The commencement of the deductible period

Before the 2003 version, Cl. 16-7 sub-clause 1 provided that the deductible period should commence "from the beginning of the casualty". If the vessel was not delayed immediately after a casualty, adjustment practice invariably counted the deductible period from the initial time lost until the agreed number of days had been reached, so that the insurer’s exposure commenced only after such time. On this basis, the wording of Cl. 16-7 on this point was inaccurate. The wording was therefore changed in the 2003 version and now provides that the deductible period “shall run from the commencement of the loss of time”.

The deductible period may be interrupted or consumed in stages. Some delay may occur immediately after the casualty and later on in connection with surveys, temporary repairs, tenders and final repairs. In theory, the deductible period could be apportioned over the various periods the vessel is out of service, but as is explained in the following case, the deductible period runs from the commencement of the loss of time.

In the "Ranhav" award, ND 1967, page 269, the arbitrator decided a dispute under the loss of hire conditions in use at the time.  He adopted the solution explained above which was then adopted in adjustment practice after the "Ranhav" case was decided and was incorporated in to the 1972/1993 conditions and maintained in Cl. 16-7.

The principle of always reckoning the deductible days from the commencement of the loss of time has several consequences:

Firstly, in connection with common repair time of casualty repairs and work not covered under the loss of hire insurance which are repaired simultaneously, the loss of hire insurer shall, in accordance with Cl. 16-12, pay only 50% of the compensation which would otherwise have been due under the insurance. Consequently and to the extent that the assured considers it necessary or advantageous to carry out any repairs not covered by the insurance, the assured will benefit from having such repairs carried out during the deductible period which, in any event, would not be covered by the loss of hire insurance.

Secondly, in relation to the daily amount, if it is not the same for the whole period that the insurer shall compensate. If during permanent repairs, the daily amount is reduced pursuant to Cl. 16-14, sub-clause 2, the assured cannot opt for the deductible period to be the period during which the daily amount is reduced, thus enabling him to benefit from the higher daily amount during the earlier temporary repairs.

Thirdly, in connection with recoveries from third parties.  Pursuant to Cl. 5-13, cp. also Cl. 16-16, recoveries from third parties shall be apportioned between the assured and the insurer in proportion to their respective interests. 

The 1997 version of the Commentary to Cl. 16-16 introduced a new principle of top/down apportionment, but this principle was abolished altogether in the 2003 version of the Commentary, see further under 9.4.

The Commentary to Cl. 16-7, also mentions Cl. 4-12, sub-clause 2 and Cl. 16-11, sub-clause 3 in this context.  Cl. 4-12 deals with costs of preventive measures in general, and Cl. 16-11 contains some special rules related to the cost of preventive measures which are most relevant under the loss of hire insurance – costs incurred in order to save time, see further under 12.