1. 7. Measures to avert or minimize loss
Overview
Insurance coverage of general average
Particular average/salvage charges
The main distinction in all marine insurance concerning
Primary damage
Costs of measures to avert or minimize losses
The distinction:
Primary damage = scope of cover
Costs of measure = reimbursement based on tort principles
Spring 2007
Marine insurance

2. 7.1. Overview Duty to notify/avert or minimize loss cf.
NMIP § 3-31/CICG § 25.1
Gard rule 82.1 (b)
and 6.7 above.
= connected to right to be reimbursed
NMIP § 4-7 ff./CICG § 39-§ 40
Gard rule 46
The regulation consists of two components:
Duty to notify/avert or minimize loss, and
Right to be reimbursed for costs
The first component belongs systematically to the regulation in NMIP ch 3: duty of due care.
The second component will be presented here.
Two set of rules: the York Antwerpen rules on general average
and provisions for particular average.
Makes the regulation more complicated than in other insurance branches
Spring 2007
Marine insurance

3. 7.1. Overview Rests on fundamental insurance principles:
Fairness
Motivation to salvage
Economic effeciency
The rules more complicated in NMIP/CICG
Here: Only NMIP and CICG
The reasoning:
Fairness: The assured incurred losses with the intention of preserving the subject matter insured and thereby avoiding liablility for the insurer. Seems fair that the insurer having saved money should indemnify the assured
Motivation: If the assured should have to pay the measures himself, he might be more careful about taking them
This would be contrary to Economic effeciency: The society in general is better off when values are salvaged than if the assured does not prevent damage because
Spring 2007
Marine insurance

4. 7.2 Insurance coverage of general average
The YAR and the insurance
Some common rules
Special rules in NMIP
Spring 2007
Marine insurance

5. 7.2.1 The YAR and the insurance
The main principles of the York Antwerpen rules:
Common safety
Common benefit
Insurance coverage provided in NMIP § 4-8/CICG § 40
The starting point of the rules the principle of common safety: Where a sacrifice is made or an expense incurred in order to save the common venture – ship and cargo , sometimes also freight – from a common peril, the loss caused by these measures shall be divided between the parties according to the value each of them represent.
EKS: Callin in a professional salvor where the ship has a list and appears likely to sink, or
Cargo jettisoned to lighten the ship after it has run aground,
The rules have later developed to include common benefit, which is a rule more than a principle:
The rule concerns expences incurred in a port of refugee, where the vessel and cargo is safe. If such expences are incurred in the common interest of the vessel and cargo, in order to enable the common venture to proceed on the contemplated voyage, the expences should be divided according to the interests involved.
EKS discharging, storing or reloading of cargo in order to get access to the ship in order to effect repairs
Traditionally, the losses included in a GA settlement were covered by the involved parties themselves. Today, the insurance cover these expences, see NMIP § 4-8 for hull insurance and CICG § 40.
Spring 2007
Marine insurance

6. 7.2.2 Some common rules Must be a peril insured against
But: Cargo insurance on B and C clauses
Coverage of common benefit expences
The situation where the ship or goods is damaged
NMIP § 4-10
CICG Commentary 369
Peril insured against:
Common with the regulation for particular charges § 4-7
GA to prevent war perils example: Detouring to prevent mines or going back to harbour to prevent a bomb placed onboard
GA to prevent marine perils – grounding the ship to avoid collision
GA to prevent nuclear peril?
The insurer will also pay the common benefit exp; even if these exp outside the hull cover because there is no danger to the ship, cf § 4-8 ”any general average contribution”, CICG § 40 ”general average contribution” and 2 subp
GA cover also if the assured may not claim ga contribution from the other participants to the ga due to breach of the contract of affreightment NMIP § subp., CICG Commentary p. 370.
But not the loss because of inability to claim – this is under P& I
§ 4-10 – overlaps the other way.
Spring 2007
Marine insurance

7. Special rules in NMIP
NMIP § i.f: Valuation according to YAR
NMIP § 4-8 3: GA absorption clause
Extension of general average principles
NMIP § 4-9
NMIP § 4-11
Valuation according to GA even if the value of the ship higher than the assessed value subp last sentence
# CICG Commentary p 369: Previously similar rule – now deleted. Underinsurance/deductible the risk of the assured
Some rules creates an overlap between the GA system and the PC system:
4-9: When ship and cargo is owned by the same interest, the rules on GA does not apply. In marine insurance one pretends that the GA rules apply , i.e one makes a proforma GA settlement
4-11 – to prevent differences when the ship sails with cargo and in ballast
Spring 2007
Marine insurance

8. 7.3. Salvage measures Introduction The situation The measures
Subjective requirements
The settlement
Spring 2007
Marine insurance

9. 7.3.1 Introduction The regulation The main difference: Extent of cover
NMIP § 4-7 cf. § 4-12.
CICG § 39 and ICA § 6-4.
The main difference: Extent of cover
NMIA § 4-18: separate sum
CICG § 39 cf. ICA § 6-4: unlimited
Spring 2007
Marine insurance

10. 7.3.1 Introduction
Limited practical importance in hull insurance: Measures to salvage ships will normally be GA
Conditions for liability concerns
The situation
The measures
Subjective requirement
The settlement: Not insurance but tort
Spring 2007
Marine insurance

11. The situation
A casualty must have occurred or threatened to occur
The problem: ”threatened to occur”
Not purely preventive measures
Imminent and great probability
ND Porsanger – treshold too low?
The situation: A casualty must have occurred or threatened to occur.
The main problem is what degree of danger is required for the assured to incur costs on behalf of the insurer.
Must be a substantial degree of danger.
Normal measures to prevent loss are not salvage measures.
The danger must have materialized so that the probability of a casualty is high.
The time element: Not immidiate danger, but not to far into the future.
Ex: a ship carrying perishable goods is held back in port due to blockade, the cargo is transferred and shipped onward by other means of transport.
Spring 2007
Marine insurance

12. 7.3.3 The measures taken Must be of extraordinary character
Not foreseeable losses/expenses
Must be reasonable
But need not succeed
However: limited coverage according to § 4-18
The measures must be of extraordinary character
This is a difficult condition and closely connected to the requirement concerning the situation: the higher risk of a casualty or more damage, the less extraordinary the measures may be. If a casualty has already occurred, the measures will normally be extraordinary.
Any person: assured, crew, third party
Intent: measures taken deliberately with intent to avoid losses. But does not have to realise that there will be a loss
The regulation of deliberate damage if outside the scope of these rules?
The measures must be reasonable –
1. How shall the situation leading up to the measures be considered: subjectively according to the assureds assessment or objectively?
If the measures justifyable: 1. costs of the measures and 2. probability of success wieghed against 3. costs of the potential casualty and the probability of this. Also relevant: How much time and which other alternatives to act existed.
The measures need not succed – see § Both measures and casualties recovered. One sum insured pluss any leftover from hull ins.
Spring 2007
Marine insurance

13. 7.3.4 Subjective requirements
Any person may take the measures
The purpose must be to avert or minimize loss
No purpose/knowledge required as to incurring expenses.
Spring 2007
Marine insurance

14. 7.3.5 Settlement Any loss may be covered
No exclusions in NMIP or ICA for national cargo transports
But: CICG § 39 2 sentence: No coverage for third party liability in international transits
Any loss - not only hull damage or damage to cargo, but also
Expences –loading, discharging and storing of cargoes, towage and refloating costs
Third party liability
Exclusion: CICG § 39 2 – risk for extensive liability claims
Pure economical loss? See CICG § 6 3 nr 1.
Spring 2007
Marine insurance

15. 7.3.5 Settlement Amount: No deductibles Several interests:
CICG § 39/ICA § 6-4: Unlimited
NMIP § 4-18
No deductibles
Several interests:
Starting point: Apportionment of costs, NMIP § 4-12, CICG § 44
Not practiced strictly
Apportionment
Not if
Spring 2007
Marine insurance