Loss of hire for fishing vessels

  1. Overview of Chapter 17 of the Plan

    Loss of hire for fishing vessels is found in Chapter 17, Section 7 (Clauses 17-56 – 17-61). Chapter 17 contains the standard insurance conditions in the Plan applying to insurance of fishing vessels and small freighters. Section 1 contains rules that are common to Sections 2-7. Conditions for hull insurance are found in Sections 2 and 3, for catch and equipment insurance in Sections 4 and 5 and shipowners' liability insurance in Section 6.

    Cl. 17-1 makes it clear that the rules in Chapter 17, Sections 1-7 only apply to the extent that this is expressly agreed in the insurance contract. This means that the parties in principle have the option to insure fishing and coastal vessels on the basis of the other Chapters of the Plan, if they so wish. But it is not given that the insurers agree to insure e.g. hull insurance on the basis of the somewhat wider cover in Part Two of the Plan intended for ocean going vessels. The assured may not be interested in such wider cover if it means he has to pay a higher premium. Hence, it is normally on the insurer to ensure that the somewhat more restricted cover in Chapter 17 is expressly agreed in the insurance contract. If not, Chapter 17 will not apply. It follows from the above that Section 7 is not applicable unless it has been expressly agreed that the insurance shall also cover loss of hire, which is according to the general principle in the Plan that each type of insurance must be expressly agreed.

    For the sake of good order, it must be emphasised that all the insurances under Chapter 17 are also subject to the rules in Part I of the Plan (Chapters 1 to 9) unless excepted in Chapter 17 (or in the individual insurance contract).

  2. Clause 17-56. Relationship to Chapter 16

    Cl. 17-56 reads:

    The provisions of Chapter 16 apply with the changes prescribed in Cl. 17-57 to Cl. 17-61.


    Loss of time for fishing vessels is covered on the basis of Chapter 16, subject to the changes that follow from Cl. 17-57 to Cl. 17-61. These special rules are intended to apply only to fishing vessels and not to smaller freight vessels that are also insured on the basis of Chapter 17, Sections 1 – 6. Such freight vessels can obtain loss of hire insurance on the basis of Chapter 16 subject to any changes that might be laid down in the individual insurance contract.

  3. Clause 17-57. Liability of the insurer/applies instead of Clause 16-1

    Cl. 17-57 reads:

    The insurance covers loss due to the vessel being wholly or partially deprived of income on account of damage to the vessel, provided that the damage is recoverable under Chapter 17, Section 2, or would have been recoverable if no deductible had been agreed, see Cl. 12-18. 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 in Chapter 17, Section 2, shall be replaced by the corresponding conditions of the insurance concerned when assessing whether the damage is recoverable. If the hull insurance provides extended cover under Chapter 17, Section 3, the rules in the first and second sentences shall apply correspondingly in relation to Section 3.


    This Clause is verbatim very similar to Cl. 16-1, but all the same replaces Cl. 16-1 in its entirety because the important difference between Cl. 16-1 and Cl. 17-57 is that it is the provisions regarding hull insurance in Chapter 17, Section 2, that determine whether compensation is payable under the loss of hire cover. The last sentence of Cl. 17-57extends the loss of hire insurance correspondingly, if the hull insurance has been extended according to Chapter 17, Section 2.

    Sub-clause 2 of Cl. 16-1 has not been incorporated and will therefore not apply to fishing vessels. The reason for this is that these provisions are presumed not to be of any practical significance for fishing vessels.

  4. Clause 17-58. Total loss/applies instead of Clause 16-2

    Cl. 17-58 reads:

    The insurer is not liable for loss of time resulting from a casualty that gives the assured the right to compensation for total loss under Chapter 11 with Cl. 11-3, sub-clause 2, amended pursuant to Cl. 17-11 or under the corresponding conditions in the hull insurance that apply to the ship pursuant to Cl. 17-57, second sentence.


    This Clause is very similar to Cl. 16-2, but with the important amendment that follows from Cl. 17-11 that the threshold for condemnation has been set at 90 % instead of 80% as in Cl. 11-3, sub-clause 2.

  5. Clause 17-59. Calculation of compensation for fishing vessels/Ref. Clause 16-3

    Cl. 17-59 reads:

    The insurance does not cover loss that is due to the vessel being deprived of income from fishing as a result of regulatory measures introduced by the authorities or the fact that the authorities have stopped fishing activities.

    Quotas which are not fished in full during the quota year due to damage to the vessel, cf. Cl. 17-57, and which are allowed by the authorities to be transferred to a new quota year, shall be regarded as quotas fished in the original quota year, if the quota is fished in the new quota year. The same applies to quotas transferred by the vessel to other vessels in the quota year.

    The claims adjustment shall be issued as soon as possible after the quota year is over, but in cases where quotas are transferred to a new quota year, the claims adjustment shall be issued as soon as possible after the end of the new quota year, cf. Cl. 5-2 and Cl. 5-6.


    When calculating compensation for loss of time for fishing vessels, Cl. 16-3 will apply in full in addition to Cl. 17-59, but Cl. 17-59 contains important limitations on the extent of the compensation that can be claimed under the loss of hire insurance.

    The rationale is that calculating compensation under loss of hire insurances for fishing vessels poses special challenges and difficulties compared with ordinary merchant vessels, whether they be seagoing or have a limited trading route along the coast, because operations of fishing vessels are subject to control of national fishing authorities. The authorities’ control may consist of time limitations on the fishing of certain fish species, quotas for individual fishing vessels and overall seasonal or annual catch quotas. Seagoing fishing vessels will, nevertheless, have possibilities of obtaining a license or permit to switch from one type of fishing to another in different areas and it will thereby be possible to use the vessel for income-generating fishing operations throughout or during large parts of the year.

    Fishing is strictly regulated in almost all European countries as well as internationally through cooperation under the International Council for the Exploration of the Sea (ICES). Legal authority for regulating fishing in Norway is provided by the Act of 6 June 2008 on the Management of Wild Living Marine Resources (havressursloven).The Marine Resources Act empowers the authorities to establish national quotas, group quotas, district quotas and quotas for individual fishing vessels. Permits for individual fishing boat owners to engage in fishing are governed by the Act of 26 March 1999 No. 15 relating to the right to participate in fishing and hunting (deltakerloven). Quotas for the different types of fish are fixed for one year at a time by the fishery authorities pursuant to the Marine Resources Act.

    Cl. 17-59, sub-clause 1, therefore provides that the insurance does not cover losses resulting from the vessel being deprived of income due to regulatory measures introduced by the authorities or from the authorities having stopped fishing operations. The wording “authorities” includes national authorities, authorities in other countries and supranational authorities like the EU. This provision is a logical consequence of the principle expressed in the Commentary on Cl. 16-3 with reference to the English judgment in the “CAPRICORN”, which determined that loss of time which occurred during a period when the vessel would have been deprived of income regardless of the damage is not recoverable, see further 3.1 above.

    Therefore, the question of whether there is a recoverable loss cannot be considered solely on the basis of whether the vessel has been unable to operate regularly due to damage. Consideration must also be given to whether the vessel has been prevented from fishing its full allocated quota of a specific species of fish. If, once the vessel is back in operation after an interruption due to damage, it is able to fish its full allocated quota, the assured has suffered no loss and is thus not entitled to compensation.

    This can be illustrated by the following examples:

    (1) A purse seiner licensed to fish mackerel suffers damage to machinery on 1 October, as a result of which the vessel is unable to operate until 1 December of the same year. Mackerel is normally fished in the period September-November. Prior to the interruption, the vessel had fished two-thirds of its quota. When it began to operate again on 1 December, the assured was unable to fish the rest of his quota since the fish were no longer present in the Norwegian zone. In this case, the assured has in fact been deprived of the possibility of fishing during the period 1 October to 1 December. In principle, however, the loss will be limited to the time the vessel would need to fish the remainder of its mackerel quota. On the other hand, the vessel could conceivably lose income that it might have earned from alternative fishing operations, such as herring and autumn mackerel fishing.

    (2) A fishing vessel is licensed to trawl for Norwegian spring spawning (NSS) herring. The vessel began fishing for herring on 1 February, but due to grounding on 20 February spent 30 days in a yard for repairs. When the grounding occurred, the vessel had fished 30 % of its quota of NSS herring. After repairs of the vessel were completed, it continued to fish for blue whiting, for which it also had a quota. In the autumn of the same year, the vessel resumed fishing for NSS herring and fished its entire quota before the end of the year. The vessel was able to fish the remainder of its quota of NSS herring before the end of the calendar year, but missed the opportunity to fish for blue whiting during the period in which repairs were carried out and is thus entitled to compensation for this loss of time, unless the vessel had also fished its full blue whiting quota.

    (3) A trawler has a quota to fish sand eel (tobis) in the North Sea. The fishing season starts on 1 May. On that day a fire breaks out on board the boat, which spends 30 days in a shipyard to repair the damage. On 25 May the authorities stop the fishing because the proportion of stunted fish is too high. Fishing is not re-opened that season. The vessel has had a time loss of 30 days, but due to the moratorium on fishing, the vessel would only have been able to fish for 25 days. The recoverable loss of time is therefore limited to 25 days. If, on the other hand, the vessel had had the right to fish other species for which the authorities had not halted fishing activities, the number of days of indemnity is not reduced.

    If the assured leases another vessel to fish his full quota while the insured vessel is deprived of income, the costs of such leasing must be recoverable under Cl. 16-11.

    Cl. 17-59, sub-clause 2, second sentence, provides that quotas which are not fished in full during the quota year due to damage to the vessel, cf. Cl. 17-57, and which the authorities allow to be transferred to a new quota year, are to be regarded as quotas fished in the original quota year if the quota is fished in the new quota year.  This provision has been included because in some cases the fishery authorities may allow quotas that are not fished in full in the quota year to be credited to the quota fixed for the following year. This can apply to both group quotas and vessel quotas. The legal basis for such “transfer” is provided by the individual regulations governing the fishing activities in question, which are laid down pursuant to Cl. 11 of the Marine Resources Act. If, despite the damage, the assured is able to fish his full quota for one year in the course of two quota years, he will not have suffered any loss that is recoverable under the loss of hire insurance. However, this is conditional on the displacement in time of the fishing activities not having negative consequences for the assured’s possibility of fishing his full quota for the new quota year or in the form of a reduced quota as a result of the transfer.

    Once the fixed quota for individual vessels or groups has been fished in full, the fishery authorities may grant an extra quota. As a rule, this is done if the fishery authorities see that a great deal of the total quota for individual species of fish remains unfished in the quota year. When the total quota has been fished in full, fishing activities are stopped. If the assured is allocated an extra quota of this nature, it may be taken into account in the calculation of loss. However, such extra quotas may raise difficult issues in practice that must be resolved on a case-by-case basis. If the assured has not been able to fish his full ordinary quota on account of the damage, but would in any event have been allocated an extra quota, he will have suffered a loss. If the assured received the extra quota because he was unable to fish his full ordinary quota, the extra quota could be seen as compensation for the loss of all or part of his ordinary quota. Quotas which the vessel would obviously not have managed to fish are not recoverable. Situations where the vessel would obviously not have managed to fish its quota may arise as a result of poor operational decisions, the unavailability of fish or the fact that extra quotas are allocated so late that they cannot be fished in the quota year or the following quota year in cases where quotas are allowed to be transferred from one year to the next.

    Under sub-clause 2, second sentence, of the provision, the rule set out in the first sentence, to the effect that quotas fished in full in the new quota year are, in certain cases, to be regarded as having been fished in full in the original quota year, applies correspondingly to quotas transferred by the vessel to other vessels in the quota year. The rationale for this expansion of cover is that shipowners may transfer all or parts of their quota to other vessels in accordance with rules laid down by the authorities. These quotas may be used both in the event of a casualty and in connection with the vessel’s ordinary operations, and consequently will limit the shipowner’s loss.

    Due to the quota rules, sub-clause 3 contains a special rule in relation to the general rule in Cl. 5-2 regarding when the claims adjustment is to be issued. Whether or not the vessel has managed to fish its full allocated quota is not ascertained until the end of a quota year. This means that the insurer will not be able to assess whether the assured has suffered a real loss until the end of the year. The duty to issue the claims adjustment has therefore been deferred to as soon as possible after the end of the quota year. The same applies when quotas are transferred to a new quota year. In such a case, the duty to issue the claims adjustment arises as soon as possible after the end of the new quota year.

    Under Cl. 5-6, compensation thus falls due for payment six weeks thereafter. This applies even if the agreed insurance period has expired at an earlier date. This special rule will have relevance for the point in time when interest on overdue payments begins to accrue, cf. Cl. 5-4, last sub-clause. For loss of hire compensation, however, interest under Cl. 5-4 will accrue as provided in Cl. 5-4, sub-clause 1, third sentence, from one month after the end of the period for which the loss of hire insurer is liable, which will normally be one month after repairs of the vessel were completed, cf. Cl. 16-13. The expiry of the quota year will be of no relevance in this connection. If the insurer wishes to avoid paying interest under Cl. 5-4, he must make a payment on account under Cl. 5-7 in the usual manner.

  6. Clause 17-60. The daily amount for fishing vessels/applies instead of Clause 16-5

    Cl. 17-60 reads:

    The assured's loss of income per day (the daily amount) shall be calculated on the basis of the average income per day from fishing for vessels of the type and size in question and the geographical area in which it is natural for the vessel to deliver fish during the period when the vessel is deprived of income, less such expenses as the assured saves or ought to have saved due to the ship not being regularly operated.


    The assured's loss of income per day (the daily amount) shall be calculated on the basis of the average income per day from fishing for vessels of the type and size in question and the geographical area in which it is natural for the vessel to deliver fish during the period when the vessel is deprived of income, less such expenses as the assured saves or ought to have saved due to the ship not being regularly operated.

  7. Clause 17-61. Agreed daily amount for fishing vessels/applies instead of Clause 16-6

    If it is stated in the insurance contract that a certain amount per day shall be paid in compensation for loss of income, the said amount is the maximum compensation that may be paid out per day under Cl. 17-60 unless it is clearly evident from the contract that the amount is an agreed daily amount.


    As opposed to Cl. 16-6, Cl. 17-61 contains no presumption that if a daily amount is stated in the insurance contract, this shall be deemed to be an agreed daily amount. To the contrary, the presumption is the other way around, namely that the daily amount stated in the insurance contract is merely the daily sum insured or the maximum amount to be paid per day. Thus, the loss of hire insurance for fishing vessels is normally covered as so called “open insurance” and calculation of the loss shall be made in accordance with Cl. 17-60, cf. Cl. 17-59. It is in principle possible also for fishing vessels to let the daily amount stated in the insurance contract be a so called “agreed daily amount”, but this must in case be expressly written into the insurance contract in no uncertain terms. It is unlikely that the insurer will accept the daily amount to be an “agreed daily amount” for vessels subject to quota regulations. For vessels fishing worldwide, able switch between quota systems in different parts of the world, and thus able to earn income more or less all year around, an agreed daily amount may make sense.