Clause 21: Disbursement Warranty

21.1       Additional insurances as follows are permitted:

21.1.1 Disbursements, Managers' Commissions, Profits or Excess or Increased Value of Hull and Machinery. A sum not exceeding 25% of the value stated herein.

21.1.2 Freight, Chartered Freight or Anticipated Freight, insured for              time. Asum not exceeding 25% of the value as stated herein less any sum insured, however described, under 21.1.1

21.1.3 Freight or Hire, under contracts for voyage. A sum not exceeding the gross freight or hire for the current cargo passage and next succeeding cargo passage (such insurance to include, if required, a preliminary and an intermediate ballast passage) plus the charges of insurance. In the case of a voyage charter where payment is made on a time basis, the sum permitted for insurance shall be calculated on the estimated duration of the voyage, subject to the limitation of two cargo passages as laid down herein. Any sum insured under 21.1.2 to be taken into account and only the excess thereof may be insured, which excess shall be reduced as the freight or hire is advanced or earned by the gross amount so advanced or earned.

21.1.4 Anticipated Freight if the vessel sails in ballast and not under Charter. A sum not exceeding the anticipated gross freight on next cargo passage, such sum to be reasonably estimated on the basis of the current rate of freight at time of insurance plus the charges of insurance. Any sum insured under 21.1.2 to be taken into account and only the excess thereof may be insured. 

21.1.5 Time Charter Hire or Charter Hire for Series of Voyages. A sum not exceeding 50% of the gross hire which is to be earned under the charter in a period not exceeding 18 months. Any sum insured under 21.1.2 to be taken into account and only the excess thereof may be insured, which excess shall be reduced as the hire is advanced or earned under the charter by 50% of the gross amount so advanced or earned but the sum insured need not be reduced while the total of the sums insured under 21.1.2 and 21.1.5 does not exceed 50% of the gross hire still to be earned under the charter. An insurance under this Section may begin on the signing of the charter.

21.1.6 Premiums. A sum not exceeding the actual premiums of all interests insured for a period not exceeding 12 months (excluding premiums insured under the foregoing sections but including, if required, the premium or estimated calls on any Club or War etc. Risk insurance) reducing pro rata monthly. 

21.1.7 Returns of Premium. A sum not exceeding the actual returns which are allowable under any insurance but which would not be recoverable thereunder in the event of a total loss of the vessel whether by insured perils or otherwise.

21.1.8 Insurance irrespective of amount against: Any risks excluded by Clauses 23, 24, 25 and 26 below.

21.2       Warranted that no insurance on any interests enumerated in the foregoing 21.1.1 to 21.1.7 in excess of the amounts permitted therein and no other insurance which includes total loss of the vessel P.P.I., F.I.A., or subject to any other like term, is or shall be effected to operate during the currency of this insurance by or for account of the Assured, Owners, Managers or Mortgagees. Provided always that a breach of this warranty shall not afford the Underwriters any defence to a claim by a Mortgagee who has accepted 

Comments to ITCH

Clause 21.1 -  Sub-clauses 21.1.1 – 21.1. 7

These sub-clauses impose limits on the amount of additional insurance that the assured may take out. On the one hand it is recognized that the insurable value under a H&M policy which is broadly based on the vessel’s market value will not cover all the losses suffered by a ship owner after a total loss, on the other it is important that the total amount payable in the event of a total loss should not be so high that the assureds stands to make a substantial profit.

Sub-clause 21.1.1 deals with additional insurance to cover disbursements, that is already incurred operational costs, expected profit and any capital value that the vessel might have at the time of the casualty over and above the insured value under the H&M insurance. The limit for such additional insurance which is written on a total loss only basis is 25% of the insured value stated in the H&M policy.

Sub-clauses 21.1.2 -21.1.7 deal with insurance that cover specific types of freight or premiums. These rules are now of limited practical relevance since current market practice to take out total loss only(TLO) insurance for a fixed and agreed amount. 


Comments to NMIP 

NMIP Ch. 14: Separate insurances against total loss

The NMIP takes a more modern approach and contains rules for two types of TLO insurance referred to as Hull Interest and Freight Interest insurance, each limited to an additional 25% of the insured value under the H&M insurance. There are differences between the two types of Interest insurance which relate to the historical background. Hull interest insurance covers not only the value of the vessel up to an additional 25% as agreed in the policy but separately also collision liability in accordance with Cls.13-1 to 13-3 that exceeds the amount recoverable under the H&M policy. Theoretically it is possible for a collision to result in a total loss of the vessel at the same time as the vessel is ultimately held liable for damage to another vessel or a fixed installation for an amount that exceeds the H&M insured value. Potentially therefore the insurer could be liable for the sum insured under a Hull Interest Insurance twice.

Freight Insurance only covers the agreed insured amount once.   

Comments to ITCH

Clause 21.1

Sub-clause 21.1.8

This clause states the obvious: the assured is free to take out insurance against war and similar risks without restriction.

This is also obviously the position under the Plan.

Clause 21.2

This clause is also something of an anachronism in that there is no longer any practical or commercial reason to take out insurance on P.P.I. (Policy Proof of Interest) or F.I.A. (Full Interest Admitted) or similar expression which according to MIA Section 4 renders the insurance void and unenforceable. The origins of the use of unenforceable contracts in marine insurance is discussed in Arnould[1] in Chapter 11. Clause 21.2 simply reinforces the point that it is a condition of the contract that the assured will keep the use of TLO insurances in any form within the limits set out in Cl. 21.1 

Comments to NMIP

There is no equivalent provision in NMIP as P.P.I. policies are unknown in the Nordic countries. 

[1] Arnould’s Law of Marine Insurance and Average, 16th ed., Sweet & Maxwell Ltd. 2008.