The Nordic Insurance Plan 3-15 defines three types of trading areas; ordinary, conditional and ex-cluded.
Why is it important to know about the trading areas?
Most trading waters are defined as ordinary, and in these areas your vessel is fully covered under the terms of the Plan. If you are unlucky enough to sustain damage to your ship once your vessel has sailed out of an ordi-nary trading area, the damage may not be fully covered by Underwriters. This regulation is in place because it is more risky to sail in conditional and excluded trading areas than in ordinary waters, due to tougher weather con-ditions and the risk of ice.
Grey area: Excluded Trading Area
Stripped area: Conditional Trading Area
White area: Ordinary Trading Area
The geographical areas can be found in the Appendix to the Plan.
What are the consequences if one does not notify Codan about a change of trading area?
If your vessel does not sustain any damage when sailing in conditional or excluded trading areas, there are no consequences for your insurance cover.
However, if damage occurs in conditional trading waters and you have failed to inform Underwriters about the risk alteration, the claim shall be settled with a reduction of 25% of the full amount of compensation (up to a maximum of USD 200.000), in addition to the regular eductibles.
If your vessel is to sail in an excluded trading area, you must obtain permission from Codan prior to the commencement of the journey. If you do not agree terms of sailing in the excluded trading area with Codan in advance, the vessel’s insurance coverage will cease for as long as the ship sails in the excluded trading area and will only come into effect again when your vessel enters an ordinary trading area.
The 25% reduction of compensation may not always apply if the damage occurs in conditional or excluded trading areas. If, for example;
- the vessel entered the conditional trading area by mistake, meaning the captain did not intentionally breach the contract
- the navigation was undertaken as a necessary measure to save human life
- the ship or goods had to be salvaged by, for example, sailing into a port of refuge
It should also be borne in mind that Underwriters will not be liable for any new casualties occurring as a consequence of a known damage that occurred in the excluded area. The special rules for damage resulting from unknown damage in § 2-11 of the Plan will not apply.
Fishing vessels pursuant to Chapter 17 of the Plan have their own excluded trading areas listed in Appendix III of the Plan. They are also constrained by the level of ice concentration on open waters as detailed in ice charts issued by The Norwegian Meteorological Institute. Damage occurring in any trading area with an ice concentration of 4/10-6/10 or higher is not covered by the insurance.
What does it mean practice?
To avoid any misunderstanding, we strongly recommend that you always inform Underwriters about any departure from the ordinary trading areas defined by the Plan. In practice, you may sail in any trading area; however, you may not be fully covered should damage occur.
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.