Blocking and trapping and other war risks specialities

War risk cover taken out on the basis of Chapter 15 of the Plan will also constitute a loss of hire insurance, see Cl. 15-2 (e). The deductible period, the daily amount, the maximum number of days etc. must be agreed in the policy and otherwise the conditions and limitations of cover shall be the same for the war risks and marine risks loss of hire insurance. Cl. 15-16, sub-clause 1, expressly provides that the provisions of Section 6 of Chapter 15 shall apply in addition to the provisions of Chapter 16.

There is an alternative way of covering war risks loss of hire insurance which may be used if the owner does not want to cover it on the basis of Chapter 15 of the Plan. If the owner has covered hull insurance for marine and war risks on foreign conditions, he will not need the full package contained in Chapter 15, but he may wish to cover loss of hire insurance on Norwegian conditions (i.e. Chapter 16 of the Plan) both for marine and war perils. This can be achieved simply by expressly stating in the loss of hire insurance contract that it also comprises war risks according to, for example, Cl. 2-9 of the Plan or any other war risks clause that clearly defines the risks that shall be comprised by the war risks loss of hire insurance. It would also be advisable to incorporate the provisions contained in Clauses 15-4 to 15-9 or similar clauses in foreign conditions, in particular the English Automatic Termination clause.

  1. Cl. 15-16. Extended cover for war risks blocking and trapping

    It has been explained in 3.7.2 above that the marine loss of hire conditions, in Cl. 16-1, sub-clause 2, cover loss of time due to blocking and trapping of the vessel by physical obstructions. The corresponding rule under the war risk conditions has been extended in order to include blocking and trapping by non-physical obstructions. This extension has been effected by replacing the marine conditions in Cl. 16-1, sub-clause 2, letter (b), with the following provision set out in Cl. 15-16, sub-clause 2:

    The insurer is liable for loss due to the ship being wholly or partly deprived of income because it is prevented from leaving a port or a similar limited area.

    The marine loss of hire conditions provide cover only if the vessel is prevented from leaving the port by a physical obstruction other than ice. (It should be noted that a loss of time due to the vessel being prevented from entering the port is not covered under any circumstances.) War risks may of course also create physical obstructions (e.g. bombing of a port wrecking several vessels which wreckage prevents other vessels from leaving the port). There is no doubt that loss of time due to such physical obstruction is also covered by the war risk conditions in Cl. 15-16, sub-clause 2, which is wide enough to include blocking and trapping both by physical obstruction and by other means.

    For practical purposes, such other means of blocking and trapping are interventions by a foreign state power, cf. Cl. 2-9, sub-clause 1 (b) and above under 2.3.3. Such intervention may be by way of capture, Cl. 2-9, sub-clause 1 (b), blocking the entrance of the port with mines or threatening to torpedo vessels leaving the port. Such threat must be more specifically directed towards the port in question than the general risk of being torpedoed at sea during a war. If the enemy navy is waiting outside the port ready to fire at the vessel, the vessel must be considered as having been prevented from leaving the port as per Cl. 15-16, sub-clause 2.

    It is not crucial to define the term «port» since the further words "similar limited area" clearly suggest that blocking and trapping outside ordinary ports are included in the cover. The Commentary to Cl. 15-16 and Cl. 16-1 gives very little guidance on this point and only refers to Cl. 15-12 which provides for total loss compensation in case the vessel is trapped by a war peril for more than 12 months..

    The Commentary to Cl. 15-12 mentions that the cover for blocking and trapping was developed during the various wars in the Middle East. Vessels were trapped in the Suez Canal when this was closed after air attacks; the same was the case for vessels trapped in Shatt-al-Arab. Such areas are deemed similar to ports or harbours.  The Commentary also suggests that the whole Arabic Gulf is to be treated as a limited area similar to a port, since the Norwegian War Risks Association implied that a closing of the Strait of Hormuz due to war perils would constitute blocking and trapping under their insurance conditions. The Commentary goes on to state expressly that the Great Lakes do not constitute such a «limited area» similar to a port even if the only entrance is through the St. Lawrence Seaway.  If vessels are trapped in this area because the locks in the Seaway are destroyed by bombing, there is no loss of hire cover under Cl. 15-16.

    Wilhelmsen and Bull: Handbook on Hull insurance, Gyldendal 2007, page 345 adopts without reservation the solution of the Commentary in relation to Cl. 15-12 that the Great Lakes are not “a similar limited area”.

    The Commentary to Cl. 15-12, which is also relevant to Cl. 15-16, emphasises that the wording “port or similar limited area” means that the area must not be too large:

    The comparison shows that the area must not be too large geographically and, accordingly, must be comparable to a port.

    This means that loss of hire cover is not extended to vessels or off-shore units operating on off-shore locations on the high seas even if war perils may wholly or partly deprive them of income. Off-shore units, which are anchored while at work on the location, are therefore not readily moveable. A threat of attack against the unit may temporary require evacuation of the whole crew, which results in down time or off hire under the contract with the operator of the field. But even if, due to the threat, the unit is restricted in its operation, the cover under Cl. 15-16 has never been intended to comprise vessels or units operating stationary on the high seas. The high seas are certainly not comparable with a port and no loss of hire cover is therefore available unless the threat materialises into a physical damage to the vessel or unit.

    This view was contested in an arbitration case “Bulford Dolphin”, published in ND 2009 page 202. The arbitrators concluded in accordance with the view expressed above. Due to this arbitration award the Commentary to Cl. 15-16 was amended by adding the following:

    Both Cl. 15-16 and Cl. 15-12 apply only to blocking and trapping in ports or similarly limited areas. In an arbitration award rendered on 8 May 2009 between Dolphin Drilling and the Norwegian Shipowners’ Mutual War Risks Insurance Association (Bulford Dolphin), the court found that a rig anchored off the coast is not in a port or similar limited area. The court also stated that Cl. 15-16 only applies to blocking or trapping due to interventions by a State power, cf. in that respect the remark above, and that blocking or trapping due to threats of attack by terrorists or pirates is not recoverable under loss-of-hire insurance. This statement is an obiter dictum and concerns the construction of an issue that is highly controversial. However, as long as piracy was limited under Cl. 2-9 (d) to the “open sea” the statement had little practical significance in relation to piracy because it is unlikely that the geographical area specified in Cl. 15-12 and Cl. 15-16 would at the same time be in the “open sea”[32]. In view of the expansion that has now been made in the geographical aspect of the concept of piracy, however, piracy could conceivably take place within “a similar limited area”, cf. the Commentary on Cl. 2-9 (d). To avoid this expansion of the concept of piracy having an unintended effect on loss-of-hire cover, the Committee agrees that it is natural to limit the scope of Cl. 15-16 to only cover interventions by foreign State powers. With regard to shipowners’ overall need for loss-of-hire insurance in the event of attacks by pirates and terrorists, the cover provided under Cl. 15-16 will in any event be totally marginal. (Footnote and emphasis added)

    The clear intention behind the above underlined quote from the Commentary to Cl. 15-16 was also to make it clear that any loss of time due to piracy or terrorism not resulting in any damage to the vessel would not be covered under Cl. 15-16 even if it may be said that the vessel was blocked or trapped by pirates or terrorists in a port or similar limited area. The assured may cover in the market loss of hire insurance for loss of income due to piracy or terrorists attacks such as waiting time while negotiations of ransom are going on etc. but it will depend on the employment of the vessel whether the assured needs such cover. Under certain charterparties the vessel is not off hire due to piracy attacks. Hence, it was agreed in 2010 that such cover should not be part of the standard cover under the Plan. This has not been subject to any further discussions during development of the Nordic Plan, neither for the 2013 version, nor the current 2016 version.

    [32] The Commentary to Cl. 2-9, sub-clause 1 (d) was substantially amended in 2010 by defining the geographical area for piracy much wider and more precise than criminal acts on the high seas.

  2. Cl. 15-17. Loss in connection with a call at a visitation port, temporary stay, etc.

    Cl. 15-17 reads:

    The insurer is also liable for loss of time if the ship is brought to a port by a foreign State power for the purpose of:

    1. visitation and search of cargo, etc.
    2. capture and temporary detention.
    If the assured is entitled to compensation for total loss under Cl. 15-11 or Cl. 15-12, he is not entitled to compensation under this section beyond the first month of the loss of time. If compensation has already been paid, it shall be deducted from the total loss compensation.

    As opposed to Cl. 15-16, only detention in port is relevant in this case, there is no extension to a detention in a "similar limited area".  The Commentary does not suggest any reason for the restriction and does not offer any assistance in interpreting the word "port". We venture that port must be read somewhat liberally, but certainly excluding mere stoppage at sea. The words "brought to a port" suggest that the vessel must be brought to a place which is a safe port for the vessel insofar as marine risks are concerned. In this context, the Arabian Gulf is not a port. It may be questioned whether satisfactory cover is provided to the assured, as it is difficult to understand why the insurer cannot cover any loss of time in excess of the agreed deductible period caused by a detention by foreign state power, regardless of whether the vessel is detained in port or at sea.

    The Commentary to Cl. 15- 17 suggests that detention for customs purposes is included in Cl. 15-17, and refers to an unpublished Norwegian arbitration award by Brækhus, the "Germa Lionel" commented on in Kaskoboken on pages 73-73 and 239-240 and in Handbook in Hull Insurance, by Bull and Wilhelmsen on page 95. This is somewhat misleading because the facts surrounding «Germa Lionel» are better classified as an aggressive intervention by a state power than a mere detention for customs purposes. The intervention by a state power to exercise customs and other normal civil authority is undoubtedly a marine peril, see the Commentary to Cl. 2-9, sub-clause 1, letter (b), where it is stated: "The war risk insurance therefore does not cover losses arising from the ship being detained by the authorities ……because the crew is suspected of smuggling."

    The "Germa Lionel" was detained by Libyan authorities for two months.  The vessel came from London where there had been an 11 day siege at the Libyan Embassy following a protest at which a policewoman had been shot and killed. When the vessel arrived in Libya, the crew were interrogated and one crew member died as a result of torture. The whole cargo was searched. It was never clarified what the Libyan authorities were looking for, but apparently they realised that they made a mistake because the vessel was released unconditionally (and without the slightest apology). The arbitrator held that it was the war risk insurer that should compensate part of the extra expenses etc. pursuant to provisions similar to Cl. 3‑17.  He held that the action of the Libyan authorities was an intervention pursuant to Cl. 2-9, sub-clause 1(b), but emphasised that whatever reason the Libyan authorities had for their intervention, they went far beyond what could be considered the exercise of normal civil authority for a port state.

    Intervention by a foreign state power and blocking and trapping depriving the assured of the use of the vessel for more than twelve months entitles the assured, if caused by a war peril, to claim total loss compensation pursuant to Clauses 15-11 and 15-12. If so, according to Cl. 15-17, sub-clause 2, the assured is not entitled to loss of time compensation for more than the first month, which corresponds to the period the insurer is not obliged to pay interest on the total loss compensation, cp. Cl. 5-4, and see under 13 above. In this context, any payment under his war risks hull insurance less than the total loss compensation does not deprive the assured of his right to claim loss of hire. If the assured has been compensated for loss of time during the twelve-month period, such compensation in excess of one month is deducted from the total loss compensation cp. the last sentence of Cl. 15-17.

    This does not create any difficulty if both insurances are covered by the same insurer, as Chapter 15 presupposes. If that is not the case, it is difficult to see how the two insurances can be combined in this manner, particularly if the war risk hull cover is covered on foreign conditions but war risks loss of hire is covered on the basis of Chapter 16 with extensions as per Section 6 of Chapter 15. If the assured is not entitled to any total loss compensation under his war risks hull cover in case of interventions by foreign state power or blocking and trapping lasting for more than twelve months, then, of course, the war risks loss of hire insurer must pay in full as per their policy.

    If the assured is entitled to total loss compensation under his war risk hull cover, the war risk loss of hire insurer must become subrogated to the assureds claim for total loss, see Cl. 2-6 sub-clause 2. Admittedly this solution is not readily apparent from the wording of Cl. 2-6, but the loss of hire insurance must be deemed to be subsidiary to the hull insurance in this regard. If the insurer who is secondarily liable has already paid, he must be entitled to be subrogated to the assured’s claim against the primary insurer in accordance with the general rules on subrogation. The special rule on subrogation in Cl. 5-13 is not applicable, see the Commentary to Cl. 5-13 where it is expressly stated that Cl. 2-6 on double insurance shall govern.

    The Commentary to Cl. 15-17 states that Cl. 15-17, sub-clause 2, is a general rule, which may imply that it is also applicable in relation to the extended blocking and trapping cover under Cl. 15-16, sub-clause 2. The reference in Cl. 15-17, sub-clause 2 to Cl. 15-12 supports this understanding of the Commentary, but apart from that, the wording of Cl. 15-17 only deals with situations where a vessel is trapped in port after having been brought into the port by a foreign state power.

    If a vessel is trapped in a port which was entered freely, because the port is subsequently blocked after bombing or mining, it is indeed difficult to read into Cl. 15-16 the limitations contained in Cl. 15-17, particularly since Cl. 15-18 expressly refers to Cl. 15‑17. One would have expected such a reference also in Cl. 15-16, if the same limitation of cover should apply. On the other hand there is no reason to treat these cases differently. If the assured obtains full compensation for total loss, there is no reason for him to get loss of hire compensation in addition, cp. the discussion under 4.1 above. It seems that the Commentary is correct on this point, provided that it is read as suggested above.

  3. Cl. 15-18. Loss caused by orders issued by the insurer

    Cl. 15-18 reads as follows:

    The insurer is also liable for loss of time resulting from orders issued by the insurer, cf. Cl. 15-4.  However, this does not apply to orders given by the insurer in connection with the outbreak of war.

    If the assured is entitled to compensation for total loss under Cl. 15-13, Cl. 15‑17, sub-clause 2, shall apply correspondingly." (The English version of the Plan contains a misprint as sub-clause 2 refers to Cl. 15-3 rather than Cl. 15-13.)

    According to Cl. 15-4, the war risk insurer is entitled to give orders as to how and where to operate the vessel in order to reduce the risk of damage to or loss of the vessel. If such orders cause the assured to suffer a loss of income, he is entitled to be compensated for this by the insurer. Such order may be to stay in port until further orders are given by the insurer. If the vessel is kept in port without income for more than six months, the assured is entitled to total loss compensation pursuant to Cl. 15-13. In such a case, the loss of hire compensation shall be reduced to only one month, see above under 16.2.

    It is clear that there is little or no point for the loss of hire insurer to invoke Cl. 15-18 if he does not also cover the war risk hull insurance. It is difficult to see any benefit for a loss of hire insurer in giving any orders aiming at preventing a loss of hire claim, if he must compensate the assured's loss of time resulting from following such orders.  By keeping the vessel in port he may theoretically avoid paying for loss of hire during repairs if the vessel is damaged during sailing. The latter payment may be higher than the payment for the detention in port, but this is a very speculative calculation which would probably be avoided by most insurers.