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Chapter 1: Introductory provisions

  • General

    A number of provisions of a general nature, which are difficult to fit into the Plan’s system in any other way, are compiled in this Chapter. While the solutions in the 1964 Plan have essentially been maintained in the Chapter, Cl. 1-3 regarding contracts entered into through a broker is new, and Cl. 1-4 regarding jurisdiction and choice of law has been expanded.

  • Clause 1-1. Definitions

    This Clause was amended in 2016. The definitions of “loss” and “particular loss” in previous versions were deleted and a new definition of “broker” was added in sub-clause (d).

    Sub-clauses (a), (b) and (c) remain unchanged. Sub-clause (a) requires no comments. Sub-clause (b) gives a definition of the term “the person effecting the insurance”. Norwegian insurance law distinguishes between “the person effecting the insurance”, who is the person entering into the contract with the insurer, and “the assured”, who is the person entitled to compensation from the insurer, cf. sub-clause (c). The person effecting the insurance and the assured will often be one and the same, but this is not necessarily the case, as for example where a charterer effects the insurance, whilst the shipowner is the assured.

    The definition of “the assured” in sub-clause (c) corresponds to the definition in Nordic Insurance Contracts Acts (Nordic ICAs). The decisive criterion for having status as an “assured” under the insurance is that the person in question is in a position where he may have a right to compensation under the insurance contract, not that he in actual fact has such a right under the contract in question. Hence, the shipowner will have status as an assured, even if, for example, the ship’s mortgage loans exceed the ship’s insurable value, and the mortgagee will be entitled to the entire sum insured in the event of an insurance settlement. This is primarily significant in relation to the rules in the Plan which impose duties on the assured, cf. in particular the rules relating to the duty of care in Chapter 3 of the Plan.

    In addition to the distinction between the person effecting the insurance and the assured, a distinction must be made between “the person effecting the insurance” and his authorised representative. A broker, agent or intermediary is not the person effecting the insurance, but the authorised representative of the person effecting the insurance (or of the insurer, if relevant).

    Sub-clause (d) defines “broker” as the entity that is instructed by the person effecting the insurance to act as an intermediary between the person effecting the insurance and the insurer. The broker is engaged by the person effecting the insurance and is acting on his behalf, cf. Cl. 1-3, sub-clause 1. In general, the broker safeguards the interests of the person effecting the insurance.

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    Clause 1-1. Definitions

    For the purposes of this Plan the insurer means the party who under the terms of the contract has undertaken to grant insurance, the person effecting the insurance means the party who has entered into the insurance contract with the insurer, the assured means the party who is entitled under the...

  • Clause 1-2. Policy

    Sub-clause 1, first sentence, was editorially amended in 2016 replacing the term “require” with “demand”.

    Sub-clause 1, first sentence, states that the person effecting the insurance may demand that a policy be issued. A “policy” according to the Plan is the insurer´s written confirmation of the insurance contract. The term “policy” in the Plan corresponds to an “insurance certificate” under Nordic ICAs. However, the term “policy” is so firmly established in marine insurance that it was deemed expedient to retain it. In contrast to the provisions contained in Nordic ICAs, the insurer has no obligation to issue a policy unless the person effecting the insurance demands him to do so. Frequently, other documents will have been issued which replace the policy, cf. below under Cl. 1-3, in which event a policy would be superfluous.

    In previous Plan versions, policy was used as a term both to describe the insurer´s written confirmation of the insurance contract as stated in Cl. 1-2 and as a reference to the insurance contract with the inclusion of the individual policy, the conditions and other documents. This was somewhat confusing, in particular because in today’s insurance marked a policy is not always issued. The 2016 Version makes a distinction between the policy as defined in Cl. 1-2 and the term “insurance contract”, which refers to the individual agreement between the person effecting the insurance and the insurer in general, thereby including both the policy - if issued - and the conditions. The distinction entails no substantive amendment. The purpose is to avoid using the term policy as a reference to the insurance contract in general. A formal policy is today in less demand due to data processed insurance documentation sufficiently evidencing the content of the insurance contract without necessitating a subsequent written confirmation issued by the insurer. 

    Thus, in 2016 the term “policy” was replaced with the term “insurance contract” in the Plan and its Commentaries where the term was referring to the all documents included as part of the insurance contract and not only the individual confirmation. This amendment is made in the following clauses: 4-8, 5-3, 8-2, 12-15, 12-16, 12-18, 13-4, 14-1, 14-2, 15-3, 15-15, 16-4, 16-6, 16-7, 16-12, 17-1, 17-3, 17-15, 17-18, 17-28, 17-31, 17-34, 17-55, 18-1, 18-32, 18-33, 18-38, 18-39, 18-40, 18-46, 18-48, 18-49, 18-54, 19-2, 19-5, 19-8, 19-9, 19-10, 19-25 and 19-26. It should be noted that the concept “insurance contract” also includes the conditions in the Plan as part of the contract, cf. the discussion under Cl. 3-22, sub-clause 1.

    The concept of a “policy” as defined in Cl. 1-2 must be distinguished from the concept of the document in which the broker confirms details of the insurance placement (in practice called “Cover Note”, “Evidence of Cover” or similar). An appointed broker issues confirmation of cover containing all relevant insurance conditions, either as a complete text or by way of reference, which is sent to the person effecting the insurance. The confirmation shall mirror the terms of the insurance agreement entered into with the insurer.

    Sub-clause 1, second sentence, relating to the content of the policy, and the third sentence concerning the possibility of relying on the assumption that no other conditions apply than those appearing from the policy, corresponds to sections in the relevant Nordic ICAs. The rule to the effect that the insurer cannot invoke conditions to which no reference is made in the policy is a natural equivalent to the principle that the person effecting the insurance will be bound by the policy unless he raises an objection, cf. sub-clause 2. However, it would not be expedient to prevent the insurer entirely from invoking provisions that do not appear in the policy or the references contained in it. If the insurer can prove that the person effecting the insurance was aware of the relevant condition and that this was to form part of the contract, the parties’ agreement shall prevail over the written contract, cf. in this respect also the solution contained in Nordic ICAs.

    Nordic ICAs lay down detailed requirements con­cerning the conditions that must be incorporated in the policy. These requirements are not sufficiently flexible for marine insurance. Paragraph 2 corresponds to § 2, second paragraph, of the 1964 Plan, but has been somewhat rewritten.

    Sections in the Nordic ICAs also contain a number of rules relating to the insurer’s duty of disclosure. This type of rule is not required in marine insurance.

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    Clause 1-2. Policy

    When the contract is concluded, the person effecting the insurance may demand that a policy be issued. The policy shall confirm that a contract has been entered into and shall refer to the conditions. If the insurer wishes to invoke conditions which are not set out in the policy or incorporated i...

  • Clause 1-3. Contracts entered into through a broker

    This Clause was amended in 2016. Sub-clause 1 was rewritten based on the new definition of “broker” in Cl. 1-1 (d). The new sub-clause 1 replaced both sub-clauses 1 and 2 in earlier versions of the Plan. In sub-clause 2 (former sub-clause 3), first sentence, the word “requires” was replaced with “demands” and new sub-clauses 3 and 4 was added. 

    Sub-clause 1 emphasizes that the broker acts on behalf of the person effecting the insurance in all cases except those were the insurer has given written authority to the broker to perform a specific function on behalf of the insurer. This provision conforms with general principles of contract law. 

    Sub-clause 2 must be seen in conjunction with Cl. 1-2 concerning the policy. The first sentence imposes a duty on the broker to assist in obtaining a policy if the contract was entered into through a broker. If the broker acts on behalf of the insurers, he can to the extent that he has the necessary authority issue a common policy so that it will not be necessary for the person effecting the insurance to obtain a policy from each insurer. In that event, it should be clearly evident from the policy that it is issued by authority and on whose behalf the broker is signing, cf. second sentence. If the broker fails to state these facts, he risks becoming directly liable under the insurance contract. If the broker issues the policy on behalf of the insurer, he is acting as the representative of the insurer, and not of the person effecting the insurance. Any errors on the part of the broker in connection with the issuance of the policy will therefore be the insurer’s risk.

    If a policy is issued, the duty to raise objections set forth in Cl. 1-2, sub-clause 2, shall apply. This means that the person effecting the insurance must check the policy against any underlying agreement to see if the policy is correct. If the policy differs from the underlying agreement, and the person effecting the insurance fails to object, he risks that the policy takes precedence over the agreement.

    Sub-clause 3 gives the broker authority to receive premium returns or claims settlements. The purpose of the new clause is to simplify the documentation procedures for the parties. The insurer does not need to obtain confirmation of the broker’s authority every time any payment shall be made, provided always that the loss payee provision in the insurance contract is followed. It also follows that any payment by the insurer is binding also on the person effecting the insurance and/or the assured. Second sentence of sub-clause 4 makes it clear that the person effecting the insurance and/or the assured at any time may change or withdraw the power of attorney. In this event, the insurer must pay directly to the person effecting the insurance or the assured as appropriate. Return of premium will normally be made to the person effecting the insurance as the party responsible for payment of the premium, cf. Cl. 6-1. Settlements of claims will normally go to the assured, being the party entitled to compensation of claims, cf. Cl. 1-1 (c). Any change or withdrawal of the broker’s authority to receive payments from the insurer will only take effect upon his receipt of the notice. The notice may be sent through the broker, but will not take effect until the broker conveys the notice to the insurer. Therefore, if it is a matter of urgency it is advisable to send the notice directly to the insurer.

    Sub-clause 4 applies to premium payments. The person effecting the insurance will normally wish to pay the premium via his broker and leave it to the broker to distribute the premium to the participating insurers. As reiterated in sub-clause 5, according to sub-clause 1 the broker shall be deemed to act on behalf of the person effecting the insurance. In this context, payment of premium to the broker does not satisfy the duty of the person effecting the insurance to pay the premium to the insurer. If the broker for some reason does not forward the premium to the insurer, this is the risk of the person effecting the insurance. Interest on overdue premium according to Cl. 6-1, sub-clause 2, may accrue, and in a worst-case scenario the person effecting the insurance may have to pay the premium once again to the insurer if e.g. the broker should be declared bankrupt.

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    Clause 1-3. Contracts entered into through a broker

    The broker acts on behalf of the person effecting the insurance in all cases except those where the insurer has given written authority to the broker to perform a specific function on behalf of the insurer. If the person effecting the insurance demands that a policy be issued in accordance with C...

  • Clause 1-4. Jurisdiction and choice of law

    This Clause was amended in the 2013 Plan to adapt the Plan to its future application in Denmark, Finland and Sweden. The word “Nordic” in Cl. 1-4 embraces only Denmark (including Greenland and the Faroe Islands), Finland (including Åland), Norway and Sweden. Iceland is a non-Nordic country in the context of Cl. 1-4.

    The solution set out as standard in this Clause is that any dispute arising out of the contract can be settled by commencing proceedings against the claims leader. Chapter 9 defines the powers of the claims leader. These do not extend to all matters concerning the insurance, and the Commentary to Cl. 9-1 mentions that in practice it is sometimes necessary to make a distinction between the “rating leader” and the “claims leader”. The former has the power to bind following insurers in such matters as premium adjustments due to changes in vessel values, additional premiums for breach of trading warranties, rating of additional vessels and similar matters. It is not always the case that the same insurer is both rating and claims leader and in some cases there may be separate rating leaders for different geographical markets. It is not possible in a standard contract such as the Plan to provide solutions for all the various arrangements that assureds and their brokers might find most suitable for their requirements.

    Sub-clause 1 regulates jurisdiction and background law for any conflict associated with an insurance contract effected on Plan conditions and with a Nordic claims leader. There are similarities between the laws of the four Nordic countries, mainly as a consequence of co-operation in certain areas of private law including insurance, but each country has its own completely independent legislature and court system. Cl. 1-4 uses the term “law and venue of the claims leader”. If the claims leader is Norwegian then Norwegian law will govern the insurance contract, and any dispute will be subject to the jurisdiction of the court where the claims leader has its head office. Correspondingly, if the claims leader is Danish with its head office in Copenhagen, the insurance contract is governed by Danish law and disputes must be referred to the court which according to Danish law is the competent court. The rules in sub-clause 1 and 3 are in accordance with the provisions contained in Article 9 (1) (a) and (c) of the Lugano Convention, which provides that both the claims leader and the co-insurer may be sued in the claims leader’s State of domicile. On the other hand, the assured is precluded from invoking against the Nordic claims leader the other venue rules contained in Article 9 of the Lugano Convention, as well as the other venue rules contained in Section 3. This departure from the Convention is valid as it concerns insurance related to ocean-going ships or offshore structures, cf. Article 13 (5) cf. Article 14 of the Lugano Convention.

    The Insurance Contract Act of the relevant Nordic country becomes applicable as background law. However, there are very few rules in the ICAs of the Nordic countries that are mandatory for this type of marine insurance. The relevant ICA must be subordinate to the wording of the insurance contract and Plan conditions including solutions that follow by necessary implication. Nor is it necessary to state that the individual insurance contract takes precedence over the provisions of the Plan. Background law includes the rules governing sources of law and methodology of the relevant Nordic country. These will thus determine any issue concerning precedence between the various sources of law.

    The provisions also apply where a non-Nordic assured enters into an agreement with a Nordic claims leader on Plan conditions. In such cases, the assured may wish to have the right to institute proceedings in his home country. There is nothing preventing the parties from entering into such agreement provided it is in writing; a verbal agreement is not sufficient, cf. sub-clause 4 and below. If no agreement in writing has been made, sub-clause 1 prevails and the venue where the claims leader’s head office is located must be used. Nor is there anything to prevent the parties from agreeing in writing on the background law of another country. However, it must be emphasized that the Plan is very closely bound up with the law and practice of the Nordic countries, especially Norway. Applying any other law as background law will normally give rise to considerable difficulties. Sub-clause 4 states that the provisions in sub-clause 1 may only be departed from if the insurer gives his written consent. The provision applies both to choice of law and jurisdiction. Under Finnish and Swedish law any dispute on marine insurance matters must be placed before the local official adjuster before the dispute can be brought before the domestic courts. Cl. 1-4 will of course be subordinated to applicable local mandatory statutes. See further Cl. 5-5 and the Commentary to this Clause. Sub-clause 2 regulates choice of law when the insurance is effected with a non-Nordic claims leader. In such cases, it is not natural to apply non-Nordic background law. Hence, the default choice of law is Norwegian law.

    Cl. 1-4 does not contain any provisions on jurisdiction if the claims leader is non-Nordic. If the non-Nordic claims leader does not accept a Nordic or other jurisdiction suitable to the assured, the assured will have to institute legal proceedings where the non-Nordic claims leader is domiciled. However, the solution from the Norwegian 1964 Plan is maintained to the effect that Norwegian background law shall also apply. In the event of litigation outside any of the Nordic countries, the court will therefore have to apply Norwegian law, unless the parties have agreed that the background law of another country shall apply. Whether a specific jurisdiction clause also requires the application of the substantive law of that country must be decided in accordance with applicable rules on choice of law.

    Sub-clause 3 allows an assured to sue the co-insurers in the claims leader’s venue. In contrast to sub-clause 1, this is an option (cf. the words “may sue”). The assured may instead institute proceedings where the various co-insurers are  domiciled or any other available jurisdiction. The provision does not apply only to the claims leader’s general venue (home venue). It is also possible to sue the co-insurers in all the venues where the claims leader, according to law or contract, is obliged to accept lawsuits. Sub-clause 3 also applies in those cases where the claims leader is non-Nordic, so that the assured will have the option to sue any of the co-insurers (whether Nordic or non-Nordic) at the venue of the non-Nordic claims leader. The Plan does not contain any explicit reference to the Commentary and its significance as a basis for resolving disputes. This is in keeping with the approach of the Norwegian 1996 Plan. Nevertheless the Commentary shall still carry more weight as a legal source than is normally the case with the Traveau Preparatoire of statutes. The Commentary as a whole has been thoroughly discussed and approved by the Nordic Revision Committee, and it must therefore be regarded as an integral component of the standard contract which the Plan constitutes. However, in case of any obvious conflict between the Plan text and the Commentary, the text shall prevail as the primary legal source over the Commentary.

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    Clause 1-4. Jurisdiction and choice of law

    If insurance based on this Plan is effected with a Nordic claims leader, it is agreed that legal proceedings against the claims leader concerning any matter, dispute or disagreement of any kind which may arise during or in connection with or which in any way concerns the insurance contract, may...

  • Clause 1-5. Insurance period

    This provision corresponds to Cl. 4 of the 1964 Plan and relevant sections of the Nordic Insurance Contracts Acts (Nordic ICAs). Sub-clause 4 was added in the 2003 Version of the 1996 Plan. Sub-clause 4 was further amended in the 2007 version in connection with the amendment to Cl. 12-2. Changes were also made in the Commentary. The specification of the time in sub-clause 2 was changed in the 2010 version, at which time changes were also made in the Commentary on sub-clause 3.

    The rule contained in sub-clause 1 is new and corresponds to relevant Nordic ICAs, relating to term of liability. The Nordic ICAs contain more detailed rules than Cl. 4 of the 1964 Plan relating to the inception of the insurance. These do not fit in very well with marine insurance. This applies in particular to rules which governs the insurer’s liability in those cases where it is clear that the request for insurance will be granted by the insurer.

    Sub-clause 2 corresponds to Cl. 4 of the 1964 Plan, but the wording is derived from relevant Nordic ICAs. However, the time is tied to Coordinated Universal Time (UTC). The time specified for cessation of liability in sub-clause 2, second sentence, was changed in the 2010 version from 24:00 hours to 23:59:59 hours because the time 24:00 hours does not exist. This provision shall only apply if nothing else is agreed by the parties. If an insurance is transferred upon termination from one insurer to another, it is important that the parties take into account any differences in times in the insurance conditions in order to avoid creating periods of time with no cover.

    Relevant Nordic ICAs provide that the insurer cannot reserve the right to amend the conditions during the insurance period. However, this is not a mandatory rule for marine insurance. If the insurer wants to make such a reservation, this will accordingly take precedence over the rule contained in Nordic ICAs.

    The rule contained in sub-clause 3 is new, and relates to relevant Nordic ICAs, which set out the rule concerning the insurer’s duty to give notice if he does not wish to renew the insurance. Failure to give notice results in the insurance contract being renewed for one year. In marine insurance the insurer should, however, be free to decide whether or not to renew the insurance, see the first sentence, which introduces a point of departure that is opposite to that applied in relevant Nordic ICAs: the insurance is terminated unless otherwise agreed. The reference to Cl. 1-2 entails that the rules relating to documentation and the duty to raise objections are correspondingly applicable in the event of a renewal.

    The question of an extension of the insurance when the ship has sustained damage which must be repaired for the purpose of making it compliant with technical and operational safety requirements and it is uncertain whether the assured is entitled to claim for a total loss is governed by Cl. 10-10 and Cl.11-8.

    Rules relating to extension where the insurance terminates because of notice of termination or certain other circumstances are included in the relevant rules on termination, see Cl. 3-14, sub-clause 2, Cl. 3-17, sub-clause 1, third sentence, and Cl. 3-27. The duration of a voyage insurance is regulated in Cl. 10-9.

    If the ship has changed hull insurer and there is doubt as to whether damage is to be covered by the former or latter insurer, the question will normally have to be decided on the basis of the rules contained in Cl. 2-11. Both insurers will, in that event, be obliged to make a proportionate payment on account, cf. Cl. 5-7.

    Sub-clause 4 was added in the 2003 version, and a further addition was made to it in the 2007 version. The provision solves a previously controversial issue concerning the period of insurance in connection with multi-year insurance contracts. Insurance normally runs for one year at a time, and many of the provisions in the Plan stipulate an insurance period of one year. Recently, however, multi-year insurance contracts have become increasingly common, giving rise to the question of whether the insurance period is to consist of the entire term of the insurance contract, or whether the point of departure is to be an insurance period of one year.

    The provision states that if the parties have agreed that the insurance is to attach for a period longer than one year, the insurance period shall nevertheless be deemed to be one year in relation to certain provisions. This applies to Cl. 2-2 regarding the calculation of insurable value, Cl. 2-11 regarding incidence of loss, Cl. 5-3, last sub-clause, regarding calculation of rates of exchange , Cl. 5-4, sub-clause 3, regarding calculation of interest on the compensation, Cl. 6-3, sub-clause 1, regarding payment of premium in the event of total loss, Cl. 12-2 regarding the right to cash compensation,  Cl. 16-4, sub-clause 2, regarding calculation of the loss of time and Cl. 16-14 regarding liability for repairs carried out after expiry of the insurance period. Further comments on the rule may be found under the respective provisions.

    If the insurance period has been fixed in full years, the provision poses no problem. Starting from the date on which the insurer’s liability attaches, the total period is then divided into two or more one-year periods, In practice, however, one finds examples of insurance periods consisting of one or more full years with additional months, e.g. 1 ½ years, or 3 years and 3 months. In these cases, too, each full year or 12-month period is calculated individually from the date on which the insurance was effected; the “extra” time that does not constitute a full year then becomes a separate insurance period consisting of the relevant number of months.

    On the other hand, the entire term of the insurance contract must be regarded as the basic insurance period in relation to Cl. 6-4 and Cl. 6-5 of the Plan regarding the increase/reduction of premium, and Cl. 10-10 and Cl. 11-8 regarding extension of the insurance. The same applies with regard to the question of renewal, cf. Cl. 1-5, sub-clause 3, and Cl. 17-2.  Under the 2003 version, this also applied to Cl. 18-10 regarding the right to compensation for damage to offshore structures. However, the provision in Cl. 18-10 was deleted in the 2007 version because it was rendered superfluous by the general rule regarding the right to compensation that was added in Cl. 12-2 of the 2007 version. In relation to Cl. 12-2, it has been decided that the “end of the insurance period” means the end of a one-year period, cf. the Commentary on this provision.

    The main rule, therefore, is to divide up the total term of the insurance contract into several insurance periods or periods of one year in relation to certain provisions, while otherwise retaining the basic principle that the insurance period is the entire term agreed upon in the insurance contract.

    This provision only applies where an insurance period longer than one year is agreed. If an insurance period shorter than one year is agreed, this shorter period also applies in relation to the aforementioned provisions.

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    Clause 1-5. Insurance period

    Unless otherwise agreed, the insurer's liability attaches when the person effecting the insurance or the insurer has approved the conditions stipulated by the other party. If the insurer's liability under the agreement attaches on a certain day without any indication of time, liability commences ...