Clause 12: Deductible

12.1 No claim arising from a peril insured against shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence (including claims under Clauses 8, 11 and 13) exceeds {Response} in which case this sum shall be deducted. Nevertheless the expense of sighting the bottom after stranding, if reasonably incurred specially for that purpose, shall be paid even if no damage be found. This Clause 12.1 shall not apply to a claim for total or constructive total loss of the vessel or, in the event of such a claim, to any associated claim under Clause 13 arising from the same accident or occurrence.

12.2 Claims for damage by heavy weather occurring during a single sea passage between two successive ports shall be treated as being due to one accident. In the case of such heavy weather extending over a period not wholly covered by this insurance the deductible to be applied to the claim recoverable hereunder shall be the proportion of the above deductible that the number of days of such heavy weather falling within the period of this insurance bears to the number of days of heavy weather during the single sea passage. The expression "heavy weather" in this Clause 12.2 shall be deemed to include contact with floating ice.

12.3 Excluding any interest comprised therein, recoveries against any claim which is subject to the above deductible shall be credited to the Underwriters in full to the extent of the sum by which the aggregate of the claim unreduced by any recoveries exceeds the above deductible.

12.4 Interest comprised in recoveries shall be apportioned between the Assured and the Underwriters, taking into account the sums paid by the Underwriters and the dates when such payments were made, notwithstanding that by the addition of interest the Underwriters may receive a larger sum than they have paid.

Comments to ITCH Cl. 12.1

ITCH sub-clause 12.1, states that deductible applies to all claims, except claims for total loss and associated sue and labour charges. A claim must arise out of a separate accident or occurrence, which means that one deductible, is applicable only if these accidents or occurrences form a connected set of events. If one or more events from which the claim arises are the result of a new cause not connected directly with the previous events, more than one deductible is to be applied. The only claims recoverable without application of deductible are claims for total loss and sue labour charges, only if associated with total loss claims.

The Sighting Bottom Clause in the second sentence of sub-clause 12.1, pronounce that insurers cover the costs of sighting the bottom after a stranding. Insurers will cover the costs even if no damage is found and without the application of deductible. However, the expense must be reasonably incurred, which is subject to provisions of MIA Section 69.

NMIP Comparison

NMIP Cl. 12-18 incorporates the main deductible provision equivalent to the main rule expressed in ITCH sub-clause 12.1. Other deductions such as ice and machinery damage, which applies if agreed by the parties, are dealt with separately in Cl. 12-15 and Cl. 12-16. Further, Cl. 12-17 lists losses that are not subject to any deductible when applying Cl. 12-15 and Cl. 12-16. Clause 12-19 deals with how the various deductions, if agreed, should be applied if more than one deductible becomes applicable to the same loss.

NMIP calculates the deductible for each individual casualty, whereas under ITCH the deductible unit is “each separate accident or occurrence”. The commentary to Cl. 12-18 contains guidelines for determining the number of casualties. These guidelines would appear to be very similar in effect to the rules in English law for determining what amounts to “a separate accident or occurrence”.

Under ITCH only total loss claims and associated sue and labour charges are recoverable without deductible. The following claims are payable without application of deductible in NMIP:

-              Total loss, as per NMIP Cl. 4-1,

-              Particular measures to avert and minimise the loss (Sue and Labour  charges under ITCH) even if not associated with total loss claims, as per  NMIP Cl. 12-18 cf. Cl. 4-12,

-              Measures to avert and minimise the loss including General Average and  Assumed General Average claims, as per NMIP Cl. 12-18 cf. clauses 4-7 – 4-11,

-              Costs in connection with claims settlement including costs of  superintendent, as per NMIP Cl. 12-18 cf. Cl. 4-5.

NMIP does not have an equivalent provision to the Sighting Bottom clause. The commentary states that if the classification society demands docking after grounding, the costs of such survey is recoverable without deductible even if no damage is found. 

Comments to ITCH Cl. 12.2

According to ITCH sub-clause 12.2, all heavy weather (or ice) occurring during the single passage between two successive ports, shall be treated as due to one accident. A call at any port, even port of refuge, terminates such a passage within the meaning of this clause. If the period of heavy weather extends over more than one policy, the deductible shall be apportioned.

NMIP Comparison

Clause 12-18 sub-clause 2, stipulates that damage caused by heavy weather or navigating in ice which has occurred during the single passage, shall be regarded as a single casualty. Same as under ITCH, a call at any port terminates such a passage within the meaning of the clause. The NMIP differs however from ITCH, as deductible is not apportioned if period of heavy weather extends over more than one policy. NMIP will allocate the deductible to the policy when the peril struck, as per Cl. 2-11.

Comments to ITCH Cl. 12.3

Sub-clause 12.3 supersedes MIA Section 79 (2).

Sub-clause 12.3 stipulates that recovery will be credited to insurers in full until the sum they have paid is fully reimbursed. Only after this point, the assured may participate in recovery. As an example, if the insurers pay claim of USD 300,000, net of USD 150,000 deductible and the recovery amount equals USD 320,000, insurers recover USD 300,000 and the assured USD 20,000. Under NMIP, the recovery is apportioned pro-rata and in the given example, the assured would recover USD 106,666. Apportionment of recoveries stipulated in ITCH Cl. 12.3 is not applicable to recoveries in cross liabilities.

As per sub-clause 12.4, interest comprised in recoveries under ITCH shall be apportioned pro-rata between assured and insurers.

NMIP Comparison

Under ITCH the assured can participate in the recovery only when the insurers are fully reimbursed. In NMIP, the assured can participates in recovery in proportion to the amount of loss he/she has carried. The same rule is applicable to interest comprised in recoveries. A practical example can be found under this Comparison, in commentary to ITCH sub-clause 12.3 above.