ITC

Question 1

Clause 4

Answer 1

Termination

Question 2

Clause 6

Answer 2

Perils

Question 3

Clause 8

Answer 3

3/4ths Collision Liability

Question 4

Clause 9

Answer 4

Sisterships

Question 5

Clause 10

Answer 5

Notice of claim and tenders

Question 6

Clause 11

Answer 6

General Average and Salvage

Question 7

Clause 12

Answer 7

Deductibles & recoveries

Question 8

AAA Special Committee Report

Answer 8

(a) one deductible is to be applied when either:
i) there is only one accident or occurrence form which the claims arise, or
ii) Even though there is more than one accident or occurrence, these form a connected set of events from which the claims arise.
(b) However, if one or more of the events from which the claims arise are the result of a new cause, which would be considered a Novus actus interveniens, then more than one deductible is to be applied to the claims.

1. Cases involving the application of one deductible.

A vessel is moored at a port where it is customary to lie safely aground at low tide. Vessel sustains damage due to ranging at each tide during one period of heavy weather lasting for several days. The damage all flows from one peril insured - the stress of weather over one period, comprising one accident.

2. Cases involving the application of more than one deductible.

A vessel is proceeding through a dock system with tug assistance. As she is about to enter, she is caught by the wind and collides with one of her tugs, sustaining damage. While in a lock later in the system the water is let in too rapidly, she surges and again collides with a tug sustaining damage. In this case, there is no connecting link between each contact, with each contact due to quite separate causes. Therefore, two deductibles to be applied

3. Cases of a sequence of events where a strict interpretation suggests the application of only one deductible, but the working party considers that it would be more reasonable to apply more than one deductible.

A vessel is moored at a port where it is customary to lie safely aground at low tide. Vessel sustains damage due to ranging at each tide During two periods of heavy weather separated by an interval of a number of days of fair weather. A strict interpretation might require that as there were two separate periods of heavy weather, there should be two deductibles. Such an interpretation could lead to anomalies and dispute and it appears reasonable to the working party that in practice in such a case as this the accident or occurrence be regarded as ranging in this particular berth and only one deductible should be applied.

Question 9

Clause 13

Answer 9

Sue and Labour

Question 10

Clause 13.4 and Clause 13.5

Answer 10

13.4) When sue and labour expenses are incurred, liability shall not exceed the proportion of such expenses that the amount insured hereunder bears to the value of the Vessel as stated, OR to the sound value of the Vessel at the time of the occurrence giving rise to the expenditure if the sound value exceeds that value.

• Where Underwriters have admitted a claim for total loss and the insured property is saved, the above provisions shall not apply unless the expenses of suing and labouring exceed the value of such property saved, and then shall apply only to the amount of the expenses which is in excess of such value.

13.5) When there is a claim for total loss of the Vessel and expenses have been reasonably incurred in saving or attempting to save the Vessel and there are no proceeds, or the expenses exceed the proceeds
- This insurance shall bear its share of such proportion of the sue and labour expenses (or of the expenses in excess of any proceeds) as may reasonably be regarded as having been incurred in respect of the Vessel
- BUT: if underinsurance - if the Vessel be insured for less than its sound value at the time of the occurrence giving rise to the expenditure, the amount recoverable under this clause shall be reduced in proportion to the under insurance.

Question 11

Clause 14

Answer 11

Claims payable without deduction new for old

Question 12

Clause 16

Answer 12

Wages and Maintenance

Question 13

Clause 17

Answer 13

Agency

Question 14

Clause 18

Answer 14

Unrepaired damage

Question 15

Clause 19

Answer 15

CTL

Question 16

Clause 23

Answer 16

War exclusions

Question 17

Clause 24

Answer 17

Strikes exclusions

Question 18

Clause 25

Answer 18

Malicious acts exclusion

Question 19

Clause 26

Answer 19

Nuclear exclusion

Question 20

D1

Answer 20

Removal expenses

Question 21

D1 - 4(a) and 4(b)

Answer 21

4(a) Where the vessel is removed to a port of repair:
* As an immediate consequence of damage, of which Underwriters are liable for the cost of repairs
* OR the vessel is necessarily taken out of service especially to effect repairs arising from that damage

The entire cost of removal shall be treated as part of the cost of repairing that damage, notwithstanding that owners may have taken advantage of the removal to carry out a class survey or to effect other repairs on their own account.

BUT: where the vessel is removed to a port of repair:
* as an immediate consequence of damage of which Underwriters are not liable for the cost of repairs
* or for Owners’ work, other than a routine overhaul as in 4(b) below,
underwriters are not liable for any removal expenses, notwithstanding that repairs for which they are liable may be carried out at the port of repair.

4 (b) Where the vessel is removed to a repair port for routine overhaul at which repairs on both Owners’ and Underwriters’ accounts are effected
* The expenses of removal shall be apportioned pro rata to the cost of all work effected at the port (including drydock dues and general services)

Question 22

D5

Answer 22

Drydock common expenses

Question 23

D6

Answer 23

Tankers common expenses

Question 24

D8

Answer 24

Scraping and painting

Question 25

D10

Answer 25

Liner vessels

Question 26

Rule A

Answer 26

Definition of GA:

There is a GA act when:

There is an extraordinary sacrifice of expenditure, intentionally or reasonably made or incurred, for the common safety or for the purpose of preserving from peril the property involved in the common maritime adventure

Question 27

Rule C

Answer 27

Included / excluded losses

Question 28

Rule D

Answer 28

Remedies and defences

Question 29

Rule F

Answer 29

Substituted expenses

Question 30

ICC - Clause 1

Answer 30

Risks

Question 31

ICC - Clause 2

Answer 31

General average

Question 32

ICC - Clause 3

Answer 32

Both to blame collision clause

Question 33

ICC - Clause 4

Answer 33

4.1) Willful misconduct of the assured
4.2) Ordinary leakage, loss in weight / volume, or wear and tear of the subject-matter insured
4.3) Insufficiency of packing/preparation of the subject matter insured to withstand the ordinary incidents of the voyage, where such packing or preparation is carried out by the Assured or their employees or prior to the attachment of this insurance
4.4) Inherent vice
4.5) Delay, even if the delay is caused by a risk insured against
4.6) Insolvency or financial default of the owners, managers, charterers of the vessel whereby, at the time of loading the cargo, the Assured are aware or should be aware that such insolvency could prevent the normal prosecution of the voyage. However, this does not apply where the contract of insurance has been assigned to the assured, who has bought or agreed to buy the cargo in good faith under a binding contract
4.7) Directly or indirectly caused by the use of any weapon or device employing atomic or nuclear fission and/or fusion

Question 34

ICC - Clause 5

Answer 34

5.1) This insurance does not cover loss, damage or expense caused by:

5.1.1) Unseaworthiness of vessel for the safe carriage of the cargo, where the Assured are aware of this at the time of loading cargo
* Does not apply where the contract of insurance has been assigned to the assured who has bought or agreed to buy the cargo in good faith under a binding contract

5.1.2) Unfitness of container for the safe carriage of the cargo, where loading is carried out by the Assured or prior to attachment of this insurance and they are aware of such unfitness at the time of loading.

5.3) Underwriters waive any breach of the implied warranties of seaworthiness of the ship to carry the subject-matter insured to destination.

Question 35

ICC - Clause 6 and 7

Answer 35

6) In no case shall this insurance cover loss damage or expense caused by

6.1) War, civil war, revolution, rebellion or any hostile act by or against a belligerent power
6.2) Capture, seizure, arrest, restraint, or detainment (except piracy)
6.3) Derelict mines torpedoes bombs or other derelict weapons of war

7) In no case shall this insurance cover loss damage or expense caused by:

7.1) Strikers, locked out workmen, or persons taking part in labour disturbances, riots or civil commotions
7.2) Resulting from the above^
7.3) Terrorism – any person acting on behalf of/in connection with any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of any government whether or not legally constituted
7.4) Any person acting from a political, ideological or religious motive

Question 36

ICC - Clause 8

Answer 36

Transit clause

Question 37

ICC - Clause 11

Answer 37

Insurable interest

11.1) In order to recover under this insurance, the assured must have an insurable interest in the subject matter insured at the time of loss. i.e legal or equitable relation to the adventure or subject matter insured

11.2) Where there is an insurable interest, the assured may recover in respect of any insured loss, notwithstanding that the loss may have occurred before the contract of insurance was concluded, unless the assured were aware of the loss and insurers were not.

Question 38

ICC - Clause 12

Answer 38

Forwarding charges

Question 39

ICC - Clause 14

Answer 39

Increased value

Question 40

ICC - Clause 16

Answer 40

Duty of the assured (i.e sue and labour)

Question 41

ICC - Clause 17

Answer 41

Waiver and minimising losses

Measures taken by the Assured or the Insurers with the object of saving, protecting or recovering the subject matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

Question 42

ICC - Salvage Loss

Answer 42

Underwriters settle the claim by leaving the assured to sell the cargo and paying him the difference between the insured value and the sale price. Mathematically the end result is the same, but administratively it is much easier for the underwriter.

Question 43

Do a GA calculation

Question 44

Do a Collision Liability calculation

Question 45

Do a cargo calculation - Depreciation basis

Question 46

Do a Dry Dock calculation

Question 47

Do a S&L - underinsurance calculation

Question 48

ICC - Clause 9

Answer 48

Termination of contracts of carriage

9) This insurance shall terminate when, due to circumstances beyond the control of the Assured, either:
- The contract of carriage is terminated at a port or place other than the destination named in the insurance,
- The transit is terminated before unloading of the subject-matter insured
UNLESS: prompt notice is given to the Insurers and continuation of cover is requested in which case the insurance shall remain in force until either

9.1) the subject-matter insured is sold and delivered at such port or place, or, until the expiry of 60 days after arrival of the subject-matter insured at such port or place, whichever shall first occur
OR
9.2) if the subject-matter insured is forwarded within the said period of 60 days to the destination named in the contract of insurance or to any other destination, then this insurance shall remain in force until terminated in accordance with Clause 8.

Question 49

Definition of ‘salvage loss settlement’

Answer 49

• Insured value minus the value it was sold for = CLAIM
• Cargo must not have reached its final destination
• Underwriters settle the claim by leaving the assured to sell the cargo and paying him the difference between the insured value and the sale price.

Question 50

Institute Additional Perils Clauses – Hulls 1/10/83

Answer 50

Extension of cover compared to ITCH

1.1) The cost of repairing or replacing
1.1.1) Any boiler which bursts or shaft which breaks
1.1.2) Any defective part which has caused loss or damage to the Vessel covered by
Clause 6.2.2 of the ITC - Hulls 1/10/83

1.2) Loss of or damage to the Vessel caused by any accident or by negligence, incompetence or error of judgement of any person whatsoever.

2) No claim shall be allowed for the cost of repairing or replacing any defective part as a result of an error in design or construction which has not caused loss or damage to the Vessel.

3) The cover provided in Clause 1 is subject to all other terms, conditions and exclusions contained in this insurance and is subject to a due diligence proviso.

Question 51

IUA Cyber Loss Exclusion Clauses

Answer 51

IUA 09-081 and IUA 09-082

Question 52

Difference in cover of cargo clauses A, B, C

Answer 52

• A Clauses are sometimes referred to as “Full Cover”
  A Clauses = All risks excluding war risks only
• B Clauses as “With Particular Average”
  B Clauses = majority risks excluding war, malicious damage, theft / pilferage, taking at
  sea
• C Clauses as “Free of Particular Average”
  C Clauses = restricted cover

Question 53

GA Absorption Clause

Answer 53

A GA absorption clause is a provision inserted into a hull insurance policy which requires underwriters to “absorb”, up to an agreed amount, a claim in GA that the insured shipowner has against other parties (i.e right of GA contribution from all parties involved in the common maritime adventure).

Question 54

Increased value and excess liability policies

Answer 54

Purpose and effect :
- Designed to provide an additional source of recovery over and above the H&M policy insured value in the case of total loss and provides additional coverage in respect of the balance of any general average, salvage, sue and labour charges and collision liabilities which are not recoverable under the original policy due to under-insurance.

Effect of under-insurance (section .81, MIA, 1906):
- Where the assured is insured for an amount less than the insurable value OR, in the case of a valued policy, for an amount less than the policy valuation he is deemed to be his own insurer in respect of the uninsured balance i.e not recoverable

Claims to which underinsurance applies under ITCH 1/10/83:
- Sue and labour
- GA
- Salvage

Question 55

A.B.S Loss of Charter Hire Insurance 1/10/83 - LOH

Answer 55

LOH insurance protects the shipowner by providing a specified daily indemnity in respect of any loss of freight, earnings or any other income which occurs as a result of a loss of time due to physical damage to the vessel covered by the policy.

1) If, in consequence of any of the following events, occurring during this insurance period:

(a) loss, damage or occurrence covered by ITC (1/10/83) or Norwegian Hull Form or American Institute Hull Clauses (1977) OR
(b) Breakdown of machinery, including electrical machinery or boilers, provided that such breakdown has not resulted from wear and tear or want of due diligence by the Assured,

The Vessel is prevented from earning hire for a period in excess of X days, then this insurance shall pay X, for each 24 hours in excess of the said days, during which the Vessel is prevented from earning hire.

• BUT: Not exceeding a further X days in respect of any one accident or occurrence and not exceeding X days in total, during the period of this Insurance.
• Provided that the repairs in respect of the claim made are completed within 12 months of the expiry of this insurance period.

Question 56

P&I insurance

Answer 56

P&I’, is the policy ship owners purchase to protect them against liability claims from crew, passengers and third parties

CCPPPEW

o Collision
o Property damage
o Pollution
o Personal injury, loss of life, illness
o Environmental damage
o Wreck removal
o Cargo onboard your own vessel not recoverable from H&M insurers

Question 57

LOF

Answer 57

• A – Contractors’ basic obligation:
  Salvors agree to use their best endeavors to salvage the property and to take it to the
  place specified in the contract or to any such place to be agreed hereafter, or otherwise
  to take it to a place of safety.
• B – Environmental protection:
  While performing salvage services the salvors shall use their best endeavors to
  prevent or minimise damage to the environment.
• C – Scopic:
  If invoked, salvors can receive Special Compensation (a tariff to calculate their
  expenses and a fair rate for tugs and equipment used in salvage operations) in certain
  circumstances where the salved fund is insufficient to allow them to recover adequate
  remuneration.
• D – Effect of other remedies:
  Salvors’ services shall be rendered and accepted under the principle of “no cure - no
  pay” ….
• E – Prior services
  This agreement shall cover salvage services performed before and up to the date of this
  agreement.
• F – Duties of property owners:
  The owners of the property shall cooperate fully with the salvors.
  (i) The salvors may make reasonable use of the vessel’s machinery and equipment free
  of expense provided that property on board is not unnecessarily damaged, abandoned
  or sacrificed
  (ii) The salvors shall be entitled to all such information relating to the vessel or the
  property as they may reasonably require, provided such information is relevant to the
  performance of the services and is available without undue difficulty or delay.
• G – Rights of termination
  When there is no longer any reasonable prospect of a useful result leading to a salvage
  reward, owners or salvors are entitled to terminate the services by giving reasonable
  prior written notice.
• H – Deemed performance
  Services shall be deemed to have been performed when the property is in a safe
  condition in the place of safety or place stated on the form, regardless of if damaged or
  in need of maintenance.
  AND provided that the continuation of salvage services is no longer necessary to avoid
  the property becoming lost or further damaged.

Question 58

What is ‘open cover’

Answer 58

The open cover is a contract for 12 months which gives the Insured continuous protection to cover a large number of shipments and the premium of which would be adjusted from the respective cash deposit account maintained by the Insured.

Question 59

Progressive damage and overtime

Question 60

Examples of GA expenditure and GA sacrifice

Answer 60

GA Sacrifice of ship and cargo
* Throwing overboard (“jettison”) some cargo or ship’s material, equipment or stores, in order to lighten the ship
* Refloating damage to the ship

GA expenditure incurred for the common safety
* Port charges.
* Towage to port of refuge
* Temporary repairs (when necessary for the safe prosecution of the voyage or to enable damage to be repaired)
* Lightening charges
* Entering / leaving the port of refuge
* Handling or discharging cargo,
* Fuel or stores

Question 61

Documentation of cargo claim

Answer 61

• Insurance Policy
  The document issued by the Insurance Company to evidence that the cargo has been insured. It provides details of the policy number, voyage, cargo details and insurance conditions.
• Contract of carriage
  A contract of carriage is a contract between a carrier of goods and the supplier or buyer. Contracts of carriage generally define the rights, obligations and responsibilities of the contracting parties.
• Bills of lading
  This contains the core details of the movement of the goods, such as the shipper and carrier information, goods shipped, quantity, and shipping terms. Also provides evidence of the contract of carriage.
• Claim statement / survey report
  The purpose of the statement of claim is to clearly define the details of the loss, including goods damaged, extent of damage, and the value of the damage. Usually evidenced in survey report.
• Commercial Invoice
  This will be used to establish purchase price of goods and to confirm the terms of sale to ensure that an insurable interest does apply.