Commentary
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Part One: Rules common to all types of insurance
- Chapter 1: Introductory provisions
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Chapter 2: General rules relating to the scope of the insurance
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Section 1: Insurable interest and insurable value
- General
- 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
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Section 2: Perils insured against, causation and loss
- General
- 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
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Section 1: Insurable interest and insurable value
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Chapter 3: Duties of the person effecting the insurance and of the assured
- General remarks
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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.
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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
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Chapter 4: Liability of the insurer
- General
- Section 1: General rules relating to the liability of the insurer
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Section 2: Costs of measures to avert or minimise the loss, including salvage awards and general average
- General
- 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
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Chapter 5: Settlement of claims
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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
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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.
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Section 1: Claims adjustment, interest, payments on account, etc.
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Chapter 6: Premium
- General
- 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
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Chapter 8: Co-insurance of third parties
- General
- 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
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Chapter 9: Relations between the claims leader and co-insurers
- General
- 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
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Part Two: Hull insurance
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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
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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
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Chapter 12: Damage
- General
- 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
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Chapter 10: General rules relating to the scope of the hull insurance
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Part Three: Other insurances for ocean-going vessels
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Chapter 14: Separate insurances against total loss
- General
- 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
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Chapter 16: Loss of hire insurance
- General
- 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
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Chapter 14: Separate insurances against total loss
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Part Four: Other insurances
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Chapter 17: Insurance for fishing vessels
- General
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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
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Section 2: Hull insurance
- General
- 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
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Section 4: Catch and equipment insurance - standard cover
- General
- 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
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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
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Chapter 18: Insurance of mobile offshore units (MOUs)
- Overview
- Section 1: General rules relating to the scope of the insurance
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Section 2: Hull insurance
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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
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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
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Section 2-3: Damage
- General
- 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
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Section 2-1: General rules relating to the scope of the H&M insurance
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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
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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
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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.
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Section 6: Construction risks insurance
- Section 6-1: General rules relating to the scope of construction risks insurance
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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
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Chapter 19: Builders’ risks insurance
- General
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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
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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
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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
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Chapter 20: Insurance for vessels with trading certificates
- General
- Section 1: Common provisions
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Section 2: Hull insurance
- General
- 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
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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
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Chapter 17: Insurance for fishing vessels
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Section 4: Liability insurance
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Clause 19-20. Scope of the liability insurance
View Clause Go to Plan pageThe provision was amended in the 2013 Plan. In sub-clause 1 the term “imposed” has been replaced by “required” and sub-clause 4 regarding the assured’s liability for damage to the environment if the damage occurred in direct connection with the performance of the building contract is new.
The liability cover comprises the yard’s liability to third parties. Additionally, the buyer is co-insured under this provision in order to ensure that he is covered if he has not taken out a separate liability insurance that covers liability in connection with the building project. If the yard has taken out the insurance, it therefore follows from Cl. 19-3 that the term “assured” in Cl. 19-20 comprises both the yard as the person effecting the insurance and the assured and the buyer as co-insured. If, however, the insurance is taken out by the buyer, the yard will not be co-insured according to Cl. 19-3 and will thus not be comprised by the liability part of the builders’ risks insurance either. In such cases the yard must take out its own insurance or arrange to be co-insured under the buyer’s cover.
The first sentence establishes that liability comprises personal injury and loss of life. The basis for liability is irrelevant; it may be liability based on fault for the yard’s management, employer’s liability or non-statutory strict liability. On the other hand, there is an important limitation to the requirement that the injury must have arisen in direct connection with the performance of the building contract, cf. below.
The issue of whether trial trips/delivery voyages are comprised by the insurance depends on whether they are carried out within the area specified by the certificate, including the trading area, cf. Cl. 19-5, sub-clause 1 (b). If this is the case, damage caused by the yard during such runs must be regarded as damage that has arisen “in direct connection with the execution of the building contract.” Whether there are invited guests or others who are injured is irrelevant in this connection: see, however, the exclusion in Cl. 19-21, sub-clause 1 (a), in respect of the yard’s own employees, cf. below. The same must be the case for injuries during transport to or from the subject-matter insured with another vessel to the extent that the yard becomes liable for such damage. Here the yard may incur transport liability if he owns or leases the vessel. If, however, the transport is handled by another carrier it will normally be that carrier, and not the assured, who will be liable.
The terms “personal injury” and “loss of life” are referred to in further detail in Cl. 21-6. Reference is therefore made to the comments on that provision.
The second point establishes the insurer’s liability for property damage caused to a third party. That the object must belong to a “third party” means that damage to or loss of the yard’s own objects is not covered. The term “third party” must be read as a “third party” here in relation to the yard or buyer as tort-feasor. If the yard causes damage to the buyer’s property, this will in principle be comprised by the liability insurance. The same applies if the buyer causes damage to the yard’s property. To the extent that such damage is covered by the hull conditions in Chapter 19, Sections 1, 2 or 5, the damage will, however, fall outside the scope of the liability insurance, cf. Cl. 19-21 (c). Reference is furthermore made to the comments on Cl. 21-7, sub-clause 1.
The third point concerns liability for removal of wrecks that is required by the authorities. In the 2013 Plan the word “imposed” was replaced with “required”. The wreck-removal liability concords with the international liability according to IMO rules and comprises the assured’s liability in connection with the raising, removal, destruction, marking or illumination of the subject-matter insured or parts thereof. Only liability imposed by the authorities, and thus not contractual liability, is covered. This also follows from Cl. 19-21, sub-clause 1 (e). Reference is furthermore made to Cl. 21-11 of the Commentary on coastal and fishing vessels.
Only the assured’s legal liability for damages is covered. The yard must therefore be liable according to general rules of liability law determining the basis for liability, causation and loss in order to trigger payment of the insurance. If the yard out of consideration for its customers or for other reasons chooses to cover damage for which it does not have liability, this is irrelevant to the insurance.
A further condition is that the liability has arisen “in direct connection with the performance of the building contract”. Like shipowner’s liability insurance, liability insurance under a builders’ risks cover is therefore tied directly to a specific subject-matter insured - i.e. in this connection a building contract. Liability for damages in connection with other building projects must be allocated to the builders’ risks cover of these projects.
That liability arises “in direct connection with the performance of the building contract” means that liability is connected with the actual construction work or the handling of parts or materials intended for the relevant subject-matter insured. Liability in connection with the handling of materials or parts before it has been decided that these parts, etc., shall be used for the said subject-matter insured, accordingly falls outside the scope of cover and will have to be covered under a more general liability insurance for the yard or the buyer. The same must be the case for liability connected with the assured’s general operations.
On the other hand, it is not a condition that liability arises in connection with the actual construction work. Liability arising during storage or transport of parts for the relevant subject-matter insured must also be covered, provided that this takes place within the place of insurance according to the insurance contract. Similarly, liability arising during a trial run or a delivery run within the place insured must be covered.
The provision in Cl. 19-20 must be seen in conjunction with the general rule regarding perils in Cl. 19-1. The insurance therefore applies to any marine peril and to the war perils strikes and lockouts. However, it does not cover the yard’s liability for damages resulting from other war perils, unless a war-risk insurance has been effected under Section 6.
Sub-clause 2 deals with the insurer´s cover of damage to objects belonging to the yard resulting from collision or striking after the subject-matter insured has been launched. This provision must be seen in conjunction with the general sister-vessels rule in Cl. 4-16 about the insurer’s liability in the event of damage to objects belonging to the assured. If the subject-matter insured causes damage to objects belonging to the assured during or after launching, and this is attributable to circumstances for which the assured would have been liable if the damaged objects belonged to a third party, the insurer is liable to the assured according to Cl. 4-16 to the same extent as he would have had to cover the assured’s liability to third parties. This now follows from the reference to Cl. 4-16 as regards damage from collision or striking following launching. The provision is worded such that the sister-vessels rule shall not apply to any damage to the assured’s own property other than what is specifically mentioned.
The fact that the liability cover in Section 4 has been extended to include buyer’s liability if it is the yard that is effecting the insurance, cf. Cl. 19-3, entails that Cl. 4-16 shall also apply if the subject-matter insured causes damage to the buyer’s property. However, this is hardly a very practical situation.
Cl. 4-16 does not cover the situation where the subject-matter insured causes damage to the buyer’s property without the assured’s conduct having given rise to liability. However, such damage should be covered by an ordinary property insurance taken out by the assured, and not under the builders’ risks insurance, which concerns either damage to or loss of the subject-matter insured and components thereof, etc., or the assured’s liability for damages.
Sub-clause 3 establishes that the insurer covers the assured’s liability for bunker oil pollution damage in accordance with the provisions laid down in national legislation that are based on the provisions of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (the Bunkers Convention). Through this provision, cover under the Plan is expanded to include all liability under the Bunkers Convention. This approach tallies with practice, where it has been customary for the parties to agree on a corresponding expansion of cover by incorporating a special clause in the insurance contract. The provision corresponds to Cl. 21-13.
Sub-clause 4 was new in the 2013 Plan.
Sub-clause 4 establishes that the insurer covers the assured’s liability for damage to the environment. Vessels trading in the waters of the states in the European Economic Area are liable for damage to the environment pursuant to the rules of the EU Directive 2004/35CE of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage. The purpose of the Directive is to establish a framework of environmental liability based on the ‘polluter-pays’ principle, to prevent and remedy environmental damage. The Directive applies where environmental damage and damage to protected species and natural habitats are concerned, to occupational activities which present a risk for human health or the environment. The Nordic countries have incorporated the rules of the Directive into their national legislation. In Denmark, the relevant acts are Act of 17 June 2008 No 466 relating to environmental damage (Lov om undersøgelse, forebyggelse og afhjælpning af miljøskader - Miljøskadeloven) and Act of 22 December 2006 No 1757 relating to environmental protection (lov om miljøbeskyttelse); in Finland, Act of 29 May 2009 No 383 relating to remedying certain environmental damage (Lag om avhjälpande av vissa miljöskador); in Norway, Act of 19 June 2009 No. 100 Relating to the Management of Biological, Geological and Landscape Diversity (Nature Diversity Act) – (Lov om forvaltning av naturens mangfold - naturmangfoldloven); and in Sweden, the Environmental Code of 11 June 1998 (Miljöbalken).
Examples of environmental damage that can give rise to a claim for environmental compensation include:
- A vessel, tow, etc. sails into waters that are too shallow and the keel damages a coral reef.
- A vessel, tow, etc. drifts into a wetlands area and runs aground. The vessel/hull and the rescue vessels that must enter the area destroy nesting sites and disturb the birds’ food supply, with the result that the area is partly abandoned.
Environmental damage in the form of the discharge of bunkers is regulated in sub-clause 3 above.
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Clause 19-21. Limitations on the liability insurance
View Clause Go to Plan pageClause 19-21 was amended in 2016 to be verbatim the same as Cl. 18-98, sub-clauses 5 and 6. Apart from mere editorial amendments, the only amendment of substance is that the words “contractor or sub-contractor” were added in sub-clause 1, letters (a), (b) and (d).
Sub-clause 1 (a) excludes liability for personal injuries or loss of life of the yard’s own employees. This exclusion is also extended to the employees of the yard’s contractors or sub-contractors. For Norwegian yards this liability will normally be covered by the occupational injury insurance. In that event, it follows from sub-clause 2 that this liability falls outside the scope of liability insurance under the builders’ risks insurance. It is nevertheless necessary to have a separate rule to cover foreign yards that do not have the type of insurance or social benefit schemes for their employees as mentioned in sub-clause 2. A person is “employed” by the assured if the yard, in addition to wages or salary, covers the employer’s social security contributions for the person in question. The same applies to employees of the yard’s contractors or-sub-contractors. A consultant with a consultant’s fee and without any contract of employment is, by contrast, not employed.
Sub-clause 1 (b) excludes objects that belong to the yard’s employees from the cover. This exclusion is also extended to belongings of employees of the yard’s contractors or sub-contractors. The exclusion is in accordance with the exclusion in sub-clause (a), and also with the provision in Cl. 21-7, sub-clause 2.
Sub-clause 1 (c) is patterned on Cl. 21-19, sub-clause 1 (a), but applies only to damage which is recoverable under Chapter 19, Sections 1, 2 and 5. This has to do with the fact that the liability insurance under the builders’ risks insurance terminates concurrently with the termination of the hull insurance under Section 2 or Section 5, which means that there is no question of tying this liability cover to the ordinary hull insurance or other insurances on Plan conditions.
In accordance with the provisions in Chapter 21, this insurance is complementary in relation to other covers. It is therefore irrelevant whether the said insurance has in actual fact been effected; whether or not the loss could have been covered under the relevant insurance is the decisive factor.
Only losses which, according to their nature, could have been covered under the said insurances fall outside the liability cover under the builders’ risks insurance. If the buyer suffers a loss which falls outside the scope of the said insurances, e.g. consequential loss, this must be covered under the liability conditions, provided that the requirements as regards adequate causation are satisfied.
Sub-clause 1 (d) contains a delimitation in relation to other liability insurances which the yard has taken out. If the liability is e.g. covered by an ordinary liability insurance taken out by the yard, this will prevail over the liability cover under the builders’ risks insurance. However, this applies only if such liability insurance has been effected; on this point the cover is thus subsidiary, not complementary. The liability cover pursuant to Cl. 19-20 is also subsidiary to any liability insurance effected by the yard’s contractors or sub-contractors.
According to sub-clause 1 (e), furthermore, the insurer does not cover liability which is based exclusively on a contract. This exclusion concords with normal non-marine liability insurances which do not cover contract liability. However, the rule differs from ordinary shipowners’ liability insurance, which does not have such an exclusion.
Examples of such contracts include:
- Liability which exceeds what follows from general rules of liability law, but which the assured nevertheless has committed himself to bear by a promise, a contract, an agreement or a guarantee (e.g. guarantee commitments in a building contract);
- Liability which the assured must ultimately bear because he has waived his right of recourse;
- Liability for expenses/costs/losses related to the performance of the assured’s contract (i.e. agreed performance, delivery, contract work, etc.)
- Liability in connection with unusual or prohibited contractual conditions (cf. Cl 4-15 and associated Commentary)
Sub-clause 2 deals with cases of liability for personal injury which the insurer does not cover. It is evident from the provision that arrangements other than insurance have been included, cf. sub-clause 2 (a), and to some extent the cover has been made complementary to insurance benefits which are imposed by collective agreement and financed by the liable employer (cf. sub-clause 2 (c)). The solution is almost identical to Cl. 21-19, sub-clause 2, but the relationship to the occupational injury insurance has been adjusted to the fact that the insurance shall also be applicable to building projects at foreign yards. Reference is therefore made to Cl. 21-19, sub-clause 2.
Clause 19-21. Limitations on the liability insurance
The insurer does not cover: liability for personal injury or loss of life of the employees of the assured, contractors or sub-contractors, liability for loss of or damage to objects belonging to the employees of the assured, contractors or sub-contractors, loss or liability which is insurable...
Clause 19-20. Scope of the liability insurance
The insurer covers the assured’s liability resulting from personal injury or loss of life, loss of or damage to an object belonging to a third party, and liability for the removal of wrecks required by the authorities if the loss arose in direct connection with the performance of the building...