Tue, Oct

Termination of cover - Hulls


Termination of cover - Hulls. In cargo insurance, once the insurance cover has attached, the cover cannot be withdrawn at the option of the underwriter.

The situation is different in the case of a time policy covering a ship. From the underwriter’s point of view, he wishes to see the risk remaining throughout the policy period as substantially the same risk he was contemplating when he accepted the risk. There are certain changes that could not take place which seriously affect this assessment of risk and provision is made to terminate the cover immediately upon the happening of any of these events. The following is an extract from the Institute Time Clauses (Hulls) 1983:

“Termination - This clause 4 shall prevail notwithstanding any provision whether typed or printed in this insurance inconsistent therewith.

Unless the Underwriters agree to the contrary in writing, this insurance shall terminate automatically at the time of - Change of Classification Society of the Vessel, or change suspension, discontinuance, withdrawal or expiry of her Class therein, provided that if the Vessel is at sea such automatic termination shall be deferred until arrival at her next port. However, where such change, suspension, discontinuance or withdrawal of her Class has resulted from loss or damage covered by Clause 6 of this insurance or which would be covered by an insurance of the Vessel subject to current institute War and Strikes Clauses. Hulls - Time such automatic termination shall only operate should the vessel sail form her next port without the prior approval of the Classification Society.

Any change, voluntary or otherwise, in the ownership or flag, transfer to new management or charter on a bareboat basis, or requisition for title or use of the vessel, provided that, if the vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, such automatic termination shall if required be deferred, whilst the vessel continues her planned voyage, until arrival at final port of discharge if with cargo or at port of destination if in ballast. However, in the event of requisition for title or use without the prior execution of a written agreement by the Assured, such automatic termination shall occur fifteen days after such requisition whether the vessel is at sea or in port.

A pro rata daily net return of premium shall be made.”

In the past it was seldom the case that the ship’s flag was changed during the policy period, but there is a growing practice of change to (so-called) “flags of convenience”, without a change in ownership or management. In such cases there may be several reasons for the change (which may not necessarily be to a flag that allows lower standards). Accordingly, underwriters terminate the policy automatically upon such change, thereby giving them the opportunity to decide whether or not to insure the ship under the new flag.

The common practice of having a warranty in the hull policy regarding maintenance of class should no longer be necessary now that a change of classification terminates the policy cover automatically. It should be noted that Suspension of class due to damage from an insured peril does not terminate the cover, unless the ship puts to sea without the approval of a classification society.