Commentary

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Section 1: Common provisions

  • Clause 20-1. Scope of application

    As mentioned under General, certain freighters and other vessels are insured on so-called hull conditions for ocean-going vessels (Chapters 10 to 13). It is therefore necessary to have a rule determining the applicable cover if this is not clear. According to Cl. 20-1 the rules in Chapter 20 shall only apply to the extent that this is explicitly stipulated in the insurance contract. The provision has the greatest practical significance in relation to the hull cover because there are two sets of rules to choose between here. If hull insurance has been effected on Plan conditions without Chapter 20, Sections 2 and 3, being mentioned in the insurance contract, only the rules in Chapters 10 to 13 shall apply.

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    Clause 20-1. Scope of application

    The rules in this Chapter shall only apply to the extent that this follows from the insurance contract.

  • Clause 20-2. Renewal of the insurance/Ref. Clause 1-5

    Cl. 1-5, sub-clause 3, establishes that the insurance is not renewed unless this has been specifically agreed. Many of the persons effecting insurances in this industry do not have professional offices. It may therefore be problematic for them to be required to ensure that the insurance is renewed, particularly if it expires while they are at sea. However, the reinsurance is frequently not finalised until immediately before the insurance takes effect, and insurers do not want to bear the risk if it turns out that reinsurance is not obtainable on the conditions anticipated 30 days before the renewal. The problem of reinsurance may be resolved by the insurers cancelling the insurance not less than 30 days before expiry if it is not clear whether satisfactory reinsurance is obtainable. This special rule has therefore been maintained in the form of a rule providing for automatic renewal if the insurance is not cancelled 30 days before the date of expiry.

    In the rule regarding automatic renewal it is specified that in such case the insurance is renewed at the same premium and on the same conditions as before, cf. sub-clause 1. If the insurer does not wish to renew the insurance, or if he is only willing to renew it on different conditions or at a different premium rate, he must follow the procedure set out in sub-clause 2, cf. below.

    The basic rule in sub-clause 1 is that the insurance remains in force on the same conditions and at the same premium rate unless it is cancelled within 30 days prior to expiry of the insurance period, cf. above. If the insurer wishes to cancel the insurance or change the premium rate or the conditions, it now follows from sub-clause 2 that he must notify the person effecting the insurance of this within one month of expiry of the insurance period. The person effecting the insurance is thereby given a reasonable amount of time to consider alternative cover. For insurance contracts that run for several years, the decisive point in time for the insurer's duty of notification will be when the multi-year insurance contract is about to expire. Thus, the provisions do not apply to payments of due premium during the period covered by the multi-year insurance contract.

    Under sub-clause 3, the person effecting the insurance has a time limit of 14 days before expiry of the insurance period to consider the insurer's renewal offer. If he notifies the insurer, before the time limit expires, that he does not wish to accept the renewal offer, this will result in the contract lapsing from the date the insurance period expires unless the parties agree on new conditions. On the other hand, if the person effecting the insurance fails to respond within the time limit, he is bound by the renewal at the proposed premium rate and on the proposed conditions. Therefore, if the person effecting the insurance accepts an offer from a competing insurer, it is important that he at the same time ensures that the previous contract is cancelled within the specified time limit. Otherwise, he will be bound by two insurance contracts, in which case he must ask one of the insurers to release him from the contract.

    If the insurer wishes to renew the insurance on the same conditions and at the same premium rate, it will not be necessary for him to send notification pursuant to sub-clause 2. If, in such a case, the person effecting the insurance should not wish to renew the insurance, possibly not on the same conditions or at the same premium rate, he must notify the insurer accordingly within the same time limit as stated above, i.e. 14 days prior to expiry of the insurance period. Otherwise the insurance will remain in force on the same conditions and at the same premium rate pursuant to sub-clause 1.

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    Clause 20-2. Renewal of the insurance/Ref. Clause 1-5

    Upon expiry of the insurance period, the insurance is automatically renewed for 12 months at the same premium and on the same conditions. If the insurer does not wish to renew the insurance, or if  it only wishes to renew it at a different rate or on different conditions, the insurer must notify...

  • Clause 20-3. Classification and vessel inspection/Ref. Clause 3-14 and Clause 3-8

    Clause 3-14 assumes that the vessel is in class and establishes that the insurance will automatically lapse in the event of loss of class. Change of classification society is deemed to be an alteration of the risk, cf. Cl. 3-8, sub-clause 2, last sentence. However, there is no reason to introduce such an assumption for vessels that are insured under this Chapter, see sub-clause 1, which merely establishes that if the vessel is classed with a classification society at the inception of the insurance, Cl. 3-14 and Cl. 3-8, sub-clause 2, shall apply in the normal way. The provision means that the insurance lapses if the assured cancels the class and proceeds to sail legally under the rules of the vessel´s flag state.

    Vessels which are not in class will be subject to the vessel´s flag state. According to the rules of the Norwegian Maritime Authority, freighters of more than 50 gross registered tonnes will be issued a trading certificate.

    Trading certificates, equipment certificates, safety certificates and the like issued by the vessel´s flag state have the same significance as class has for larger vessels. Norwegian vessels with a length of less than 15 meters are insured on separate conditions according to the mandatory rules of the Norwegian Insurance Contracts Act. Under sub-clause 2, first sentence, the insurance of a vessel that is not in class is made subject to the condition that it has a valid certificate according to the rules of the vessel´s flag state. The term “certificate” covers trading certificate, equipment certificate/safety certificate, survey certificate and any other form of certificate which the vessel´s flag state might issue. The lapse of a valid certificate will for such vessels result in the lapse of the insurance, cf. second sentence, which refers to the rules relating to the loss of class. This provision may seem strict, but the reaction is necessary because normally it should take a lot more to lose a trading certificate or another certificate than it does to lose a class.

    Orders from the vessel´s flag state are regulated in Cl. 3-22.

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    Clause 20-3. Classification and vessel inspection/ Ref. Clause 3-14 and Clause 3-8

    If the vessel at the start of the insurance period is classified with a classification society approved by the insurer, Cl. 3-14 and Cl. 3-8, sub-clause 2, shall apply. Vessels not ascribed to any class shall at the start of the insurance period have a valid certificate in accordance with the rul...

  • Clause 20-4. Safety regulations/Ref. Clause 3-22 and Clause 3-25

    Section 7, sub-clause 1 of the Norwegian Ship Safety Act No. 9 of 15 February 2007 reads as follows in English translation:

    “The operator of the ship shall ensure that a safety management system which can be documented and verified is established, implemented and developed in his organisation and on the individual vessels in order to identify and control the risk and also to ensure compliance with requirements laid down in a statute or in the actual safety management system. The contents, scope and documentation of the safety management system shall be adapted to the needs of the operator and his activities.”

    There has been discussion on whether Section 7 of the Norwegian Ship Safety Act applies to vessels below 500 gt. The reason for this discussion is that the ISM Code has not been made applicable for vessels below 500 gt. However, the Norwegian Maritime Authority has reiterated that said Section 7 pursuant to Section 2 of the Act is applicable for all vessels except pleasure craft less than 24m length. 

    Similar provisions as in Section 7 of the Norwegian Ship Safety Act do not exist in the other Nordic countries whose legislation refers to the standard of the ISM Code when it comes to what vessels have a statutory obligation to apply safety management systems. 

    Section 7 of the Norwegian Ship Safety Act is in itself a safety regulation as defined in Cl. 3-22 of the Plan; breach of which will be governed by Cl. 3-25. However, as Section 7 of the Norwegian Ship Safety Act is so vague, it for practical purposes will be very difficult to invoke it against the assured until the Norwegian Maritime Authority has adopted a regulation setting out what a safety management system for vessels under 500 gt. should comprise. For vessels or other crafts or units that are subject to the ISM Code, reference is made to the Commentary to Cl. 3-22 and Cl. 3-25 where it is made clear that the ISM Code is a safety regulation pursuant to the definition in Cl. 3-22; breach of which is governed by Cl. 3-25.

    The provision provides three special safety regulations for the insurance of vessels with limited trading areas and comes in addition to Cl. 3-22 et seq. in the general part of the Plan.

    The provision constitutes “a special safety regulation laid down in the insurance contract” under Cl. 3-25, sub-clause 2. This means that the assured must be fully identified with anyone “whose duty it is on behalf of the assured to comply with the regulation or to ensure that it is complied with”. This will normally be the duty of the master of the vessel. As a special safety regulation Cl. 17-5 (a) also prevails over the provision relating to the situation where the owner is the master of the vessel in Cl. 3-25, sub-clause 1, second sentence. If the owner himself is the master of the vessel, he will therefore forfeit coverage if the vessel sustains damage due to negligent ice-forcing.

    Sub-clause 1 (a) applies only to ice-forcing. Ice-forcing presupposes that the vessel proceeds through ice as the result of a deliberate choice. It further follows from the rules relating to safety regulations that the damage must be a foreseeable consequence of this choice. If ice damage is sustained accidentally, e.g. by striking against drift ice in open sea, this does not constitute ice-forcing. Nor does the provision cover “ice-forcing” in order to avert major damage or total loss where a vessel has unexpectedly become ice bound; this would constitute a measure to avert or minimise loss. On the other hand, sub-clause (a) will apply if the master has deliberately proceeded into an area where it is foreseeable that the vessel will become ice-bound. In the 2023 Version, an exemption was accepted if the vessel has an appropriate class or certificate by the relevant authority, or same is agreed in writing by the insurer or explicitly mentioned in the policy.

    It is further a condition that the forcing concerns “ice”. If the vessel is sailing in an open lane, this does not constitute ice-forcing. Furthermore, the content of the term “ice” can be difficult to define precisely. The term must be defined on the basis of discretionary criteria, such as the thickness, solidity and extent of the ice. There may also be reason to take into consideration the time of year in question and whether any ice-breaker service has been organised. A certain support may also be obtained from the ice classification requirements.

    Sub-clause (b) concerns the trading certificate, which is referred to in Cl. 20-3. The trading area stipulated by the authorities is normally described in a trading certificate for the vessel in question. As a rule, the trading area in the trading certificate will be more limited than the area specified in the Plan. If the insurer wants the trading area under the insurance to coincide with the trading area in the trading certificate, this must follow from the insurance contract. Normally, however, this type of official regulation is only in the nature of a special safety regulation in relation to the insurance. Under these rules, if a vessel proceeds beyond the trading limits specified in the trading certificate, this will only have consequences for the insurance coverage if the infringement can be ascribed to the assured, or someone with whom he may be identified, and if there is a causal connection between the infringement and the casualty. This means that the sanction will be somewhat less strict than it would have been pursuant to Cl. 3-15, sub-clause 3. If the vessel has lost its trading certificate, the rules in Cl. 20-3 shall apply.

    The provisions contained in the trading certificate automatically constitute safety regulations under Cl. 3-22. However, the advantage of mentioning them specifically here is that the identification rule in Cl. 3-25, sub-clause 2, second sentence, becomes applicable.

    Orders from the vessel´s flag state are not subject to any special regulations. If the assured fails to comply with orders issued by the flag state, the trading certificate might become invalid, in which case the insurance will automatically lapse according to Cl. 20-3.

    Sub-clause (c) concerns vessels at quay or laid up, and is consequently more extensive than Cl. 3-26, which merely concerns vessels laid up. For small vessels, it is more practical to stay in port than to be laid up. There is moreover a special need for safety regulations in connection with the risk of theft, because it is normally quite simple to gain access to this type of vessel. It is therefore the assured’s duty to provide daily supervision of the vessel and its moorings and furthermore to secure the vessel and its equipment. The provision also contains a requirement that the equipment shall be kept in such a way that it can only be removed by the use of tools.

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    Clause 20-4. Safety regulations/Ref. Clause 3-22 and Clause 3-25

    The following special safety regulations shall apply, cf. Cl. 3-25, sub-clause 2: The vessel shall not force ice , unless the vessel has appropriate ice class or a certificate by the relevant authority, or same is agreed in writing by the insurer or explicitly mentioned in the policy. If the vess...

  • Clause 20-5. Savings to the assured

    The provision is taken from the P&I conditions in the 1964 Plan, but contains a general principle of insurance law and has therefore been generalised.

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    Clause 20-5. Savings to the assured

    If the assured as a result of a casualty or liability covered by the insurance has received additional income, saved expenses or averted liability which  it would otherwise have incurred and which would not have been covered by the insurer, the latter may deduct from the compensation an amount...