Claims Guidelines no. 8

Deductibles

Main rule: NMIP § 12-18, for each casualty the amount stated in the policy shall be deducted. Damage caused by heavy weather or navigation in ice, which has occurred during the period between depar-ture from one port and arrival at the next one, shall be regarded as a single casualty.

 

The purpose of the deductible is to achieve a clear-cut limit for the size of the recoverable damage. The size of the deductible affects you insurance premium, and it eliminates claims for minor casualties that entail dispropor-tionate quantities of paper work. The Underwriters may require the inclusion of deductions for ice damage, ma-chinery damage and liability due to collision or strike.

 

Ice damage deduction

If your vessels are insured under § 12-15 of the Plan, damage due to striking against or contact with ice is re-coverable subject to a deduction stated in the policy. In general, an ice damage deduction is not required, but recommended in areas with high frequency of ice. Unless otherwise agreed, the ice damage deduction shall be applied in cases where you have paid additional premium in order to enter conditional and/or excluded trading areas.

 

Machinery damage deduction

If your insurance cover includes a machinery damage deduction (AMD), any damage to the machinery and ac-cessories, and to pipelines and electrical cables outside the machinery, is liable for an AMD. The AMD applies exclusively to defects of machinery; therefore, no AMD is applied to your claim if the machine damage is caused by external causes such as grounding, collision, striking, flooded engine room, or fire and explosion that origi-nates from outside the engine room. A list of machine parts that are subject to an AMD can be found in the Commentary of the NMIP.

 

Third party liability deductible

Codan’s hull insurance is primarily an insurance of property, however you may choose to add third party liability (TPL) cover to your hull insurance, rather than arranging this separately through your P&I club. TPL covers loss incurred as a result of liability arising from collision or striking by your vessel, its accessories, equipment or cargo, or by a tug used by your ship. A collision casualty often results in both hull and liability claims, and by placing the collision liability with Codan, it may be easier to keep an overview of the situation. In a third party claim, Codan is liable up to an amount equal to the sum insured under the hull insurance.

 

Costs without deductible

There are some costs in connection with claims settlement that are recoverable without any deductible:

  1. Damage surveys
  2.  

  3. Litigation costs or expert assistance in a liability claim
  4.  

  5. Loss arising from measures to avert or minimize loss
  6.  

  7. General average

 

Costs without ice and AMD deduction

Below is a list of necessary costs without ice or AMD deduction in a claims settlement:

  1. Loss of time due to delay in obtaining yard tenders as per clause 12-11, sub-clause 2
  2.  

  3. Removal of your ship to a ship yard
  4.  

  5. Unused spare parts that are damaged or lost
  6.  

  7. Temporary repairs
  8.  

  9. Depreciation in value of your vessel while less extensive repairs are made when complete repair of the damage is impossible

 

More than one casualty: how many deductibles shall be applied?

The number of casualties decides the number of deductibles that Codan will apply to your claim. Normally it is easy to distinguish individual casualties that occur in close proximity in time and place; however this might not always be the case:

  1. It may be difficult to establish the number of deductibles when there is an error in design that causes cracks in your vessel over time. In such cases, the cracks must be traced back to the original cause and the number of deductibles is determined by the number of causes that can be tracked.
  2.  

  3. The number of deductibles is irrelevant if the classification society has approved a postponement of damage repair for the initial damage, unless there is a question over the safety of your ship. This may especially apply in cases involving engine damage.
  4.  

  5. If new damage arises as a result of errors by a repair yard, it may be difficult to prove that the yard was responsible if the consequential damage occurs long after the initial repair. In such cases, incontroverti-ble evidence is needed to determine the number of deductibles.
  6.  

  7. If there is further development of damage which you as the assured could have averted, a new deducti-ble shall be applied, even though there has only been one casualty.

 

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.