This Clause was amended in the 2019 Version.
Sub-clause 1 covers all costs incurred after the casualty which are necessary in order to establish whether any recoverable loss has occurred and, if so, its extent, or which are necessary in order to secure any recourse against third parties. Thus the insurer shall pay costs in connection with the necessary factual investigation and damage surveys. The same applies to costs in connection with the conduct of a vessel’s protest and maritime accident inquiry, provided that these measures are attributable to a casualty which resulted, or could have resulted, in recoverable losses. The provision does not distinguish between costs incurred by the insurer or the assured. The assured’s surveyor is, however, covered by sub-clause 2.
A requirement for cover of costs is that there has been a casualty which may result in a claim under a particular insurance cover. If for example the object insured does not function as intended, the hull insurer will not cover cost of technical investigations if the conclusion is that there is no damage and that the malfunction or errors were caused by some inherent defects, or simply not fit for purpose. The same must apply even if there has been an external event with an increased risk of damage but no damage has occurred. Say that the insured object has been exposed to heavy weather and it is decided to check whether the object has suffered any damage, such investigations must be considered as part of the normal operation of the object and the cost have to be covered by the assured if no damage is found. If technical inspections are carried out on various individual and independent parts of the object, and one or more of these parts are found damaged, the costs should be apportioned as per Cl. 4-6. An external event may constitute a “casualty” where inspection costs might be covered in full even if no damage is found. The typical example is a grounding incident where the insurer will cover a dive survey even if no damage is found.
There might be situations where costs incurred shall be considered as repair costs even if considered in isolation they have the character of determining the extent of damage. That is the situation if in parallel with repairs adjacent areas or connected interdependent parts are dismantled and checked for damages. E.g., if it is likely that there might be consequential damages to the gear following a damage to a propeller blade of a thruster, costs of dismantling the thruster for investigation should be considered as repair costs even if no other damage is found. The same solution applies if the class due to the characteristics of a grounding incident require that the vessel should be docked.
Even if the extent of damage has been ascertained it might be necessary to conduct further technical investigation regarding the cause of damage. If the cause, however, is sufficiently established to conclude that the loss is recoverable under the insurance, further investigations into the root cause will as a starting point be for owner’s account. Such further investigations might be required by third parties or be necessary to upgrade the insured object to avoid this kind of damage in the future. If further investigations into the root cause are necessary for the purpose of recourse against a third party, such costs may still be covered by the insurance as recovery costs.
This provision will also cover costs of obtaining expert opinions in order to clarify technical or legal questions, for example, an opinion to document the cause of a corrosion damage or expert assistance on a specific legal question. Costs incurred by the assured by engaging legal or technical consultants in a dispute with the insurer will not be covered. However, if the dispute ends up in litigation, the applicable procedural law will regulate recovery of legal costs.
Sub-clause 2 covers the assured’s surveyor. This provision has according to long-standing and uniform practice been subject to a relatively strict interpretation.
Costs connected with the assured’s surveyor/technical consultant are only recoverable if the insurer has been given the opportunity to participate in the survey, and the insurer’s liability is normally limited to the costs of one surveyor/technical consultant engaged by or from the shipowner’s company. However, in complex or large cases with extensive workload for the assured’s surveyor/technical consultant, the costs of more than one surveyor/technical consultant is recoverable. The insurer’s liability for costs of the surveyor/technical consultant is furthermore limited to the time the repairs take plus travel and maintenance expenses in connection with travelling to and from the place of repairs. The costs will be covered even if repairs are carried out at the home town of the owners’ surveyor/technical consultant, but the costs will of course be limited to the time attending the vessel for repairs. Costs in connection with the settlement of the repair invoice are also recoverable, but planning of repairs before the vessel’s arrival and administration costs are not.
As regards other costs, the insurer does not cover internal costs or the costs of hiring someone to draw up the statement of claim or retaining legal or expert assistance to draft the claim submission to the insurer. Internal costs and costs for external assistance that should have been obtained internally should not be recoverable.
Nevertheless, the recovery of costs in connection with the claims settlement is subject to the condition either that it is clear in advance that the claim exceeds the deductible, or at least that there is reasonable doubt whether the claim will exceed the deductible.
Sub-clause 3 introduces no material changes. In previous versions the basis for cover of costs relating to handling and adjusting the claim was encompassed by the wording “costs of establishing the loss and calculating the compensation”. The provision establishes that the insurance covers costs of handling the claim as well as drawing up the adjustment. The provision does not distinguish between work contracted to a third party or carried out with the claims leader’s internal resources. It might also be that the management and handling of the claim is carried out by the insurer and the adjusting is outsourced to a third party or vice versa.
In the event of what is known as “aggregate deductibles” the assured will, in addition to the ordinary deductible per loss, bear a risk for a certain period. Under certain such clauses the assured must cover any damage occurring within the stated period of time until the amount of damage exceeds the amount of the aggregate deductible. In that event, until the entire aggregate deductible has been “consumed”, it may be alleged that the casualties occurring are not relevant to the insurance. This is not correct, however: an overview of the casualties occurring is needed in order to know when the aggregate deductible has been exhausted and the insurer’s liability arises. Accordingly, the insurer should cover costs in connection with survey and claims settlements for such casualties, even if the insurer, due to the aggregate deductible, does not incur any liability for the actual loss.
Cefor - The Nordic Association of Marine Insurers