Marine perils

Loss of hire insurance for marine perils will cover loss of income resulting from damage to the vessel caused by a marine peril. Cl. 2-10 of the Plan provides that unless otherwise agreed, the insurance covers only marine perils. This means that it must be expressly agreed if the loss of hire insurance is also to cover war perils.  Without such express agreement, the loss of hire insurance will be deemed to be a marine peril insurance.

Cl. 2-8 of the Plan defines marine perils insurance as an "all perils insurance" with four exceptions:

  1. war perils pursuant to Cl. 2-9
  2. intervention by a state power
  3. insolvency
  4. release of nuclear energy and other perils excluded by the English Institute Extended Radioactive Contamination Exclusion Clause (known as the RACE II clause).

The all-risk principle means that it is not necessary to look for which perils are positively covered, since there is no such listing. Every risk is covered unless it is expressly excepted by one of the four heads listed above. This means that damage to the vessel and any loss of income caused by grounding, fire, explosion, collision or perils of the sea such as heavy weather etc. is covered under a marine loss of hire insurance.

Since Cl. 2-8 (a) expressly refers to war risk cover as defined in Cl. 2-9, there will be no overlap or gap in the cover between marine and war risk insurance under the Plan. Thus, if a peril is not a war peril pursuant to Cl. 2-9, it is by definition a marine peril under Cl. 2‑8, unless excepted pursuant to letters (b) to (d).

This is different from the English and American conditions (both for hull and loss of hire insurance) which are based on the "named peril" principle. The named peril principle has exactly the opposite effect of the all risk principle. Only those perils expressly listed or named in the policy or the insurance conditions will be covered. Owners which are familiar with the English conditions, but not with the Plan all risk principle may be confused and feel uncomfortable at not seeing a list of the perils covered in the policy or conditions.  Under the Plan conditions it is important to look for the exceptions rather than the perils covered.

The real difference between the perils covered under the various systems is not great and may be unimportant to the assured if no dispute arises.  However, the Plan all risk principle is more beneficial to the assured than the English named peril principle in the event of any dispute or uncertainty.  According to the Plan Cl. 2-12, sub-clause 2, it is the insurer who bears the burden of proving that the loss has been caused by an excepted peril, while under the English conditions, the burden is on the assured to prove that the loss was caused by a named peril. This means that English insurers, once they decide to dispute a claim, simply inform the assured that the claim is rejected because the loss was not caused by an insured peril.