Commentary

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Section 4: Total loss

  • Clause 15-10. Relationship to Chapter 11

    The provision is, strictly speaking, unnecessary, but it does provide an appropriate bridge between Chapter 11 and the other rules in the Section.

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    Clause 15-10. Relationship to Chapter 11

    The provisions in this Section shall apply in addition to the provisions contained in Chapter 11.

  • Clause 15-11. Intervention by a foreign State power, piracy

    Sub-clauses 1 and  2 were amended in the 2019 Version.

    Sub-clause 1 states that the assured is entitled to total loss compensation if the ship is taken from him due to intervention by a foreign State power and he has not received it back within six months. It does not matter whether the intervention may be characterised as a "permanent" or "temporary" intervention. The wording "for which the insurer is liable under Cl. 2-9" has been incorporated to serve as a reminder that the perils covered may vary, depending on which war risk insurer is involved.

    Sub-clause 2 uses the expression "similar unlawful interventions" which encompasses first and foremost mutiny and war-motivated theft, cf. ND 1945.53 NV IGLAND. Ordinary theft is covered by the marine perils insurer. 

    Only the assured may bring a claim for the ship to be deemed a total loss under the rules in sub-clauses 1 and 2; the insurer has no such right.

    In connection with the amendments made in Cl. 2-8 and Cl. 2-9 regarding cover for State intervention in the 2019 Version, the time-limits in sub-clauses 1 and 2, which sets out when the assured can claim total loss, were reduced from twelve to six months.

    Sub-clause 3 allows the deadlines in sub-clauses 1 and 2 to be disregarded when it is clear that the assured will not recover the ship.

    It goes without saying that the assured will not be able to bring a claim for total loss compensation after the ship has been released. Conversely, sub-clause 4 stipulates that the claim of the assured for total loss compensation will remain intact if the ship is released after he has brought a claim for total loss compensation. The fact that the compensation has not been paid out makes no difference. When an assured brings a claim for total loss compensation, it will often be in connection with other measures he takes to obtain a new ship. Consequently, it is proper that he acquire an irrevocable right to total loss compensation in view of his claim for total loss compensation.

    Sub-clause 5 confers corresponding application on the provisions of Clauses 11-8 and 11-9.

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    Clause 15-11. Intervention by a foreign State power, piracy

    If the assured has been deprived of the vessel by an intervention by a foreign State power, for which the insurer is liable under Cl. 2-9, the assured may claim for a total loss if the vessel has not been released within six months from the day the intervention took place. If the vessel has been...

  • Clause 15-12. Blocking and trapping

    Sub-clause 1 gives the assured a right to total loss compensation when the ship is prevented from leaving port, etc., as a result of a war risk, and the hindrance lasts for over 12 months. The provision is aimed primarily at cases where the hindrance is of a physical nature, for example, when the ship remains trapped because the lock gates have been destroyed by bombing, or because a bridge has been blown up by sabotage and blocks the way out of port. The lines are fluid, however, between hindrances of this type and hindrances consisting of a foreign State power detaining the ship in port due to fear that it will fall into enemy hands. The detention may be reinforced by the area around the ship being mined or by other measures aimed at preventing the ship from leaving the area. Regardless of whether the authority in question implements separate physical measures, a detention of this nature will be deemed to be blocking and trapping within the meaning of the provision, and will also fall within the scope of Cl. 15-11.

    The hindrance will be manifested by the ship being unable to leave port "or a similar limited area". The comparison shows that the area must not be too large geographically and, accordingly, must be comparable to a port. A typical example would be that the ship remains trapped in a canal, etc., because the lock gates or other structures have been destroyed. The events in Shatt-al-arab during the Iran-Iraq war and in the Suez Canal during the war between Israel and Egypt are examples of this type of situation. The provision will not apply, however, if a general cargo ship is prevented from leaving the Great Lakes because the lock gates have been bombed in the St. Lawrence Seaway. By contrast, in relation to the Strait of Hormuz, the provision must be given a wide interpretation. Accordingly, if an oil tanker is unable to get out of the Strait of Hormuz during a conflict, e.g. because the Strait has been mined, the provision will apply.

    Sub-clause 2 stipulates that Cl. 15-11, sub-clauses 3, 4 and 5 shall apply correspondingly.

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    Clause 15-12. Blocking and trapping

    If the vessel is prevented from leaving a port or a similar limited area due to blocking, the assured may claim for a total loss, if the relevant obstruction has not ceased within twelve months after the day it occurred. The provisions in Cl. 15-11, sub-clauses 3, 4 and 5, shall apply...

  • Clause 15-13. Restrictions imposed by the insurer

    The provision confers on the assured entitlement to total loss compensation when restrictions imposed by the insurer prevent the ship from earning income for a period of over six months. This provision is related to the loss-of-hire cover, see Cl. 15-18. When the assured is covered for loss of time arising from orders issued by the insurer, it is reasonable for that cover at some point to be switched over to total loss cover. There is a fundamental difference between Cl. 15-18 and this provision, however. Under Cl. 15-18, it is sufficient that there has been a loss of time. This may very well be the case even though the ship is partially earning income, see Cl. 16-1. For the assured to be entitled to total loss compensation, however, the ship must have been entirely deprived of income. If then, the assured has been ordered to follow another route than the usual one, for example, on a voyage between Europe and the United States, the assured will be able to claim under Cl. 15-18, if that deviation leads to a loss of time. A claim for total loss compensation will not be possible, however, since the ship will still be earning income. This implies that the provision will be of most significance when the insurer orders the ship not to leave port or another area due to a war situation or other circumstances for which the insurer will be liable.

    The deadline in Cl. 15-13 is, as in Cl. 15-11, set at six months and not twelve as provided for in Cl. 15-11 and Cl. 15-12. The reason for this is that a shorter time period is reasonable when it is the insurer's measure which leads to the ship sustaining a loss. The insurer will be able to assess the overall risk and, if he comes to the conclusion that, in view of the circumstances as a whole, the only sensible thing to do is to detain the ship for as long as six months, then he should compensate the actual loss of the asset the assured thereby suffers, and not just the loss of income.

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    Clause 15-13. Restrictions imposed by the insurer

    If the vessel  has been deprived of income for more than six months as a result of orders issued by the insurer, cf. Cl. 15-4, the assured may claim for a total loss.

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