Clause 10: Notice of Claim and Tenders
10.1 In the event of accident whereby loss or damage may result in a claim under this insurance, notice shall be given to the Underwriters prior to survey and also, if the vessel is abroad, to the nearest Lloyd's Agent so that a surveyor may be appointed to represent the Underwriters should they so desire.
10.2 The Underwriters shall be entitled to decide the port to which the vessel shall proceed for docking or repair (the actual additional expense of the voyage arising from compliance with the Underwriters' requirements being refunded to the Assured) and shall have a right of veto concerning a place of repair or a repairing firm.
10.3 The Underwriters may also take tenders or may require further tenders to be taken for the repair of the vessel. Where such a tender has been taken and a tender is accepted with the approval of the Underwriters, an allowance shall be made at the rate of 30% per annum on the insured value for time lost between the despatch of the invitations to tender required by Underwriters and the acceptance of a tender to the extent that such time is lost solely as the result of tenders having been taken and provided that the tender is accepted without delay after receipt of the Underwriters' approval.
Due credit shall be given against the allowance as above for any amounts recovered in respect of fuel and stores and wages and maintenance of the Master Officers and Crew or any member thereof, including amounts allowed in general average, and for any amounts recovered from third parties in respect of damages for detention and/or loss of profit and/or running expenses, for the period covered by the tender allowance or any part thereof.
Where a part of the cost of the repair of damage other than a fixed deductible is not recoverable from the Underwriters the allowance shall be reduced by a similar proportion.
10.4 In the event of failure to comply with the conditions of this Clause 10 a deduction of 15% shall be made from the amount of the ascertained claim.Compare
Comments to ITCH Cl. 10.1
Sub-clause 10.1 appears at first sight to deal with the important issue of the time limit for giving notice of a claim. However, the clause is concerned with ensuring that notice of a claim is given prior to any survey and not with a time limit for notification itself. For this reason a notice shall be given to the insurer and if the vessel is abroad, to the nearest Lloyds Agent so that a surveyor may be appointed to represent the insurer. This means that the assured’s obligation is not so much to give notice within a specific time limit but to make sure the notice is given prior to conducting any survey of a damage that is relevant to any claim. Non-compliance with the latter would presumably be considered as a failure to comply with the conditions of Cl. 10 and further the penalty in sub-clause 10.4, a 15% deduction from the ascertained claim, would apply.
Since neither ITCH nor MIA contain rules dealing directly with the time bar in respect of making claims, this will be decided under the ordinary rules of the law of the jurisdiction that applies to the contract. In respect of English law, the time bar for claims under an insurance contract is six years.
NMIP does not contain an exact equivalent to ITCH sub-clause 10.1, addressing the question of notice to insurers in order to enable a survey to be carried out. However, NMIP contains rules addressing the duty to give notice of a casualty generally. Clause 3-29 requires the assured to give notice, not only when a casualty occurs, but also if a casualty threatens to occur. The only sanction to not comply with Cl. 3-29 is stated in Cl. 3-31; if the assured has deliberately or through gross negligence failed to give notice, then the insurer is not liable for a greater loss than he would have been liable for if notice had been given.
The more detailed rules are Cl. 5-23 Time-limit for notification of a casualty and Cl. 5-24 Limitation. Under Cl. 5-23 notification of a casualty or claim shall be given to the insurers without undue delay:
- within six months from the date when the assured become aware of it and
- within 24 months from the hull damage below the waterline occurred.
Claims become time-barred within three years from the end of the calendar year during which the assured becomes aware of a damage caused by an insured peril, or, in any event, after ten years, as per NMIP Cl. 5-24.
Comments to ITCH Cl. 10.2 and 10.3
Sub-clause 10.2 says that insurers have right to decide to which port the vessel shall proceed to for dry-docking or repair and have veto regarding place of repair or repairing team. If insurers use the said rights, they will compensate the assured for the additional expense of the voyage arising from compliance with their instructions.
Insurers also have the right to take tenders or require further tenders to be taken, as per sub-clause 10.3. In the given case, they will pay an allowance of 30% per annum on the insured value for the time lost. The latter is calculated from the dispatch of the invitation to tender required by insurer until acceptance of a tender. The compensation shall be reduced further for amounts covered in respect of wages and maintenance, fuel and stores, etc.
Contrary to ITCH, NMIP Cl. 12-12 gives the assured the right to choose the repair yard. If the assured does not choose the lowest tender, the insurer’s liability will be limited to the lowest tender with an addition of 20 % per annum of the insured value for the time saved by the assured. Further, if the assured has justifiable reason to object to the repairs being carried out at one of the yards that have submitted tenders, he may demand the quote from that yard to be disregarded.
Clause 12-11 covers time lost whilst waiting for tenders. ITCH only covers the time lost if the insurer requires a tender. NMIP, on the other hand, covers time lost irrespective of whether the tender has been requested by the assured or the insurer. Allowance is payable in excess of 10 days at 20 % per annum of the agreed hull value.
Comments to ITCH Cl. 10.4
A fixed penalty for non-compliance with provisions of Cl. 10 amounts to 15 % deduction from the net claim, whether the assured was negligent or not.
Under ITCH the assured might pay the fixed penalty even if there was no negligence from his side. Under NMIP, if the assured intentionally or through gross negligence fails to notify the insurer of a casualty, he will not recover any additional costs that arose due to this failure (greater loss), as per Cl. 3-31.