Clause 1-1. Application and definitions
Introduction
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). Further amendments were made in the 2027 Version of the Plan by including a new sub-clause 1 and moving the definitions to sub-clause 2.
Sub-clause 1
The Plan is a comprehensive set of standard marine insurance conditions that becomes applicable by the parties agreeing that the insurance contract shall be based on the Nordic Marine Insurance Plan of 2013. By agreeing that the insurance contract shall be based on the Plan, they simultaneously agree that the Commentary applies as it “shall be considered as an integrated part of the insurance contract”.
In the previous Commentary, the relationship between the Plan text and Commentary were explained as follows:
“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”.
However, similar to the Plan, the Commentary has been drafted by the Plan’s Standing Revision Committee, and both are agreed documents. Thus, the Commentary shall not be treated merely as preparatory works (travaux préparatories), but as “an integrated part of the insurance contract”. For prior versions of the Plan, it was also accepted in case law that the Commentary should carry significant weight as an aid to interpreting the wording, see, for example, Sitakathrine, ND 2000 p. 442, Bulford Dolphin, ND 2009 p. 202 and the Heroic Idun case from 5 August 2025. Similar statements have been made by other Nordic courts in relation to other so-called agreed documents with commentaries prepared by the drafting committee (see, for example, the judgment of the Swedish Supreme Court in NJA 2018 p. 301, paragraph 11). With the wording now integrating the Commentary as part of the insurance contract, the importance of the Commentary is reaffirmed and the weight further strengthened compared to the previous versions.
The Commentary explains the reasoning behind the provisions, how they relate to other provisions, and explains how they are intended to be applied in various situations. The latter entails that the Commentary contains a number of pre-agreed interpretations of how the wording of the Plan shall be understood. This enhances clarity and predictability.
However, in general, the Commentary cannot be subjected to the same degree of textual analysis as the wording in the Plan. While some statements in the Commentary provide conclusive interpretations of specific provisions, others are more discursive in nature. Such discursive statements are used to identify areas where the interpretations are not straight forward, and where it is eventually left to practice to determine the issue with the benefit of a specific case being enlightened and argued. Another important function of the Commentary is to explain the purpose of particular provisions or amendments to the Plan, which may aid the interpretation of the wording. The intended function or purpose of a given provision may also be discerned from its drafting history either as set out in the Commentary itself or by examining how the provision has developed through previous editions of the Plan and its predecessors.
While an important contribution to the interpretation and adaption of the provisions, the Commentary cannot and should not overshadow or substitute the wording of the provisions relevant to the case. The weight to be given to references in the Commentary must always be assessed in light of its purpose and the context in which it appears. As before, 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. See also the Heroic Idun (paragraph no 1208).
Sub-clause 2
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 ship-owner 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 it 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 vessel’s mortgage loans exceed the vessel’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 its 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 its 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. Application and definitions
The rules in this Plan apply whenever the parties have agreed that the insurance contract shall be based on the Nordic Marine Insurance Plan of 2013. The Commentary to the clauses shall be considered as an integrated part of the insurance contract.
For the purposes of this Plan
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 it 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 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 it 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…
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 where 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, the broker can to the extent that it 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, it risks becoming directly liable under the insurance contract. If the broker issues the policy on behalf of the insurer, it 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, it 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 its 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.
Clause 1-4A. Governing law
This Clause was amended in the 2013 Plan to adapt the Plan to its future application in Denmark, Finland and Sweden. In the 2019 Version, sub-clause 2 was amended and a new Cl. 1-4B on arbitration inserted. In the 2027 Version, the Clause was further amended to only regulate governing law. Cl. 1-4B regulates arbitration, whilst choice of courts as a dispute resolution mechanism is regulated in Cl. 1-4C.
Sub-clause 1
Sub-clause 1 regulates governing law for an insurance contract effected on the Plan and with a Nordic claims leader. Governing law includes rules regarding interpretation of contracts, background law like an Insurance Contract Act and rules governing sources of law and methodology. The latter will determine any issue concerning precedence between the various sources of law.
The word “Nordic” in Cl. 1-4A 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. 1-4A.
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.
Each of the Nordic countries has their own Insurance Contract Act (ICA), which as a starting point has status as background law for the Plan. To the extent these provisions are mandatory, they must obviously apply. The mandatory application of the Nordic ICA’s varies somewhat, but as a main rule these acts are not mandatory for the type of insurance regulated in the Plan. The influence of mandatory provisions is therefore limited. Further, the non-mandatory regulation will as a starting point have limited function as background law due to the characteristics of the types of insurance regulated in the Plan, the negotiations resulting in the clauses, and the method of drafting the clauses.
The Plan is drafted to provide a total and comprehensive framework for marine insurance and regulates both issues that are not regulated in the ICAs, for instance in particular the scope of cover, and issues that are regulated in the acts, typically duties of disclosure and due care for the person effecting the insurance/the assured. The reason for including issues that are also regulated in the Acts is that the ICAs are very consumer friendly legislations not suited for professional insurance covering assets with high value used in international transport and trade. The Plan is therefore aimed at including a total regulation adjusted to the special needs for insurance of ocean going vessels. This means that to the extent the rules in ICAs are included in the Plan, the rules in the ICAs are departed from as being not suitable. But it also means that rules in the ICAs not included in the Plan do not necessarily provide a convenient solution for insurance according to the Plan. The clearest example is the Norwegian ICA part 2 on pre-contractual duties that is not included in the Plan and not meant to apply.
In other cases, it must be assessed concretely to what extent the provisions in ICA may supplement the regulation in the Plan. For matters regulated in the Plan, but without adopting all parts of the matter regulated in the ICA, the natural presumption should be that the provision in the Plan shall not be supplemented by any added provisions in the ICA. In such cases, the interpretation of the Plan should rather be based on the Plan as a system and considerations of legal security and predictability. There is little room for considerations of fairness or reasonableness as such considerations are taken care of by the committee drafting the clauses.
The provisions also apply where a non-Nordic assured enters into an agreement with a Nordic claims leader on Plan conditions. Nothing prevents the parties from agreeing 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 2
If insurance is effected with a non-Nordic claims leader, Norwegian law applies. This is the solution where arbitration or court proceedings is agreed in Norway, as well as where arbitration or court proceedings is agreed in a non-Nordic country.
However, if the parties have agreed on arbitration or court proceedings in another Nordic country, it is more natural to apply the law of this country.
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Clause 1-4A. Governing law
If insurance is effected with a Nordic claims leader, this insurance contract shall be governed by and construed in accordance with the law at the place where the head office of the claims leader is located at the time of the conclusion of the contract.
Clause 1-4B. Arbitration Clause
This Clause was new in the 2019 Version and only applicable if the parties had agreed to refer disputes to arbitration. In the 2027 Version, arbitration is made the default solution unless otherwise agreed. Thus, it must be specifically agreed to refer disputes to the courts, see Cl. 1-4C.
There are two main reasons to insert an arbitration clause as the default provision instead of ordinary court proceedings. The first reason is that several insurers today refer to arbitration as their main dispute resolution solution, and it is therefore convenient to have this as the standard solution in the Plan.
The second reason concerns uncertainty of the regulation on court jurisdiction and recognition and enforcement of judgments after Brexit. The EU legislation on court jurisdiction and recognition and enforcement of judgments in civil and commercial law is based on the revised Brussel I Directive of 2012, which is applicable also for Norway and Denmark through the Lugano Convention of 2007. The UK is, however, not a signatory party to the Lugano Convention, and this creates uncertainty about recognition and enforcement of EU/EFTA court decisions in the UK and UK court decisions in the EU/EFTA states. This is primarily a problem when the insurance is effected with non-Nordic claims leaders where jurisdiction in the UK often is a natural choice. The committee is therefore of the view that it is more convenient to refer disputes to arbitration, where recognition and enforcement is based on the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958). It should however be noted that this may also be a problem for Nordic claims leaders in cases where there are co-insurers domiciled in the UK, and the question will be enforcement of Nordic judgments against such co-insurers.
Sub-clause 1 states that any “dispute arising out of or in connection with this insurance contract, including any disputes regarding the existence, breach, termination or validity hereof, shall be finally settled by arbitration under the Nordic Offshore and Maritime Arbitration Association’s (“NOMA”) Arbitration Rules in force at the time when such arbitration proceedings are commenced. The arbitral tribunal shall be composed of three arbitrators unless otherwise agreed”. The sentence “Nordic Arbitration’s Best Practice Guidelines shall be taken into account” from the 2023 Version Cl. 1-4B, sub-clause 2, last sentence, is not repeated as this is unnecessary in addition to the reference to the NOMA Rules.
NOMA was established in 2017 and has developed arbitration regulation and best practice guidelines to fit Nordic legal tradition and culture. It is therefore convenient to refer arbitration to this system.
Sub-clause 2 sets out the place of arbitration for an insurance effected with a Nordic claims leader as the place where the head office of the claims leader is located at the time of the conclusion of the contract.
Sub-clause 3 sets out Oslo as the place of arbitration for an insurance effected with a non-Nordic claims leader.
Sub-clause 4 sets out that the language of the arbitration shall be English unless otherwise agreed after the commencement of the arbitration.
Sub-clause 5 regulates consolidation into one arbitration. Under a co-insurance scheme there is, in principle, as many insurance agreements as there are co-insurers. At the outset, each of those insurance agreements are separate. However, to avoid several different arbitration proceedings, and potentially diverging awards, it is beneficial to ensure that arbitrations between, on the one hand, the co-insurers, including the claims leader, and, on the other hand, the assured, are consolidated into one arbitration. Appointment of arbitrators in case of such a multiple parties arbitration raises certain particular questions, which explains why Article 8 of the NOMA Rules applies.
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Clause 1-4B. Arbitration Clause
Any dispute arising out of or in connection with this insurance contract, including any disputes regarding the existence, breach, termination or validity hereof, shall be finally settled by arbitration under the Nordic Offshore and Maritime Arbitration Association’s (“NOMA”) Arbitration Rules and in force at the time when such arbitration proceedings…
Clause 1-4C. Dispute resolution in the courts
This Clause was new in the 2027 Version of the Plan and includes parts of the previous Cl. 1-4A regarding dispute resolution by the courts.
The default dispute resolution provision is arbitration as per Cl. 1-4B. The parties may however agree in writing that disputes shall be referred to the courts as per Cl. 1-4C or tailor specific solutions for the specific insurance contract.
If the claims leader is Nordic, the dispute will be subject to the jurisdiction of the court where the claims leader has its head office. The word “Nordic” has the same meaning as in Cl. 1-4A and reference is made to the Commentary to this provision. If there is a non-Nordic claims leader, the default position is the Oslo District Court.
The co-insurers may be sued in the venue of the claims leader. This is an option (cf. the words “may be sued”). The assured may instead institute proceedings where the various co-insurers are domiciled or any other available jurisdiction.
Cl. 1-4C is in accordance with 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 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 vessels or offshore structures, cf. Article 13 (5) cf. Article 14 of the Lugano Convention.
This option, to sue the co-insurers where the various co-insurers are domiciled, presumes that Cl. 1-4C applies. If the parties have agreed arbitration according to Cl. 1-4B, this provision does not apply.
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Clause 1-4C. Dispute resolution in the courts
If the parties have agreed in writing that disputes shall be referred to the courts, the following applies:
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 it 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 vessel 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 vessel 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. 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. 16-1, sub-clause 3, regarding calculation of the loss of time, sub-clause 4, regarding calculation of reinstatement premium 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.