The Norwegian Marine Insurance Plan
Pursuant to the Norwegian Insurance Contract 69 of June 16 1989 insurance companies are free to decide which risks to insure and under what policies. This update examines the concept of 'war risk' as defined in marine insurance.
Traditionally, terrorism has fallen outside the definition of 'war' or 'warlike conditions'. Terrorism is specifically defined as a war risk in Norwegian marine insurance conditions, but cargo clauses contain no express provisions for including terrorism as a war risk.
The terrorist attacks of September 11 2001 on the United States have challenged traditional thinking on whether acts of terrorism are deemed to be 'warlike conditions'.
In support of treating the terrorist attacks of September 11 as equivalent to warlike conditions is the fact that for the first time in its 52-year history, the North Atlantic Treaty Organization (NATO) unanimously declared the attack on the United States to be an attack on all NATO members pursuant to Article 5 of the NATO Treaty.
However, the question has not yet been judicially considered in Norway
The Norwegian Marine Insurance Plan
War risks insurance
Shipowners' insurance is customarily divided into two groups: insurance for general marine risks and insurance for war risks. A shipowner must take out both types of insurance in order to insure itself against all possible kinds of risks.
The provisions for war risks insurance under the Norwegian Marine Insurance Plan (NMIP) 1996 (amended 2002) state that war risks insurance must generally include:
- hull insurance;
- total loss insurance;
- loss of hire insurance;
- principal and interest insurance; and
- occupational injuries insurance.
However, the parties are free to agree between themselves that war insurance should only cover one or more of these types of losses.
The extent of the war risks cover also depends on whether the insurance is taken out with the Norwegian Shipowners' Mutual War Risks Insurance Association.
Plan favours shipowners
NMIP favours the shipowner because the insurance against marine risk covers 'all risk' with certain clearly defined exceptions, including war risks.
By definition, there will be no gap in the insurance cover as long as both marine risk and war risk insurance are covered on the basis of the NMIP (except for nuclear risk and inability to make payment, which are not insurable).
Further, the NMIP clearly states the result if there is disagreement between the marine and war insurers:
"If one or more insurers are involved in a dispute as to which of them is liable for the loss, each of them shall, on demand, make a proportionate payment on account in respect of the claim."
Thus, the assured shall not be left exposed should a disagreement arise between the insurers over the line between marine and war risks.
War risk insurance includes:
"war or warlike conditions, or the use of arms or other implements of war in the course of military exercises in peacetime or in guarding against infringements of neutrality…
...riots, strikes, lockouts, sabotage acts of terrorism and the like."
It is quite clear that the ongoing events in Afghanistan meet these conditions. However, it is difficult to predict from this that future terrorist actions, even those of similar scope as the events of September 11, will be treated as war or warlike conditions, unless such actions are carried out by a state or in conjunction with the state.
On the other hand, it may be the case that as a consequence of refusing to hand over terrorists and thereby risking military attack, a state is supporting terrorist actions to such a degree that its refusal to hand over the terrorists should be considered war or warlike.
In conclusion, pursuant to the NMIP terrorism will be covered by the war risks insurance.
For further information please contact Haakon Stang-Lund or Trond Eilertsen at Wikborg, Rein & Co by telephone (+47 22 82 75 00) by fax (+47 22 82 75 01) or by email ([email protected] or [email protected]).