Clause 18-54, Sub-clause 1 reads:
If repairs covered under this insurance are carried out simultaneous with work which is not covered under any loss of hire insurance, but which:
the insurer shall pay compensation for half of the time common to both categories of works in excess of the deductible period. Works under a - c, which would not have deprived the MOU from income if carried out separately and which have not delayed the casualty repairs, shall not be taken into account. If casualty damage is discovered or occurs during the period the MOU would have been deprived of income if the work under (a)–(c) had been carried out separately, time for repairs carried out simultaneously with scheduled works under a - c shall not be compensated. (Emphasis added)
- is carried out to fulfil classification requirements, or
- is necessary to enable the MOU to meet technical and operational safety requirements or perform its contractual obligations, or
- is related to the reconstruction of the MOU,
This Clause was new in the 2013 Plan and corresponds to Cl. 16-12. In addition to some editorial amendments substantive amendments were made in the 2013 Plan compared to Cl. 16-12 by adding the two new sentences to sub-clause 1 emphasised above. The Commentary to Cl. 16-12 is relevant also to Cl. 18-54 and is therefore referred to, see also 7.4.1 above.
The provision regulates the liability of the loss of hire insurer in cases where repairs that are covered by the insurance and work that is not covered by it are carried out at the same time. The latter may be relevant to a loss of hire insurance for an earlier or later year, or it may be work that is not covered by any insurance, e.g. work relating to classification or modifications.
When repairs relating to one or more casualties (under one or more loss of hire insurance contracts) are carried out at the same time as work for the assured’s account (e.g. work in connection with periodic classification surveys), the loss of time during the stay at the repair yard will in actual fact be due to several concurrent causes of damage. In the absence of other provisions, the loss in such cases must be apportioned between the assured and the various insurers in accordance with the rule of apportionment in Cl. 2-13. However, this type of solution is unsatisfactory from a technical legal standpoint because it will entail numerous decisions that are made largely on a discretionary basis. In order to avoid these problems, therefore, more clear-cut rules of apportionment have traditionally been applied in the loss-of-hire conditions. The rules of apportionment in Cl. 18-54 are based on those principles set out at Cl. 16-12, with the result that the causation rules in Cl. 2-13 are set aside in two respects:
Firstly, by applying relatively simple criteria, Cl. 18-54 (and Cl. 16-12) prescribe when simultaneous repairs are to be regarded as concurrent causes of the loss of time, and when one of the repairs is to be regarded as the only cause. In this way, difficult and, to some extent, subtle questions of causation are avoided. Secondly, Cl. 18-54 (and Cl. 16-12) fix the exact proportions to be used when apportioning the time lost among the various repairs; it is therefore unnecessary to use the discretionary rule of apportionment in Cl. 2-13.
These two departures from the main rule considerably simplify the issue. The fact that the provisions may occasionally give one of the parties an unwarranted advantage is of little significance compared to the substantial advantages achieved for the adjustment of the claim under the loss of hire insurance.
Pursuant to sub-clause 1 (a) to (c), an apportionment is to be made between the assured and the insurer when specified owner’s work is carried out at the same time as casualty work. Owner’s maintenance work which does not fall within the categories of work defined in letters (a) to (c) shall never be subject to any apportionment pursuant to Cl. 18-54.
In accordance with sub-clause 1, first sentence, the apportionment is to be made on the basis of an equal shares principle: the insurer shall pay compensation for half of the common repair time in excess of the deductible period. The said principle presupposes that the common work time is utilized equally effectively by both parties, and that it is therefore equitable to share the loss of time during this period equally; furthermore, this type of 50/50 rule is very easy to apply in practice.
This reasoning is generally relevant also to MOUs, but compared to vessels or MOUs carrying goods and/or passengers, MOUs will to a much larger extent carry out not only ordinary maintenance work, but also letters (a) to (c) work while they are offshore and still earn hire wholly or in part.
Hence, a new second sentence was added to sub-clause 1 providing that works under letters (a) to (c) which would not have deprived the MOU from income if it had been carried out separately shall not be taken into account for apportionment pursuant to the first sentence of sub-clause 1. This means that the assured may carry out e.g. classification work simultaneously with casualty work without any apportionment of the common time, if the classification work could have been carried out separately without loss of income. It will be a question of fact whether the classification work was of such nature that it could have been carried out without loss of income. If not, a 50/50 apportionment shall be applied on the common time. If the owner’s work delays the casualty work, sub-clause 4 of Cl. 18-54 applies also on how the delay shall be apportioned between the casualty- and owner’s work.
It was considered whether the principle adopted in the new second sentence of sub-clause 1 should be applied in the insurers favor in those cases where the casualty work is deferred to a period when the MOU is out of service due to owner’s work. It was, however, agreed that it is in both the insurers, as well as the assured’s, long term interests to encourage the owner to defer the casualty work to a convenient time rather than risk to impose on the insurer an unnecessary loss by repairing casualty work at once. The obligation to mitigate loss according to Cl. 3-30 cf. Cl. 3-31 would, of course, limit the owner’s possibilities to impose an unnecessary loss on the insurer. All the same, it was felt prudent to supplement the potentially contentious Cl. 3-30 with an economic incentive for the owner to defer casualty work whenever prudent to a convenient time and still be compensated for half the common time according to the first sentence of sub-clause 1.
However, the new third sentence of sub-clause 1 provides that if casualty damage is discovered or occurs during a period when the MOU would have been deprived of income if works under letters (a) to (c) had been carried out separately, time for repairs carried out simultaneously with scheduled works under letters a) to c) shall not be compensated. The third sentence of sub-clause 1 only applies if casualty work is repaired simultaneously with the same scheduled works under letter (a) to (c) during which the casualty work was discovered or occurred. If the casualty work so discovered or occurred is deferred to a subsequent period when other scheduled works under letters (a) to (c) are carried out, then what is written above on deferred casualty work shall apply, cf. also, in this regard, Cl. 3-30.