Special loss payable clauses, similar or identical to those used in relation to an assignment of insurances, will be used when the mortgagee is co-insured under the owner's insurances. Such clauses are not necessary if the vessel is insured based on the Plan because Cl. 7-4 contains the provisions necessary both to protect third party interests and to enable the owner and insurer to deal smoothly with minor repairs up to 5% of the sum insured.
Cl.7-4, sub-clause 4, provides that compensation for loss of time may not be paid out without the consent of the mortgagee "who has a mortgage on the ship's freight income". This is consistent with Cl. 7-1, which provides that the mortgagee will not be automatically co-insured under the loss of hire insurance if he does not have a pledge in the income of the vessel. The reason for this limitation is that the loss of hire insurance is irrelevant for a mortgagee who has no interest in the earnings of the vessel. However, the parties may agree to give the mortgagee the same benefits also in cases where he has not obtained a pledge on the income of the vessel, in which case the mortgagee must either have the loss of hire insurance assigned to him or be expressly included as a co-assured under the loss of hire insurance.