Co-assured’s' duty of disclosure

The person effecting the insurance, i.e. the contracting party, see Cl. 1-1, letter (b), will usually have an interest in the subject matter insured and will take out the insurance for his own benefit. However, he may also enter into the insurance contract for the benefit of a third party who may have an interest in the subject matter insured. Typically, the owner effects an insurance to protect his own interests and at the same time names the charterer as assured as well.  Any party whose interests are assured by the insurance contract is defined as an assured, see Cl. 1-1, letter (c). The assured who has not effected the insurance is referred to as a "co-assured".

According to Chapter 3, Section 1, the duty of disclosure is vested in the person effecting the insurance. If the person effecting the insurance fails to comply with his duty of disclosure, the insurer may invoke this failure against any co-assured parties, see Cl. 3-38.

Cl. 8-3, sub-clause 1, extends the scope of the duty of disclosure set out in Chapter 3, Section 1, to any co-assured, other than a co-assured mortgagee, see the Commentary to Cl. 8-3 , who is aware of having been named as co-assured under the policy. If one such co-assured party is in breach of his duty of disclosure, the insurer may only invoke this breach against the other assured parties if the co-assured in breach had the overall decision-making authority for the operation of the vessel, see Cl. 8-3, sub-clause 3, and Cl.3-37. The co-assured in breach of the duty of disclosure may, of course, have forfeited his own cover even if he was not in charge of the operation of the vessel.

Sub-clause 2 governs the third party’s breach of the rules relating to duty of care. The provision gives the insurer the right to invoke the rules in Chapter 3, Sections 2 to 5 or Cl. 5-1 against the third party. A co-assured charterer who has the duty to comply with safety regulations related to, for example, dangerous goods carried onboard, may forfeit his protection under the co-insurance if the breach is in violation of Cl. 3-22, cf. Cl. 3-25 causing loss of or damage to the vessel. Thus, the protection offered to the co-assured according to the new Cl. 8-2, see further on this clause under 11.2.2, will not apply and the hull insurer who has paid the loss or damage may seek recourse against the charterer. The same will apply to the loss of hire insurer who has compensated the owner for loss of time due to the damage.

It may be argued that the provision in sub-clause 2 is superfluous, since the rules relating to the duty of care are aimed directly at “the assured” and the third party as a co-assured party is covered by this expression. However, for the sake of clarity, it was decided to introduce an express provision to this effect.