International Hull Clauses At A Glance. Comparing the International Hull Clauses 01/11/02 and the Institute Time Clauses - Hulls 01/10/83

Transcription

1 International Hull Clauses At A Glance Comparing the International Hull Clauses 01/11/02 and the Institute Time Clauses - Hulls 01/10/83 Hill Taylor Dickinson 1 st Edition November 2002

2 Whilst care has been taken in the preparation of this guide, the matters referred to herein are subject to change and no liability or responsibility is accepted by anyone for any errors or omissions which may exist in it. The contents of this booklet are descriptive only and should not be used as a substitute for legal advice.

3 International Hull Clauses At A Glance Comparing the International Hull Clauses - 01/11/02 and ITC - Hulls 01/10/83 Purpose of this guide 3 1. General 6 2. Perils 6 3. Leased equipment 7 4. Parts taken off 7 5. Pollution hazard /4ths collision liability 8 7. Sistership 9 8. General average and salvage 9 9. Duty of the assured (sue and labour) Navigation provisions Breach of navigation provisions Continuation Classification and ISM Management Deductible New for old Bottom treatment Wages and maintenance Agency commissions Unrepaired damage Constructive total loss Freight waiver Assignment Disbursements warranty Cancelling returns Separate insurances Several liability Affiliated companies War exclusion Strikes exclusion Malicious acts exclusion Radioactive contamination exclusion 17

4 33. Chemical/Biological/Electromagnetic weapons/cyber attack exclusion Navigating limits Bering Sea Transit Recommissioning Helicopter engagement Premium payment Contracts (Rights of Third Parties) Act /4ths Collision Liability Fixed and floating objects Returns for lay-up General average absorption Additional perils Leading Underwriters Notice of claims Tender provisions Duties of the Assured Duties of Underwriters in relation to claims Provision of security Payment of claims Recoveries Dispute Resolution 28 2

5 International Hull Clauses At A Glance Comparing the International Hull Clauses - 01/11/02 and ITC - Hulls 01/10/83 Purpose of this Guide This booklet is intended to serve as a guide to the International Hull Clauses 01/11/02 and to highlight the principal changes from the Institute Time Clauses Hulls 01/10/83. It is not an exhaustive analysis of the extent of cover nor does it list all the changes which have been introduced. Whilst there are comments on certain key changes, these are not intended as legal advice on the meaning of any Clause. In order to keep this booklet as simple as possible, no detailed reference is made to the Institute Time Clauses - Hulls 01/11/95. A separate booklet in this series already deals with those Clauses. The principal changes from ITC Hulls 01/10/83 are as follows 1 General The Clauses are now in three Parts Part 1 contains the Principal Insuring Conditions Part 2 contains commonly used additional clauses, some mandatory and some which may be agreed on placing such as 4/4ths RDC and FFO Cover, Returns for Lay-Up, General Average Absorption and Additional Perils Part 3 contains provisions for claims handling and sets out the duties of the Assured and Underwriters 2 Part 1 - Principal Insuring Conditions Modifications to the Inchmaree Clause (Cl. 2.2 formerly Cl. 6.2 of ITC-Hulls (01/10/83)) Cover for leased equipment (Cl. 3) Cover for parts taken off (Cl. 4) Pollution hazard clause has been extended (Cl. 5) Costs limit of 25% of insured value for collision liabilities (Cl. 6.3) Provisions to deal with General Average and Article 13 salvage awards under the International Convention on Salvage 1989 Navigation provisions. No longer warranties. No cover for loss during period of breach (Cls.10 and 11) Classification and ISM (Cl.13). Major changes. Automatic termination for failure to 3

6 maintain Class, to comply with Class requirements affecting seaworthiness and to have in place valid ISM documentation Continuing duty of Assured to comply with flag state requirements and Class reporting requirements (Cl. 14.4). No cover for loss attributable to such breach Constructive Total Loss now to be payable when costs of repair or recovery exceed 80% of insured value (Cl. 21) Incorporation of new standard market Radioactive Contamination and Chemical/Biological/Electromagnetic weapons/cyber attack exclusions (Cls. 32 and 33) 3 Part 2 - Additional Clauses Old Institute Trading warranty limits are no longer warranties but are limits on cover per Cl. 10 (Cl. 34) New Recommissioning condition (Cl. 36) Helicopter engagement (Cl. 37) Premium Payment Clause (45 days or as may be agreed) based on LSW 3000 (Cl. 38) 4/4ths RDC (Cl. 40) and Fixed and Floating Objects Cover (Cl.41), where agreed on placing Lay-up returns only where agreed on placing (Cl. 42) General Average Absorption where agreed on placing (Cl. 43). Assured has option of claiming entire GA under Cl. 8, subject to agreed limit New Additional Perils Clause (Cl. 44) where agreed on placing based on old Institute Additional Perils Clause amended to cover costs not covered or excluded under Cls and Part 3 - Claims Provisions New Leading Underwriter clause with authority to bind followers in respect of claims matters (Cl. 45) Modified notice of claim provision (Cl. 46). Failure to give notice within 180 days of Assured, Owners or Managers becoming aware of any accident or occurrence means claim not recoverable New Clause setting out duties of Assured to co-operate in claims investigation (Cls and 48.2) and not to mislead Underwriters or conceal material facts from them at any stage of claims process (Cl ) New Clause setting out duties of Underwriters in relation to surveyors, appointment of average adjusters, payment of their fees and release of reports. Undertaking to make a decision on claims within 28 days of a fully documented claims presentation (Cl. 49) 4

7 Provision of security based on JHC 2001/066 (Cl. 50) Important changes relating to recoveries in Cl. 52. Duty on Assured to co-operate with Underwriters to protect recoveries at Underwriters' expense before claim paid or agreed Recoveries to be shared pro rata to insured and uninsured losses rather than "top down" (Cl ) New ADR provision (Cl. 53). Parties have option to attempt mediation or other form of ADR to resolve disputes by methods of their choice with the standard CEDR Solve model procedures to apply in default. 5

8 PART 1 PRINCIPAL INSURING CONDITIONS (01/11/02) 1. General 1 Introductory wording relating to application of Parts 1, 2 and 3 and the optional cover in Clauses This insurance is subject to English law and practice. 3 This insurance is subject to the exclusive jurisdiction of the English High Court of Justice, except as may be expressly provided herein to the contrary. 4 Severability clause New 2. Perils 1 Covers loss of or damage to the subjectmatter insured caused by 1.1 perils of the seas, rivers, lakes or other navigable waters New Parts 2 & 3 may be altered in the future, without alteration to Part 1. No change New Previously applied where risks written on the MAR 91 form. May be deleted. No change (cl. 6.1) No change (cl ) 1.2 fire, explosion No change (cl ) 1.3 violent theft by persons from outside the vessel No change (cl ) 1.4 jettison No change (cl ) 1.5 piracy No change (cl ) Changed (cl breakdown to nuclear installations) Deleted. See Clause contact with land conveyance, dock or harbour equipment or installation 1.7 earthquake, volcanic eruption or lightning 1.8 accidents in loading, discharging or shifting cargo, fuel, stores or parts 1.9 contact with satellites, aircraft, helicopters or similar objects, or objects falling therefrom. 2 Covers loss of or damage to the subjectmatter insured caused by 2.1 bursting of boilers or breakage of shafts but excludes the cost of repairing or replacing the boiler which bursts or the shaft which breaks Changed (cl ) Aircraft or objects falling therefrom now addressed in Clause No change (cl ) Changed (cl ) No longer subject to the due diligence proviso in Clause 2.2 and extended to include stores and parts. Changed (cl ) Now includes damage caused by helicopters, satellites and objects falling therefrom. This was subject to the due diligence proviso in Clause 6.2 of the 1995 clauses. No change (cl. 6.2) Changed (cl ) Cover applies when damage is caused by bursting boilers or breaking shafts, but not in respect of the boiler or shaft itself. (Additional Perils cover can be agreed - see Clause 44 below.) 6

9 2. (Cont d) 2.2 any latent defect in the machinery or hull, but only to the extent that the cost of repairing the loss or damage caused thereby exceeds the cost that would have been incurred to correct the latent defect 3. Leased equipment 4. Parts taken off 2.3 negligence of Master, Officers, Crew or Pilots 2.4 negligence of repairers or charterers provided such repairers or charterers are not an Assured under this insurance Changed (cl ) Cover applies to damage caused by the latent defect to the extent that damage done by the defect is more expensive to repair than the defect itself. This Clause seeks to reinstate a distinction between the defect and consequential damage as understood prior to the Court of Appeal decision in the Nukila, without referring to part. Part defies easy definition. (Additional Perils cover can be agreed - see Clause 44 below.) No change (cl ) No change (cl ) 2.5 barratry of Master, Officers or Crew No change (cl ) provided that such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers. 3 Master, Officers, Crew or Pilots shall not be considered Owners within the meaning of this Clause 2 should they hold shares in the vessel. 1 Covers loss of or damage to equipment not owned by the Assured but installed on the vessel for which the Assured has assumed contractual liability. Damage must be caused by an insured peril. 2 The measure of indemnity is the lesser of the cost of repair, replacement or the contractual liability. Cover for leased equipment is included in the insured value. 1 Covers loss of or damage to parts taken off the vessel. Damage must be caused by an insured peril. 2 The measure of indemnity for leased parts taken off is the same as for leased equipment under Clause 3. No change The additional words or Superintendents or any of their onshore management introduced in the 1995 clauses have not been included. No change (cl 6.3) New Cover applies to leased equipment, lost or damaged by the Clause 2 perils (or Additional Perils, if agreed). The Clause does not provide all risks cover for leased equipment as appears under some market wordings. The Clause is based on CL362. New Cover applies to parts taken off the vessel lost or damaged by the Clause 2 perils (or Additional Perils, if agreed). Cover is limited to 60 days and subject to a limit of 5% of the insured value of the vessel. This Clause is based on CL364, but includes leased parts taken off and is extended to 60 days. 7

10 4. (Cont d) 3 Parts taken off are covered excess of any other responsive insurance. 5. Pollution hazard 6. 3/4ths collision liability 4 Cover is limited to 60 days whilst the parts are not on board the vessel. Excess periods can be held covered where notice is given to Underwriters prior to expiry and any amended terms of cover and additional premium agreed. 5 The Underwriters liability for parts taken off does not exceed 5% of the insured value of the vessel. Covers loss of or damage to the vessel caused by any governmental authority under its powers to prevent or mitigate a pollution hazard or damage to the environment or threat thereof, where these result from damage to the vessel for which the Underwriters are liable. Proviso as to exercise of due diligence to prevent/mitigate the hazard or threat. 1 Cover for 3/4ths of any sum(s) paid by the Assured due to its legal liability in damages following a collision for 1.1 loss of or damage to any other vessel or property thereon 1.2 delay to or loss of use of any such other vessel or property thereon 1.3 general average of, salvage of, or salvage under contract of, any such other vessel or property thereon, 2 Cover under Clause 6 is in addition to the indemnity provided by the other terms and conditions of this insurance, subject to the following provisions 2.1 where the vessels are both to blame, subject to limitation of liability, the indemnity under Clause 6 is to be calculated on the principle of crossliabilities. 2.2 Underwriters liability under Clauses 6.1 and 6.2 is limited to three fourths of the insured value of the vessel in respect of any one collision. 3 Underwriters to pay three fourths of the legal costs in contesting/limiting liability where Underwriters have given their prior written consent and subject to a limit of 25% of the insured value of the insured vessel. Changed (cl. 7) Extended to include governmental action to prevent or mitigate damage to the environment/threat thereof as well as a pollution hazard/threat. No change (cl 8.1) No change (cl ) No change (cl ) No change (cl ) No change (cl. 8.2) No change (cl ) No change (cl ) Changed (cl. 8.3) The costs cover is now subject to a limit of 25% of the insured value of the vessel. 8

11 6. (Cont d) EXCLUSIONS 7. Sistership 8. General average and salvage 4 Clause 6 does not cover payments by the Assured in respect of 4.1 removal or disposal of obstructions, wrecks, cargoes or any other thing whatsoever 4.2 any real or personal property or thing whatsoever except other vessels or property on other vessels 4.3 the cargo or other property on, or the engagements of, the insured vessel No change (cl. 8.4) No change (cl ) No change (cl ) No change (cl ) 4.4 loss of life, personal injury or illness No change (cl ) 4.5 pollution or contamination, damage to the environment or threats thereof, except from other vessels with which the insured vessel is in collision. However, the clause does not apply to an enhanced salvage award under Article 13(1)(b) of the International Convention on Salvage, 1989 Cover for collision with/salvage services rendered by sisterships. The sum payable, if any, is fixed by an arbitrator agreed between Underwriters and the Assured. 1 Covers the vessel's proportion of salvage, salvage charges and/or general average. Underwriters liability is reduced in the event of under insurance. Specific cover for general average sacrifice. 2 Adjustment to be according to the law and practice obtaining at the place where the adventure ends, but where the contract of affreightment so provides the adjustment shall be according to the York-Antwerp Rules. 3 When the vessel sails in ballast and not under charter, the provisions of the York-Antwerp Rules, 1994 (excluding Rules XX and XXI) apply. Defines the general average voyage in such circumstances. 4 No claim under Clause 8 where the loss was not incurred to avoid a peril insured. Changed (cl ) Extends exclusion to threats of pollution/contamination and to damage to the environment or threat thereof. However, the exclusion will not apply to an enhanced salvage award under Article 13(1)(b) No change (cl. 9) No change (cl. 11.1) No change (cl. 11.2) Changed (cl 11.3) York-Antwerp Rules 1994 are substituted for the York-Antwerp Rules As before, the provisions relating to commission on general average disbursements and interest on losses made good in general average are excluded. Unlike the 1995 clauses, expenses under Rule XI(d) (see cl below) are not excluded under this clause. No change (cl. 11.4) 9

12 8. (Cont d) 5 Underwriters shall not be liable under this Clause 8 for 9. Duty of the Assured (sue and labour) 5.1 special compensation payable to a salvor under Article 14 of the International Convention on Salvage, 1989 or under any other similar provision 5.2 expenses or liabilities incurred in respect of damage (actual or threatened) to the environment or due to the escape (actual or threatened) of pollutants from the vessel. 6 Clause 8.5 does not exclude any sum which the Assured shall pay 6.1 as an enhanced salvage award under Article 13(1)(b) of the International Convention on Salvage, as general average expenditure allowable under Rule XI(d) of the York-Antwerp Rules 1994, but only where the contract of affreightment provides for adjustment according to the York-Antwerp Rules In case of any loss or misfortune it is the duty of the Assured and their servants and agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this insurance. 2 Underwriters will contribute to charges properly and reasonably incurred by the Assured under Clause 9.1. General average, salvage charges (except as provided for in Clause 9.5), special compensation and expenses referred to in Clause 8.5 and collision defence or attack costs are not recoverable under Clause 9. 3 Measures taken by the Assured or Underwriters to save, protect or recover the subject-matter insured will not prejudice the rights of either party. New No cover for or in respect of special compensation payable to a salvor under Article 14 No cover for or in respect of expenses or liabilities incurred in respect of damage (actual or threatened) to the environment or due to escape (actual or threatened) of pollution from the vessel. New An enhanced salvage award under Article 13(1)(b) is not excluded by Clause 8.5. Where the contract of affreightment provides for adjustment under the York- Antwerp Rules 1994, certain expenses to prevent or minimise damage to the environment allowable under Rule XI(d) are not excluded by Clause 8.5. Under the 1995 clauses, additional cover had to be purchased under the General Average Pollution Expenditure Clause (CL 360). No change (cl. 13.1) Changed (cl. 13.2) To make it clear that Article 14 special compensation and expenses excluded by Clause 8.5 are also irrecoverable as sue and labour. No change (cl. 13.3) 10

13 9. (Cont d) 4 Provides that where the vessel is underinsured, Underwriters liability is reduced accordingly. Separate provisions apply where Underwriters have agreed a total loss. 10. Navigation provisions 5 Provides that where Underwriters have agreed a total loss of the vessel and expenses have been reasonably incurred in saving or attempting to save the vessel and there are no salved proceeds, or the expenses exceed the salved proceeds, then Underwriters pay pro rata. 6 The sum recoverable under this Clause 9 shall be in addition to the loss otherwise recoverable under this insurance but shall in no circumstances exceed the insured value of the vessel. Unless Underwriters agree otherwise in accordance with Clause 11 1 the vessel shall not sail nor be employed in breach of any provisions as to cargo, trade or locality such as the Institute limits (see Clause 34 below) 2 the vessel may sail or navigate with or without pilots, go on trial trips and assist and tow vessels or craft in distress, but may not be towed (except as is customary) or to the first safe port or place when in need of assistance, or undertake towage or salvage services under a previously arranged contract. 3 the Assured shall not enter into any contract with pilots or for customary towage which limits or exempts the liability of the pilots and/or tugs and so on unless compelled to do so in accordance with established local law or practice 4 the vessel shall not be employed in trading operations which entail cargo loading or discharging at sea from or into another vessel (not being a harbour or inshore craft) No change (cl. 13.4) Changed (cl. 13.5) In the same way as Clause 9.2 (see above). No change (cl. 13.6) Changed (cl. 1) Breach of these clauses is no longer a breach of warranty in the strict sense (if ever it was) under the Marine Insurance Act Rather, Underwriters are not liable for loss and damage arising whilst the vessel or the Assured are in breach (see Clause 11 below). New To address any separate provisions in the slip and the Institute Warranties, now replicated in Clause 34. Changed (cl. 1.1) In that Clause 10.2 no longer operates as a warranty and breach is now addressed in Clause 11. New This Clause follows Clause 1.2 of the 1995 Clauses. Changed (cl. 1.2) In that Clause 10.4 no longer operates as a warranty and breach of this provision is now addressed in Clause

14 11. Breach of navigation provisions 12. Continuation 13. Classification and ISM In the event of breach of Clause 10, the Underwriters are not liable for any loss, damage, liability or expense arising out of or resulting from an accident or occurrence during the period of breach, unless immediate notice is given to Underwriters after receipt of advices of such breach and any amended terms of cover and any additional premium required are agreed. If at expiry, the vessel is at sea and in distress or missing, or in port and in distress, she is held covered until arrival at the next port in good safety, or if in port and in distress until the vessel is made safe, at a pro rata monthly premium, provided that notice is given to Underwriters as soon as possible. 1 At the inception of and throughout the period of this insurance 1.1 the vessel shall be classed with a Classification Society agreed by Underwriters 1.2 there shall be no change, suspension, discontinuance, withdrawal or expiry of the vessel s class with the Classification Society New (cl 3) Since Clause 10 no longer contains warranties under which Underwriters might be discharged from liability from the date of breach, this Clause provides instead that Underwriters are not liable as a result of anything happening during the period of breach, unless notice is given to Underwriters immediately after the breach is advised. Thus, for example, charterers taking the vessel within Institute limits will not prejudice the owners cover, provided that immediately after the owner becomes aware, he notifies Underwriters and agrees any amended terms of cover and additional premium. Changed (cl. 2) The vessel must now be in distress/missing (at sea) or in distress (in port) for Clause 12 to apply. Simply being at sea or at a port of call is no longer sufficient. Whilst the vessel must now be in distress if in port, there is no longer a requirement that the port be one of refuge or call. Cover is no longer provided until the vessel arrives at her port of destination. Cover continues only until the next port in good safety or, if the vessel is in port at expiry, until the vessel is made safe. The requirement under the 1995 clauses that notice be given prior to expiry has been changed to as soon as possible. Changed (cl. 4) This clause broadly follows ITC-Hulls 1/10/83, but also applies to ISM and recommendations by Class as to seaworthiness. The remedy remains as automatic termination, subject to clause Change (cl. 4.1) Clause 13 now envisages that the Underwriters must agree the vessel s Class at the outset. No change (cl. 4.1) 12

15 13. (Cont d) 1.3 any recommendations, requirements or restrictions imposed by the vessel's Classification Society which relate to the vessel's seaworthiness or to her maintenance in a seaworthy condition shall be complied with by the dates required by that Society 1.4 the Owners or the party assuming responsibility for operation of the vessel from the Owners shall hold a valid Document of Compliance in respect of the vessel as required by Chapter IX of the International Convention for the Safety of Life at Sea (SOLAS) 1974 as amended and any modification thereof 1.5 the vessel shall have in force a valid Safety Management Certificate as required by Chapter IX of the International Convention for the Safety of Life at Sea (SOLAS) 1974 as amended and any modification thereof. 2 Unless Underwriters agree otherwise, the insurance terminates automatically at the time of breach of Clause unless the vessel is at sea, in which case the termination operates on arrival at her next port 2.2 unless the change, suspension, discontinuance or withdrawal of her class under Clause has resulted from loss or damage covered under the insurance or which would be covered by the Institute War and Strikes Clauses Hulls-Time, in which case the termination only operates if the vessel sails from her next port without the prior approval of the Classification Society. New This is taken from the JH131 wording. The Assured must ensure that any Class recommendations etc. relating to seaworthiness are complied with by the due dates. This was clause in the 1995 Clauses. New This tracks Chapter IX in relation to the DOC New This tracks Chapter IX in relation to the SMC New The insurance will terminate automatically, subject to contrary agreement by Underwriters and the original exceptions No change (cl 4.1) No change (cl 4.1) 13

16 13. (Cont d) A pro rata daily net return of premium shall be made provided that a total loss of the vessel, whether by perils insured under this insurance or otherwise, has not occurred during the period of this insurance or any extension thereof. 14. Management 1 Unless Underwriters otherwise agree, the insurance terminates automatically at the time of 1.1 any change, voluntary or otherwise, in the ownership or flag of the vessel 1.2 transfer of the vessel to new management 1.3 charter of the vessel on a bareboat basis 1.4 requisition of the vessel for title or use proviso that if the vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, automatic termination can be deferred until arrival at final port of discharge if with cargo or at port of destination if in ballast. Provision as to requisition for title or use. 2 Unless Underwriters agree otherwise, the insurance terminates automatically when the vessel sails (with or without cargo) with an intention of being broken up, or being sold for breaking up. 3 In the event of termination under Clause 14.1 or Clause 14.2 above, a pro rata daily net return of premium shall be made provided that a total loss of the vessel, whether by perils insured under this insurance or otherwise, has not occurred during the period of this insurance or any extension thereof. 4 It is the duty of the Assured, Owners and Managers to Changed In the event of termination, premium is still returnable, provided that there has not been a total loss of the vessel. New This clause broadly follows Clause 4.2 of ITC-Hulls 1/10/83, but also now applies to break-up voyages. Clause 14.4 is new and again adopts provisions from JH131. No change (cl 4.2) No change (cl 4.2) No change (cl 4.2) No change (cl 4.2) No change (cl 4.2) Changed (cl. 1.3) The insurance now terminates automatically, whereas under ITC-Hulls 01/10/83, the insured value was reduced to the market value of the vessel as scrap (albeit without limiting claims for GA and sue & labour). However, as previously, an extension of cover may be negotiated. Changed In the event of termination, premium is still returnable, provided that there has not been a total loss of the vessel. A return is also now available where the insurance terminates under Clause New 14

17 14. (Cont d) 4.1 comply with all statutory requirements of the vessel's flag state relating to construction, adaptation, condition, fitment, equipment, operation and manning of the vessel 15. Deductible 16. New for old 4.2 comply with all requirements of the vessel's Classification Society regarding the reporting to the Classification Society of accidents to and defects in the vessel. In the event of any breach of Clause 14.4, Underwriters are not be liable for any loss, damage, liability or expense attributable to such breach. 1 Application of deductible. Deductible will not apply to the expense of sighting the bottom after stranding, in certain circumstances. 2 Machinery Damage Additional deductible may apply. If it does, then it must be applied before the deductible in Clause Neither deductible applies to a claim for total loss or sue and labour associated therewith. 4 Heavy weather between two successive ports is treated as being due to one accident. 5 Lightening/cargo loading or discharging damage is treated as being due to one accident. Claims recoverable under this insurance shall be payable without deduction on the basis of new for old. New This additional requirement relates to certain flag state requirements and includes ISM and STCW obligations. New This Clause is based on JH131, however is not a warranty, but rather a duty. It is a variation of clause 4.3 in the 1995 clauses, although the duty to report now applies where the Assured is required to do so under Class rules, rather than where the incident condition or damage are matters in respect of which Class might make recommendations. New Breach of the duties means that Underwriters are not liable, where the breach is causative of loss. Changed (Cl 12.1) The changes reflect the additional cover in Clause 3 (Leased Equipment), Clause 4 (Parts Taken Off), the optional extensions in Clauses 40 and 41 (4/4ths RDC and FFO) and Clauses 43 and 44 (GA Absorption and Additional Perils). These optional extensions are subject to the Clause 15.1 deductible. The size of the deductible is no longer stated in the body of the Clause. New This Machinery Damage deductible (taken from CL 289) only applies where agreed. If AMD is 0, the Clause has no effect. This clause includes the Additional Deductible Adaptation Clauses (CL 306) (when Clause 44 applies). No change (cl 12.1) No change (cl. 12.2) New This Clause is based upon the market Lightening Clause and will apply where Underwriters have agreed cover for trading operations entailing cargo loading or discharging at sea under Clause 10.4/Clause 11. No change (cl. 14) 15

18 17. Bottom treatment 18. Wages and maintenance 19. Agency commission 20. Unrepaired damage 21. Constructive total loss 22. Freight waiver 23. Assignment Underwriters not liable in respect of bottom treatment, except in specified circumstances. Underwriters not liable for wages/maintenance of Master or Crew except in specified circumstances. The costs of the Assured obtaining and supplying information/documents or associated agency charges cannot be recovered. 1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs. 2 In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent total loss of the vessel (whether by perils insured under this insurance or otherwise) sustained during the period of this insurance or any extension thereof. 3 The Underwriters shall not be liable in respect of unrepaired damage for more than the insured value of the vessel at the time this insurance terminates. 1 In ascertaining whether the vessel is a constructive total loss, the figure to be taken into account as the repaired value shall be 80% of the insured value. The value of the vessel or wreck is excluded from the calculation. 2 No claim for constructive total loss of the vessel based upon the cost of recovery and/or repair of the vessel shall be recoverable unless such costs exceed 80% of the insured value of the vessel. In the event of a total loss Underwriters cannot claim freight. No assignment will be recognised by Underwriters unless a dated notice of such assignment signed by the Assured is endorsed on the policy. No change (cl. 15) No change (cl 16) No change (cl 17) However, the Assured is now under a contractual obligation to provide certain information to Underwriters under Part 3. Underwriters will pay certain reasonable costs in respect of recoveries under Clause 52. No change (cl 18.1) No change (cl 18.2) No change (Cl 18.3) Changed (Cl 19.1) The figure to be taken into account in assessing whether the vessel is a CTL is now 80% of the insured value, rather than 100%. Changed (Cl 19.2) As above No change (Cl 20) No change (Cl 5) 16

19 24. Disbursements warranty 25. Cancelling returns 26. Separate insurances 27. Several liability 28. Affiliated companies 29. War exclusion 30. Strikes exclusion 31. Malicious acts exclusion 32. Radioactive contamination exclusion 33. Chem/Bio Sets out the additional insurances permitted including increased value, freight, hire, insurance premiums, war and strikes and now chemical, biological, electromagnetic weapons and cyber attack. If the insurance is cancelled by agreement, the Underwriters will pay a pro rata monthly net return of premium, provided there has not been a total loss of the vessel. If more than one vessel is insured, each vessel insured is deemed to be separately insured. Underwriters obligations are several and not joint and limited to their individual subscriptions. Underwriters not liable for a defaulting Underwriter. If the vessel is chartered by an associated, subsidiary or affiliated company of the Assured, Underwriters waive their rights of subrogation against such charterers, where there is an insured loss, save where charterers have responsive liability cover. Loss, damage, liability or expense due to specified war risks are excluded Loss, damage, liability or expense due to specified strikes and terrorist acts are excluded. Loss, damage, liability or expense due to explosives or any weapon of war, caused by a person acting maliciously or from a political motive are excluded. Loss, damage, liability or expense due to radiation or contact with radioactive material or any weapon employing atomic or nuclear fission are excluded. Loss, damage, liability or expense due to any chemical, biological or electromagnetic weapon or computers used to inflict harm are excluded. Changed change (Cl 21) To permit insurance against the expanded RACE clause (Clause 32) and Clause 33. Changed (Cl 22) Cancelling returns only available, although lay-up returns are optional under Clause 42. New This is a standard provision. It was very frequently incorporated by the terms of the slip. New This is a standard provision. It was very frequently incorporated by the terms of the slip. New This is based on a standard provision previously frequently incorporated. Unlike some market wordings, however, cover is not extended to the associated, subsidiary and affiliated companies of the Assured. No change (Cl 24) No change (cl 25) No change (Cl 26) Changed (cl 26) This is the standard RACE wording (cl 356) amended in accordance with the Institute Extended Radioactive Contamination Exclusion Clause. The extension applies to any weapon rather than weapon of war and radioactive matter not used for peaceful purposes. New This follows the new Institute Chemical, Biological, Bio-Chemical, Electromagnetic Weapons and Cyber Attack Exclusion Clause PART 2 ADDITIONAL CLAUSES (01/11/02) 34. Navigating limits The vessel shall not enter areas prescribed by the Institute Warranties. New This follows the standard Institute Warranty limits (CL 26), amended to reflect that these are no longer warranties, but conditions in accordance with Clause

20 35. Bering Sea Transit 36. Recommissioning condition 37. Helicopter engagement 38. Premium payment The vessel may enter the Bering Sea in certain circumstances. As a condition precedent to the liability of Underwriters, the vessel shall not sail from lay-up berth following a lay-up period of more than 180 consecutive days unless the Classification Society or a surveyor agreed by the Underwriters has examined the vessel and the Assured has carried out any repairs or requirements recommended by the Classification Society or such surveyor. Engaging helicopters for the transportation of personnel, supplies and equipment to and/or from the vessel will not prejudice cover, provided the International Chamber of Shipping "Guide to Helicopter/Ship Operations" dated May 1989 is adhered to. 1 The premium shall be paid within 45 days (or other agreed period) of inception or where payment by instalment has been agreed, the first instalment must be paid within the same period from inception and subsequent instalment premiums must be paid when due. 2 If the premium is not paid in accordance with Clause 38.1, Underwriters have the right to cancel the insurance by notifying the Assured via the broker in writing. 3 Not less than 15 days notice of cancellation must be given by Underwriters. Notice is automatically revoked if the premium is paid. If it is not paid, the insurance terminates automatically. 4 Premium remains due to the Underwriters in respect of the period prior to, but not after cancellation unless there is a recoverable claim prior to termination, in which case the full premium is due. 5 The Leaders may give notice on behalf of the followers in accordance with the Leaders clause (Clause 45), but if they do not, this does prevent a follower giving notice in its own right. 6 Where the premium is to be paid through a Market Bureau, payment to the Underwriters will be deemed to occur on the day of delivery of a premium advice note to the Bureau. New Bering Sea Transit cover is now standard. New If laid up for 6 months, Underwriters will not be liable if the vessel sails without survey and without any required repairs having been undertaken. New This is based on LSW788, combined with clause 1.3 of the 1995 clauses. New This is based upon LSW 3000 and provides that the premium must be paid within a specified period, either 45 days or such other period as may be agreed and on a similar basis for payment by instalment. 18

21 39. Contracts (Rights of Third Parties) Act /4ths Collision Liability 41. Fixed and floating objects 42. Returns for lay-up 1 No benefit of this insurance is intended to be conferred on or enforceable by any party other than the Assured, save as may be expressly provided herein to the contrary. 2 This insurance may by agreement between the Assured and the Underwriters be rescinded or varied without the consent of any third party to whom the enforcement of any terms has been expressly provided for. If the Underwriters have agreed, Clause 6 is amended by deletion of three fourths of. If the Underwriters have agreed, then Clauses 6 and 7 are amended to give FFO cover. 1 If the Underwriters have agreed, the agreed percentage of the net premium shall be returned for each period of 30 consecutive days the vessel is laid up not under repair in a port or in a lay-up area provided such port or lay-up area is approved by Underwriters. 2 The vessel is not considered as under repair when work is undertaken in respect of ordinary wear and tear or following recommendations from the Classification Society. 3 Provided always that 3.1 a total loss has not occurred during the period of this insurance 3.2 no return is allowed when the vessel is lying in exposed or unprotected waters or in a port or lay-up area not approved by Underwriters 3.3 no return is allowed when the vessel is being used for the storage of cargo or for lightering purposes. 3.4 pro rata return of premium if the 30 consecutive days (see Clause 42.1) fall on successive insurances. New This Act applies automatically to all contracts subject to English law and concluded post 11 th May This clause makes clear that only parties to the insurance contract can enforce benefits under it, save where there is contrary provision. New 4/4ths collision liability cover can now be agreed on placing and is provided by amendment to Clause 6. The costs cover under Clause 6.3 is also amended to 4/4ths, although is still subject to a limit of 25% of the insured value. New FFO cover can now be agreed on placing and is provided by amendment to Clause 6 and necessary amendments to Clause 7 (sistership). The costs cover under Clause 6.3 is still subject to a limit of 25% of the insured value. Changed (cl 23) Lay-up returns are now only given if agreed on placing and are limited to Not Under Repair. The percentage return must also be agreed on placing. No change (Cl ) Changed (Cl ) The proviso has been deleted No change (Cl ) No change (Cl ) 19

22 43. General average absorption 44. Additional perils 1 If Underwriters have agreed, the Assured shall have the option of claiming general average in full (excluding only commission and interest) from Underwriters without recourse to any other contributing interests, subject to the limit agreed. 2 The Assured shall not claim general average from the other contributing interests and Underwriters waive any rights of subrogation in relation to general average contributions. 3 Any claim, including the fees of any average adjuster, shall not exceed the limit agreed and is subject to the Clause 15 deducible. 1 If the Underwriters have agreed, this insurance covers 1.1 the cost of repairing or replacing any boiler which bursts or shaft which breaks, where such bursting or breakage has caused loss of or damage to the subject-matter insured covered by Clause the cost that would have been incurred to correct the latent defect where such latent defect has caused loss of or damage to the subjectmatter insured covered by Clause loss of or damage to the vessel caused by any accident or by negligence, incompetence or error of judgment of any person whatsoever. 2 The cover provided in Clause 44.1 is subject to the proviso that such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers. Master, Officers, Crew or Pilots shall not be considered Owners within the meaning of this Clause 44.2 should they hold shares in the vessel. PART 3 CLAIMS PROVISIONS (01/11/02) 45. Leading Underwriters 1 Where there is co-insurance, the followers agree that the Leaders designated in the slip or policy may bind them for their proportions in respect of Clause 38 (premium payment) and the following claims related matters New The Assured has the option, in respect of GA covered under Clause 8, of claiming the entire GA (less commission and interest) up to the limit agreed on placing. New Additional Perils cover, based upon the Institute Additional Perils Clause (CL294), may be agreed on placing Changed This is amended to cover the costs excluded under Clause Changed This is amended to cover the costs of correcting the latent defect itself, not recoverable under Clause No change No change The due diligence proviso applies in respect of the loss or damage under Clause and by the burst boiler, broken shaft or latent defect and to loss and damage caused by any accident or negligence under Clause New The status of the Leaders is now formally set out in relation to claims matters and the giving of notice under the premium payment clause (Clause 38). 20

23 45. (Cont d) 1.1 the appointment of surveyors, experts, average adjusters and lawyers, in relation to matters which may give rise to a claim 46. Notice of claims 1.2 the duties and obligations to be undertaken by the Underwriters including security 1.3 claims procedures, the handling of any claim and the pursuit of recoveries 1.4 all payments or settlements to the Assured or to third parties other than ex-gratia payments. However, the Leaders may require matters to be referred to the followers. 2 The followers shall, to the extent of their respective several proportions, indemnify and hold harmless the Leaders in respect of all liabilities, costs or expenses incurred by the Leaders in respect of the above. 3 If the Leaders require expenses to be collected for a party instructed by them, the collecting party may charge 5% of the amount collected for this service or such other amount as may be agreed in advance. 4 The agreement in this Clause between the Leaders and the followers is subject to the exclusive jurisdiction of the English High Court of Justice and to English law and practice. 1 In the event of an accident or occurrence which may result in a claim under the insurance, notice must be given to the Leaders as soon as possible after the Assured, Owners or Managers become aware of the accident or occurrence. A surveyor may be appointed if the Leaders so desire. This enables fees of surveyors, experts and so on to be collected by a third party agency and for the costs of that collection to be borne by Underwriters. This is relevant in circumstances where the brokers are unwilling or unable to collect fees. Changed (Cl 13.1) An Assured must now give notice to the Leaders of potential claims as soon as possible. The obligation arises when the Assured, Owners or Managers become aware of the loss or damage giving rise to the potential claim. There is no longer a requirement to give notice to Lloyd s Agents. 21

24 46. (Cont d) 2 If notice is not given to the Leaders within 180 days of the Assured, Owners or Managers becoming aware of any such accident or occurrence, no claim shall be recoverable under this insurance in respect of any loss, damage, liability or expense arising out of or resulting from any such accident or occurrence, unless the Leaders agree to the contrary in writing. 47. Tender provisions 48. Duties of the Assured 1 The Leaders can decide where the vessel is to be repaired and can veto a place or repair/repairing firm. 2 The Leaders may take tenders or require further tenders to be taken for the repair of the vessel. The Assured may be entitled to specified compensation in this event. 3 Credit to be given against the allowance in Clause 47.2 for specified amounts recovered in general average or from third parties by way of damages for detention and so on. 4 Deduction of 15% from the net claim in the event the Assured fails to comply with Clause The Assured shall, upon request and at their own expense, provide the Leaders with all relevant documents and information that they might reasonably require to consider any claim. 2 Upon reasonable request, the Assured shall also assist the Leading Underwriter(s) or their authorised agents in the investigation of any claim, including, but not limited to 2.1 interview(s) of any employee, exemployee or agent of the Assured 2.2 interview(s) of any third party whom the Leading Underwriter(s) consider may have knowledge of matters relevant to the claim 2.3 survey(s) of the subject-matter insured 2.4 inspection(s) of the classification records of the vessel. New If notice is not given to the Leaders within 180 days of the Assured, Owners or Managers becoming aware of the loss or damage giving rise to the potential claim, Underwriters are discharged from liability for any resulting claim. The Leaders can waive a breach of the notice provision and such waiver will be binding on the followers. No change (Cl 10.2) Reference to Underwriters is replaced by the Leaders. No change (Cl 10.3) Reference to Underwriters is replaced by the Leaders. No change (Cl 10.3) No change (Cl 10.3/10.4) New Clause 48 sets out the responsibilities of the Assured in relation to claims and the consequences of any attempts to mislead Underwriters. This Clause sets out those matters in which the Assured would normally be expected to assist, in relation to a claim. These are new contractual obligations. This follows Clause 4.4 of the 1995 Clauses, although is limited to class records, rather than information and documents. 22

25 48. (Cont d) 3 It shall be a condition precedent to the liability of Underwriters that the Assured shall not at any stage (whether legal proceedings be commenced or not) knowingly or recklessly 49. Duties of Underwriters in relation to claims 3.1 mislead or attempt to mislead Underwriters in the proper consideration of a claim or the settlement thereof by relying in the presentation or maintenance of such claim on any evidence which is false 3.2 conceal any circumstance or matter from Underwriters which might be material to the proper consideration of a claim or a defence to such a claim. 1 The Leaders may, at their sole discretion, upon the notification of an accident or occurrence which may result in a claim 1.1 instruct a surveyor who shall report to them concerning cause and extent of damage, necessary repairs, fair and reasonable costs thereof and any other matter which the Leaders or the surveyor consider relevant On the present state of the law, claims involving pure fraud (scuttling, arson and so on) may result in the Assured forfeiting all benefit under the insurance. However, on the recent authorities, the position in relation to fraudulent devices, such as fabricated evidence or an exaggeration of the loss, is unclear. This Clause provides for a remedy, namely that Underwriters are, in effect, discharged from liability in respect of the claim. The entire contract is not forfeit. As the Courts have held that the duty of good faith comes to an end, in the claims context, once litigation has started, the Clause makes clear that this contractual obligation applies whether legal proceedings have been commenced or not. New This Clause sets out the duties of Underwriters in relation to claims and embodies in contractual terms common practice. The appointment of surveyors or confirmation of appointment of an adjuster is discretionary on the part of Underwriters. 23

26 49. (Cont d) 1.2 confirm the appointment of an independent average adjuster to assist the Assured in the preparation of the claim. If not already agreed, the Assured shall propose the average adjuster to be appointed who may be a Fellow of the Association of Average Adjusters of the United Kingdom or any other average adjuster mutually acceptable to the Assured and the Leaders. 2 Where such appointments are made, the Underwriters shall pay the reasonable fees directly to the surveyor and the average adjuster, whether a claim ultimately arises or not. However, the Underwriters' liability for such fees shall cease no later than when Underwriters pay, settle or deny the claim or it becomes apparent that any claim is unlikely to exceed the deductible. 3 The making of such appointments is not an admission by Underwriters that the accident, occurrence or resulting claim is covered or a waiver of any rights or defences that Underwriters may have under the insurance or at law. 4 The reports of the surveyor shall, subject to no conflict of interest being identified by the Leaders, be released without delay to the Assured and the appointed average adjuster. 5 The Leaders are entitled to request the appointed average adjuster to provide status reports at any stage. 6 The Leaders shall give prompt consideration to the making of a payment on account upon the recommendation of the appointed average adjuster or, if no adjuster is appointed, upon the request of the Assured supported by appropriate documentation. The Adjuster may be agreed at the outset, alternatively may be a fellow of the Association of Average Adjusters or an adjuster mutually acceptable to the Assured and Underwriters. What is appropriate documentation, in the absence of a payment on account recommendation from an adjuster will be a question of fact in all the circumstances. The Leaders agreement to a payment on account will be binding on the followers. 24