© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO Eve de Coning Research fellow PhD Scandinavian Institute of Maritime Law October 2007 MARINE INSURANCE MARL16

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO LECTURE OUTLINE Wednesday 17 October LECTURE 1: ’INTRODUCTION’ 1.Marine insurance: an overview 2.Types of marine insurance 3.Sources of law LECTURE 2: ’CONTENT’ 4. The marine insurance contract 5. Duties imposed on the parties

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 1. Marine insurance: an overview 1.Definition: a) no definition of the concept ’insurance’ b) certain characteristics: i. transfer of risk ii. uncertain event iii.spreads the loss iv.premium 2. Marine insurance: a) insurance of vessels b) insurance of cargo c) (liability insurance)

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 1. Marine insurance: an overview (cont.) 3. Medieaval roots: a) origin of all insurance b) Roman Law: integral to the maritime loan c) 1227 AD: Pope Gregory IX’s papal see prohibition on maritime loans d) North Italians (Lombardy): indemnity and subrogation e) Lombard street 4. Common roots ? ’Marine insurance is a law not peculiar to one, but common to all commercial nations. Whence it is derived but from natural reasons, existing in all men, and reaching the same results in all countries alike.’ Emerigon’s Marine insurance market: a) UK b) Scandinavian and French c) similar (not uniform!) law and different practices d) attempt at unification by the CMI Singapore, 2001: now abandoned

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 2. Types of marine insurance 1.Shipowner insurances a) Hull insurance (H&M insurance) NMIP part two - property damage insurance - liability insurance in cases of ’collision or striking’ b) Total loss insurances NMIP chapter 14 - hull interest insurance - freight interest insurance c) War insurance NMIP chapter 15 - war perils (§2-9) and, if vessel temporarily seized, marine perils (§15-1 read with §§ 3-19 and 2-8) d) Loss of hire insurance NMIP chapter 16 - loss of hire during ’off hire’ - all types of contracts of affreightment - compensates lack of income

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 2. Types of marine insurance (cont.) 2. Protection and Indemnity (P&I) Insurance (international rules) - mutual insurance - organised in ’clubs’ or mutual associations - the largest clubs are in the ’International Group’ 3. Cargo Insurance - covers total loss, shortage and damage to cargo CICG § 6 - includes also measures to avert or minimise loss CISG § 6: - salvage charges - general average contributions - litigation charges etc - does not include general economic loss or third party liability.

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 3. Sources of law 1.Legislation a) Until 1930: The Maritime Code (MC) b) From 1930: The Insurance Contract Act (ICA) - limited relevance - marine insurance plans more important c) Currently: i. The Inurance Contract Act of 16 June 1989 no mainly non-mandatory application to marine insurance (ICA § 1-3 litra (c) and litra (e)) - but if mandatory, the insurance conditions take account of ICA ii. ICA suplemented by - plans - rules - conditions

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 3. Sources of law (cont.) 2. Marine insurance plans - most important legal source in Norway - an agreed document - currently two plans: a) Norwegian Marine Insurance Plan (NMIP 1996 version 2007) b) Conditions relating to Insurance for the Carriage of Goods (CICG 1995 version 2004) 3. P&I - rules - each club has own rules that the shipowner contracts to - no uniformity, but great similarity

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 3. Sources of law (cont.) UK market: 1.Statute: Chalmer’s Marine Insurance Act of Major standard insurance policies are prepared by the International Underwriting Association (IUA) of London 3.These prepare the ’Institute Clauses’ a) Institute Time Clauses – Hulls b) Institute Voyage Clauses – Hulls c) Institute Cargo Clauses (A) d) Institute Cargo Clauses (B) e) Institute Cargo Clauses (C) f) Institute Time Clauses (freight) g) Institute Voyage Clauses (freight)

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 4. The marine insurance contract: a) Parties The parties to the insurance contract a) ’person effecting the insurance’ NMIP § 1-1 litra (b) b) ’assured’ NMIP § 1-1 litra (c) c) ’co-assured’ NMIP chapters 7 and 8, CICG § 9 d) ’insurer’ NMIP § 1-1 litra (a) or ’company’ CICG/ICA e) ’co-insurer’ and ’claims leader’ NMIP chapter 9

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 4. The marine insurance contract: b) Formation 1.The insurance contract a) ordinary contract law applies - if broker NMIP § 1-3 provides particular rules b) documentation - shipowner insurance a) insurance policy NMIP § passivity is approval NMIP § cargo insurance a) single shipment: insurance certificate ICA § 2-2 = insurance document in terms of CICG § 1 no. 4 b) multiple shipments, ie period insurance: period (open cover and floating) insurance certificate (CICG annex § 4 and § 5) and single shipment insurance certificate (ie insurance document) will be issued

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 4. The marine insurance contract: c) Interest insured 1.’Insurable interest’ a) ’economic interest’ b) terminology abandoned by ICA and CICG, but retained by NMIP c) lawful? 2.’Insurable value’ a) the value of the interest at the inception of the insurance NMIP § 2-2 and CICG § 29 b) cargo insurance: includes certain expenses and 10% profit CICG § 29 c) shipowner insurance: assessment NMIP § ’Sum insured’ a) the elected sum insured in terms of which premiums are paid b) over and under insurance

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 4. The marine insurance contract: d) Cover 1. Perils insured - starting point: ’all risk’ NMIP § 2-8 and CICG § 3 - also: ’named peril’ CICG § 4 and § 5 - h/e exceptions: - war risks NMIP 2-8 litra (a) and CICG § 18 no. 6 - intervention by a State power NMIP 2-8 litra (b) and CICG § 18 no. 7 - nuclear/radioactive contamination: RACE II – clause NMIP § 2-8 litra (d) and CICG § 18 nos. 3 and 11

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 4. The marine insurance contract: d) Cover (cont.) 2. Causation - ’peril struck’ principle NMIP § 2-11 and CICG § 7 - multiple causes: - ’dominant cause’? - ’apportionment’ principle NMIP § 2-13 and CICG § 20 - exceptions: - ’dominant cause’ when marine and war peril NMIP § nuclear contamination: entire loss attributed this peril NMIP § 2-13 and CICG § 20 - multiple insurance periods: - ’apportionment’ principle? ND NSC HEKTOR - ’Anti-Hektor’ clause NMIP § 2-11

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: overview 1.Imposed on who? - both person effecting insurance/assured and insurer, but mainly former - problem of identification 2.Duties imposed NMIP chapter 3 a) Rules of disclosure: - disclosure information material to the evaluation of risk - disclose information of significance to the alteration of risk b) Central duties of care: - avoid causing damage - uphold safety regulations (NB! no-longer seaworthiness) - notify of and avert/minimise loss

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: Identification 1.Imputation or attribution of conduct 2.Four scenarios: a) person effecting insurance and his representatives - not regulated in ICA, NMIP or CICG - contract law principles: identification of representative, ie broker b) assured and his representatives NMIP: - act of persons with authority and management functions in areas of material importance for the insurance NMIP § not fault of Master or crew in ’service as seamen’ NMIP § exception: - breach of safety regulations in contract is attributed to assured NMIP § 3-25

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: identification (cont.) CICG: - based on persons position (at management level) and function (responsible for transport of insured goods) CICG § 10 c) assured and the person effecting insurance NMIP: - regardless of whether conduct by person effecting insurance or representative NMIP § 3-38 CICG: - similar to NMIP, but also includes previous owner CICG §10 - exceptions CICG § 11 no. 3 d) between co-assured NMIP: - no identification, unless overall decision-making authority NMIP § 3-37 CICG: - not covered in CICG § 10 and § 11, however ICA § 7-3

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: a) Rules of disclosure i. Duty of disclosure 1.When contract is being concluded 2.Information about risk a) active duty NMIP § 3-1 b) passive duty CICG § 12 3.Not information about new circumstances, however notification duty if aware of incorrect or incomplete information 4.Sanctions depends on blame (fraudulent, blameworthy and innocent conduct)

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: a) Rules of disclosure ii. Alteration of risk 1.Change in circumstances which alters risk after insurance effected NMIP § 3-8 to § 3-21, ICA § 4-5 and § General rules NMIP § 3-8 to Specific rules: a) loss of class or change of classification society NMIP § 3-14 b) excluded trading area NMIP § 3-15 c) illegal purpose NMIP § 3-16

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: b) Central duties of care i. Avoid causing damage 1.Covered in NMIP § 3-32 to § 3-35 and ICA § Compensation depends on assured’s level of fault a) intentional conduct (eg scuttling): no compensation NMIP § 3-32 and ICA § 4-9 b) grossly negligent conduct: reduced compensation NMIP § 3-33 and ICA § 4-9 c) ordinary negligent conduct: full compensation NMIP (by implication) and ICA § unless breach of safety regulation

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: b) Central duties of care ii. Uphold safety regulations 1.’A rule concerning measures for the prevention of loss’ 2.Which safety regulations? a) NMIP § 3-22 to § issued by public authority, - stipulated in insurance contract, - prescribed by the insurer, or - issued by the classification society (including periodic surveys) b) CICG § 21 - § 24 - domestic trade: safety regulations in § 22 - § 24 and insurance certificate - international trade: also those issued by public authority c) P&I Insurance - often stipulated specific safety regulations

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: b) Central duties of care ii. Uphold safety regulations (cont.) 3. Consequence upon breach NMIP § 3-25: a) insurer is not liable b) unless: - no causation, or - no culpable conduct CICG § 21: International trade = NMIP (Domestic trade: ICA § 4-8 – special rules)

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO 5. Duties imposed on the parties: b) Central duties of care iii. Notify of and avert/minimise loss 1.Loss is imminent or has occured 2.Duties: a) inform the insurer NMIP § 3-29 and CICG § 25 b) reasonable measures to avert or minimise loss NMIP § 3-30 and CICG § 25 3.Breach a) Intention or gross negligence: compensate damage which would have happened regardless NMIP § 3-31 and CICG § 26 b) Domestic transport: discretionary evaluation ICA § 4-10

© DET JURIDISKE FAKULTET UNIVERSITETET I OSLO Further reference The international maritime committee – Comite Maritime International (CMI): The Australian Law Reform Commission’s report on marine insurance: ALRC 91: Review of the Marine Insurance Act 1909 (Cth) (2001) Available at Marine insurance in an international context, see: Wilhelmsen ’Duty of Disclosure, Duty of Good Faith, Alteration of Risk and Warranties: An analysis of the Replies to the CMI Questionnaire’ CMI Yearbook 2000 at 332 Available at