3.2 The difference between marine risk and war risk cover
As demonstrated under 3.1, NP Cl. 2-8 and Cl. 2-9 sub-clause 1 letters b and c provide a broad cover for political risk, with exclusions only for interventions by own state for the furtherance of overriding political objectives, the operation of ordinary legal process as defined, and requisition. The goal is for an assured effecting insurance against marine risks and war risks to have the best cover possible, provided that the risk can be reinsured.
NP Cl. 2-8 and Cl. 2-9, however, only regulate the “perils” insured. Nordic marine insurance makes a distinction between perils insured, the insured event, losses covered and causation. The perils insured define what perils or risks are covered under the insurance. The insured event defines how these perils must materialize and strike the vessel for the insurer to be liable. The losses covered define what losses are covered. These three elements are tied together with a requirement of causation. The rules on causation and losses covered are different for marine risk than for war risk cover.
Causation for marine perils is regulated under NP Cl. 2-13, where the approach is attribution of loss over different perils. Causation for war perils is singled out by a special rule in NP Cl. 2-14, where the starting point is the dominant cause rule. As the difference is a matter of approach, the question of which solution is better for the assured will depend on the circumstances.
Losses covered are regulated under NP Chapter 11 for total loss, Chapter 12 for damage, and Chapter 16 for loss of hire. These rules apply both for marine risk and for war risk cover. However, in addition to these rules, NP Chapter 15 provides for extended cover for war risk. The characteristic feature of the rules on total loss in NP Chapter 11 is that compensation for total loss requires the vessel to be actually lost to the assured.(1) NP Cl. 11-1. NP Chapter 15 extends this to provide cover for total loss for two war perils. First, if “the assured has been deprived of the vessel by an intervention by a foreign State power, for which the insurer is liable under Cl. 2-9”, and the vessel is not “released within twelve months from the day the intervention took place”.(2) NP Cl. 15-11 sub-clause 1. If the assured may claim total loss according to Cl. 15-11, it is “irrelevant for the assured’s claim that the vessel is released at a later time, cf. sub-clause 4”. This provision presumably refer to the cover for foreign state power according to Cl. 2-9 letter b even if the specific motive requirement is not mentioned. Second, a similar rule applies if “the vessel has been captured by pirates or taken away from the assured by similar unlawful interventions, for which the insurer is liable under Cl. 2-9”. The provision refers to “pirates”, but the purpose of piracy is normally economic profit(3) Commentary 2023 p. 65. and thus less relevant here. The expression “similar unlawful interventions” is more unclear as it may refer to the interventions mentioned in Cl. 2-9 letter d (piracy and mutiny) or include also letter c (terrorism and politically motivated use of violence). The Commentary refers to mutiny and war-motivated theft,(4) Commentary 2023 p. 353. but as the wording of the clause is broader, this should be decisive. There are no court cases on this issue, and the interpretation appears uncertain.
Furthermore, if “the vessel is prevented from leaving a port or a similar limited area due to blocking, the assured may claim for a total loss, if the relevant obstruction has not ceased within twelve months after the day it occurred”.(5) NP Cl. 15-12 sub-clause 1. It is not stated who may perform the blocking, and the concept of blocking is not explained. The Commentary has the following comments:(6) Commentary 2023 p. 354.
“The provision is aimed primarily at cases where the hindrance is of a physical nature, for example, when the vessel remains trapped because the lock gates have been destroyed by bombing, or because a bridge has been blown up by sabotage and blocks the way out of port. The lines are fluid, however, between hindrances of this type and hindrances consisting of a foreign State power detaining the vessel in port due to fear that it will fall into enemy hands. The detention may be reinforced by the area around the vessel being mined or by other measures aimed at preventing the vessel from leaving the area. Regardless of whether the authority in question implements separate physical measures, a detention of this nature will be deemed to be blocking and trapping within the meaning of the provision, and will also fall within the scope of Cl. 15-11.”
Thus, it appears that both physical blocking and blocking due to detention is covered, but also that the provision only applies to “foreign state” power. The Commentary here appears somewhat contradictory to the wording of the clause.
In addition, the main rule in NP Chapter 16 is that cover for loss of hire is triggered by damage to the vessel.(7) NP Cl. 16-1 sub-clause 1. Sub-clause 2 provides cover for a limited number of other circumstances but they are less relevant here. NP Chapter 15 provides better cover on two issues: First, the insurer “is liable for loss due to the vessel being wholly or partly deprived of income because it is prevented from leaving a port or a similar limited area”, regardless of any damage to the vessel.(8) NP Cl. 15-16 sub-clause 2. There is no requirement of (physical) blocking and no reference to who is preventing the vessel from leaving the port. The Commentary, however, clearly limits the peril to “interventions by foreign power” and delimits against interventions by terrorists and pirates.(9) Commentary 2023 p. 358 with reference to ND 2009 p. 202 NA Bulford Dolphin.
Second, the insurer is also liable for loss of time if the vessel is brought into a port by a foreign State power for the purpose of visitation and search of cargo, etc., together with capture and temporary detention.(10) NP Cl. 15-17 sub-clause 1.
If the agreed value of the vessel according to NP Cl. 2-3 is higher than the market value, the assured will have an economic incentive to claim total loss for the vessel in order to receive the high agreed value, leaving the vessel to the insurer. For this reason, there is a lot of pressure on NP. Cl. 15-11 and Cl. 15-12 in cases where the vessel is arrested and detained in port. Most cases on this issue concern the distinction between the interventions by foreign state power that are covered by NP Cl. 2-9 letter b and those covered under Cl. 2-8, lacking the extra cover for total loss regardless of whether the vessel has actually been lost. Thus, the main issue here is the content of NP Cl. 2-9 letter b, which will be discussed in 3.3 below. The cover for terrorists and military groups acting with political motive is as mentioned more unclear, but presumably such groups are covered under Cl. 15-11 sub-clause 2 but not under Cl. 15-12.