Cost of measures to avert or minimise the loss

  1. General

    The Plan requires the assured to incur expenses to reduce the insurer's liability.

    This means that the assured is under an obligation to incur extra expenses in order to minimise the loss of hire insurer’s liability.  As mentioned in 7.2.1 above, there may well be a possible conflict of interests between the hull insurer and the loss of hire insurer in this context. For example, the extra cost of overtime for repairs to the vessel may not only have reduced the time needed to complete the repairs (to the advantage of the loss of hire insurer), but might also have resulted in costs-savings which would otherwise have been for the hull insurer’s account, for example, saved dock rental. Even though Cl. 12-8 of the Plan applies to the time saved, practice is that when overtime has resulted in saved dock rental, the overtime costs have been covered under the hull insurance up to the saved rental amount. The loss of hire insurer will not pay for the cost of overtime or any other additional expense that can be shown to have produced savings in repair costs. Under the Norwegian conditions, only the remaining extra expenses which are not compensated by the hull insurer under Cl. 12-8 will be considered by the loss of hire insurer. This is demonstrated by the following example:

    Extra cost of overtime :     NOK  50,000
    Saved dock rental covered by hull insurer             :     "     10,000
      :     "    40,000
    Cl.12-8:  Covered by hull insurer :     "    32,000
    Remaining extra expenses :     NOK     8,000

    Only the remaining extra expenses of NOK 8,000 will be considered by the loss of hire insurer.

    Temporary repairs also fall within this category.

    Under the Plan, the loss of hire insurer pays for the extra cost of temporary repairs which are not recoverable from the hull insurer, see Cl. 12-7. However, the loss of hire insurer will not pay beyond the amount that he would have paid had permanent, instead of temporary, repairs been effected.

    Also, other measures taken for the purpose of preventing loss of time may be compensated under the loss of hire insurance.

  2. Extra costs incurred in order to save time, Cl. 16-11

    Cl. 16-11 of the Plan corresponds to Cl. 7 of the 1972 and 1993 conditions. The heading and sub-clause 1, first sentence was edited in 2003. A new second sentence was added to sub-clause 1 at the same time. The effect of the latter amendment is commented under 12.2.3 below. The Commentary was amended in 2013 by adding two new sentences. One on enhanced voyage expenses and another on the assured’s duty to minimise the loss rather than unnecessarily keep the vessel idle waiting for repairs. Both are incorporated into 12.2.4 below.

    Cl. 16-11 reads as follows:

    The insurer shall be liable for extra costs incurred in connection with temporary repairs and in connection with extraordinary measures taken in order to avert or minimise loss of time covered by the insurance, insofar as such extra costs are not recoverable from the hull insurer. If the hull insurance has been effected on conditions other than those of the Plan, and these conditions have been accepted in writing by the insurer, the rules of Cl. 16-1, sub-clause 1, second sentence, shall apply.

    The insurer shall not, however, be liable for such costs in excess of the amount he would have had to pay if such measures had not been taken.

    If time is saved for the assured, he shall bear a share of the extra costs that is proportionate to the time saved for his account.