Frequently Asked Questions in relation to policy and cover issues arising in the aftermath of the Japan incident on the 11th March 2011.

 

Following an increased number of inquiries from our members and business partners regarding what consequences the Japan incident, in March this year, has had on our members’ various insurance policies, we would hereby like to take the opportunity to give some general guidelines in an attempt to answer the most frequently asked questions.

Notwithstanding the above, our members and business partners are strongly advised to seek the Club’s advice in relation to any specific question, as every situation will be based on its own facts and merits.

 

1) Insurance cover for liabilities, losses, costs and expenses caused by either the earthquake and/or the tsunami.

Question 1:1 – Does the Club’s Protection and Indemnity (P&I) insurance extend to cover liabilities, losses, costs and expenses caused by either the earthquake and/or the tsunami?

Answer: Yes, subject to the Club’s rules and our members’ terms of entry, our members’ P&I insurance will cover liabilities, losses, costs and expenses caused by either the earthquake and/or the tsunami.

Question 1:2 – Does the Club’s Hull and Machinery (H&M) insurances extend to cover loss of or damage to a ship caused by either the earthquake and/or the tsunami?

Answer: Yes, subject to the terms of members’ H&M insurance, our members’ H&M insurance will cover loss of or damage to a ship caused by either the earthquake and/or the tsunami.

Question 1:3 – Does the Club’s Loss of Hire (LoH) insurance extend to cover loss of income as a result of a vessel being damaged by either the earthquake and/or the tsunami?

Answer: Yes, subject to the terms of members’ LoH insurance, our members’ LoH insurance will cover loss of income as a result of a vessel being damaged by either the earthquake and/or the tsunami. However, there shall be no cover for loss of income for delays resulting from other causes than those amounting to a recoverable H&M claim.

Question 1:4 – Does the Club’s Freight Demurrage and Defence (FD&D) insurance extend to cover costs and expenses incurred in connection with any claims, disputes or proceedings arising as a consequence of either the earthquake and/or the tsunami?

Answer: Yes, subject to the Club’s rules and our members’ terms of entry, our members’ FD&D insurance will cover costs and expenses incurred in connection with any claims, disputes or proceedings arising as a consequence of either the earthquake and/or the tsunami.

 2) Insurance cover for liabilities, losses, costs and expenses caused by atomic radiation.

Question 2:1 – Does the Club’s Protection and Indemnity (P&I) insurance extend to cover liabilities, losses, costs and expenses caused by atomic radiation?

Answer: No, with reference to Rule 11:7 (Rules for P&I Insurance) our members’ P&I insurance will not cover liabilities, losses, costs and expenses caused by atomic radiation. The latter exclusion concerns all aspects of our members’ P&I cover, i.e. liabilities in respect of persons and cargo etc. The reason for the latter exclusion is that the Club, similar to all other Clubs of the International Group, is prevented from reinsuring such liabilities according to the International Group’s Pooling Agreement. 

We hereby quote the wording of Rule 11:7 for our members’ and business partners’ easy reference:

Rule 11:7 – Nuclear risks 

The cover afforded by the Association shall exclude liabilities, costs or expenses directly or indirectly caused by or contributed to by or arising from 

(a) ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel, 

(b) the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof,

(c) any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

(d) the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter.

However, the Association may cover liabilities, costs or expenses arising out of the carriage of “excepted matter” as defined in Section 26 (1) of the Nuclear Installations Act 1965 of the United Kingdom, provided that it is carried as cargo and that the carriage has been approved by the Association. “Excepted matter” consists of radioisotopes which are used or intended to be used for industrial, commercial, agricultural, medical or scientific purpose, natural uranium and depleted uranium. This clause shall override anything contained in these Rules inconsistent therewith.

Question 2:2 – Does the Club’s Hull and Machinery (H&M) insurances extend to cover loss of, or damage to, a ship caused by atomic radiation?

Answer: No, subject to the terms of members’ H&M insurance, our members’ H&M insurance will not cover loss of or damage to the ship caused by atomic radiation. Our members’ H&M policies incorporate the RACE II clause “Radioactive Contamination, Chemical, Biological, Bio-Chemical and Electromagnetic Exclusion Clause 2003.11.10” (C.1.3.), which expressly exclude cover for liabilities in connection atomic radiation. We hereby quote the wording of the RACE II clause for our members’ and business partners’ easy reference:

 INSTITUTE RADIOACTIVE CONTAMINATION, CHEMICAL, BIOLOGICAL, BIO-CHEMICAL AND ELECTROMAGNETIC WEAPONS EXCLUSION CLAUSE

 This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith 

1. In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from

1.1 ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel

1.2 the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof

1.3 any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter

1.4 the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter.

The exclusion in this sub-clause does not extend to radioactive isotopes, other than nuclear fuel, when such isotopes are being prepared, carried, stored, or used for commercial, agricultural, medical, scientific or other similar peaceful purposes

1.5 any chemical, biological, bio-chemical, or electromagnetic weapon

Apart from the exclusion in the above mentioned RACE II clause, most H&M conditions also incorporate separate exclusion regimes. We hereby quote a few examples of such exclusion clauses that are included in the most commonly used conditions, for our members’ and business partners’ easy reference:

Swedish Conditions: (AV – 2000)

The Swedish Conditions are based on an “all risk” insurance cover that will cover all perils unless they are expressly excluded. Clause 7:2(f) of The General Swedish Hull Insurance Conditions of 1st January 2000, contains the following exclusion clause:

Clause 7
Excluded losses
—
7.2 The insurer is not liable for loss or damage caused by:
—
f) damage or liability, directly or indirectly caused by, contributed to by or arising from:
—
2) other nuclear damage, which means damage caused by:

i) radioactive properties of nuclear fuel;

ii) radioactive products;

iii)radioactive properties in combination with toxic, explosive or other hazardous properties of the fuel or the product, and/or

iv) damage, caused by ionising radiation from other source of radiation in a nuclear installation or atomic reactor than nuclear fuel or radioactive product.

The terms nuclear fuel, radioactive product, atomic reactor and nuclear installation shall be defined as per the Swedish Nuclear Liability Act (1968:45).

 Clause 7.2 (f) shall be paramount and shall override anything contained in this insurance inconsistent therewith. 

The Norwegian Plan: (NPL 1996 (2010))

The Norwegian conditions are based on an “all risk” insurance cover that will cover all perils unless they are expressly excluded. Clause 2:8 of The Norwegian Plan version 2010, contains the following exclusion clause:

§ 2-8. Perils covered by an insurance against marine perils

An insurance against marine perils covers all perils to which the interest may be exposed, with the exception of:
—
(d) perils covered by the RACE II clause:

1. ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel,

2. the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof,

3. any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter,

4. the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter. The exclusion in this sub-clause does not extend to radioactive isotopes, other than nuclear fuel, when such isotopes are being prepared, carried, stored, or used for commercial, agricultural, medical, scientific, or other similar peaceful purposes.

5. any chemical, biological, bio-chemical, or electromagnetic weapon.

English conditions: (ITC 1/10/83)

The English conditions, contrary to the Swedish Conditions, are based on “named perils”. That is to say, members’ H&M insurance will only cover loss of, or damage to the vessel caused by an expressly mentioned peril. The most commonly used conditions are still those of 1st October 1983. Clause 6,1,6 covers “breakdown of or accident to nuclear installations or reactors”. The risk is, however, excluded by the inclusion of the RACE II Clause, “Radioactive Contamination, Chemical, Biological, Bio-Chemical and Electromagnetic Exclusion Clause 2003.11.10” (C.1.3.), into the policy. Notwithstanding the latter, The Institute Time Clauses of 1st November 1995 contains the following expressed exclusion clause:

27 RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE

In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from

27.1 ionising radiation from or contamination by radioactivity from nuclear fuel, or from any nuclear waste or from the combustion of nuclear fuel.

27.2 the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof

27:3 any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

German conditions: (DTV 1978 (1992))

German conditions are based on an “all risk” insurance cover that will cover all perils unless they are expressly excluded. The risks of nuclear energy and radioactive material are excluded by virtue of Clause 19:1. However, all other risks in relation to atomic radiations are excluded by the inclusion of the RACE II Clause, “Radioactive Contamination, Chemical, Biological, Bio-Chemical and Electromagnetic Exclusion Clause 2003.11.10” (C.1.3.), into the policy.

Question 2:3 – Does the Club’s Loss of Hire (LoH) insurance extend to cover loss of time caused by atomic radiation?

Answer: No, our members’ LoH insurance will not cover loss of income as a result of the vessel being damaged by atomic radiation. The reason for the latter position is because the cause of the delay does not amount to a recoverable H&M claim and also due to the fact that our members’ LoH policies incorporates the RACE II clause, which expressly excludes cover for liabilities connected to atomic radiation. We hereby quote the wording of the RACE II clause for our members’ and business partners’ easy reference:

 INSTITUTE RADIOACTIVE CONTAMINATION, CHEMICAL, BIOLOGICAL, BIO-CHEMICAL AND ELECTROMAGNETIC WEAPONS EXCLUSION CLAUSE

 This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith 

1. In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from

1.1 ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel

1.2 the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof

1.3 any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter

1.4 the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter. The exclusion in this sub-clause does not extend to radioactive isotopes, other than nuclear fuel, when such isotopes are being prepared, carried, stored, or used for commercial, agricultural, medical, scientific or other similar peaceful purposes

1.5 any chemical, biological, bio-chemical, or electromagnetic weapon

Question 2:4 – Does the Club’s Freight Demurrage and Defence (FD&D) insurance extend to cover costs and expenses incurred in connection with any claims, disputes or proceedings arising as a consequence of atomic radiation?

Answer: Subject to the Club’s rules and our members’ terms of entry, our members’ FD&D insurance will cover costs and expenses incurred in connection with any claims, disputes or proceedings arising as a consequence of atomic radiation.

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Disclaimer: This Member Alert is intended to provide only general guidance and information pertaining to the issues identified and commented upon herein. The content of this Alert  is not intended to be, and should not be treated as being final and binding  legal advice. If Members consider they are likely to or in fact have encountered problems or difficulties as discussed in this Alert, they are asked to contact the Club and obtain further legal advice relevant to their specific circumstances.