One or more casualties

Each casualty will be subject to one deductible period. A casualty, in this respect, is a set of circumstances, which, pursuant to Cl. 16-1, give rise to a claim under the policy. Thus, if a casualty is followed by several separate periods of delays, for example in connection with the subsequent surveys or during temporary and subsequent permanent repairs, there shall be only one deductible period.

The term "casualty" is not defined in the Plan. In the context of loss of hire insurance, a casualty constitutes the circumstance which gives rise to a new claim under the loss of hire policy - i.e. the event which the assured is insured against.

However, it is usually not difficult to determine whether there has been more than one casualty.  Section 16-7, sub-clauses 2 and 3, deals with possible disputes regarding heavy weather damage and damage caused by the vessel passing through ice.

Judgements on deductible or sum insured under hull insurance may be of interest also in relation to loss of hire insurance. Judgements on limitation of liability may also provide some guidance, as there is one limitation amount available for each event or accident.

In the Norwegian Supreme Court case in respect of the "Vestfold I", ND 1977 page 38 NH, the engine gear was damaged during grounding.  About two months after the repair of the damage, the gear broke again. A misalignment was discovered on the crankshaft that had not been discovered during the first repairs. In addition to misalignment, the crankshaft had been wrongly mounted. It was found that the damage to the gear was caused either by misalignment in the crankshaft or wrongful installation, or a combination of these factors. The insurer's liability in respect of the damage to the machinery, including the gear, was subject to the damage being the result of the grounding. The question in dispute was whether the new gear damage should be attributed to the original grounding, in which case it would be covered under the insurance policy, or whether it should be considered a new casualty caused by error in workmanship, in which case it would not be covered by the insurance. The Supreme Court held that the insurer was liable according to the rule concerning the combination of perils and who should therefore pay 2/3 of the new damage to the gear. The court stated that the chain of causation from the original grounding was not broken when the yard made errors in connection with the repairs.[13]

The "Sunvictor", ND 1974, page 103 NH, dealt with the question of the number of deductibles under an Anglo-American deductible clause. The hull policy incorporated the 1964 Plan, but contained a special deductible clause providing for a deductible of USD 100,000 for claims "arising out of each separate accident".  It was further provided "that a sequence of damage arising from the same accident shall be treated as due to that accident".  The "Sunvictor" grounded in the St. Lawrence channel and sustained bottom damage. Further bottom damage occurred when the vessel was pulled off the ground. In addition, the vessel was damaged by ice while aground and during towage to the nearest port or place of refuge. Finally, the vessel sustained further ice damage during removal to the repair yard in Quebec. The hull insurer argued that all damage occurring during removal of the vessel from the port or place of refuge to Quebec was a new "separate accident", so that two deductibles should apply. The Norwegian Supreme Court did not agree. The court held that there was causative connection between the grounding and all the subsequent damage, and that there was a "sequence of damage" so that only one deductible should apply.

The proper interpretation of the words "one and the same event" for limitation of liability purposes was considered in the "Tønsnes" case, ND 1984, page 129, in which the vessel caused damage to several fishing nets during approximately one hour. The court held this to be “one and the same event“.  The same expression was considered in connection with the "Ny Dolsøy", ND 1987 page 160, which delivered contaminated bunkers to two different ships during 24 hours, resulting in damage to the engines of both vessels. This was  also considered as being "one and the same event" in relation to limitation of liability.

On the basis of these judgements it is impossible to formulate any simple test giving guidance in evaluating whether there is one or more casualties. Nevertheless, the following factors seem to be of importance: (i) distance in location and time between the incidents, (ii) causation; could the assured have avoided the last incident and to what extent and (iii) was the last incident a consequence of an increased risk due to the first incident?

The above discussion is for practical purposes of limited, if any, interest under a loss of hire insurance.  Whether there are one or more casualties, is potentially of great importance for the parties in the other cases mentioned above.  Whether one or more global limitation amounts shall apply, may have dramatic consequences for the parties concerned. The same may apply to the sum insured, in particular if the assured should end up in the unfortunate situation that one court decides that two or more global limitation amounts are available to the third parties having suffered damage as a result of the casualty, while another court decides that there is only one sum insured available to cover the liability towards third parties.  The claim in tort by the third parties may well be subject to the jurisdiction of a court different from the court deciding the assured's claim under his insurance policies. The courts may even be located in different countries.

Even the question of one or more deductibles under a hull policy may be of significant importance, depending on the amount of the deductible. In principle, the same may be said with regard to the deductible under a loss of hire policy. Deductible periods of 30 days or more are not uncommon, and with daily loss of income in the range of USD 10,000 or more, there may be amounts at stake of some importance to the parties. The daily income may be several times higher than the amount agreed in the policy depending on the state of the market and, in the off-shore sector  and passenger trade (namely large cruise vessels and/or ferries), income may well be several hundred thousand dollars per day increasing dramatically the importance for the parties of whether one or more deductible periods should be applied.

Under the loss of hire conditions there is no basis for aggregating the deductible periods if they run parallel for the casualties covered under the loss of hire policy.  That will normally be the case in those borderline cases where there may be doubt as to whether there are one or more casualties.

The example of a vessel being out of control in port after an engine breakdown may illustrate the point. The vessel may sustain damage at several places at different times while striking other vessels in port before ending its uncontrolled navigation firmly aground or stuck at a quay.  Even if one should conclude that each striking is a separate casualty, no loss of time will occur until the vessel is stopped one way or another.  Only then will the deductible period or periods start to run, see below at 6.3. A possible solution could have been that, if the series of events was deemed to be two or more casualties, two or more deductible periods should be applied. However, the Commentary to Cl. 16-7 expressly states that, as long as the deductible periods run parallel, they shall not be cumulative, but shall be exhausted at the same time. In other words: in this situation, it does not matter whether the series of events is deemed to be one or more casualties. The same solution was adopted in the 1972/1993 conditions, see the 1972-Commentary, page 34. This solution was apparently considered self-evident by the authors of the 1972‑Commentary and was repeated without discussion in the 1996 revision of the Plan.

[13] Even though this judgment is often cited and used in relation to discussion of one or more casualties, it is important to bear in mind that the Supreme Court did not decide on whether one or two deductibles should apply, but whether there was any cover at all under the limited cover provided under the special conditions for insurance of coastal and fishing vessels. In order to secure some cover for the insured, the Supreme Court did not deem a clear error in workmanship by the repair yard as breaking the chain of causation between the grounding and the subsequent gear damage that occurred only after insufficient and erroneous repairs were carried out. In order to secure part cover for the insured, the court went so far as to expressly state that it was a foreseeable consequence of the grounding that the yard might make an error in workmanship. This statement is in itself at best very dubious, if not manifestly wrong, and it must be queried whether the court would have stretched the law to this extent, if the subject matter for the court had been the far less serious issue for the assured of whether one or two deductibles should apply. The writer suggests that an error in workmanship by the repair yard must be deemed as a new incident so that the costs of repair and loss of time due to such errors must be subject to a new deductible.