This Clause corresponds to Cl. 79 of the 1964 Plan, and Cefor I.3 and PIC Cl. 5.7.
This provision establishes the principle that the insurer is liable up to the sum insured for each individual casualty, and shall apply in all branches where a sum insured is agreed.
Sub-clause 1, first sentence, is based on Cl. 79 of the 1964 Plan, sub-clause 1. The insurer is liable with up to one sum insured for “loss caused by any one casualty”. The term “any one casualty” is discussed in further detail below.
Sub-clause 1, second sentence, is based on the Special Conditions (Cefor I.3, and PIC Cl. 5.7), but with certain amendments. The provision is bound up with the traditional principle in insurance law that the insurer, in addition to the sum insured, is liable for costs of measures to avert or minimise loss. Under the 1964 Plan, the insurer originally had unlimited liability for these costs. However, this liability was limited in the Special Conditions (Cefor I.3, and PIC Cl. 5.7) so that the costs of measures to avert or minimise loss basically had to be covered up to the sum insured under Cl. 79, sub-clause 1, or possibly the separate sum insured under Cl. 196. There was nevertheless a certain extension of the cover: if the separate sum insured under Cl. 196 of the Plan was not used to cover costs of collision or measures to avert or minimise such liability, the balance could be used to cover costs of measures to avert or minimise damage to or total loss of the ship to the extent that such measures exceeded the sum insured.
According to this, the cover under the Special Conditions of costs to avert or minimise loss were more limited than the corresponding cover under the relevant Nordic Insurance Contracts Acts (Nordic ICAs). Under the Norwegian ICA Section 6-4, the rule is that the insurer is fully liable for costs of measures to avert or minimise loss. During the revision of the Plan, there was general agreement that the limitation in the Special Conditions went too far. The intention was originally that the P&I insurers were to cover the costs of measures to avert or minimise loss which were not recoverable under the hull insurance. However, this applied only to the Norwegian P&I insurers, and the assured therefore ran the risk of being without cover if he had a foreign P&I insurer. Nor was the solution laid down in any agreement, and it was therefore uncertain to what extent it would be complied with in practice. The regard for the interests of the assured therefore warranted a certain expansion of the scope of cover. Out of regard for the reinsurers, however, cover of costs of measures to avert or minimise loss had to be subject to a limitation. These conflicting interests have been resolved by the introduction of a separate sum insured for the costs of measures to avert or minimise loss stipulated in sub-clause 1, second sentence. This sum insured comprises the total costs of measures to avert or minimise loss for the relevant insurance under the Plan. For hull insurance, this means that both costs of measures to avert or minimise loss associated with the property insurance, as well as costs of measures incurred to avert collision liability, are included. The insurer’s maximum liability for one and the same casualty thus consists of three sums insured. Such a solution concords with the solution in the English conditions.
If the sum insured for property damage under a hull insurance has not been exhausted by compensation paid for such damage, it should be possible to use the excess of the sum insured to cover costs of measures to avert or minimise loss that exceed the separate sum insured for such costs. This solution is reflected in sub-clause 1, third sentence. On the other hand, it should not be possible to transfer the separate sum insured for the collision liability under sub-clause 2 and Cl. 13-3 for the purpose of covering costs of measures to avert or minimise loss in this way. The provision relating to a separate sum insured for collision liability contained in sub-clause 2 and Cl. 13-3 is bound up with the regulation of the owner’s liability. According to the Limitation of Liability Convention of 1976, the owner is liable up to a certain amount per ton, regardless of the fate of the ship. Without a separate sum insured for collision liability, collisions causing extensive damage to both ships may result in the P&I insurer having to cover a substantial part of the collision liability.
The fact that the insurer covers collision liability “separately” means that he does not cover collision liability within the actual hull insurance sum. Thus, whatever might be left of the ordinary sum insured after the damage to the ship has been covered shall not be used to cover liability. The separate sum insured for collision liability has been fixed at an amount equal to the sum insured under the hull insurance, cf. Cl. 13-3.
It follows from the regulation in Cl. 4-18 that the limit in terms of amount of the insurer’s liability is linked to “any one casualty”. The question whether one or more casualties occurred will rarely give rise to problems. Difficulties do not arise until a series of events occur in rapid succession or with a strong mutual causal connection. In that event, the distinction between one and several casualties must be decided on a case-to-case basis. Some guidance may be found in practice in connection with Cl. 12-18 concerning deductibles; the deductible, too, shall be calculated for each individual casualty. However, the content of the casualty concept will not necessarily be the same in both connections.
The question as to when successive events constitute one or more casualties may arise in three standard scenarios:
1. One and the same peril materializes several times. By way of example, a ship sustains hull damage while navigating in ice on a number of clearly separate occasions, cf. e.g. ND 1974.103 NH Sunvictor, which concerned the question relating to the number of deductibles under an Anglo-American deductible clause. As a rule, this problem will concern the number of deductibles. The ship will normally be a constructive total loss if several incidents of damage exceed the sum insured. However, in principle it may in such situations also be a question whether the insurer shall be liable for up to more than one times the sum insured.
2. Damage caused by one event interacts with new circumstances and results in further damage. By way of example, the steering gear of a ship is damaged in a collision with the result that the helm is locked in a starboard position. Before the crew manages to stop the engine, a new collision occurs. As regards property-damage cover, in this group of events as well, it will be the question of deductibles which is the most interesting. However, in the event of several successive collisions, the total collision liability may become so extensive that the question of whether the insurer is liable for up to one or several times the sum insured becomes relevant.
3. One incident of damage requires several repairs. The typical example is that the first repairs were inadequately performed, or that they were not thorough enough, cf. ND 1977.38 NH Vestfold I, which concerned the question whether new damage resulting from errors committed during the repairs of the engine after a grounding was to be regarded as a consequence of the grounding. If the first damage has been repaired before the next one occurs, there may also be a need for more than one sum insured.
There is no case law regarding the distinction between one and several casualties in relation to the sum insured. Certain elements may be taken from ND 1974.103 NH Sunvictor and ND 1977.38 NH Vestfold I, cf. above. In addition, some guidance may be found in case law concerning limitation of liability under Section 175 no. 4 of the Norwegian Maritime Code, which ties the limit of liability to “the sum total of all claims arising from one and the same event”. If it is a situation where the ship collides with several other ships in quick succession, causing a total loss exceeding the sum insured for the collision liability, the natural thing to do would be to tie the solution to the decision regarding the owner’s right to limit his liability to third parties. However, also in other cases where a limitation of liability under the Norwegian Maritime Code is relevant, the interpretation of the term “one and the same event” in the Norwegian Maritime Code may help shed some light on the question concerning the distinction between one and several casualties in relation to the sum insured. Reference is made to ND 1984.129 NH Tønsnes, where damage to seven net loops in the course of roughly one hour was regarded as caused by one event; and ND 1987.160 NH Ny Dolsøy, where it was regarded as one event that contaminated bunkers delivered at an interval of 24 hours to two ships within the same fishing area caused damage to the machinery of these vessels.
Accordingly, the question whether one or several casualties have occurred in relation to the sum insured must be the subject of a case-to-case evaluation, where the following elements may come into play:
1. Is there a close connection in terms of location and time between the successive incidents of damage, or are the new accidents of a totally independent nature? Taking the two limitation of liability judgments referred to above as a point of departure, it is nevertheless hardly possible to stipulate very strict requirements as to connection in time and place in order for several incidents of damage to be regarded as one casualty. As long as the incidents occur within a limited area, it must be accepted that they occurred at certain intervals.
2. What possibilities did the assured have of averting the last damage? As regards this element, a distinction must, however, be made between the number of deductibles and the number of sums insured. If it is a question of whether new damage shall trigger several deductibles, the assured’s negligence must be regarded as a new and independent cause that breaks the chain of causation from the first incident. This follows from the view that the deductible shall have a deterrent effect. However, in relation to the number of sums insured, the deterrence aspect may suggest that negligence on the part of the assured does not give rise to a new sum insured. Deterrence considerations might, in other words, warrant varying the distinction between one and several casualties depending on whether it is a question of more than one sum insured or more than one deductible.
3. Does the initial damage or its cause entail an increased risk of new damage, or is the last incident a result of a “generally prevailing risk of damage” which would have occurred with the same effect independently of the first damage or its cause?
Cefor - The Nordic Association of Marine Insurers