The Nordic Marine Insurance Plan 2013 Why, how and what does the assured get?

1. The Nordic Marine Insurance Plan 2013 Why, how and what does the assured get? Professor Trine-Lise Wilhelmsen Scandinavian Institute of Maritime Law

3. Why? • Background: The international picture • Several attempts at harmonization • No success • Why: • Fundamental differences in • Legal framework • Material contractual solutions • Contractual tradition • National contracts competitive advantage

4. Why? • Nordic harmonization possible due to • Common Insurance Contract Act 1930 • Common contractual traditions • National hull conditions, but based on the Norwegian Marine Insurance Plan • 1964 • 1996 • Competitive advantage limited • Maintenance of 4 national conditions costly

5. How? • The Nordic Plan Agreement • Basis NMIP 1996, version 2010 • Follows the procedures from the Norwegian Plan system: • Agreed document • Secretariat Scandinavian Institute • Broad Commentaries • Systematic maintenance program

6. Advantages of the agreed approach: Flexibility

7. Foreseeability

8. Reasonableness

9. What does the assured get • A comprehensive and total product • Jurisdiction/choice of law • Scope of cover • Duties of disclosure and due care • The settlement • But: May be departed from

10. A comprehensive and total product

11. Hull I Freight I 17 Coastal vessels 18 Offshore units 19 Builders Risks xx Tailor made H & M LOH Common provisions War

12. Part I Chapters 1- 9: Common Provisions Part IIChapters 10 -13: Hull 14 Hull and Freight Interest (TLO) 15 War Package 16 Loss of Hire Part III Chapters 17 – 19 17 Coastal vessel 18 Offshore units 19 Builders Risks PlusAdditional & tailor made covers

13. Jurisdiction/choice of law

14. Jurisdiction/choice of law • Nordic claims leader, 1-4 (1) • Legal proceedings before the courts in the venue where the claims leader is located • Based on the law of this venue • Non Nordic claims leader, 1-4 (2) • No regulation of jurisdiction • ”agreed that Norwegian law shall apply” • The coinsurers may be sued at the venue of the claims leader, 1-4 (3)

15. Scope of cover

16. Perils insured against • Perils insured, the main distinction: • NP Cl 2-8: all risks • ITCH/IHC: named perils • The difference • New perils • Burden of proof • The result: More foreseeability for the assured in case of unknown risk

17. Incidence of loss • The problem • NP Cl. 2-11 • Starting point: Peril has struck (1) • But: • Unknown defect (2) • Unknown damage (3) • Known defect/damage (4)

18. Causation • The problem • The alternatives • NP Cl. 2-13: General rule, Apportionment • Why: • Fair division of risk • Considerations of deterrence • Cl. 2-14; combination of war/marine peril

19. Losses covered, hull • Starting point: Cl. 12-1; Cost of repair • But: Some additional cover for loss of time • Relevant for NP Clauses • 12-7 Temporary repair • 12-8 Costs to expediting repairs • 12-11 Invitation to tender • 12-12 Choice of repair yard

20. Why cover for loss of time? The shipowner wants: To minimize loss of time in order to get the ship back in employment The insurer wants: Cheapest possible repair which often takes more time Compromise: The insurer is required to consider the assured’s interest in averting loss of time by paying up to 20 % of insurable value pa calculated for the time suffered or averted.

21. Losses covered, hull • Lack of maintenance, wear and tear etc • NP Cl. 12-3: • The part not in proper condition is excluded • Any consequential damage covered • Full cover for total loss/liability • The reason: Consequential damage similar to a casualty • Unpredictable • Cover secure foreseeability

22. Losses covered, hull • Error in material and design, 12-4 • Consequential damage covered • But not the cost of rectifying the error • Coverage for primary damage if the part is classed • Why: • Similar to a casualty • Cover provides foreseeability

23. Duty of disclosure • NP 3-1: All material facts shall be disclosed • NP 3-2/3-3:Fraud/negligence: void/no liability • Breach without fault, 3-4: • Covered, • but insurer may cancel • Why: Seems reasonable

24. Duty of due care, introduction • Main goal: To obtain safety at sea and avoid casualties • Legal techniques • Warranties • Alteration of risk • Safety regulations • Common: Warranty of classification • NP: Alteration of risk/safety regulation

25. Alteration of risk • The regulation • The concept, NP Cl. 3-8 (1) • The sanctions, Cl. 3-9 to 3-11 • In particular applied to change of • State of registration • manager/ technical/maritime operator • Classification society • UK: Warranties

26. Safety regulations

27. Safety regulations, concept • NP Cl. 3-22: A safety regulation is a rule • concerning measures for the prevention of loss • given by • Public authorities • The Classification society • The insurer • And is automatically included in the insurance contract

28. Safety regulations, breach • 3-25: The insurer is freed from liability in case the assured breaches a safety regulation if • The assured has acted with negligence • There is causation between breach and casualty • The assured has the burden of proving no negligence

29. The settlement • NP ch. 5 comprehensive regulation on • Information, 5-1 • Claims adjustment, 5-2 • Interest on compensation, 5-4 • Due date, 5-6 • Subrogation, 5-13 • Time limit and limitation, 5-23/5-24. • Etc

30. Settlement: Interest on compensation

31. Interest on compensation • NP 5-4 (1) • On claims: starting to run 1 month after notification sent to insurer • On expenses: from the date of the disbursement • Loss of time: 1 month after expiry of the insured period • Why: cover assured’s loss of profit while waiting for payment

32. Interest on compensation • NP 5-4 (2): Delay caused by the assured: no interest • NP 5-4 (3): CIBOR/NIBOR/STIBOR+ 2 % • NP 5-4 (4): • After due date interest extended with 2 %. • Due date = 6 weeks after the date when the claim adjustment is or should have been issued.

33. Claims leader (hovedassurandør) • NP chapter 9 • The Norwegian concept ”claims leader” • Wide authority to act on behalf of the co insurers: • Approve lay up plan, 9-3 • Notifications, 9-4 • Salvage measures, 9-5 • Removal and repairs, 9-6

34. Thank you for your attention!