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6. Duty of disclosure and due care

6. Duty of disclosure and due care. Trine-Lise Wilhelmsen. Outline. Introduction The relationship with ICA Duty of disclosure Alteration of risk Safety regulation Casualties caused by the assured Notification and salvage measures Identification. 6.1. Introduction.

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6. Duty of disclosure and due care

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  1. 6. Duty of disclosure and due care Trine-Lise Wilhelmsen

  2. Outline • Introduction • The relationship with ICA • Duty of disclosure • Alteration of risk • Safety regulation • Casualties caused by the assured • Notification and salvage measures • Identification Marine insurance

  3. 6.1. Introduction • Subjective (duty) vs objective (scope) rules • The conflict of interest • Two different kinds of duties • The sanctioning system Marine insurance

  4. Duty of disclosure and due care Insurer’s interest Assured’s interest Maximum information Risk control Financial coverage Duties Duties connected to the risk Due care Duty of Dis closure Alteration Of risk Safety regulation Causing the loss Notify/ salvage Marine insurance

  5. 6.2 The relationship with ICA • NMIP: • Departs from ICA 1989 • Follows previous NMIP/ICA 1930 • But: • Warranty approach (classification) • Concept of unseaworthiness deleted (2007) Marine insurance

  6. 6.2 The relationship with ICA • CICG • Follows ICA • But: • Stricter safety-regulation for international transport • Suspension of insurance in case of delay • Gard • Departs from ICA • Closer to MIA Marine insurance

  7. 6.3. Duty of disclosure • Two main systems: NMIP/Gard and CICG/ICA • The problems to be discussed: • The extent of the duty of disclosure • The time of the duty of disclosure • Who has the duty of disclosure • The sanctioning system Marine insurance

  8. 6.3.1 The extent of the duty of disclosure • NMIP § 3-1/Gard 6: All relevant information • = Active duty of disclosure • The concept of relevant information • CICG § 12/ICA § 4-1: Answering questions • Passive duty of disclosure Marine insurance

  9. 6.3.2 The time of the duty of disclosure • NMIP § 3-1, CICG § 12, Gard 6 • Concerns • Time of the factual circumstances • Time of good faith • Good faith: When the contract is entered into • Factual circumstances: Duty to make corrections Marine insurance

  10. Time of the duty of disclosure Factual circumstances Good faith All the time But: Only for factual circumstances at Contract point When contract is entered Marine insurance

  11. 6.3.3 Who has a duty of disclosure • Starting point: • The person effecting the insurance, NMIP § 3-1,1, CICG § 12, 1 • The member, Gard 6 • NMIP § 8-2/CICG § 13: Special rule for the assured • Identification with agents/ brokers Marine insurance

  12. 6.3.4 The sanctioning system • NMIP/CICG/ICA • Double system: No liability/cancellation • Depending on the degree of fault: • Fraud • Negligence • Innocent breach • Gard: Sanction connected to the significance of the breach Marine insurance

  13. 6.3.4 Sanctions, NMIP • Fraud; NMIP § 3-2. • The contract is not binding • Right to cancel all other contracts • Negligent or intentional breaches, § 3-3: • Not binding/ no liability • cancellation according to the circumstances • Innocent breach, § 3-4 • Cancellation Marine insurance

  14. 6.3.4 Sanctions, CICG/ICA • Fraud, ICA § 4-2 and § 4-3: • No liability • Termination • More than a little to blame, ICA § 4-2 and § 4-3 • Deductions in liability • Cancellation, 14 days notice • Less than a little to blame • Cancellation, 14 days notice Marine insurance

  15. 6.3.4 Conditions to invoke sanctions • Common for NMIP and CICG/ICA • Conditions to invoke the sanctions, NMIP § 3-5 and § 3-6, ICA § 4-4; • No knowledge • Decisive risk factor • Notification Marine insurance

  16. 6.3.4 Sanctions, Gard • Rule 6.2 and 6.3 • ”Neglected” his duty • Non acceptance of entrance with full knowledge: No liability • Acceptance on other conditions: cover depends on these conditions Marine insurance

  17. 6.4 Alteration of risk • Overview • NMIP: General regulation • NMIP: Special regulation • Gard: General regulation • Gard: Special regulation Marine insurance

  18. 6.4.1 Overview • CICG • follows the ICA • General regulation • Not very practical • NMIP and Gard • General regulation • Sanctions as duty of disclosure • Special regulation Marine insurance

  19. 6.4.2. NMIP: general regulation • NMIP § 3-8 to § 3-13 • The concept of alteration of risk, NMIP § 3-8, 1 • Shall be deemed as alteration of risk, NMIP § 3-8, 2 – Change of • State of registration • Technical/maritime operator • Classification society Marine insurance

  20. 6.4.2 NMIP: general regulation • Alteration of risk caused by the assured: • No liability, § 3-9 • Cancellation, § 3-10 • Alteration of risk not caused by the assured; • Notification, § 3-11 • If not, § 3-9 applies • + Cancellation, § 3-11 Marine insurance

  21. 6.4.3 NMIP: The special regulation • Classification • Change of ownership • Illegal activities • Trading limits Marine insurance

  22. 6.4.3.1 Classification, NMIP § 3-14 • Expressed as a warranty: • The ship shall be classified when the insurance commences • Loss of class = the insurance terminates regardless of • causation • fault • Similar regulation in many other countries Marine insurance

  23. 6.4.3.2 Change of ownership • NMIP § 3-21 • The insurance terminates immediately • Reason: the importance of ownership • Change of ownership # change of shareholder structure Marine insurance

  24. 6.4.3.3 Illegal activities • Starting point: No liability for losses caused by illegal activities unless the assured in good faith, NMIP § 3-16 , 1 • If the ship is used primarily for illegal activities, the insurance terminates, § 3-16, 3. Marine insurance

  25. 6.4.3.4 Trading limits • NMIP § 3-15; • Ordinary areas, • conditional areas and • excluded areas • The areas defined in enclosure to the Plan Marine insurance

  26. 6.4.3.4 Trading limits • Conditional areas, § 3-15, 2; • sailing subject to additional premium. • Sanction extra deductible • Excluded areas, § 3-15, 3; • Insurance ceases to be in effect until the ship leaves the excluded area Marine insurance

  27. 6.4.4 Gard: General regulation • Rule 7 • 7.1: Duty to disclose alteration of risk • 7.2: Alteration of risk intentionally caused • Non acceptance if known: no liability if causation • Acceptance on other conditions: covered if covered under these Marine insurance

  28. 6.4.5 Gard: Classification and certification • Rule 8.1: Conditions for insurance: • Classification • Notification of damage • Comply with classification requirements • Notification if change of classification Society • Compliance with all safety regulations • Rule 8.3: Sanction • Coverage suspended when conditions not fulfilled Marine insurance

  29. 6.5. Safety regulation • Overview • NMIP: Safety regulation • NMIP: Sanction • NMIP: Ships laid up • CICG/ICA Marine insurance

  30. 6.5.1 Overview • Scandinavian invention • Not used in other systems • Anglo American parallel: warranties (cf. Gard 8.1 cf. 8.3) • Powerful weapon for insurer • The traditional system: seaworthiness and safety regulations as parallel rules Marine insurance

  31. 6.5.2 NMIP: Safety regulation • The concept of a safety regulation, § 3-22 • May be issued by • public authorities, • the insurer • or the classification society. • Includes • periodic surveys, § 3-22,2 • Ice class regulation prescribed by the class, § 3-22, 3 Marine insurance

  32. 6.5.2 NMIP: Sanction • Sanction 1; No liability § 3-25 • Fault, § 3-25, 1 • Causation, § 3-25,1 • Burden of proof shifted, § 3-25,1 • Breach of special safety regulation results in extended identification, NMIP § 3-25,2 Marine insurance

  33. 6.5.3 NMIP: Sanction • Sanction 2; Cancellation, § 3-27 • 14 days notice • (a): Not in compliance with a technical or operational safety regulation • (b) safety regulation of material significance Marine insurance

  34. 6.5.3 NMIP: Ships laid up • NMIP § 3-26: Laid up plan required • No lay up plan drawn up, or laid up plan not followed: The provisions for breach of safety regulations is followed Marine insurance

  35. 6.5.4 CICG/ICA: Concept of safety regulation • National transport: § 21.1.1: • § 22 – unsuitable means of transport • § 23 – marking and packing of goods • § 24 – Goods carried in thermo regulated means of transport Marine insurance

  36. 6.5.4 CICG/ICA: Concept of safety regulation • International transport: § 21.1.2: • As above • + “all regulations and injunctions concerning measures for the prevention of loss issued by public authorities” Marine insurance

  37. 6.5.5 CICG/ICA: Sanction • § 21.2: No liability (# ICA) provided • Causation • Fault: “Cannot be imputed” (# ICA) • Burden of proof: shifted Marine insurance

  38. 6.6 Casualties caused by the assured • Overview • NMIP • CICG/ICA Marine insurance

  39. 6.6.1 Overview • The NMIP and CICG/ICA: distinction between • Intent • Gross negligence • Ordinary negligence • Gard: Rule 71: willful misconduct Marine insurance

  40. 6.6.2 Caused by the assured, NMIP • Intent, NMIP § 3-32 and § 3-34 • Sanction 1: No liability, NMIP § 3-32 • Sanction 2: • Termination of this contract without notice, § 3-34, 1. • Termination of other contracts by giving 14 days notice, § 3-34, 2 Marine insurance

  41. 6.6.2 Caused by the assured, NMIP • Gross negligence: • Sanction 1; NMIP § 3-33: 0-100 % liability according to • the degree of fault and • other circumstances, • Sanction 2; NMIP § 3-34, 1, 2: Termination, 14 days notice • Ordinary negligence: No sanction Marine insurance

  42. 6.6.3 Caused by the assured, CICG • ICA § 4-9 • Intent – no liability • Without fraud: part liability possible • Gross negligence – reduction in liability • Ordinary negligence – full liability Marine insurance

  43. 6.7 Notification and salvage measures • Duty to notify • Duty to salvage • Sanction Marine insurance

  44. 6.7.1 Duty to notify • NMIP § 3-29/ CICG § 25.2/ Gard rule 82 1 (a): • if loss has occurred or threatens to occur • Without undue delay/promptly • NMIP § 3-29/ CICG § 25: also • keep informed • + notify of maritime inquiry/surveys Marine insurance

  45. 6.7.2 Duty to salvage • NMIP § 3-31/CICG § 25.1/Gard rule 82.1 (b): • Reasonable measures to avert/minimize a loss • NMIP § 3-31/CICG § 25.1 • Follow insurer’s instructions Marine insurance

  46. 6.7.3 The sanction • NMIP § 3-31/CICG § 26: No liability • if fault (intent or gross negligence) and • only for losses that would otherwise not have been incurred • Gard rule 82.2: Gard may • reject or reduce any claim • Claim reimbursement Marine insurance

  47. 6.8 Identification, Overview • The issue of identification • The need for rules • The different types of identification problems: • the person effecting insurance and his helpers • the assured and his helpers • the assured and the person effecting the insurance • the assured and co-insured/co-owner Marine insurance

  48. Identification between person effecting the insurance and his helpers The person effecting ins. The insurer breach of the duty of disclosure Broker/ Agent Marine insurance

  49. IDENTIFICATION BETWEEN THE ASSURED AND HIS HELPERS Assured Insurer Breach of duty of due care ”Helpers” Marine insurance

  50. Identification between the assured and the person effecting the insurance Assured Insurer Breach of duty of disclosure Person effecting insurance Marine insurance

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