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. Deprivation of the use of the vessel
Sub-clauses 1, 3 and 5 were amended in the 2027 Version, while sub-clause 2 was new.
In cases where a vessel is physically damaged or lost, the assured may claim compensation for total loss if the conditions of Chapter 11 are met, cf. Cl. 15-10. Cl. 15-11 provides cover for total loss in situations where the assured has been deprived of the vessel because it is struck by a war peril under Cl. 2-9, without the conditions for an actual physical total loss under Chapter 11 being met. Such situations have proved increasingly topical and challenging for owners in recent years’ geopolitical landscape.
Sub-clause 1 states that the assured is entitled to claim compensation for total loss if the assured “has been deprived of the vessel” by an intervention from a foreign State power for which the insurer is responsible under Cl. 2-9, sub-clause 1 (a) or (b) and the assured has not recovered the vessel within twelve months. It does not matter whether the intervention may be characterised as “permanent” or “temporary”.
The twelve months’ time-limit was previously interrupted by the vessel being “released”. In the 2027 Version, this was changed, so that the time-limit is interrupted by the vessel being “recovered”. This is meant to reflect that the time-limit is not interrupted unless the assured in fact has regained the ability to use the vessel. For example; if a formal release order has been issued by the authorities but the vessel nevertheless remains detained, the assured will not have “recovered” the vessel. However, practicalities and bureaucracy may entail that some time passes from a release order until the assured has the opportunity to freely use the vessel again, without this meaning that the assured did not “recover” the vessel at the time of the formal release order. At what time the assured “recovered” the vessel must always depend on a concrete assessment of the specific circumstances of the case and the realities rather than formalities.
Sub-clause 1’s reference to “foreign State power” is meant to be understood in line with the definition contained in Cl. 2-9, sub-clause 1 (b), second sentence. For organisations and individuals “who unlawfully purport to exercise public or supranational authority” it may be difficult to establish whether the particular intervention was made purporting to exercise such authority, or for some other reasons. However, if the intervention is motivated by social, religious or political reasons, the intervention may fall under Cl. 2-9, sub-clause 1 (c) and sub-clause 2 of Cl. 15-11. And in case of “pure” piracy, the situation may be covered by Cl. 2-9, sub-clause 1 (d) and sub-clause 3 of Cl. 15-11. Thus, the question of whether the individuals or organisation purports to exercise public authority will only arise in exceptional cases if a war risks insurer has not accepted liability for the perils in Cl. 2-9 (1) (c) and/or (d).
Sub-clause 2 was new in the 2027 Version and included to reflect two aspects of the total loss cover under Cl. 15-11.
First, if a war peril as named in Cl. 2-9, sub-clause 1 (c) results in the assured being deprived of the vessel in the same manner as an intervention by a foreign State power (sub-clause 1) or by an act of piracy as named in Cl. 2-9, sub-clause 1 (d) (sub-clause 3), a claim for compensation for total loss should be allowed on the same conditions as for the two latter alternatives. As long as a war peril results in the same deprivation of the vessel for the assured, there is no reason to attach any importance to which war peril it is; total loss compensation should in principle be available for all war perils.
Second, acts falling within Cl. 2-9, sub-clause 1 (c) may have similarities with “war or war-like” acts falling within Cl. 2-9, sub-clause 1 (a), for example threats of using arms or implements of war, detonating explosives hidden on the vessel, etc. Instead of naming a particular kind of incident as the starting point for the twelve month period, the sub-clause refers to the “day when such act deprived the assured of the use of the vessel”. This means that the vessel does not need to be physically damaged by acts of sabotage, terrorism or similar, but that the operation of the war peril must have produced some concrete and specific result that deprives the assured of using it. A general heightening of risks or threats will not suffice to prevent the assured from using the vessel. However, if there is an imminent danger that the vessel will suffer a loss covered by the insurance, such may in certain cases deprive the assured from using the vessel. For example if there is a concrete threat against crew and/or the vessel if certain demands are not complied with by the assured.
Sub-clause 3 covers capture by pirates and includes 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.
Also, for sub-clause 3, the starting point for the twelve month period is determined by reference to the “day when such act deprived the assured of the use of the vessel”, cf. the Commentary to sub-clause 2 above.
Only the assured may bring a claim for compensation for total loss under the rules in sub-clauses 1, 2 and 3; the insurer has no such right.
Sub-clause 4 allows the deadlines in sub-clauses 1, 2 and 3 to be disregarded when it is clear that the assured will not recover the vessel.
It goes without saying that the assured will not be able to bring a claim for total loss compensation after the vessel has been released. Conversely, sub-clause 5 stipulates that the claim of the assured for total loss compensation will remain intact if the vessel is released after the assured has brought a claim for total loss compensation. To make it clear that this applies to all alternatives in sub-clauses 1, 2 and 3, the expression “recovered” has been added in the 2027 Version to cover situations where the assured resume control of the vessel and is no longer deprived of using it. 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 the assured takes to obtain a new vessel. Consequently, it is considered appropriate that the assured is provided with an irrevocable right to the total loss compensation. This is however not always the case, typically when a vessel is recovered subsequent to the expiry of the twelve month period. Still, the assured would be entitled to claim total loss compensation if the claim has been brought before the twelve month period expires. In such cases the insurer will subrogate to the assured’s right in the object insured upon payment of the total loss compensation, cf. Cl. 5-19.
Sub-clause 6 confers corresponding application on the provisions of Clauses 11-8 and 11-9.
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Clause 15-11. Deprivation of the use of the vessel
If the assured has been deprived of the use of the vessel by an intervention by a foreign State power, for which the insurer is liable under Cl. 2-9, sub-clause 1 (a) or (b), the assured may claim compensation for total loss if the vessel has not been recovered within…
Clause 15-12. Blocking and trapping
The Clause was amended and the Commentary was rewritten in the 2027 Version.
Sub-clause 1 gives the assured a right to claim compensation for total loss when the vessel is prevented from leaving port, etc., as a result of a war peril as per Cl. 2-9, and the hindrance lasts and prevents the vessel from leaving for over twelve months.
The provision is aimed primarily at cases where the hindrance is of a physical nature, for example, when the vessel 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 hindrance will be manifested by the vessel 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 vessel 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.
In relation to for example the Strait of Hormuz, the provision “similar limited area” must be given a wide interpretation. Accordingly, if an oil tanker is unable to get out of the Persian Gulf through the Strait of Hormuz during a conflict, e.g. because the Strait has been mined, the provision will apply. This is because the only way out of the Persian Gulf is through the Strait of Hormuz, and even though the Persian Gulf itself is large, the vessel is effectively confined to a discrete body of water with no alternative navigable passage to the high seas. However, whether a vessel within the Persian Gulf will be entitled to claim for a total loss will depend on whether it is “prevented from leaving” in the sense of Cl. 15-12.
A vessel that is ordinarily engaged in trade entirely within the blocked area (e.g., trading between ports within the Persian Gulf) will not, without more, be considered “prevented from leaving” within the meaning of Cl. 15-12.
The term “prevented” will encompass all types of physical obstructions effectively blocking the vessel from leaving. This will include mines deployed by a State power to hinder enemy warships from entering its waters and ports. The lines are fluid, however, between hindrances of this type and hindrances consisting of express threats by the military forces of a State power. A generally heightened risk of being attacked due to an ongoing war or hostilities will not in itself qualify as a blocking under sub-clause 1. Cl. 15-12 presupposes that a war peril has struck the insured interest according to Cl. 2-11, sub-clause 1. Thus, the risk of being attacked must be imminent, concrete and specific in order to prevent “the vessel” from leaving, cf. the Commentary to Cl. 2-11, sub-clause 1.
If military forces threaten to use arms against vessels leaving a port or passing a strait as part of the ongoing hostilities in combination with attacks on vessels in or close to the strait, this type of threat expressed and warned by a national military force would normally satisfy the requirement of “prevented” in sub-clause 1 even if no mines or other physical hindrances are implemented. This is because threats of this magnitude would be natural to equate with a physical hinderance in the form of e.g. mines. However, the threats must always be assessed against the characteristics of “the vessel”; factors such as ownership of vessel and cargo, the vessel’s flag etc., may affect whether the risk of being attacked is imminent, concrete and specific. If a threat against vessels from military forces is specific to “the vessel” or vessels with similar characteristics and related geographically to a port or similar limited area, such will be deemed as blocking and vessels will be regarded as prevented from leaving. However, such risks may be sufficiently mitigated by other means, for example a military escort, and the vessel would in cases of such mitigation normally not be “prevented” from leaving the area. It should be noted that the assessment of when a peril has struck under Cl. 2-11 is based on objective criteria as set out in the Commentary, and may therefore differ conceptually from the assured’s own subjective internal risk assessment and risk appetite in the particular circumstances.
It is only prevention from “leaving” a port or similar limited area that may entitle an assured to bring a claim for total loss. If a vessel is prevented from entering a port or a similar limited area in order to load or discharge cargo, to reach a scheduled repair at a yard, or for other reasons, this will not entitle the assured to bring a claim for total loss compensation.
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 by a war peril pursuant to Cl. 2-9 for a continuous period of twelve months, the assured may claim compensation for total loss.
Clause 15-13. Instructions imposed by the insurer
The Clause was editorially amended in the 2027 Version. “Orders issued by the insurer” was amended to “instructions issued by the insurer” to be consistent with the wording in Cl. 15-4.
The provision confers on the assured entitlement to total loss compensation when instructions imposed by the insurer prevent the vessel 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 instructions 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 vessel is partially earning income, see Cl. 16-1. For the assured to be entitled to total loss compensation, however, the vessel must have been entirely deprived of income. If then, the assured has been instructed 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 vessel will still be earning income. This implies that the provision will be of most significance when the insurer instructs the vessel 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 set at six months and not twelve as provided for in Cl. 15-22 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 vessel sustaining a loss. The insurer will be able to assess the overall risk and, if the insurer comes to the conclusion that, in view of the circumstances as a whole, the only sensible thing to do is to detain the vessel for as long as six months, then the insurer 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. Instructions imposed by the insurer
If the vessel has been wholly deprived of income for more than six months as a result of instructions issued by the insurer, cf. Cl. 15-4, the assured may claim for a total loss.