Clause 15-16. Relationship to Chapter 16
The Clause was amended in the 2027 Version by deleting sub-clause 2 which is now encompassed by Cl. 15-17, sub-clause 3, letter e.
The provision highlights that if a loss of income has occurred as a result of the perils outlined in Cl. 15-17, the rules in Chapter 16 determine to what extent the assured will be entitled to cover from the war risks insurer. However, Cl. 16-1 is replaced by Cl. 15-17 below.
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Clause 15-16. Relationship to Chapter 16
The provisions contained in this Section shall apply in addition to the provisions in Chapter 16.
Clause 15-17. Main rules regarding the liability of the insurer
The Clause was amended in the 2027 Version. The old clause was deleted and replaced by this new Cl. 15-17.
Whilst the new Cl. 15-17 replaces Cl. 16-1 insofar as war loss of hire is concerned, sub-clause 2 is largely the same but redrafted to reference war perils specifically. Therefore, for guidance on the general application of the Clause reference is requested to the Commentary on Cl. 16-1.
Sub-clause 3 (a) to (d) retains all of the non-damage loss of hire situations as outlined in Cl. 16-1, except to specifically link them to war perils.
Sub-clause 3 (e) encapsulates the extension of cover that is provided only under war loss of hire insurance when a vessel is prevented from leaving a port or similar area without a physical obstruction being in place. The limitation to this cover is that it only extends to a vessel which is ‘prevented from leaving’ by reason of the perils listed in Cl. 2-9, sub-clause 1, letter (a) or (b). These perils would tend to manifest themselves through express orders and edicts of a State power, usually accompanied with the threat of military force.
The threshold as to whether a vessel is prevented from leaving a port/place without being physically obstructed is closely linked to the provisions of Cl. 15-12 (so-called Blocking & Trapping). Accordingly, 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.
On the other hand, if military forces threatens to use arms against vessels 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 “being prevented from leaving” 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 is only prevention from “leaving” a port or similar limited area that may entitle an assured to bring a claim for loss of income under this Clause. 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 loss of income. Equally, if the vessel would otherwise have remained plying its trade within the port or area, it is difficult to see how a claim for loss of income can arise under this Clause, until the vessel was otherwise scheduled to depart.
For sub-clause 4 and sub-clause 5, reference is made to the Commentary to the corresponding provisions in Cl. 16-1. Note that re-instatement premium for war risks loss of hire insurance raises some additional questions. Similar to Cl. 16-1 the premium payable for reinstatement “shall be 100 % of the agreed premium pertaining to the vessel involved” calculated pro-rata on the amount reinstated. The “agreed premium” will, however, depend on where and when the casualty occurred. If the casualty occurred in the normal trading area, the “agreed premium” will be the basic premium for the loss of hire war risks insurance. However, if the casualty occurred in a conditional or excluded area, the “agreed premium” is the basic premium plus the additional premium agreed for the specific stay in the area at the time the casualty occurred.
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Clause 15-17. Main rules regarding the liability of the insurer
Instead of Cl. 16-1 the following shall apply:
Clause 15-18. Loss caused by instructions issued by the insurer
The Clause was amended in the 2027 Version. The first was an editorial amendment from “orders issued by the insurer” to “instructions issued by the insurer” to be consistent with the wording in Cl. 15-4. Further, sub-clause 2 was deleted.
The provision must be read in conjunction with Cl. 15-13, which confers on the assured entitlement to total loss compensation in the event of orders which have considerable impact on the operation of the vessel.
Sub-clause 1 sets out when the assured is entitled to loss of hire cover under this provision. The decisive factor is whether the instruction from the insurer, cf. Cl. 15-4, has caused a loss of time for the vessel. The instruction may result in a total loss of income, which will typically be the case when the instruction requires the vessel to remain in port. The vessel may also be deprived of income wholly or in part if the vessel is instructed to deviate or take another (longer) route than it would have otherwise taken.
It follows from sub-clause 1, second sentence, that the assured is not entitled to have its loss of time covered if the insurer issues an instruction in connection with the outbreak of war. This is such a special situation that the insurer must be allowed to “freeze” the situation until it has obtained a proper overview of the consequences. An obligation to compensate for the assured’s loss of time in such cases would easily place the insurer in a difficult situation of double pressure. The insurer must, however, be under an obligation to decide which measures it wishes to implement and which ones do not need to be maintained as soon as possible after the circumstances surrounding the outbreak of war have become clear. If these decisions are dragged out, the general rule in the first sentence will apply.
The rules in Chapter 16 on the calculation of loss of hire and adjustment of compensation shall apply.
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Clause 15-18. Loss caused by instructions issued by the insurer
The insurer is also liable for loss of time resulting from instructions issued by the insurer, cf. Cl. 15-4. However, this does not apply to instructions given by the insurer in connection with the outbreak of war.