Causation

Causation is primarily a question of fact. In many instances it is easy to establish the required causation.  If the vessel collides with another vessel and is severely damaged, the vessel must be repaired at the nearest yard capable of carrying out repairs. If no other repairs are carried out at the same time, the assured is entitled to be compensated under his loss of hire insurance for the whole period, from the time of the collision until the completion of the repairs (possibly even longer, subject to Cl. 16-13), less the deductible period.

However, in real life, once the vessel has to be taken out of service, the assured will more often than not take the opportunity to carry out other repairs and maintenance work simultaneously with the average repairs in order to use the time lost as efficiently as possible.

On the other hand, the assured does not take the vessel out of service for damage repairs if such repairs can be postponed to a later planned docking period and carried out concurrently with the assured's work.

Regardless of which category of work triggered the off-hire period it is, in principle, a combination of causes that contribute wholly or in part towards the loss of income for the assured during the common repair period or other common loss of time.

It is difficult to resolve the causation problem in these cases based on generally applied principles such as the causa proxima doctrine or the apportionment rule. Therefore, the Nordic loss of hire conditions contain specific rules on how to adjust the claims in cases of simultaneous repairs, see further Cl. 16-12 dealt with under 7.4.1 below. The solutions adopted in Cl. 16-12 are premised upon the principle of equal apportionment regardless of the question of causation in each case.  This solution may not always be fair and reasonable,but it provides a clear and practical solution.

Cl. 16-10 contains another solution on how to apportion time lost during removal to the repair yard, see under 7.3 below.  This period of time lost shall be attributed to the category of repairs that necessitated the removal. The same applies to time lost after completion of repairs, if recoverable pursuant to Cl. 16-13 (see 7.4.2 below) and to time lost during surveys, while obtaining tenders, during tank cleaning, waiting to commence repairs and other similar measures necessary to carry out the repairs.  Cl. 16-10 introduces something very similar to the causa proxima doctrine. 

In other cases of combined causes, the apportionment rule set out in Cl. 2-13 applies

The 1972 Commentary illustrates the apportionment principle by the following example on page 16:  a vessel is damaged and has to seek a port of refuge and carry out temporary repairs shortly before the winter season.  Before the repairs are completed, the port is closed by ice.  The 1972 Commentary suggests that all loss of time until completion of the repairs should be attributed to the damage, while additional loss of time thereafter due solely to the ice should be excluded from the adjustment.

However, this method of apportionment is open to criticism.  The time lost during the period when the vessel was prevented from sailing due to both the repairs and the ice could have been apportioned equally between these two independent but simultaneously contributing causes.  It is conceivable that even the period after the repairs were completed (when only ice prevented the vessel from sailing) should be apportioned, since the vessel would not have found itself in an ice-bound port but for the damage causing it to become delayed into the ice season. 

As can be seen from the above, the apportionment rule gives little guidance and therefore gives a broad discretion to average adjusters, the courts and/or arbitrators. 

The Commentary to Cl. 16-1 discusses the application of the apportionment rule in Cl. 2-13 in loss of hire insurance at some length.

Firstly, the case is discussed where the hull damage is caused by an insured and an uninsured peril. The insured peril may be an error in navigation by the master leading to grounding of the vessel and the uninsured peril may be a breach of safety regulation that can be imposed against the assured such as e.g. failure to provide the vessel with an adequate and/or updated chart for the area. Another example, damage to the hull may have been caused partly by a peril of the sea (heavy weather) which is an insured peril, and partly by corrosion, which is excluded from the hull cover pursuant to Cl. 12-3.  Even if the repair period and other loss of time due to survey etc. are not increased as a result of the uninsured peril, the loss of time must be apportioned.  The Commentary points out that an apportionment made by the hull insurer according to Cl. 2-13, will normally be followed by the loss of hirer insurer unless there are special reasons to apply a different apportionment in relation to the loss of hire insurance. If the damage has been caused by a combination of marine and war perils, the rules in Cl. 2-14 to Cl. 2-16 apply.

Secondly, in cases of simultaneous repairs the Commentary emphasises that the equal apportionment rule of Cl. 16-12 applies instead of the apportionment rule in Cl. 2-13, cf. above.

Thirdly, there may be a situation where perils not covered or attributable to another insurance period may result in delays or prolongation of the loss of time or stay at a repair yard. Such perils may be external, for instance, strike at the yard, extreme weather conditions delaying the repair work or detention of the vessel due to arrest or similar measures. There may also be delays related to the vessel itself, such as discovery during repairs of damage previously unknown and not covered by the current loss of hire insurance. Cl. 16-12 on simultaneous repairs may also apply in the latter case. The Commentary to Cl. 16-1 states with regard to this third situation:

As to the third situation, we must fall back on the general rule of apportionment in Cl. 2-13. In this case, contrary to the first situation, there will be no apportionment settlement for the underlying hull damage, and Cl. 2-13 must thus be applied directly to the loss-of-hire settlement. Consequently, the loss of time shall be apportioned over the individual perils according to the influence each of them must be assumed to have had on the occurrence and extent of the loss. Guidance has to be sought in the Commentary to Cl. 2-13 where criteria for weighing the different causes in different situations are given. One of the criteria will be how foreseeable the event prolonging the loss of time is when the ship is sent to the repair yard. In relation to Loss of Hire insurance, this criterion of foreseeability must be seen in connection with the rules regarding evaluation of tenders in Cl. 16-9, the assured’s duty to reduce the loss and general preventive considerations. (Emphasis added) 

This paragraph of the Commentary was amended in 2013 in order to underscore that the apportionment principles of Cl. 2-13 should be applied unless otherwise expressly provided so that the guidelines contained in previous versions of the Commentary should no longer apply. 

The Commentary to Cl. 16-1 goes on to discuss how the apportionment rule  may be applied, if the repair period is prolonged because of a strike. In the 1996 and subsequent versions until version 2003, the Commentary to Cl. 16-1 contained the following passage:

Questions relating to causation must also be dealt with in accordance with the rules in the general part of the Plan. If time is lost partly because of damage to the ship and partly because of other circumstances not covered by the insurance, then the apportionment rule in § 2-13 will determine the extent of the insurer’s liability. In principle, such an apportionment should be made where the stay at the repair yard is prolonged because of a strike. In practice extra delay arising from a strike by workers at a repair yard has been covered. On the basis that a strike at the repair yard is not unforeseeable, it is assumed that this practice will be continued. The extent of the cover will, however, depend on what was the reason for the vessel’s stay at the repair yard, c.f. § 16-12 and below. [3]

The Commentary stated that the whole period at the yard should be covered in full, subject to Cl. 16-12, if it is the yard's own workers that go on strike and thereby prolong the loss of time. 

In 2003, Chapter 16 was reviewed and the above quoted passage was replaced as follows:

In practice, it is particularly the prolongation of stays in a repair yard due to strikes that has caused problems. The 1996 Commentary states that while, in principle, the apportionment rule in § 2-13 was to be applied, in practice a prolongation of the stay in a repair yard due to a strike among the yard workers had been covered. However, the practice referred to consisted only of accepting local strikes at the yard as “foreseeable”, and in such cases paying “full” compensation, i.e. without proportionate apportionment. In the Committee’s view, prolongation due to a strike must be considered in the customary manner on the basis of § 2-13, and not on the basis of whether or not the strike is local. [4]

Since 2003 there has been no amendment to the Commentary on this point. The effect of this amendment of the Commentary to Cl. 16-1 is that the previous alleged practice is abolished. Prolongation of the repair period due to local strike at the repair yard must be apportioned in accordance with Cl. 2-13. Such “apportionment” may still be 100-0, depending on the circumstances in each case, see further the Commentary to Cl. 2-13.

The above quoted passages from the Commentary to Cl. 16-1 put weight on whether a concurrent cause prolonging the loss of time or stay at a repair yard is foreseeable.

In cases where the insured vessel after an incident triggering the loss of hire insurance is delayed by the local authorities, the foreseeability criterion has been applied in determining whether such delays may be wholly or partly allowed under the loss of hire insurance. If the delay caused by the local authority is a foreseeable consequence of the damage to the vessel, at least a certain part of the delay has been allowed. If, on the other hand, the delay is unforeseeable, the chain of causation is broken. According to adjusting practice the delay must be a foreseeable consequence of the vessel’s own damage. If the vessel causes damage to third parties property and is delayed as a result of arrest by a third party claimant and/or the local authorities held the vessel while the incident is investigated, such delays are not covered under the loss of hire insurance at all. This point was emphasised in the 1972 Commentary in the smaller font on page 15. The current Commentary does not discuss the point, but no amendment was intended by omitting this discussion. 

In recent years local authorities have become increasingly concerned about damage to coral reefs after groundings on such reefs. In many cases not only the coral reef is damaged, but also the vessel. If the vessel is delayed solely due to the authorities concern for the environmental damage, no part of the delay will be allowed. But if the authorities are also concerned with the damage to the vessel and wishes to ensure that the vessel is capable of continue safely either by its own power or in tow, adjustment practice has allowed a few days delay caused by the local authorities’ investigation and to issue necessary towage permits etc. This practice dates back to the 1972 Conditions. But only two or three days were allowed as this was deemed what was reasonable and necessary for the authorities to complete the investigation and to issue the required permits to continue the voyage or to move to an appropriate repair port. There are examples of authorities delaying the vessel for longer periods, but such extended delay is not compensated under the loss of hire policy.

Adjustment practice may apply a relative foreseeability test depending on where the incident takes place. In countries where the bureaucracy is known to work slowly, five days delay for example may be deemed foreseeable. Any further delay is unforeseeable and is thus not allowed.

Other examples from adjustment practice:

  1. The vessel entered the repair dock for class work and other owner’s work. The vessel struck the dock gate so that the bunker tank was punctured causing bunker oil to run out into the dock. The dock gate was closed in time to avoid any oil spill outside the dock. No repairs could be commenced until the bunker oil was removed from the dock. This took 15 days. The repair of the contact damage took another 10 days. Deductible was 14 days. The 15 days it took to clean the dock was deemed a foreseeable consequence of the damage and allowed under the loss of hire insurance, even if it was not the damage to the vessel itself that caused the delay. Thus 10 plus 15 days were allowed, less the deductible of 14 days, giving 11 days compensation under the loss of hire insurance.
  2. A tanker is damaged but the class does not require immediate repair and issues a Condition of Class that the repair is carried out within a certain time or at the next docking etc. Traditionally, under the general mitigation rule in Cl. 3-30 the assured must then postpone repairs and cannot opt to repair immediately at the expense of the loss of hire insurer. This tradition is challenged if the vessel for commercial reasons cannot defer repairs. It may be that the major oil companies will not charter the vessel for trade to US ports as long as there is a Condition of Class pending. If the vessel can nonetheless be employed in other trade, such a commercial restriction is no reason for the assured to repair the vessel before required by the class. But it may be situations where such commercial restriction is inflicting upon the assured loss of income so that it must be deemed reasonable to allow the assured to carry out repairs earlier than required by class.
  3. When it comes to auxiliary engines and multiple failures the typical scenario is as follows: A vessel has one auxiliary engine out of commission due to either maintenance or damage, then there is a damage to a second auxiliary engine, with consequential off-hire for repairs. There is clear practice with regard to a combination of different perils, in accordance with the Plan section 2-13, for this type of incidents. If reasonable measures have been taken to re-commission the first auxiliary engine, then the loss of hire is allocated to the latter auxiliary engine damage only. It is considered that the latter auxiliary engine damage is the triggering cause. Of course, this is provided that the Class would not allow the vessel to sail with two auxiliary engines out of operational condition. In the Nordic marine insurance practice, insurers, and the independent and sworn average adjusters, have frequently referred to and found analogous support in the NMIP 16-10, sub-clause 1.


[3] See the 1999 Commentary page 367

[4] This amendment of the Commentary was overlooked in error in the second edition of this book.