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22 May 2013
The Norwegian Marine Insurance Plan contained conditions for marine insurance (other than protection and indemnity) that were widely used in both the Norwegian and international markets. In January 2013 it was replaced by the Nordic Marine Insurance Plan 2013 – referred to as the Nordic Plan.
While the Nordic Plan is largely based on its predecessor, some important changes have been introduced. These amendments will better facilitate use of the plan in other Nordic countries, as well as in the international market.
The Nordic Plan continues the tradition of being an agreed document. This was one of the great strengths of the former Norwegian Plan, since the terms are seen to be more balanced than is the case with other insurance conditions. The plan was negotiated by the Nordic Association of Marine Insurers and the Nordic Shipowners' Associations in Norway, Sweden, Denmark and Finland, with assistance from the Nordic Official Average Adjusters and academics from the Scandinavian Institute of Maritime Law at the University of Oslo.
The Nordic Plan is accompanied by extensive commentary, which is an invaluable aid to understanding the reasoning behind the provisions and pre-empts many interpretive questions that could arise. In order to ensure that the Nordic Plan keeps up with developments in the market, it will be revised every three years by the Standing Revision Committee. The official language of the Nordic Plan and the accompanying commentary is English.
In contrast to the English Institute Hull Clauses, the Nordic Plan is based on the 'all-risks' principle. This means that cover is provided for all marine perils unless expressly excluded. This makes it easier for assureds to ensure that all relevant marine risks are covered.
Another advantage for assureds as compared to, for example, the English hull clauses is that they are entitled to interest on claims paid under the plan.
Important aspects of assureds' duty of due care are regulated by the concepts of alteration of risk and safety regulations. Safety regulations are rules concerning measures for the prevention of loss issued by public authorities, the classification society or the insurer. Under these provisions, the insurer will be entitled to deny cover only if the assured either aggravated the risk or breached any safety regulations, provided that:
This contrasts favourably with the concept of warranties under English marine insurance, where breach of a warranty discharges the insurer from liability, irrespective of whether there is any causal connection with the loss or whether the assured is to blame, which can sometimes create harsh and unreasonable results.
Jurisdiction and choice of law
The Nordic Plan provides that when insurance is effected with a Nordic claims leader (ie, a claims leader based in Norway, Sweden, Denmark or Finland), legal proceedings may be commenced before the courts only in the venue in which the claims leader's head office is located. The co-insurers may also be sued in the venue of the claims leader, but this is optional. The governing law is the law of the venue of the claims leader. When insurance is effected with a non-Nordic claims leader, Norwegian law applies unless the parties expressly agree otherwise.
Causation – incidence of loss
If damage to a vessel develops over time, questions can arise in deciding which policy period the loss should be allocated to. This is highly relevant when different insurers cover different periods.
The Nordic Plan maintains the main rule regarding incidence of loss that has been in force since 1930. This rule states that an insurer is liable for losses incurred as a result of the insured interest being struck by an insured peril during the insurance period. The actual damage need not have occurred during the insurance period. It is sufficient that the insured peril have materialised to the extent of creating a critical situation (eg, where a vessel is stuck in ice or captured by pirates without suffering physical damage until a later insurance period).
On occasion, a pre-existing undetected defect or damage that originated in one insurance period can cause further or different damage during a later insurance period. In such cases it can be difficult to decide which insurance period(s) to allocate the loss to. The Nordic Plan's rules concerning such issues have been simplified and clarified.
Where an undetected defect results in damage to the insured vessel, the defect is deemed to be a marine peril that strikes the insured interest at the time when the damage starts to develop. Where undetected damage in one part of the vessel results in damage to another part, the original damage shall be deemed to be a marine peril that strikes the insured interest at the time that the damage to the other part begins to develop.
The Nordic Plan also contains a special rule concerning defect or damage which is known by the assured, but not by the insurer. Where such defect causes damage, or such damage causes damage to other parts, the insurer's liability will not exceed the amount that the assured would have been able to recover under the insurance in force at the time that the assured first acquired knowledge of the relevant defect or damage.
Error in design and faulty materials
The Nordic Plan covers losses caused by error in design and faulty materials through the all-risks cover. This cover is provided because it is accepted by insurers that such perils constitute an unpredictable risk for the assured. However, this cover may be considered controversial, since the decision on whether to carry out work on the vessel is one that the assured makes, rather than insurers. The cover is therefore limited to include consequential damage caused by error in design or faulty material – that is, the insurer is not liable for the costs of renewing or repairing the parts of the hull, machinery or equipment that are defective. However, there is an important exception to this rule if the parts in question were approved by the classification society.
The initial response to the Nordic Plan from the market suggests that the introduction of joint Nordic insurance conditions has been welcomed by insurers and assureds alike. The Nordic Plan appears to be an up-to-date, balanced, adequate and foreseeable insurance solution. Compared to many other standard terms of insurance, the Nordic Plan will no doubt provide greater certainty to both insurers and assureds as to the extent of insurance cover.
For further information on this topic please contact Anders W Færden, Kaja Oftedal Rasting or Herman Steen at Wikborg Rein by telephone (+47 22 82 75 00), fax (+47 22 82 75 01) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).
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