The Nordic Hull Insurance Clauses: A Comparison

1
The Nordic Hull Insurance Clauses A Comparison

• Professor Hans Jacob Bull
• Scandinavian Institute of Maritime Law
• University of Oslo

2
The hull insurance clauses compared

• Denmark
• Forsikringsbetingelser for kasko 1992/1998 (DFK)
• Dansk Søforsikringskonvention 1934 (DSK)
• Finland
• Finska kaskoförsäkringsvillkor för fartyg 2001
  (FFF)
• Norway
• Norsk Sjøforsikringsplan 1996 (version 2007) ch.
  1-9 and 10-13 (NSPL) with preparatory works
• Sweden
• Allmänna Svenska Kaskoförsäkringsvillkor 2000
  (SKV) with preparatory works
• Allmän Svensk Sjöförsäkringsplan 2006 (SSP)

3
Background law

• Insurance Contracts Acts Different in the four
  countries
• Finland/Norway/Sweden New ICA, but with
  differences
• Denmark Old ICA
• General insurance principles May differ in the
  four countries
• Example Rules on when a casualty has occurred
• NSPL 2-11 When the peril struck
• Not regulated in the other conditions. Background
  law When the damage occurred
• Example Rules on causation
• NSPL 2-13 and FFF 16 Apportionment where
  combination of perils, unless combination
  marine/war
• Not regulated in the other conditions. Background
  law Main cause rule

4
General comments Form and format

• Denmark/Finland/Norway The hull clauses resemble
  ordinary acts
• Sweden The hull clauses are formulated in a less
  formal manner (storytelling)
• Structure Great variation
• Clauses with a similar content are often placed
  in different chapters or under different headings
• Problem with clauses placed in different sets of
  conditons Denmark and Sweden
• The Swedish hull clauses Unclear structure,
  difficult to get the necessary overview (Ex. 7
  uncovered damage) few headings

5
General comments Content

• In general Great resemblance between hull
  clauses in the four countries
• BUT In several minor questions important
  differences
• Danish hull clauses more oldfashioned (?)
• Danish hull clauses offer a more narrow cover (?)
• The way forward
• Impossible to cover all elements
• Concentrate on some of the central clauses
• Starting point The Norwegian clauses

6
Objects covered

• NSPL 10-1 first paragraph and SKV 1 first and
  second paragraph The ship, equipment/spare parts
  on board, bunkers/lubricating oil on board
• DFK 1.1 Same, but not bunkers/lubricating oil
• FFF 14.1.a-c Same, but limited cover of
  equipment. Bunkers not covered

7
Objects not covered

• NSPL 10-1 second paragraph Objects intended
  for consumption loose objects intended for
  securing/protecting the cargo containers
• SKV 1 fourth paragraph second and third
  sentence Same. But containers (?)
• FFF 14.2 Same. But Artistic decorations
• DFK 1.1 DSK 109 second and third paragraph
  Several specific exceptions, most of them
  different from those found in the other
  conditions. Containers not specifically mentioned

8
Objects temporarily removed

• NSPL 10-2 Cover for objects temporarily
  removed from the vessel due to repair/running of
  the ship, provided the objects are intended to be
  brought back before departure
• FFF 14.1 d) and SKV 1 second and third
  paragraph Same
• DFK/DSK Not regulated, but same solution as NSPL
  follows from practice

9
Sum insured

• NSPL 4-18 and 4-19, FFF 65 Three sums
  insured of equal size (the ordinary sum insured
  sum insured for tort liability sum insured for
  costs of saving acts (SA)) interest and certain
  costs
• SKV 6 point 1 and 3 Same, but no separate sum
  for SA (reasonable)
• DFK 5-7 Two sums insured, ordinary sum for
  tort liability, SA, interest and certain costs

10
Perils insured against

• All risks principle The basis of all four
  clauses, NSPL 2-8, DFK 3.1, FFF 6, SKV 5
  litra (e) (awkvard placing!)
• General exceptions
• Perils covered by war insurance. But Some
  differences
• Piracy and mutiny NSPL 2-9 letter (d) and FFF
  15.1 (war insurance) SKV 7 point (2)
  (divided piracy marine insurance mutiny war
  insurance)
• DFK 4.4 (marine insurance)
• Sabotage The concept seems to differ
• RACE II Same solution? (not found in the general
  conditions in DFK, FFF and SKV, but special
  conditions?)

11
Alteration of risk Loss of class or change of
classification society

• Loss of class NSPL 3-14.2, DFK 2.3.1, FFF
  34.2 and SKV 4 The insurance is automatically
  terminated
• Change of classification society
• DFK 2.3.1, FFF 34.2 and SKV 4 The
  insurance is automatically terminated
• NSPL 3-8.2 and 3-9 The insurer is free from
  liability, provided it may be assumed that the
  insurer would not have accepted the insurance,
  had he known the change

12
Alteration of risk Change of State of
registration

• NSPL 3-8.2 and 3-9 The insurer is free from
  liability, provided it may be assumed that the
  insurer would not have accepted the insurance,
  had he known the change
• DFK 2.3.2 The insurance is automatically
  terminated
• FFF and SKV Not expressly regulated (?). But
  General rules on alteration of risk

13
Alteration of risk Change of management, etc.

• NSPL 3-8.2 and 3-9 The insurer is free from
  liability, provided it may be assumed that the
  insurer would not have accepted the insurance,
  had he known the change of management or compay
  responsible for technical/maritime operation
• DFK 2.3.3 The insurance is automatically
  terminated where change of management or ship is
  bareboat chartered
• FFF 38 Same solution as NSPL regarding change
  of management
• SKV Not specifically regulated, except for right
  to cancel the insurance where change of
  management. But General rules on alteration of
  risk (?)

14
Unseaworthiness

• NSPL Concept abandonned. Instead Fall back on
  rules on safety regulations
• FFF 43, SKV 12 Non-liability where
  unseaworthiness, provided
• Causation
• The insured had or ought to have had knowledge
  when possible to react
• Burden of proof expressly regulated
• DFK 4.5 Same as FFF and SKV. But Relevant
  point of time is when the ship leaves last port.
  Burden of proof not expressly regulated. But
  Practice

15
Actual total loss

• Rules on actual total loss the same in all four
  countries, NSPL 11-1, DSK 126, SKV 24 no. 1
  and 4, FFF 10.2
• Deduction for previous unrepaired damage?
• NSPL 11-1 second paragraph and SKV 27 no. 1
  No, and no cover for unrepaired damage where
  total loss
• DFK 9.2 No, unless vessel unseaworthy
  special rules on cover under previous insurance
• FFF no express regulation, but same solution as
  in NSPL

16
Constructive total loss 1

• Conditions
• NSPL 11-3 second paragraph and FFF 10.3 The
  cost (defined fifth paragraph) of repairing
  casualty damage (defined fourth paragraph) will
  amount to at least 80 of the insurable value, or
  of the value of the ship after repairs (defined
  third paragraph) if higher
• SKV 26 Identical with NSPL, but the
  alternative value of the ship after repairs is
  missing
• DSK 129 A complicated system where two
  conditions have to be fulfilled
• Both The cost of repairing all damage to the
  ship will be higher than the ships value after
  repairs minus the value of ship in damaged
  condition
• And The cost of repairing casualty damage
  incurred on the voyage will be higher than the
  insurable value minus the ships value in damaged
  condions, without taking previos damages into
  consideration

17
Constructive total loss 2

• Application
• NSPL 11-5 Request without undue delay after
  salvage and survey NSPL 11-6 The insurer may
  demand removal for proper survey
• DSK 129 third and fourth paragraph Similar to
  NSPL, but the insurer can test the survey through
  invitations to tender
• SKV 26 point 2 and 3 FFF 10 no. 2 and 3
  Similar with NSPL to some extent, but survey and
  invitations to tender to prove that the
  conditions actually present

18
Damage Main rule

• All conditions The insurer will with certain
  specific exceptions - pay the costs of repair, so
  that the ship is restored to the condition prior
  to the casualty

19
Damage Unrepaired damage

• NSPL 12-2 The assured may claim compensation
  for unrepaired damage when the insurance period
  expires (first paragraph), with certain
  exceptions (third paragraph), and based on the
  estimated costs of repairs (second paragraph)
• FFF 61.1, DSK 139.4 and SKV 32 No, unless
  sale. Differences in calculating the compensation

20
Damage Inadequate maintenance, etc.

• NSPL 12-3, DFK 5.2, FFF 15.3.1.a, SKV 7
  point 1.b.1 No cover for repair of part/parts of
  hull, machinery and equipment which were in a
  defective conditions due to wear and tear,
  inadequate maintenance, etc.
• FFF 15.3.1.a In addition, no cover for repair
  of part/parts of the outer hull, where
  loss/damage is due to frames etc. in a defective
  conditions due to wear and tear, inadequate
  maintenance, etc.

21
Damage Error in design or faulty material

• NSPL 12-4 Cover costs of renewing or repairing
  part/parts of hull, machinery or equipment not in
  a proper condition due to error in design or
  faulty material, provided part/parts approved by
  class
• The other conditions No cover
• But FFF 15.2 Cover if faulty material, and
  part approved by class
• But DFK 5.1 Cover if (1) part approved by
  class, (2) damage to machinery and (3) either
  faulty material (4) or error of design in boiler,
  main engine etc., which leads to breakage, etc.
• But SKV point 1.b.2 Cover if part approved by
  class and damage occurs after normal guarantee
  period and repair is not necessary due to wear
  and tear, inadequate maintenance, etc.

22
Damage Temporary repairs

• NSPL 12-7 The insurer fully liable for
  necessary temporary repairs (first paragraph),
  and liable for other temporary repairs up to the
  amount saved for him, or up to 20 p.a. of the
  hull value for time saved by the assured (second
  paragraph)
• DFK 6.8 and FFF 60.1 Same as NSPL first
  paragraph. As for NSPL second paragraph, only up
  to the amount saved for the insurer
• SKV 29 Same as NSPL first paragraph. As for
  NSPL second paragraph, either half the costs of
  the temporary repairs, or the whole amount saved
  for the insurer

23
Damage Costs incurred in expediting repairs

• NSPL 12-8 Cover of costs incurred in
  expediting repairs through extraordinary
  measures, limited to 20 p.a. of hull value for
  time saved by assured
• DFK 6.9 Cover of costs for overtime work,
  limited to the amount saved for the insurer
• SKV 28 point 6 Cover of half the costs
  incurred through extraordinary measures, with a
  maximunm of 50 of agreed deductible
• FFF 57 nr. 8 Cover for costs incurred to save
  time, limited to the amount saved for the insurer

24
Damage Invitations to tender

• NSPL 12-11 The insurer may demand tenders from
  repair yards of his choice (first paragraph)
  cover for loss of time at the rate of 20 p.a.
  where the time used exceeds 10 days (second
  paragraph)
• SKV 28 point 2 and FFF 57 no. 2 and 58 no.
  2 Largely same solution as in NSPL first and
  second paragraph
• DFK 6.11 Same solution as NSPL first
  paragraph. No direct parallell to NSPL second
  paragraph, but cover for crews wages and
  maintenance, etc. while waiting for tenders

25
Damage Choice of repair yard

• All conditions give the insured the right to
  decide on the repair yard. Cover limited to an
  amount equal to the lowest adjusted tender,
  provided the assured did not have justifiable
  reasons for demanding that a specific tender is
  disregarded
• NSPL 12-2 second paragraph, SKV 28 point 2
  and 3 and FFF 27.3 give the assured the right
  to claim an addition of 20 p.a. of hull value
  for time saved by not choosing the lowest
  adjusted tender

26
Interest on the compensation

• NSPL 5-4 Right to claim interest even before
  due date NIBOR/LIBOR 2 after due date
  interest according to Norwegian Act on interest
  on overdue payments
• DFK 11.3 Right to claim interest on overdue
  payments according to Danish Act on interest on
  overdue payments
• FFF 72 Right to claim interest according to
  Finnish Act on interest on overdue payments from
  date of the assureds disbursements
• SKV 41 point 2 Right to claim interest from
  date of the assureds disbursements STIBOR 1,5

27
Nordic marine insurance conditions some
observations

• Today Nordic conditions contain different
  solutions on several points. But How important
  are the differences?
• Agreement on common conditions will necessitate
  concessions both from shipowners and insurers
• Are such concessions realistic? Experience from
  other work with common conditions
• UNCTAD 1980-1985
• CMI 2000-2004
• Nordic insurers does that make a difference?
• How important are agreed documents?
• May conditions be too good? Premium, deductible,
  etc.