General
Section 5 concerns questions relating to limitation. It follows from Section 28 of the Norwegian Limitations Act of 18 May 1979 No. 18 (Foreldelsesloven) that the parties may not, before the claim has arisen, agree on longer limitation periods than the law provides. The provision covers agreements on the commencement of the limitation period as well as the duration and interruptions of the period. The regulation of these questions in the new Plan must therefore not result in longer limitation periods in relation to the insurer than that what would follow from Section 3, subsection 1 of the Limitations Act, which provides that a claim becomes statute-barred three years from the earliest date when the claimant is entitled to satisfaction of his claim. However, Section 30 of the Limitations Act opens the door for special regulation in special legislation, and such special regulation is contained in ICA Section 8-6. The Norwegian Insurance Contracts Act (ICA) Section 8-6 is not a mandatory provision in marine insurance for ocean-going vessels. However, if the regulation in the Norwegian ICA on this point is departed from, the mandatory protection of the insurer in the Limitations Act will nevertheless become applicable.
In the Plan it was decided to adopt the rules of the Norwegian ICA as a basis in this area. This entails a number of amendments and simplifications in relation to the rules of the 1964 Plan. Cl. 107 of the 1964 Plan relating to time-limit for notification of casualty has been retained, but amended. Cl. 108 of the 1964 Plan contained a rule relating to time-limits for taking legal action where the insurer had refused the claim. In that event, the claim became time-barred if the assured had not taken legal action or demanded that the dispute be submitted to an average adjuster under Cl. 87 within one year of receiving the insurer’s notification of the refusal. If the dispute was submitted to an average adjuster, and his opinion was not in favour of the assured, the claim became time-barred, unless the assured had taken legal action within six months of receiving notification of the average adjuster’s decision. At the same time Cl. 110 of the Plan indicated that the limitation period would not commence while the dispute was pending before the average adjuster. This solution may have been in violation of the Limitations Act with the result that the assured ran the risk of the claim becoming time-barred under the Limitations Act before the time-limit under Cl. 108 had expired, if more than two years had elapsed between the casualty and the insurer’s refusal. This could come as quite a surprise for the owner, and the rule has therefore been deleted.
Cl. 109 of the 1964 Plan contained a provision relating to an extension of the time-limit on account of hindrance on the part of the assured. This problem is currently regulated in Section 10, subsections 2 and 3, of the Limitations Act. Through a reference to the Limitations Act in Cl. 107, sub-clause 3, the former Cl. 109 has therefore become superfluous. This provision has therefore also been deleted.
The real limitation rules were contained in Cl. 110 (three years’ limitation) and Cl. 111 (ten years’ limitation ) of the 1964 Plan. These provisions have now been combined into a single limitation rule.
Clause 5-23. Time-limit for notification of a casualty
This Clause was amended in the 2013 Plan to adapt the Plan to its future application in Denmark, Finland and Sweden. Further amendments were made in the 2019 Version. The provision does not contain any actual limitation rule, but a passivity rule which supplements Cl. 3-29 and Cl. 3-31.
According to sub-clause 1, the assured loses its right to claim compensation if notice of the casualty is not given to the insurer within twelve months of the assured becoming aware of it. The previous time-limit was six months, but this was extended to twelve months in the 2023 Version. This is according to the similar rule in Norwegian ICA Section 8-5. Due to the assured’s duty of notification under Cl. 3-29, it will only rarely occur that the insurer has not been notified at an earlier stage. The main purpose of the time-bar rules is to ensure that the insurer has knowledge of a casualty at a time when it is still possible to investigate and record facts that are relevant both for the recoverability and quantum of a potential claim, and therefore the time-limit should be relatively short.
The time-limit commences from the moment “the assured” became aware of the casualty. The general identification rules in Cl. 3-36 to Cl. 3-38 apply also for notification of a casualty, and only the knowledge of the assured and those with whom the assured can be identified is relevant.
A failure by the assured to notify the insurer of a casualty will often be due to the fact that the assured has not received any notification of the casualty from the master. Such failure will under Cl. 3-36 be regarded as a fault committed by the master in connection with its service as seafarer, which cannot be invoked by the insurer.
The time-limit commences from awareness of “the casualty”. When the insurer becomes liable for the assured’s liability to a third party, “the casualty” is the actual event causing the damage. The assured must notify the insurer of this event within twelve months, provided that the assured had reasonable grounds for believing that a claim for damages would be brought against it.
Sub-clause 2 stipulates an absolute time-limit for notification of 24 months regarding anything other than hull damage below the light waterline. If this rule should have an unfortunate consequence in a particular situation, Section 36 of the Norwegian Contracts Act may become applicable.
In all other cases, the limitations act in the state where the insurance contract was entered into shall apply. The limitations acts of the Nordic countries are as follows: the Danish Act: Lov om forældelse af fordringer of 6 June 2007, the Finnish Act: Lag om preskription av skulder of 15 August 2003, the Norwegian Act: Lov om foreldelse av fordringer (foreldelsesloven) of 18 May 1979 and the Swedish Act: Preskriptionslag of 29 January 1981.
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Clause 5-23. Time-limit for notification of a casualty
The assured loses its right to claim compensation if notice of the casualty is not given to the insurer within twelve months of the assured becoming aware of it.
Clause 5-24. Time-bar of the assured’s claim for compensation
Cl. 5-24 was amended in the 2027 Version of the Plan. The heading was revised to better reflect the contents of the Clause and the word “limitation” was replaced with the word “time-bar”. Further, sub-clause 2 was amended to clarify time-bar in liability insurance, and the Commentary was restructured to improve clarity.
Sub-clause 1, first and second sentences, contain the main rule concerning the time-bar period, and stipulate that the time-bar period is three years from the end of the calendar year in which the assured acquired the necessary knowledge of the facts on which the claim is based. The expression “acquired the necessary knowledge of the facts on which the claim is based” means that it is sufficient for the assured to have knowledge of the facts that is the basis for a claim. However, the assured is not required to know that the facts give basis for an insurance claim nor the extent of the claim. It is important to emphasize that the insurer will often recognize – explicitly or tacitly – that the assured has a claim, at the same time as there is uncertainty, and perhaps disagreement, concerning its magnitude. In that event, the recognition of the existence of a claim of the assured will in itself be sufficient to prevent the time-bar period from running. Accordingly, if, for example, the vessel’s damage following a casualty has been surveyed and temporarily repaired, and an estimate has been made of the costs of postponed permanent repairs, this must be interpreted as a recognition on the part of the insurer of the assured’s claim, unless he makes explicit reservations against any liability at all.
Sub-clause 1, third sentence, stipulates an absolute time-bar period of ten years, and concords with relevant Nordic ICAs.
Sub-clause 2 was amended in the 2027 Version to clarify that, under liability insurance, the assured’s claim for compensation becomes time-barred at the latest one year after the date of settlement, or final and unappealable court judgment, or arbitration award of the third-party liability claim.
One example of such a special limitation rule can be found in the Nordic Maritime Codes, which provide that claims for damages arising from collision become time-barred two years from the date the damage occurred.
If the assured receives and pays the claim from the third party claimant immediately before it becomes time-barred, there is a risk that the claim for compensation from the insurer will become time-barred before the assured has had an opportunity to submit a claim for compensation to the insurer.
It is also rather common for liability claims that it may take many years to reach a settlement with a third-party claimant, especially when legal proceedings have been initiated.
Therefore, the new rule in Cl. 5-24 now recognizes this reality by clearly specifying the latest possible date by which the assured’s claim for compensation becomes time-barred.
Sub-clause 3 requires that the insurer must notify the assured if it wants to invoke the time-bar for an assured’s claim for compensation that had been notified to the insurer within the time-limit for notification provided in Cl. 5-23. A notification by the insurer as per this provision will neither reduce nor in any way limit the three-year or ten-year time-bar limits in sub-clause 1 or the applicable time-bar in sub-clause 2. This rule offers the assured better protection than it has under any possible mandatory regulations regarding the time-bar period. The notification must set out a) the fact that the insurer is invoking the time-bar and b) set out the steps that the assured can take to protect against time-bar.
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Clause 5-24. Time-bar of the assured’s claim for compensation
The assured’s claim for compensation becomes time-barred after three years. The time-bar period commences at the end of the calendar year in which the assured acquired the necessary knowledge of the facts on which the claim is based. In any event, the claim is time-barred no later than ten years…