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. 

  1. Overview

    Cl. 16-11 regulates the liability of the loss of hire insurer for costs incurred in order to save time and must be read in conjunction with Cl. 4-7 concerning the insurer's liability for costs incurred to prevent or minimise loss. If costs are incurred to prevent or minimise loss that would be covered by the loss of hire insurance, they must be borne by the loss of hire insurer in accordance with the rules in Cl. 4-7 et seq. Cl. 16-11 is a continuation of the rules in Cl. 4-7 in that it specifies, in relation to a specific area of practical importance, the costs that the loss of hire insurer must cover.

    The insurer's liability under Cl. 16-11 is more extensive than his liability under the general rule in Cl. 4-7 et seq. The insurer may be liable for costs incurred to save time, even though the measures taken do not satisfy all the general conditions for recovery of sue and labour and similar expenses. For example, it is not a requirement that the measures taken were reasonable.

    Sub-clause 1 of Cl. 16-11 was edited to make it clear that all extra costs of temporary repairs in order to avoid loss of time to the benefit of the loss of hire insurer is covered, regardless of whether temporary repairs may be described as extraordinary measures or not. In all normal circumstances, temporary repairs are ordinary as opposed to extraordinary measures. The previous wording was at best ambiguous in this regard.

    Any other measures than temporary repairs must be extraordinary measures and must also be taken for the purpose of saving time. Any extraordinary measures taken for this purpose are covered under Cl. 16-11. The cover is not limited to measures taken to speed up repair work. 

  2. Cl. 16-11 cover is subsidiary to the hull cover

    Sub-clause 1 of Cl. 16-11 provides that the loss of hire insurance does not cover costs which are recoverable from the hull insurer.[29] This provision must be seen in connection with Cl. 12-7 concerning temporary repairs and Cl. 12-8 concerning costs incurred to speed up repairs. Under Cl. 12-7, the hull insurer is liable for the entire cost of temporary repairs when permanent repairs cannot be carried out where the ship is situated. The cost of temporary repairs in other cases and the costs incurred to speed up repair work are covered within 20 % p.a. of the agreed insurable hull value for the time saved for the assured, cp. 7.2.3 above. These provisions are based on the assumption that any excess costs incurred to save time will be covered by the loss of hire insurer. This means that the loss of hire insurance will be supplementary and subsidiary to the hull insurance in this respect.  The decisive element for the liability of the loss of hire insurer is the extent to which costs incurred to save time are recoverable from the ship's actual hull insurer. The liability of the loss of hire insurer is, however, not increased if the costs are not recoverable from the hull insurer because they fall below the deductible. The decisive criterion is whether the costs are of a kind that are recoverable under the ship's actual hull insurance.



    [29]  Ibid note 47, where it is explained that Cl. 16-16 does not apply to any overlap between the hull insurance and the loss of hire insurance for extra costs covered pursuant to Cl. 16-11.

  3. Hull cover other than the Plan

    Before 2003 it was irrelevant to the cover pursuant to Cl. 16-11 whether the hull insurance was covered on the Plan or other hull conditions. If the assured's hull insurance did not cover costs incurred to save time, the loss of hire insurer was liable for the costs of temporary repairs and extraordinary measures within the limits mentioned in Cl. 16-11, sub-clause 2.

    However, the 2003 version introduced a new second sentence to sub-clause 1 in line with the corresponding amendment in Cl. 16-1, sub-clause 1, second sentence, requiring that, if hull conditions other than those of the Plan triggered the loss of hire cover, such other conditions should be approved in writing by the loss of hire insurer.

    The Commentary to Cl. 16-11 makes it explicitly clear that if the loss of hire insurer has approved such other hull conditions in writing, and those conditions do provide cover similar to the cover of Cl. 12-7 and 12-8, Cl. 16-11 will supplement such similar provisions, even if they are not providing exactly the same cover as the said Plan provisions. If there is no such cover at all under the other hull conditions, costs as mentioned in Cl. 16-11 will be covered by the loss of hire insurer as was the case before 2003.

    If, however, the assured fails to obtain from the loss of hire insurer the approval in writing of other hull conditions, the intended effect of the reference in Cl. 16-11, sub-clause 1, second sentence to Cl. 16-1, sub-clause 1, second sentence is that the cover of extra costs pursuant to Cl. 16-11 will be restricted to what would have been covered if the hull insurance had been covered on the basis of the Plan.

  4. Temporary repairs and extraordinary measures

    The phrase "temporary repairs and in connection with extraordinary measures" not only covers the measures which according to Cl. 12-7 and Cl. 12-8 activate the hull insurer's liability, but also a wider range of measures. Under Cl. 16-11, it is not required that the temporary repairs be "necessary", which is a requirement under Cl. 12-7, sub-clause 1. While Cl. 12-7, sub-clause 2 applies only to temporary repair of "the damaged part", no such limitation has been mentioned in Cl. 16-11. Cl. 16-11 applies therefore to any temporary repairs. This includes all measures of a non-permanent nature taken to enable the vessel to be removed to a repair yard or to continue trading and includes, inter alia, replacement of parts of the ship or hire of equipment, such as generators. New equipment or parts which are installed and which later are to be removed are also regarded as an extraordinary measure.

    Cl. 16-11 requires that the purpose of the temporary repairs and/or extraordinary measures taken must be to save time. If the purpose is to reduce the total cost of complete repairs, the costs are to be paid in full by the hull insurer according to Cl. 12-7. If a ship that has suffered a casualty at A carries out sufficient temporary repairs to enable it to sail to B, where complete repairs can be carried out at lower costs than at A, the cost of the temporary repairs are to be paid in full by the hull insurer.

    The increase in the loss of time which arises from the removal to B must be dealt with by reference to the rule in Cl. 16-9, see under 7.2.4 above. The temporary repairs at A plus permanent repairs at B must be regarded as an alternative to permanent repairs at A. The loss of hire insurer's liability is limited to the alternative that gives the least loss of time of the two (A and A + B), provided the assured can recover the repair costs in full from his hull insurer.

    In the same way as Cl. 12-8, Cl.16-11 is based on a distinction between "ordinary" and "extraordinary" measures. The dividing line is, however, not necessarily the same in relation to the two provisions. As stated in Brækhus and Rein: Kaskoboken, page 493, it is not clear-cut to draw the dividing line between "ordinary" and "extraordinary" measures. The interpretation opens for discretionary evaluations, where the individual solutions may vary in accordance with technical developments. Nowadays, it is common practice to carry out certain types of work by means of mobile repair teams, which are thus considered "ordinary", while sending spare parts by charter plane is still considered "extraordinary".[30]

    The most common extraordinary measure is probably the payment of overtime to repair workers.

    In practice, the distinction between ordinary and extraordinary measures has particularly caused problems in connection with what has traditionally been described as "increased ordinary voyage expenses" or "enhanced voyage expenses". These are expenses that must be anticipated from time to time during the voyages of a ship, e.g. due to problems relating to weather and currents, or minor technical problems regarding the ship. A typical example is extra consumption of oil where there is an oil leakage. These increased voyage expenses have to be paid by the assured according to his duty to minimise the loss, cf. Cl. 3-30.  If the assured chooses to keep the vessel idle waiting for repair, the insurer shall not be liable for greater loss than that for which he would have been liable if the duty of the assured according to Cl. 3-30 had been fulfilled. 

    Based on a theory which appears to have its roots in general average law and practice, adjustment practice of loss of hire adjustments has been fairly restrictive. This is demonstrated by the following example: 

    The vessel is equipped with three generators, one turbine driven, and two which are driven by diesel engines. The turbo generator is damaged and repairs must be deferred until spare parts can be delivered. In order to keep the vessel trading while waiting for spares, the assured decides to hire and install a package diesel generator set onboard the vessel. Operation of the vessel during the period waiting for spares requires extra consumption for the vessel's diesel generators and consumption of gas oil and lubrication oil for the hired generator. The damage is considered recoverable under the vessel's hull insurance. 


    There is no doubt, pursuant to adjustment practice, that the necessary hire of a mobile generator and the installation/removal costs concern the loss of hire insurance not the hull insurance. Such costs are considered "extraordinary" and are thus recoverable under the loss of hire insurance. Such costs would be recoverable both under Cl. 4-7 and Cl. 16-11.

    On the other hand, average adjusters have considered the extra consumption of oil as "enhanced voyage expenses", which the assured must bear himself. This can hardly be a correct interpretation of the Plan. If the hire of a mobile generator is accepted as an extraordinary measure, the same must apply to the extra consumption. There is no valid reason why these expenses should be treated differently. Both the rental costs and the extra consumption are incurred to keep the vessel trading and are therefore "measures taken for the purpose of preventing loss of time".

    To sum up, the loss of hire insurance supplements the hull insurance in the following two ways: 

    1. It covers costs which in principle fall within Cl. 12-7 and Cl. 12-8, but which exceed the 20% limit mentioned in these provisions.

    2. It covers costs incurred to save time by way of measures taken which are of a character different from those covered under Cl. 12-7 and Cl. 12-8.


    [30] The Commentary to Cl. 16-11 is now vague on this point referring to a case by case evaluation considering what may be covered under the hull insurance in accordance with the “unrepairability” concept introduced in the Commentary to Cl. 12-1, see footnote 9.

  5. Cl. 16-11, sub-clause 2

    The loss of hire insurer's liability for extra costs is limited to the amount by which the compensation otherwise due under the loss of hire insurance is reduced as a result of the measures taken, see sub-clause 2 of Cl. 16-11. This will normally be equal to the number of days saved multiplied by the daily indemnity that the insurer would otherwise have had to pay.

    If the time saved falls within a period when other work is also carried out so that Cl. 16-12 applies, then the time saved is only that which would have been for the insurer's account. If the measures taken reduce the repair time to a level that is less than the deductible period, one cannot take into account time that is saved within the deductible period.

    The costs that are to be paid by the insurer must, because of the limitation in Cl. 16‑4, sub-clause 2, be recalculated into indemnity days by dividing the costs by the amount of the daily indemnity.

  6. Cl. 16-11, sub-clause 3

    The basic rule in relation to costs incurred to prevent or minimise loss is that no apportionment is to be made even though the measures taken also benefit the assured's uninsured interest, see Cl. 4-12, sub-clause 2.

    However, sub-clause 3 of Cl. 16-11 contains a rule which provides that the assured shall bear a portion of the extra costs in proportion to the amount of time that is saved for his account, and this is a departure from the solution that otherwise applies to costs incurred to prevent or minimise loss.

    The principles for apportionment according to sub-clause 3 have been outlined as follows in the Commentary to Cl. 16-11:

    The principles applicable to apportionment under a loss-of-hire insurance must take account of the way in which the cover is normally structured in such insurance: the assured is liable for the agreed deductible period, after which the insurer is liable for the number of days of indemnity stated in the policy, and should the loss of time exceed this maximum, the assured is again liable for the excess number of days. Costs must therefore be apportioned in such a way that the assured and the insurer cover the costs related to a saving of time during the periods of loss of time for which they are respectively liable. This means that the assured first bears costs related to any reduction of the number of days in excess of the insurance contract maximum, whereafter the insurer must cover costs related to any reduction of the number of days covered by the insurance contract, and finally the assured must cover costs related to time saved within the deductible period.