Claims Guidelines no. 3

Adjusting Practice

 

You will often find references to items being covered or not “as per adjusting practice” in adjustments under your Hull & Machinery policies, and it may not be immediately clear what the adjuster is actually referring to. These guidelines are an attempt to shed some light on the issue, and to help you better understand the final adjustment.

 

Over the course of many decades, certain adjusting principles have developed in the Norwegian market, princi-ples that in general are followed by all insurers (so called “market practice”). These primarily concern expenses incurred during the repair process that are common to both the damage and to owner’s work, but also other matters. Further, these adjusting principles are not explicitly mentioned in the Nordic Plan, but are instead re-ferred to extensively in the commentary.

Below is a list of Codan’s most frequently utilized principles of adjusting:

  1. Electricity generation during repairs. Provided the generation of electricity onboard is necessary in order to carry out the repairs, practice is to apportion these costs 50/50 between owners and under-writers, with a further apportionment of underwriter’s share based on the relative cost of owners work and damage work carried out. This includes both shore supplied electricity and the vessel’s own bun-ker consumption where generators are used onboard.
  2.  

  3. Garbage disposal. Not covered by insurers, being an ordinary running cost. Disposal of special waste arising directly from the repairs is nevertheless covered.
  4.  

  5. Fresh water and cooling water. Not covered by insurers as being ordinary running expenses.
  6.  

  7. Removal of ropes/wires/nets from the propeller. Removal at anchor or other places of safety con-stitutes a repair, and is covered with application of the deductible. Removal at sea constitutes a meas-ure to avert or minimize loss, and is covered without application of the deductible.
  8.  

  9. Lube oil. If lube oil is “damaged” in connection with engine damage, the cost of replacing this amount is recoverable. There is no cover for lube oil refills in other cases.
  10.  

  11. Cylinder liners and piston rings. These are parts that are replaced on a regular basis irrespective of damage, and if they are at, or almost at the limit of operation, the replacement costs will not be cov-ered, even if they are damaged. If they are not damaged, but it is simply reasonable to make replace-ments in connection with major engine repairs, there will usually be no coverage.
  12.  

  13. Special tools. Where special tools are purchased in connection with damage repairs, and then kept onboard for future use, 50% of the costs of such tools are covered.
  14.  

  15. Overtime and other measures used to expedite repairs. There is general cover for these expenses under the provisions of the Plan, § 12-18. However, it is standard practice that if a vessel is in dock or at quayside, overtime costs or other costs incurred in order to speed up the repairs are covered up to the amount of dock or quay rental saved.
  16.  

  17. Propeller polishing and hull cleaning. These costs are generally not covered, being ordinary running costs. However, certain special circumstances may nevertheless allow for coverage, for example where a newly delivered vessel suffers extensive damage more or less as soon as she is delivered and lies idle for extended period while she undergoes repairs.

 

A final note

These key adjusting principles are applied in the vast majority of claims, but special circumstances may arise in connection with new or special types of damage, or perhaps innovative repair options, which make the application of the current market practice seem unreasonable. These issues will be treated on a case-by-case basis as and when they arise.

For further information, please contact your local claims office.

 

Sources: NMIP of 2013 and its Commentary

Disclaimer: These guidelines cannot be construed as a complete and binding answer to all of the possible problems and questions that can arise in connection with the topic addressed.