured against, causation and loss
- Clause 2-8. Perils covered by an insurance against marine perils
- Clause 2-9. Perils covered by an insurance against war perils
- Clause 2-10. Perils insured against when no agreement has been made as to what perils are covered by the insurance
- Clause 2-11. Causation. Incidence of loss
- Clause 2-12. Main rule relating to the burden of proof
- Clause 2-13. Combination of perils
- Clause 2-14. Combination of marine and war perils
- Clause 2-15. Losses deemed to be caused entirely by war perils
- Clause 2-16. Loss attributable either to marine or war perils
- Clause 2-17. Sanction limitation and exclusion
- Section 1: Insurable interest and insurable value
Chapter 3: Duties of the person effecting the insurance and of the assured
- General remarks
Section 1: Duty of disclosure of the person effecting the insurance
- Clause 3-1. Scope of the duty of disclosure
- Clause 3-2. Fraudulent misrepresentation
- Clause 3-3. Other failure to fulfil the duty of disclosure
- Clause 3-4. Innocent breach of the duty of disclosure
- Clause 3-5. Cases where the insurer may not invoke breach of the duty of disclosure
- Clause 3-6. Duty of the insurer to give notice
- Clause 3-7. Right of the insurer to obtain particulars from the vessel's classification society, etc.
Section 2: Alteration of the risk
- Clause 3-8. Alteration of the risk
- Clause 3-9. Alteration of the risk caused or agreed to by the assured
- Clause 3-10. Right of the insurer to cancel the insurance
- Clause 3-11. Duty of the assured to give notice
- Clause 3-12. Cases where the insurer may not invoke alteration of the risk
- Clause 3-13. Duty of the insurer to give notice
- Clause 3-14. Loss of the main class
- Clause 3-15. Trading areas
- Clause 3-16. Illegal undertakings
- Clause 3-17. Suspension of insurance in the event of requisition
- Clause 3-18. Notification of requisition
- Clause 3-19. Suspension of insurance while the vessel is temporarily seized
- Clause 3-20. Removal of the vessel to a repair yard
- Clause 3-21. Change of ownership
- Section 3: Safety regulations
- Section 4: Measures to avert or minimise loss, etc.
- Section 5: Casualties caused intentionally or negligently by the assured
- Section 6. Identification
Chapter 4: Liability of the insurer
- Section 1: General rules relating to the liability of the insurer
Section 2: Costs of measures to avert or minimise the loss, including salvage awards and general average
- Clause 4-7. Compensation of the costs of measures to avert or minimise loss
- Clause 4-8. General average
- Clause 4-9. General average apportionment where the interests belong to the same person
- Clause 4-10. Damage to and loss of the object insured
- Clause 4-11. Assumed general average
- Clause 4-12. Costs of particular measures taken to avert or minimise loss
- Section 3: Liability of the assured to third parties
- Section 4: The sum insured as the limit of the liability of the insurer
Chapter 5: Settlement of claims
Section 1: Claims adjustment, interest, payments on account, etc.
- Clause 5-1. Duty of the assured to provide information and documents
- Clause 5-2. Claims adjustment
- Clause 5-3. Rates of exchange
- Clause 5-4. Interest on the compensation
- Clause 5-5. Disputes concerning the adjustment of the claim
- Clause 5-6. Due date
- Clause 5-7. Duty of the insurer to make a payment on account
- Clause 5-8. Payment on account when there is a dispute as to which insurer is liable for the loss
- Section 2: Liability of the assured to third parties
Section 3: Claims by the assured for damages against third parties
- Clause 5-13. Right of subrogation of the insurer to claims by the assured for damages against third parties
- Clause 5-14. Waiver of claim for damages
- Clause 5-15. Duty of the assured to assist the insurer with information and documents
- Clause 5-16. Duty of the assured to maintain and safeguard the claim
- Clause 5-17. Decisions concerning legal proceedings or appeals
- Clause 5-18. Salvage award which entails compensation for loss covered by the insurer
- Section 4: Right of the insurer to take over the object insured upon payment of a claim
- Section 5: Limitation, etc.
- Section 1: Claims adjustment, interest, payments on account, etc.
Chapter 6: Premium
- Clause 6-1. Payment of premium
- Clause 6-2. Right of the insurer to cancel the insurance in the event of non-payment of premium
- Clause 6-3. Premium in the event of total loss
- Clause 6-4. Additional premium when the insurance is extended
- Clause 6-5. Reduction of premium
- Clause 6-6. Reduction of premium when the vessel is laid up or in similar situations
- Clause 6-7. Claim for a reduction of premium
- Chapter 7: Co-insurance of mortgagees
Chapter 8: Co-insurance of third parties
- Clause 8-1. Rights of third parties against the insurer
- Clause 8-2. Protection of third parties against subrogation claims from the insurer
- Clause 8-3. Application of the rules in Chapter 3 and Clause 5-1
- Clause 8-4. Amendments and cancellation of the insurance contract
- Clause 8-5. Handling of claims, claims adjustment, etc.
- Clause 8-6. Other insurance
- Clause 8-7. Independent co-insurance of mortgagees or named third parties
Chapter 9: Relations between the claims leader and co-insurers
- Clause 9-1. Definitions
- Clause 9-2. The right of the claims leader to act on behalf of the co-insurers
- Clause 9-3. Lay-up plan
- Clause 9-4. Notification of a casualty
- Clause 9-5. Salvage
- Clause 9-6. Removal and repairs
- Clause 9-7. Provision of security
- Clause 9-8. Disputes with third parties
- Clause 9-9. Claims adjustment
- Clause 9-10. Insolvency of a co-insurer
- Clause 9-11. Interest on the disbursements of the claims leader
Part Two: Hull insurance
Chapter 10: General rules relating to the scope of the hull insurance
- Clause 10-1. Objects insured
- Clause 10-2. Objects, etc. temporarily removed from the vessel
- Clause 10-3. Loss due to ordinary use
- Clause 10-4. Insurance "on full conditions"
- Clause 10-5. Insurance “against total loss only” (T.L.O.)
- Clause 10-6. Insurance “against total loss and general average contribution only”
- Clause 10-7. Insurance “against total loss, general average contribution and collision liability only”
- Clause 10-8. Insurance "on stranding terms"
- Clause 10-9. Duration of voyage insurance
- Clause 10-10. Extension of the insurance
- Clause 10-11. Liability of the insurer if the vessel is salvaged by the assured
- Clause 10-12. Reduction of liability in consequence of an interest insurance
Chapter 11: Total loss
- Clause 11-1. Total loss
- Clause 11-2. Salvage attempts
- Clause 11-3. Condemnation
- Clause 11-4. Condemnation in the event of a combination of perils
- Clause 11-5. Request for condemnation
- Clause 11-6. Removal of the vessel
- Clause 11-7. Missing or abandoned vessel
- Clause 11-8. Extension of the insurance when the vessel is missing or abandoned
- Clause 11-9. Liability of the insurer during the period of clarification
Chapter 12: Damage
- Clause 12-1. Main rule concerning liability of the insurer
- Clause 12-2. Compensation for unrepaired damage
- Clause 12-3. Inadequate maintenance, etc.
- Clause 12-4. Error in design, etc.
- Clause 12-5. Losses that are not recoverable
- Clause 12-6. Deferred repairs
- Clause 12-7. Temporary repairs
- Clause 12-8. Costs incurred in expediting repairs
- Clause 12-9. Repairs of a vessel that is condemnable
- Clause 12-10. Survey of damage
- Clause 12-11. Invitations to tender
- Clause 12-12. Choice of repair yard
- Clause 12-13. Removal of the vessel
- Clause 12-14. Apportionment of common expenses
- Clause 12-15. Ice damage deductions
- Clause 12-16. Machinery damage deductions
- Clause 12-17. Compensation without deductions
- Clause 12-18. Deductible
- Clause 12-19. Basis for calculation of deductions according to Clauses 12-15 to 12-18 and Clause 3-15
- Chapter 13: Liability of the assured arising from collision or striking
- Chapter 10: General rules relating to the scope of the hull insurance
Part Three: Other insurances for ocean-going vessels
Chapter 14: Separate insurances against total loss
- Clause 14-1. Insurance against total loss and excess collision liability (hull interest insurance)
- Clause 14-2. Insurance against loss of long-term freight income (freight interest insurance)
- Clause 14-3. Common rules for separate insurances against total loss
- Clause 14-4. Limitations on the right to effect separate insurances against total loss
Chapter 15: War risks insurance
- Section 1: General rules relating to the scope of war risks insurance
- Section 2: Termination of the insurance
- Section 3: Trading areas
- Section 4: Total loss
- Section 5: Damage
- Section 6: Loss of hire
- Section 7: Owner’s liability, etc. (P&I)
- Section 8: Occupational injury insurance, etc.
Chapter 16: Loss of hire insurance
- Clause 16-1. Main rules regarding the liability of the insurer
- Clause 16-2. Total loss
- Clause 16-3. Main rule for calculating compensation
- Clause 16-4. Calculation of the loss of time
- Clause 16-5. The daily amount
- Clause 16-6. Agreed daily amount
- Clause 16-7. Deductible period
- Clause 16-8. Survey of damage
- Clause 16-9. Choice of repair yard
- Clause 16-10. Removal to the repair yard, etc.
- Clause 16-11. Extra costs incurred in order to avert or minimise loss
- Clause 16-12. Simultaneous repairs
- Clause 16-13. Loss of time after completion of repairs
- Clause 16-14. Repairs carried out after expiry of the insurance period
- Clause 16-15. Liability of the insurer when the vessel is transferred to a new owner
- Clause 16-16. Relationship to other insurances and general average
- Chapter 14: Separate insurances against total loss
Part Four: Other insurances
Chapter 17: Insurance for fishing vessels
Section 1: General provisions
- Clause 17-1. Scope of application
- Clause 17-2. Renewal of the insurance/Ref. Clause 1-5
- Clause 17-3. Trading areas for fishing vessels/Ref. Clause 3-15
- Clause 17-4. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8
- Clause 17-5. Safety regulations/Ref. Clause 3-22 and Clause 3-25
- Clause 17-6. Savings to the assured
Section 2: Hull insurance
- Clause 17-7. The relationship to Chapters 10-13
- Clause 17-7A. Fixed equipment temporarily removed from the vessel
- Clause 17-8. Change of the open or agreed insurable value/Ref. Clause 2-2 and Clause 2-3
- Clause 17-9. Damage to lifeboats, fishing, whaling and sealing tackle and catch/Ref. Clause 4-7 to Clause 4-12 and Clause 4-16
- Clause 17-10. Hull and freight-interest insurance/Ref. Clause 10-12
- Clause 17-11. Condemnation/Ref. Clause 11-3
- Clause 17-12. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1
- Clause 17-13. Limited cover of damage to machinery
- Clause 17-14. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12
- Clause 17-15. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18
- Clause 17-16. Collision liability for fishing vessels/Ref. Clause 13-1
- Clause 17-17. Collision liability/Ref. Clause 13-1
- Section 3: Hull insurance - extended cover
Section 4: Catch and equipment insurance - standard cover
- Clause 17-19. Objects insured
- Clause 17-20. Insurable value
- Clause 17-21. Extraordinary handling costs
- Clause 17-22. Excluded perils/Ref. Clause 2-8
- Clause 17-23. Deck cargo
- Clause 17-24. Total loss
- Clause 17-25. Damage to or loss of catch
- Clause 17-26. Damage to other objects
- Clause 17-27. Survey of damage
- Clause 17-28. Deductible
- Section 5: Supplementary cover for nets and seines in the sea
Section 6: Loss of hire insurance for fishing vessels
- General comments
- Clause 17-33. Relationship to Chapter 16
- Clause 17-34. Liability of the insurer/applies instead of Clause 16-1
- Clause 17-35. Total loss/applies instead of Clause 16-2
- Clause 17-36. Calculation of compensation for fishing vessels/Ref. Clause 16-3
- Clause 17-37. The daily amount for fishing vessels/applies instead of Clause 16-5
- Clause 17-38. Agreed daily amount for fishing vessels/applies instead of Clause 16-6
Chapter 18: Insurance of mobile offshore units (MOUs)
- Section 1: General rules relating to the scope of the insurance
Section 2: Hull insurance
Section 2-1: General rules relating to the scope of the H&M insurance
- Clause 18-2. Objects insured
- Clause 18-3. Objects temporarily removed or separated etc. from the MOU
- Clause 18-4. Loss due to ordinary use
- Clause 18-5. Extension of the insurance
- Clause 18-6. Liability of the insurer if the MOU is salvaged by the assured
- Clause 18-7. Reduction of liability in consequence of an interest insurance
Section 2-2: Total loss
- Clause 18-8. Total loss
- Clause 18-9. Salvage attempts
- Clause 18-10. Condemnation
- Clause 18-11. Condemnation in the event of a combination of perils
- Clause 18-12. Request for condemnation
- Clause 18-13. Removal of the MOU
- Clause 18-14. Missing or abandoned MOU
- Clause 18-15. Extension of the insurance when the MOU is missing or abandoned
- Clause 18-16. Liability of the insurer during the period of clarification
Section 2-3: Damage
- Clause 18-17. Main rule concerning liability of the insurer
- Clause 18-18. Compensation for unrepaired damage
- Clause 18-19. Inadequate maintenance
- Clause 18-20. Error in design, etc.
- Clause 18-21. Losses that are not recoverable
- Clause 18-22. Damage to the drill string
- Clause 18-23. Deferred repairs
- Clause 18-24. Temporary repairs
- Clause 18-25. Costs incurred in expediting repairs
- Clause 18-26. Repairs of an MOU that is condemnable
- Clause 18-27. Survey of damage
- Clause 18-28. Invitations to tender
- Clause 18-29. Choice of repairers
- Clause 18-30. Removal for repairs
- Clause 18-31. Apportionment of common expenses
- Clause 18-32. Ice damage deductions
- Clause 18-33. Deductible
- Clause 18-34. Basis for calculation of deductions according to Clauses 18-32, 18-33 and 3-15
- Section 2-4: Liability of the assured arising from collision or striking
- Section 2-1: General rules relating to the scope of the H&M insurance
Section 3: Separate insurances against total loss
- Clause 18-39. Insurance against total loss and excess collision liability (hull interest insurance)
- Clause 18-40. Insurance against loss of long-term freight income (freight interest insurance)
- Clause 18-41. Common rules for separate insurances against total loss
- Clause 18-42. Limitations on the right to insure separately against total loss
Section 4: Loss of hire insurance
- Clause 18-43. Main rules regarding the liability of the insurer
- Clause 18-44. Total loss
- Clause 18-45. Main rule for calculating compensation
- Clause 18-46. Calculation of the loss of time
- Clause 18-47. The daily amount
- Clause 18-48. Agreed daily amount
- Clause 18-49. Deductible period
- Clause 18-50. Survey of damage
- Clause 18-51. Choice of repairer
- Clause 18-52. Move to the repair location, etc.
- Clause 18-53. Extra costs incurred in order to avert or minimise loss
- Clause 18-54. Simultaneous works
- Clause 18-55. Loss of time after completion of repairs
- Clause 18-56. Repairs carried out after expiry of the insurance period
- Clause 18-57. Liability of the insurer when the MOU is transferred to a new owner
- Clause 18-58. Relationship to other insurances and general average
Section 5: War risks insurance
- Section 5-1: General rules relating to the scope of war risks insurance
- Section 5-2: Termination of the insurance
- Section 5-3: Areas of operation
- Section 5-4: Total loss
- Section 5-5: Damage
- Section 5-6: Loss of hire
- Section 5-7: Owner’s liability, etc. (P&I)
- Section 5-8: Occupational injury insurance, etc.
Section 6: Construction risks insurance
- Section 6-1: General rules relating to the scope of construction risks insurance
Section 6-2: Loss of or damage to the MOU
- Clause 18-87. Objects insured/Ref Clause 18-2
- Clause 18-88. Insurable value
- Clause 18-89. Compensation in the event of a total loss/Ref. Clause 4-1
- Clause 18-90. Total Loss/Ref. Section 2-2
- Clause 18-91. Damage/Ref. Section 2-3
- Clause 18-92. Error in design, etc.
- Clause 18-93. Costs incurred in order to save time/Ref. Clauses 18-24, 18-28 and 18-29
- Section 6-3: Supplementary covers
Chapter 19: Builders’ risks insurance
Section 1: Common provisions
- Clause 19-1. Perils covered/Ref. Clause 2-8, cf. Clause 2-10
- Clause 19-2. Insurance period/Ref. Clause 1-5
- Clause 19-2A. Premium in the event of total loss
- Clause 19-3. Co-insurance/Ref. Clause 8-1
- Clause 19-4. Transfer of the building contract/Ref. Clause 3-21
- Clause 19-5. Place of insurance
- Clause 19-6. The sum insured as the limit of the liability of the insurer/Ref. Clause 4-18 and Clause 4-19
- Clause 19-7. Escalation of the sum insured
- Clause 19-8. Deductible
Section 2: Loss of or damage to the subject-matter insured
- Clause 19-9. Objects insured/Ref. Clause 10-1
- Clause 19-10. Insurable value
- Clause 19-11. Total loss in the event of condemnation
- Clause 19-12. Total loss where the yard’s obligation to deliver no longer applies
- Clause 19-13. Compensation in the event of a total loss/Ref. Clause 4-1
- Clause 19-14. Damage/Ref. Chapter 12
- Clause 19-15. Limitation of the insurer’s liability/Ref. Clause 12-1
- Clause 19-16. Compensation for unrepaired damage/Ref. Clause 12-2
- Clause 19-17. Costs incurred in order to save time/Ref. Clause 12-7, Clause 12-11 and Clause 12-12
- Section 3: Indemnification of additional costs incurred in an unsuccessful launching and costs of wreck removal
- Section 4: Liability insurance
Section 5: Supplementary covers
- Clause 19-22. Applicable rules
- Clause 19-23. Insurance of additional costs in connection with rebuilding and/or building of a new subject-matter insured
- Clause 19-24. Insurance of the yard’s liability for the buyer’s interest claim for instalments paid
- Clause 19-25. Insurance of the yard’s loss of interest in the event of late delivery
- Clause 19-26. Insurance of the yard’s daily penalties in the event of late delivery
- Clause 19-27. Towage and removal of the subject-matter insured
- Section 6: Supplementary cover for war risks
Chapter 20: Insurance for vessels with trading certificates
- Section 1: Common provisions
Section 2: Hull insurance
- Clause 20-6. The relationship to Chapters 10-13
- Clause 20-7. Hull and freight-interest insurance/Ref. Clause 10-12
- Clause 20-8. Condemnation/Ref. Clause 11-3
- Clause 20-9. Damage to the hull of vessels which are not built of steel/Ref. Clause 12-1
- Clause 20-10. Limited cover of damage to machinery
- Clause 20-11. Costs incurred in saving time/Ref. Clause 12-7, Clause 12-8, Clause 12-11 and Clause 12-12
- Clause 20-12. Deductions/Ref. Clause 12-15, Clause 12-16 and Clause 12-18
- Clause 20-13. Collision liability/Ref. Clause 13-1
- Section 3: Hull insurance - extended cover
- Section 4: Hull insurance - limited cover
Chapter 21: Liability insurance
- Clause 21-1. Scope of application
- Clause 21-2. Renewal of the insurance/Ref. Clause 1-5
- Clause 21-3. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8
- Clause 21-4. Savings to the assured
- Clause 21-5. Perils covered
- Clause 21-6. Liability for personal injury
- Clause 21-7. Liability for property damage
- Clause 21-8. Liability for description
- Clause 21-9. Liability for the misdelivery of goods
- Clause 21-10. General average contributions
- Clause 21-11. Liability for removal of wrecks
- Clause 21-12. Liability for special salvage compensation
- Clause 21-13. Liability for bunker oil pollution damage and damage to the environment
- Clause 21-14. Stowaways
- Clause 21-15. Liability for fines, etc.
- Clause 21-16. Liability for social benefits for the crew
- Clause 21-17. Travel expenses for replacement crew
- Clause 21-18. Expenses for disinfection and quarantine
- Clause 21-19. Limitation due to other insurance, etc.
- Clause 21-20. Safety regulations/Ref. Clause 3-22 and Clause 3-25
- Clause 21-21. Assured's fault
- Clause 21-22. The insurer's rights in the event of liability
- Clause 21-23. Liability for loss that occurred during other transport, etc.
- Clause 21-24. Limitation of liability for fishing vessels
- Clause 21-25. Limitation of the insurer's liability for measures to avert or minimise loss
- Clause 21-26. The sum insured as a limit to the insurer's liability
- Clause 21-27. Deductible
- Chapter 17: Insurance for fishing vessels
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Section 1: Insurable interest and insurable value
This Section corresponds to Chapter 2, Section 1, of the 1964 Plan.
Cl. 5 of the 1964 Plan contained a provision as to what interests were deemed to be covered. This provision has been deleted; the scope of the relevant insurance will appear from the rules relating to the individual lines of insurance. It is nevertheless not the intention to change the reality behind the provision, viz. that it is not the object itself, but the assured’s economic interest in the object, which is covered by the insurance. The interest terminology is a practical means of creating flexibility and variation in the insurance. In particular, it must be emphasized that it is possible to let several persons each insure their separate interest in the object (e.g., owner and mortgagee), and it is relatively simple to state the items of loss in respect of which the assured may claim cover under each individual insurance (the interest in the vessel’s capital value is covered by hull insurance, the income interests by freight insurance).
However, attention should be drawn to the fact that the word “interest” is also used with a somewhat different meaning in marine insurance, viz. as a designation of certain capital or income interests which are not covered by the ordinary hull or freight insurance, cf. Chapter 14 relating to hull and freight interest insurances.
Clause 2-1. Insurance unrelated to any interestView Clause Go to Plan page
This provision is identical to Cl. 6 of the 1964 Plan.
The provision establishes the traditional precondition for a valid insurance contract, i.e. that the assured must have an economic interest in the subject-matter insured. A “wager insurance”, where it has been clear from the outset that no insurable interest existed, is therefore invalid. Similarly, the assured must be precluded from invoking the insurance after the assured has ceased to hold the interest, for example, when the vessel is definitely confiscated or passes to a new owner. Nor will the new owner of the vessel normally acquire the position of assured under the insurance contract, cf. Cl. 8-1, sub-clause 1, to the effect that the assured must be specifically named in the contract, and cf. Cl. 3-21 relating to change of ownership.
The question regarding insurance unrelated to any interest is currently not regulated in relevant Nordic Insurance Contracts Acts (Nordic ICAs), but the same result follows from Section 12 of the Norwegian Act no. 11 of 22 May 1902 relating to the coming into force of the penal code (Straffelovens ikrafttredelseslov). The fact that the corresponding provision has been lifted out of the Norwegian ICA could be an argument in favour of it also being deleted from the Plan. There is a need for some information on the interest as the subject-matter of insurance in the Commentary regardless, however, and the provision should therefore remain for pedagogical reasons, particularly with regard to those assureds who are not familiar with the Norwegian market.
The provision is based on the traditional principle that it is not the object itself, but the assured’s economic interest in the object, which is the subject-matter of the insurance. It is, however, difficult to determine the requirements the interest must meet in order to be insurable. A point of departure may be that it must be possible to base the interest on any existing economic relationship between the assured and the vessel (owner, mortgagee, charterer, user, requisitioner). Further, the interest must have economic value so that the assured will suffer an economic loss if the interest is destroyed. However, a certain margin must be given for subjective assessments in the valuation of the interest. Accordingly, it is not a requirement that the interest must have a value which is measurable according to objective criteria. When agreed insurable values are used, the assured’s own assessment of the interest must carry substantial weight. The necessary guarantee against abuse is implicit in the rules relating to revision of the valuation, cf. Cl. 2-3.
The provision contained in Cl. 2-1 does not solve the question whether the interest is “legal”, cf. former Section 35 of the ICA, currently NL 5-1-2. This question is essentially solved in the Plan through Cl. 3-16 relating to illegal activities. If the legality of the assured’s interest is at issue in relation to matters other than the use of the vessel for illegal purposes, the question must be decided on the basis of the criteria that apply generally in insurance law, cf. NL 5-1-2. In the application of the rule, due regard must be had to the nature of the provisions that are breached, the extent of the illegal activities, the extent to which the assured is aware of the facts, the connection between the illegal situation and the interest insured, and whether there is causation between the illegal situation and the damage.
Clause 2-2. Insurable valueView Clause Go to Plan page
Sub-clause 1, second sentence, and sub-clause 2 were added in 2016.
Sub-clause 1, first sentence, states that the insurable value is the full value of the interest at the inception of the insurance. This provision differs from general insurance law, where the insurable value is determined at the time of loss, cf. relevant Nordic Insurance Contracts Acts. The reason for the special rule in marine insurance was that it might be difficult to determine the value at the time of loss if the vessel was far away. With today’s communications systems, there is every possibility of determining the value at the time of the loss, regardless of where the vessel might be. Nevertheless, the traditional solution in marine insurance has been maintained on this point.
Further rules governing the time for the “inception of the insurance” are contained in Cl. 1-5 of the Plan. The time poses no problems for ordinary insurance contracts with a term of one year. If it has been agreed that the insurance is to attach for a period of more than one year, it follows from Cl. 1-5, sub-clause 4, which was added in the 2003 version, that the insurance period is to be deemed to be one year in relation to Cl. 2-2. Further details regarding the calculation of the various insurance periods are set out in the Commentary on Cl. 1-5.
As regards some interests, the value will be explicitly regulated in the various insurance conditions. This is not the case with hull insurance, in which it is the market value which forms the basis for the calculation of the insurable value.
In loss of hire insurance, cf. Chapter 16, it seems more natural to have an insurable value for the anticipated daily income, cf. Cl. 16-5, and tie the total limitation of the insurer’s liability to a certain number of days.
If the parties do not agree to fix the insurable value, the insurable value is called “open”. According to sub-clause 1, second sentence, the parties may by agreement fix the insurable value at a certain amount to avoid discussion on the market value at any given time. For ocean-going vessels, agreement on the insurable value is rather common. A fixed insurable value is called agreed insurable value, cf. Cl. 2-3, and corresponds to a “valued policy” or “agreed value” in the English market.
Sub-clause 2 states that the sum or sums insured in the insurance contract shall be deemed to constitute agreed insurable value(s) unless the circumstances clearly indicate otherwise. The term “circumstances” is taken from Cl. 16-6, and refers to matters or arguments that are relevant for the interpretation of the insurance contract. Examples are information from the negotiation between the parties, indicating that the intention of the parties was to keep the value open. The term circumstances in this respect does not include circumstances occurring after the contract is entered into, which may subsequently lead to a change in the value of the vessel. In such case, the value must be renegotiated by the parties or amended in accordance with Cl. 2-3.
Clause 2-3. Agreed insurable valueView Clause Go to Plan page
The word “assessed” was replaced with “agreed" throughout the Plan and the Commentary in 2016. Sub-clause 2 was amended in the 2019 Version.
Cl. 2-3 regulates the extent to which an agreed insurable value is binding on the insurer. For the shipowners, it is important that a valuation is unconditionally binding on the insurer: an expanding shipowner’s building programme is based on the vessels’ current freight income or, if a vessel is lost, on its insured value, and the mortgagees as well need to know that they can rely on the hull valuation.
The provision applies to all types of insurance. The term “the subject-matter insured” must therefore in this connection be interpreted to be synonymous with “the interest insured”.
Under this provision, the insurer may challenge the valuation even if the person effecting the insurance has given its information in good faith. As regards the determination of the valuation, the insurer should have an unconditional right to be given correct information, and the risk of any errors should lie with the person effecting the insurance.
If misleading information has been given about the properties which are material to the valuation, the valuation will be “set aside”. This means that the agreed valuation ceases to be in effect in its entirety, so that the value of the object insured must be determined according to the rule relating to open insurance value in Cl. 2-2, i.e. the full value of the interest at the inception of the contract. It is, in other words, not sufficient to reduce the valuation to the highest amount that would have been acceptable without conflicting with Cl. 2-3.
In relevant Nordic ICAs, reference is made to the rules relating to the duty of disclosure in the event that the person effecting the insurance has given incorrect information of importance for the valuation. In marine insurance, however, the rules relating to the duty of disclosure in Cl. 3-1 et seq. are not applicable to misleading information which is only of importance for the determination of the valuation. The consequences of the misleading information in such cases are exhaustively regulated in Cl. 2-3; there is no need for further sanctions in the form of exemption from liability or cancellation of contract as allowed by the rules relating to the duty of disclosure. However, in the event of fraud, it follows from general rules of contract law that the agreement is void. And if information has been given which is misleading in relation to the valuation as well as significant for the actual effecting of the insurance, the insurer will obviously, in addition to a reduction of the valuation, have the right to invoke Cl. 3-1 et seq. concerning exemption from liability for damage and, possibly, cancellation of the insurance.
The provision only regulates the setting aside of an excessively high valuation. The insurer should not have the right to demand that a valuation which is clearly too low be set aside with the effect that under-insurance will arise in the event of partial damage. Such a demand will hardly have any legitimate basis: to cover repair costs he has received a premium (casualty premium), which is determined on the basis of the size, type and age of the vessel, in principle independently of the valuation.
Sub-clause 2 was amended in the 2019 Version and establishes a right for both parties to demand an adjustment of the agreed insurable value in the event of a significant change in the value of the interest insured resulting from change in fundamental expectations upon which the insurance contract was based. There must have been a change that is unrelated to the acts or influence of either of the parties and the change must be of a kind that affects the express or clearly implied assumptions that were the basis for the parties‘ agreement about the insured vessel’s value. If the agreed insurable value is based on the current market value of the vessel and there is a significant change of the market value after the insurance contract was entered into, both parties may require a change of value. If on the other side the basis for the insurable value was mainly based on the contractual arrangements for the vessel, market fluctuation might not be relevant. The same must apply if the insurable value was agreed on the basis of outstanding loan arrangements with a bank. It is only the valuation which can be changed in this manner; the insurance contract remains in force.
If the parties do not agree as to whether or not the conditions for an adjustment of the valuation are met, or about a new valuation amount, sub-clause 3 provides that the decision shall be made by a Nordic average adjuster appointed by the assured.
Clause 2-4. Under-insuranceView Clause Go to Plan page
This Clause is identical to Cl. 9 of the 1964 Plan and corresponds to relevant Nordic Insurance Contracts Acts (Nordic ICAs).
The provision maintains the principle of under-insurance if the sum insured is less than the insurable value, which means that the insurer shall merely compensate the part of the loss that corresponds to the proportion that the sum insured has to the insurable value, cf. first sentence.
Until 1989, the Plan rule relating to under-insurance was in accordance with the non-mandatory point of departure in Section 40 of the Norwegian Insurance Contracts Act 1930. The main rule has now been amended to insurance on first risk: “Unless otherwise provided in the insurance contract, the assured is entitled to full compensation for his economic loss”. However, most non-marine insurance conditions maintain the principle of under-insurance. The Committee considered whether the solution of the relevant Nordic ICAs should be followed in marine insurance, but reached the conclusion that the most expedient thing to do is to maintain the traditional point of departure of under-insurance. This is particularly due to the fact that, in marine insurance, co-insurance is common, and that the combination of the first-risk principle as a non-mandatory point of departure and the pro-rata principle for co-insurance seems unnecessarily complicated.
In so far as the insurable value has been agreed, the question of under-insurance will have already been determined when the insurance is effected. Furthermore, the rule relating to under-insurance does not apply merely to the actual compensation, but also to the insurer’s right to take over proceeds and claims against third parties, affecting the insured loss. This appears from Cl. 5-13, sub-clause 2, and Cl. 5-19, sub-clause 1, second sentence.
In relation to co-insurance, the rule applies only to co-insurance in the form of several parallel insurances where each individual insurer becomes liable for that proportion of the sum insured for which it is liable in relation to the aggregate insurable value. If the co-insurance is effected in the form of insurances in several layers, each layer must be regarded as an independent interest. It is therefore necessary to calculate a separate insurance value for each layer and look at the sum insured within the relevant layer in relation to the insurable value for that particular layer. The rules relating to under-insurance are applicable to co-insurers within the same layer, but not to the relationship between several co-insurers who are each liable for their own layer.
The provision contained in Cl. 2-4 does not regulate the question of the co-insurers’ liability in the event of collision damage, in view of the fact that there is no insurable value for such liability. However, it is generally assumed that the distribution of liability among the co-insurers must be based on the hull value.
Clause 2-5. Over-insuranceView Clause Go to Plan page
This provision is identical to the provision in Cl. 10 of the 1964 Plan. The same result follows indirectly from relevant Nordic Insurance Contracts Acts (Nordic ICAs).
Sub-clause 1 is identical to the earlier provision and requires no comments. Sub-clause 2 relating to fraud is not found in Nordic ICAs, but is in accordance with non-marine insurance conditions.
Clause 2-6. Liability of the insurer when the interest is also insured with another insurerView Clause Go to Plan page
The provision corresponds to Cl. 11 of the 1964 Plan and relevant Nordic Insurance Contracts Acts (Nordic ICAs).
Sub-clause 1 establishes the principle of primary joint and several liability in the event of “double insurance”, i.e. when the same peril is insured with two or more insurers, and corresponds to the rule contained in Cl. 11 of the 1964 Plan. Basically it corresponds to the Norwegian Insurance Contracts Act Section 6-3, first sub-clause: “If the same loss is covered by several insurances, the assured may choose which insurances he or she wishes to use until the assured has obtained the total compensation to which he or she is entitled”. However, the wording of relevant Nordic ICAs does not rule out subsidiarity clauses (clauses to the effect that one insurance is subsidiary in relation to another), while there is a desire in marine insurance to keep the door open for such clauses, cf. the Commentary on sub-clause below. The earlier wording to the effect that each insurer is liable “in accordance with their respective contracts” has therefore been maintained.
Sub-clause 1 is applicable to three situations. In the first place, it applies to double insurance in the form of ordinary co-insurance. Here the individual sums insured will in the aggregate correspond to the valuation and each individual insurer will be fully liable according to his contract, regardless of the fact that other insurances have also been effected (cf., however, Chapter 9, where a number of aspects of the internal relationship between the co-insurers are regulated).
In the second place, the provision becomes significant when there is “double insurance” in the traditional sense, i.e. where several parallel insurances are effected which in the aggregate will give the assured more compensation than the loss it has suffered. The provision in Cl. 2-6 establishes that, in this case as well, the insurers are primarily jointly and severally liable to the assured within the framework of the compensation to which the assured is entitled. The further settlement between the insurers is regulated in more detail in Cl. 2-7.
The third situation where there is double insurance is when a loss is covered partly under the primary cover of an insurance, partly as costs to avert or minimise the loss under another insurance. In principle, this loss should be covered under the insurance which covers costs to avert or minimise the loss, cf. below under Cl. 2-7. But also here the assured must initially be entitled to claim damages from both insurers according to Cl. 2-6.
The size of the compensation to which the assured “is entitled” will depend on the insurance conditions. If the conditions authorize cover of varying amounts, it is the highest amount which is decisive for the size of the claim. Until the assured has recovered this amount, it may bring a claim against any of the insurers it wishes within the terms of the conditions which the relevant insurer has accepted.
The provision contained in sub-clause 1 is only applicable in the event of a conflict between two insurances covering the same peril. Hence, a conflict between an insurance against marine perils and an insurance against war perils is not a double insurance according to Cl. 2-6. Nor is it double insurance if the cover is divided into several layers. In the event of layer insurances, each layer must, as mentioned above in the Commentary on Cl. 2-5, be regarded as an independent interest. The insurer under one layer therefore does not become jointly and severally liable with the insurer under another layer, and a loss cannot be transferred from one layer to another if the insurer under one layer is, in exceptional cases, unable to cover a loss.
Sub-clause 2 is new and regulates the settlement if one insurance has been made subsidiary. The rule here is that the insurer who has subsidiary liability is only liable for the amount for which the assured does not have cover with other insurers. It should be superfluous to say this in the Plan text; the solution follows from the actual subsidiarity principle and does not give rise to any particular problems. However, because of the special rule contained in sub-clause 3, see below, an explicit provision was found to be the most expedient.
If several insurances are made subsidiary, there is a risk that the assured may be left without settlement because both or all of the insurers may invoke their subsidiarity clauses. Accordingly, in such cases, there is a need for a rule to protect the assured. A rule of this type was previously contained in Section 43 of the Norwegian Insurance Contracts Act 1930, which imposed on the insurers a primary pro-rata liability or, in the alternative, joint and several liability. This provision was considered unnecessary under the system in the Norwegian ICA 1989. During the Plan revision, it was decided that in such cases a primary joint and several liability should be imposed on the insurers vis-à-vis the assured, see sub-clause 3, which makes sub-clause 1 similarly applicable.
Cl. 14 of the 1964 Plan contained a provision relating to the duty of the person effecting the insurance to disclose any other insurances he might have. The provision corresponded to Section 44 of the Norwegian ICA 1930, which was deleted in the revision of the Norwegian ICA in 1989, inter alia on the grounds that the general provision relating to the duty of disclosure of the person effecting the insurance was sufficient to regulate the situation. The same will apply in marine insurance; furthermore, Cl. 2-5, sub-clause 2, relating to fraudulent over-insurance applies. The provision has, therefore, been deleted. If the insurer in a recourse settlement after the insurance event has occurred, should need to know about other insurances, the insurer can ask the person effecting the insurance.
Clause 2-7. Recourse between the insurers where the interest is insured with two or more insurersView Clause Go to Plan page
This Clause corresponds to Cl. 12 of the 1964 Plan and relevant Nordic Insurance Contracts Acts (Nordic ICAs).
Sub-clause 1 maintains the principle from Cl. 12, first sentence, of the 1964 Plan of a proportional apportionment among the insurers in the recourse settlement. The formulation is, however, somewhat simplified in relation to the 1964 Plan and corresponds to the wording of the Norwegian ICA Section 6-3, second sub-clause: “If two or more insurers are liable for the assured’s loss pursuant to the first sub-clause, the compensation shall be apportioned on a pro-rata basis according to the extent of the individual insurer’s liability for the loss, unless otherwise agreed between the insurers”. The 1964 Plan furthermore contained an assumption to the effect that “the total amount of the compensations for which the insurers, each according to his contract, would be liable in respect of the same loss” exceeded the compensation to which the assured was entitled. This condition is obvious and has therefore been deleted.
Sub-clause 1 regulates the internal settlement among the insurers in the event of “double insurance” in the traditional sense, i.e. that the same interest is insured against the same peril with several insurers in such a manner that the total amount of the assured’s claims in connection with a certain loss exceeds the compensation to which the assured is entitled. When the assured has received what it is entitled to, the total amount of compensation shall be apportioned among the insurers according to the maximum amounts for which each of them was liable. This is an entirely internal settlement which does not concern the assured.
Within the individual type of insurance double insurance is not likely to arise very frequently. It would be by sheer accident that, for example, a shipowner were to take out hull insurance in excess of the valuation, or cover voyage freight twice. Cl. 13 of the 1964 Plan contained a provision granting the assured the right to demand a proportional reduction of the sum insured in such situations. It has apparently not been applied in practice, and no corresponding rule is contained in relevant Nordic ICAs. This provision has therefore been deleted.
If a salvage operation concerns different interests covered by different insurers, there will seemingly be double insurance as regards costs of measures to avert or minimise the loss. However, here the rules in Cl. 2-6 and Cl. 2-7 are not applied; according to Cl. 4-12, sub-clause 2, each of the insurers is only liable for that part of the costs which is attributed on a proportional basis to the interest which it insures; in other words, there is no question of any apportionment under the rules of double insurance.
Cl.12, sub-clause 1, second sentence, of the 1964 Plan contained a rule to the effect that if an insurer was unable to “pay his share of the compensations, it is to be apportioned over the others according to the above rules, but each insurer is never obliged to pay more than the amount for which he was liable to the assured”. A similar provision in Section 42, first sub-clause, last sentence, of the Norwegian ICA 1930 was deleted, because it was regarded as unnecessary to encumber the statutory text with such detailed rules. The provision in the 1964 Plan is not referred to in the Commentary, and it has apparently not given rise to any problems in practice. It has therefore been deleted, also because the solution of a primarily pro-rata, in the alternative joint and several, liability follows from Section 2, second and third sub-clauses, of the Norwegian Act no. 1 of 17 February 1939 relating to instruments of debt (gjeldsbrevsloven) anyway, and must be considered to be the main rule relating to recourse liability in Norwegian property law.
The provision in sub-clause 2 is attributable to the fact that joint and several liability is introduced for the insurers if all of them have reserved the right to subsidiary liability to the assured. In that event, a recourse settlement among the insurers will be necessary if one or more of them have initially been charged a higher amount than what their proportionate obligation indicates.
Sub-clause 3 regulates double insurance where a loss is partly covered by the primary cover of an insurance and partly by another insurance’s cover of costs of measures to avert or minimise the loss. A corresponding regulation is contained in the hull insurance conditions, cf. Cefor 1.4 and PIC Clause 5.10. In such cases, the loss should be covered under the insurance which is liable for costs of measures to avert or minimise the loss. It would therefore not be natural to apply the recourse rules contained in Cl. 2-7, sub-clause 1, to this situation, cf. sub-clause 3, first sentence, which establishes that the insurer who covers costs of measures to avert or minimise the loss shall, to the extent of its liability, bear the full amount of compensation payments in the recourse settlement. If the insurer who covers costs of measures to avert or minimise the loss has explicitly made its liability subsidiary in relation to other insurers, this must be respected in keeping with the solution in Cl. 2-6, sub-clause 2. If both the primary insurer and the insurer of costs of measures to avert or minimise the loss have reserved the right to full recourse against the other insurer, the situation will be as if both have declared subsidiary liability. The final loss must then be placed with the insurer who is liable for the costs of measures to avert or minimise the loss - so that the primary insurer will have full recourse against the insurer of costs of measures to avert or minimise the loss if it has initially had to compensate the assured’s loss, cf. sub-clause 3, second sentence.