British Marine has made changes to the expiring 2016 Hull and Machinery General Terms and Conditions, which are now reflected in the 2018 edition which will take effect from 1st January 2018.
1) Preamble
- The preamble has been amended so as to provide clear guidance and clarity with regard to which provisions take precedence where there is a contradiction between the provisions of the Policy, the General Terms and Conditions and the Standard Clauses.
2) References to “conditions precedent” in the General Terms and Conditions
- Except for Clause 18 ‘Claims Notification and Provision of Information’, other conditions are no longer expressed as conditions precedent throughout the General Terms and Conditions since the remedies arising out of a contractual breach of such conditions are now different under the Insurance Act 2015.
- A breach of a condition precedent would have previously allowed British Marine to terminate the policy however the position has now changed by virtue of the new legislation.
3) 6. Remedies for breach of Clauses 3 (Flag State), 4 (Survey by Insurers) and 5 (ISM Code)
- Insertion of new clause as follows:
In the event of a failure by the Assured to comply with the requirements provided for under Clauses 3, 4 and 5 in respect of the Insured Vessel, the Insurers may:
6.1 terminate this Insurance by giving notice in Writing to the Assured. Such termination shall take effect from the date of such notice, but if the Insured Vessel is at sea on that date then the termination shall take effect from the date of the Insured Vessel’s arrival at her next port; or
6.2 vary or restrict the terms of this Insurance.
Reason: The remedies available to British Marine for an assured’s breach of Clauses 3, 4 or 5 have now been removed from these clause and consolidated, for the sake of clarity, and moved into this new Clause 6.
4) 14. Premium
- Paragraph amended and now reads as follows:
In spite of any provision to the contrary, the Assured undertakes that premium will be paid in full to the Insurers within 30 Days of inception of the Policy (or, in respect of instalments premiums, when due).
If the premium due under this contract has not been so paid to the Insurers by the 30th Day from the inception of the Policy (and, in respect of instalment premiums, by the date they are due) the Insurers shall have the right to terminate this contract by notifying the Assured or the broker (where applicable) in Writing. In the event of termination, premium is due to the Insurers on a pro rata basis for the period that the Insurers are on risk but the full contract premium shall be payable to the Insurers in the event of a loss or occurrence prior to the date of termination which gives rise to a valid claim under the Policy.
Reason: The new wording provides more leeway to assureds as regards the timely payment of premium. The previous wording allowed British Marine to terminate the policy or vary the terms on which cover under the policy was provided on the day premium or any instalment of premium became due.
5) 23. Duties of the Assured
- The entirety of this clause has been deleted due to the implementation of the Insurance Act 2015 into the General Terms and Conditions.
6) 24. Basis of Contract
- Insertion of new clause as follows:
Any reference to ‘basis of contract’ in this Insurance is of no effect.
Reason: Basis of contract clauses operate by converting the pre-contractual information provided by the insured into a warranty. Basis of contract clauses, along with their sole remedy of automatic suspension of cover, are no longer valid following the implementation of the Insurance Act 2015.
7) 25. Duty of Fair Presentation
- Insertion of new clause as follows:
The Assured must make a fair presentation of the risk (as set out in the Insurance Act 2015 or successor or amending legislation) in proposing for, or proposing to vary, this Insurance.
Reason: The duty of fair presentation incorporates both the assureds’ existing duty to disclose every material fact or circumstance. However greater emphasis is given to the insurers’ role in the process of disclosure, with an assured potentially fulfilling its duty of fair presentation by disclosing sufficient information to put the insurer on notice that it needs to make further enquiries.
8) 26. Duty of Fair Presentation – Remedies for Breach – Proposing for this Insurance
- Insertion of new clause as follows:
If the Assured or anyone acting on its behalf breaches the Assured’s duty of fair presentation then the Insurers’ remedies shall be as follows:
26.1 if such breach is deliberate or reckless, the Assured may:
26.1.1 treat the Policy as having been terminated from its inception; and
26.1.2 retain the premium;
26.2 if such breach is not deliberate or reckless and the Insurers would not have entered into the Policy but for the breach, the Insurers may by notice to the Assured treat the Policy as having been terminated from its inception in which case the Insurers shall return premium; and
26.3 in all other cases if, but for the said breach, the Insurers would have entered into the Policy but:
26.3.1 on different terms (other than terms relating to the premium), the Insurers may require that the Policy is treated as if it had been entered into on those different terms from the outset; or
26.3.2 would have charged a higher premium, the Insurers may reduce proportionately the amount to be paid on a claim (and, if applicable, the amount already paid on prior claims). In those circumstances, the Insurers shall pay only X% of what it would have been required to pay, where X = (premium actually charged/higher premium) x 100.
Reason: The new, proportionate remedies provided for in the Insurance Act 2015 are a departure from the pre Act position which was often varied by contractual terms. The new remedies are divided into two categories depending on whether the breach was (a) deliberate or reckless or (b) not deliberate or reckless.
9) 27. Duty of Fair Presentation – Remedies for Breach – Variation
- Insertion of new clause as follows:
If the Assured or anyone acting on its behalf breaches the Assured’s duty of fair presentation in relation to a variation of the Policy, the Insurers’ remedies shall be as follows:
27.1 if such breach is deliberate or reckless, the Insurers may:
27.1.1 by notice to the Assured treat the Policy as having been terminated from the time when the variation was concluded; and
27.1.2 retain the premium;
27.2 if such breach is not deliberate or reckless, and the Insurers would not have entered into the variation but for the breach, the Insurers may treat the Policy as if the variation was never made, in which case the Insurers shall return any additional premium relating to the variation; and
27.3 in all other case if, but for the said breach, the Insurers would have entered into the variation but:
27.3.1 on different terms (other than terms relating to the premium), the Insurers may require that the variation is treated as if it had been entered into on those difference terms;
27.3.2 would have increased the premium by more than it did or at all, the Insurers may reduce proportionately the amount to be paid on a claim arising out of events after the variation. In those circumstances, the Insurers shall pay only X% of what it would otherwise have been required to pay, where X = (premium actually charged/higher premium) x 100; or
27.3.3 would not have reduced the premium by as much as it did or at all, the Insurers may reduce proportionately the amount to be paid on a claim arising out of events after the variation. In those circumstances, the Insurers shall pay only X% of what it would otherwise have been required to pay, where X = (premium actually charged/reduced total premium) x 100.
Reason: The new, proportionate remedies provided for in the Insurance Act 2015 are a departure from the pre Act position which was often varied by contractual terms. The new remedies are divided into two categories depending on whether the breach was (a) deliberate or reckless or (b) not deliberate or reckless. The duty of fair presentation applies to variations as well and the clause sets out the remedies available on a breach of the duty in proposing a variation to the contract.
10) 28. Late Payment of Claims
- Insertion of new clause as follows:
The Insurers shall, pursuant to section 13A of the Insurance Act 2015, pay any sum due in respect of a valid claim within a reasonable time (which includes a reasonable time to investigate and assess the claim).
Reason: By introducing a new section 13A into the Insurance Act 2015, the Enterprise Act 2016 implies into every English law contract of insurance a term providing that the insurer is liable to pay valid claims “within a reasonable time”. This is a new concept in English law: if an assured makes a valid claim, the insurer is liable for damages on any claims paid late, in addition to, and separate from, the insurer’s liability under the contract of insurance itself.
11) 31. Third Parties
- Insertion of new clause as follows:
The Policy does not confer or create any right enforceable under the Contracts (Rights of Third Parties) Act 1999 or any amending or subsequent legislation by any person who is not named as the Assured and both the Insurers and the Assured may amend, cancel, or lapse this Insurance without giving notice to, or requiring the consent of, any other third party. However, this will not preclude rights enforceable under the Third Parties (Rights against Insurers) Act 2010.
This exclusion will be valid notwithstanding any term of the Policy which purports to confer a right or benefit on any such person.
Reason: The clause operates as it did previously and now specifically restricts the application of the Contracts (Rights of Third Parties) Act 1999, however, rights enforceable under the Third Parties (Rights against Insurers) Act 2010 are included as these cannot be restricted.