Iims HNC HND Unit32 Version1

HNC and HND in
Marine Surveying
UNIT 32
Hulls and Machine
Damage Claims
UNIT 32 | Hulls and Machine Damage Claims
Version 1
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Hulls and Machine Damage Claims | UNIT 32
CONTENTS page
Preamble ..................................................................................................................................................... 7
Part 1 ............................................................................................................................................................. 9
HULL SURVEYS
Chapter 1 .................................................................................................................................................... 9
INTRODUCTION
Some Definitions and explanations
Underwriters
Insurance broker
Assured
Surveyor
Marine consultant
Marine claims adjuster
Average adjuster
Marine loss adjuster
Hull surveys and hull claims
Particular average
Without prejudice
Marine Surveyors
Surveyors Qualifications
Appointment of the Surveyor
The Surveyors Role
Independence
Impartiality
The Surveyors Instructions
What should instructions include?
Relationship between surveyor and assured
Commercial vessels
Pleasure craft
Super-yachts
The Average Adjusters role
The Consultant
Cooperation Between Surveyor and Average Adjuster
Call +44 (0)23 9238 5223 or visit www.iims.org.uk - IIMS 3

CONTENTS page
Chapter 2 .................................................................................................................................................... 25
THE CLAIMS PROCESS
Introduction
What is Meant by Adjusting a Claim?
Chapter 3 .................................................................................................................................................... 28
CLAIMS ON COMMERCIAL VESSELS
Introduction
Commercial vessels
The Order of Events
The Survey
The Principal Purpose of the Survey
The Nature of the Casualty
The Extent of the Loss or Damage
The Causes of Loss or Damage
Which of several possible causes?
More than one cause
Superimposed damage
Remote causes
Proof of the cause
Surveys of Third Party Vessels
Surveyors Reports
Reporting on cause
Reporting on new for old and betterment
Format
Number and timing of reports
Preliminary advice
Field survey reports
Progress report
Formal report
Confidential letter to underwriters
Photographs
Addendum to the formal report
Checking Repair Accounts
Labour in repair accounts
Other cost considerations
Salvage

CONTENTS page
Chapter 4 .................................................................................................................................................... 51
CLAIMS ON PLEASURE CRAFT
Introduction
How much is enough?
The Claims Process
The Surveyors Appointment
Surveys
Extent of Survey and Repair Monitoring
Salvage
Reports
Format
Number and Timing
Preliminary advice
First report
Progress report
Final report
Addendum to the final report
Photographs
Burglary Claim Reports
Adjustment of the Claim
Part 2 ............................................................................................................................................................. 67
MARINE HULL INSURANCE
Chapter 5 .................................................................................................................................................... 67
INTRODUCTION
The hull surveyor and marine insurance
The Marine Market
Placing the Risk
Marine Insurance Policies
Chapter 6 .................................................................................................................................................... 72
THE MARINE INSURANCE ACT 1906
Introduction
Useful Sections of the Marine Insurance Act 1906 for Hull Surveyors

CONTENTS page
Chapter 7 .................................................................................................................................................... 85
COMMERCIAL VESSEL INSURANCE
Hull Clauses
The Institute Time Clauses - Hulls 1/11/95
The International Hull Clauses 1/11/02
The Institute Clauses for Builders Risks
The Institute Time Clauses - Hulls - Port Risks
Institute Fishing Vessel Clauses
Small Commercial Craft
Chapter 8 .................................................................................................................................................... 98
PLEASURE CRAFT INSURANCE
The Growth of Yachting and Pleasure Craft Insurance
Pleasure Craft Policies
The Proposal
The Institute Yacht Clauses
Racing Risk Extension Clause
Transit Clause
Personal Effects Clause
Machinery Damage Extension Clause
The Company Policies
The Surveyor and Warranties
Appendix A - Example of a Formal Survey Report ......................................................................... 111
Appendix B - The Rules of Practice of the Association of Average Adjusters .......................... 113
Appendix C - Institute Time Clauses-Hulls, 1/11/95 ........................................................................ 119
Appendix D - Institute Yacht Clauses, 1/11/85 .................................................................................. 130
Appendix E - Noble Marine Pleasure Craft Policy .......................................................................... 138
Appendix F - ITICs Recommended Terms & Conditions for Surveyors and Consultants .... 150
Appendix G - Definitions ....................................................................................................................... 154
Appendix H - Recommended Reading ............................................................................................... 157

Preamble
Other units in this diploma course have explained details of the structure of ships and the nature of the
damage which can sometimes occur to them.
We are concerned in this unit with surveys carried out for insurance claims on commercial vessels and
pleasure craft, and especially with the role of the surveyor in connection with them.
The skills of surveyors who attend large commercial vessels are usually very different from those
attending to small commercial and pleasure craft, although there are a number of aspects of their role
which is common to both.
This unit is not intended to provide the surveyor with the technical skills of the specific details to look
for during a survey which comes from the discipline in which he has been trained. It is intended here to
assist an understanding of the culture of surveying, the manner in which a survey should be carried out
so as to provide appointing principals with information required to consider insurance claims.
This module is in two main parts:
Part 1 Hull surveys with some background understanding of their purpose and the use to which
they are put.
Part 2 An introduction to marine hull insurance to further the understanding of this background.
Hull damage surveying on behalf of underwriters comprises a significant area of work for many marine
surveyors, some tending to specialise in this work.
In this unit we are concerned with the role of the surveyor and insurance in connection with claims
made under hull policies.
Insurers need to be satisfied that any losses claimed fall within the terms and conditions of the policies
they issue. For this they need information and look to the surveyor to provider it.
They also need to know that the amount of the claims are fair and reasonable for the work necessary
to repair, or otherwise make good, the loss or damage. For this they also need the surveyors input.
Part 1 explains the need, when a claim is made against an underwriter, for a survey to be carried out
without prejudice, followed by a report showing the nature and extent of the loss or damage. As will
be explained later, reporting the surveyors opinion on cause is also an important requirement but may
sometimes not form a part of his formal report.
Part 2 shows how the issue of a marine policy comes about and the manner in which the Marine
Insurance Act of 1906 affects marine insurance on ships of all types. Part 2 also discusses the standard
clauses used in many policies.

An in depth knowledge of marine insurance is not a requirement for a hull surveyor but a sound
understanding of some aspects of it will materially assist him, improving his observations, reporting
and attention to detail. The reason for this will become more apparent in due course but is briefly
touched upon here, as it can be very helpful in understanding the vital importance of the report to the
underwriter and the adjuster.
A surveyor with an understanding of marine insurance, provided he avoids overstepping the mark
by becoming directly involved with insurance matters when not instructed to do so, has a definite
advantage over one who lacks it.
This insurance knowledge and understanding will often result in a more comprehensive and useful report.
Furthermore the surveyor may then be able, if so instructed, to widen his role to that of a marine loss
adjuster for the smaller pleasure craft claims for which he has carried out a survey.
However, it is emphasised that although there is now the suggestion in the market of a trend
towards the surveyors wider involvement, it has not been customary for surveyors to become
involved with the details of insurance contracts. Any extension of their duties is entirely
dependent upon a principals instructions and should never be taken for granted without very
good reasons for doing so.

Part 1. HULL SURVEYS
Chapter 1. INTRODUCTION
Some Definitions and Explanations
It will be helpful here to provide definitions of the principal parties which may be involved with a hull
claim. In some cases they may not all become involved but those whose role requires a surveyors fuller
understanding are discussed in more detail later.
The number of parties likely to be involved will usually depend upon the insurance arrangements, the
type of vessel insured and possibly the size of the claim. They may each comprise more than one person:
Underwriter
Strictly speaking the term refers to a person who evaluates a risk proposed by an applicant for
insurance, discusses the terms of cover to be offered and quotes a premium.
An individual so named is usually employed by either a syndicate (as at Lloyds) or by an insurance

company. Brokers offices may also employ underwriters if they have an underwriting authority conferred
on them by a syndicate or insurance company. They are then known as underwriting agencies.
The term underwriter derives from the practice of the person who writes his name on the brokers
slip (the paper containing details of the proposed risk and recording the underwriters commitment),
under the proposed risk, thereby accepting a share or all of it when the insurance cover is arranged.
In marine insurance, as in this unit, and especially with commercial vessels, the term underwriter tends
to be used more widely than simply to refer to the person who acts for a syndicate or for a company
transacting marine insurance business. Both the person and the business are often referred to as the
underwriter or the underwriters and the term often replaces insurer.
With the mass of small craft insured, the term insurer is often used regardless of whether a syndicate
or a company actually insures the craft.
In a small office, one person may handle both the underwriting and the arrangements for the settlement
of claims. But, in larger offices, the underwriter (the person) will usually have a claims department to call
upon which will probably include a marine claims adjuster (see below).

Insurance broker
The insurance intermediary who will, for most commercial vessels and many pleasure craft, have
arranged the policy for the assured. Having secured cover for his client he usually keeps a watching
brief during the progress of the claim until its settlement, but he has no active part in the claim
process after the surveyor has been appointed except perhaps as a post box. (A surveyor may be
wise, however, to listen to what a broker may have to say but it is not unknown for a broker to try to
influence a surveyor to favour his client and the surveyor should be on his guard not to allow this to
happen.) Once the adjuster has prepared his Statement of Claim, the broker will look after his client
until settlement is made.
Assured
The insured party. In marine insurance this term is used in preference to the insured as used in non-
marine insurance. With pleasure craft the assured will probably be the owner but commercial vessels
are usually owned or chartered by companies which, if sizeable, may have an insurance department and
also a superintendent, as well as the master, to represent the assured at survey and subsequently.
The difference between the frequently poorly informed pleasure craft owner regarding marine insurance
and the commercial ship owner, receives mention later when considering the conduct of the surveyors
enquiries.
Surveyor
The person carrying out a survey. He (or she) will sometimes be a one-man operation (often the case
with pleasure craft surveys) but is more likely with commercial vessels to be the principal or a member
of the staff of a larger surveying organization. This has the benefit that the larger organisation can
provide a back-up at the companys home-base when the surveyor is away from his office during survey,
sometimes amounting to several days.
Marine consultant
A marine expert whose opinion and advice may be sought by the average adjuster, principally in PA
claims (see later), when he needs assistance beyond that which the surveyor may be able to provide,
or when the adjuster wishes to obtain it independently or as a second opinion. Marine consultants are
often ex-surveyors whose expertise and qualifications place them at a higher level of expertise.

Marine claims adjuster
Most of the larger underwriters offices have a marine department handling both underwriting and
claims handling, or a claims department fulfilling the latter role for marine claims as well as non-marine
ones. Within one or other will be at least one specialist claims adjuster but, in a small office, this role
may be carried out by the manager (who may be the actual underwriter) or an assistant temporarily
performing this role. (If the skills are lacking in a small insurance office the claim will be sent either to
head office for adjusting, or possibly to someone outside who will be instructed to adjust the claim, as
discussed more fully in a later section of this unit).
Average adjuster
Unlike the underwriters claims adjuster he is an entirely independent claims professional, often backed
up by a team and generally appointed by the owner or charterer for moderate to large particular
average (see later) claims mostly on commercial vessels.
Apart from adjusting particular average claims a substantial part of an average adjusters work arises
whenever general average (GA) is declared if a vessel is involved in a major incident. He will then work
closely with a cargo surveyor appointed as the GA surveyor and probably, to a much lesser extent, with
a hull and machinery (H & M) surveyor.
The average adjuster is a marine professional particularly well versed in claims procedures, marine
insurance and marine case law.
Marine loss adjuster
This term has not been widely used in the past but is becoming more common as general insurance
companies now take on insuring small craft but lack claims staff with a depth of marine insurance expertise.
A marine loss adjuster is rather a hybrid person often one with a marine first discipline who combines
an understanding of marine casualty damage with marine insurance knowledge. Such a person will usually
have the ability both to survey and adjust the smaller hull claims, particularly on pleasure craft.
In rare cases, some non-marine loss adjusters may qualify for this title if able to survey and adjust
pleasure craft claims by possessing adequate small craft casualties experience and an understanding of
their insurance.
The term should never be confused with that of the average adjuster whose expertise in adjusting
complex claims based upon information, usually involving commercial vessels and provided in a
surveyors report, follows from lengthy study and practice in marine claims.
The role of surveyors and adjusters is discussed more fully later but the opportunity is taken here to
explain three other terms which will frequently be used in this unit.

Hull surveys and hull claims. These terms are often used to refer to surveys and claims on either
or both hull and machinery (H & M).
This linkage arises largely because, in marine insurance, both commercial hulls and machinery are
almost always insured (in the UK and many other countries) under the same policy to which, more
often than not, the Institute Time Clauses Hulls have been attached.
The policy is referred to as a hull policy but a claim under it could concern only machinery damage.
Particular average (PA). A marine insurance term for a partial loss. This distinguishes it from a
total loss, either actual or constructive, and from a general average loss. (Section 64 of the Marine
Insurance Act 1906 simply refers to it as a partial loss of the subject-matter insured, caused by a peril
insured against, and is not a general average loss.)
It is the type of loss with which a hull surveyor is most often concerned.
Without prejudice. In the context of a survey and a surveyors conduct, this means that no
statements made or actions taken by him are, unless indicated otherwise, to be misconstrued as
committing his principals to any admission of liability or commitment to settle any part of a claim.
A surveyor almost never has this authority from his principal and he should prefix his discussions at
survey, and with the assured, with such a statement.
Marine Surveyors
This is a generic term covering those who carry out a very wide range of surveys in the marine field and
has little real meaning unless narrowed down to a more specific area of marine surveying.
The following classifications of marine surveyors narrows the field but is not all-inclusive. These groups
still leave a good deal of scope for some specialization within them.
Ship & hull surveyors are frequently, but not always, marine engineers. They are concerned
with the structure of ships and their machinery and may be referred to as H & M surveyors.
Nautical surveyors. Usually master mariners, they are principally concerned with ship
operations, collision and other casualty investigations, and equipment surveys. (Depending on
their experience they may occasionally be H & M surveyors.)
Yacht surveyors. Often boat builders and designers, whose function is similar to H & M
surveyors but usually with different training and experience. They are concerned with surveys
of small craft, sometimes also including their machinery, and in some countries they would be
known as small craft surveyors.

Cargo surveyors are concerned with a wide variety of cargoes transported by sea but
sometimes also by air freight, and occasionally by road or rail. They are often not ex-mariners
but are individuals who have had a specialised experience in certain commodities or highly
technical manufactured goods.
Hydrographic surveyors investigate the sea bed, tidal activity and all matters relating to the
production of charts.
Environmental surveyors are concerned with all types of pollution within the marine
environment.
Structural surveyors. Frequently engineers by profession, they are concerned with the
construction and maintenance of port installations, including wharves, docks and other facilities.
Surveyors Qualifications
Traditionally, hull and nautical surveyors have almost exclusively been seafarers with certificates of
competency as marine engineers and deck officers, principally first class engineer and master mariner
respectively.
Some small commercial vessel and yacht surveyors are similarly qualified but have also had experience
with small craft. The majority of small craft surveyors hold appropriate trade qualifications from
technical colleges, usually coming from a very different background, including boat building.
In many cases those concerned with wooden craft frequently have been apprenticed as shipwrights.
Similarly, surveyors of steel and aluminium craft have usually been employed in boat building in these
materials or are suitably experienced engineers, while many GRP surveyors have been fabricators,
experienced in building boats in that medium.
Most surveyors have been trained, qualified and experienced in a primary discipline where they learnt
the technical skills associated with the construction and operation of the type of vessels and smaller
craft on which they undertake surveys. Initially they usually lack actual surveying skills which they
generally have to learn on the job under the guidance of senior surveyors. (Some assistance is now
provided by a diploma course in surveying.)
The additional skills, not related to their primary disciplines and the technicalities of the
subject under survey, can be summed up as:
Survey procedures.
Survey techniques.
Report writing and formats.
Relationships and inter-action with principals and claimants.
The legal position concerning the surveyors role and conduct.
Legal and regulatory matters associated with the subjects of their surveys.

While some marine surveying organizations, both within and outside the UK, have their own
membership qualifications, there have not until recently been any universally recognised qualifications in
marine surveying.
This is changing. Lloyds Maritime Academy, the International Institute of Marine Surveying (IIMS) and the
Maritime Training Academy have introduced Diplomas in Marine Surveying in recent years which have
gained or are gaining international recognition.
In particular, the International Institutes work in promoting professional standards among surveyors
has received wide acclaim for its diploma courses. In 2012 IIMS received recognition for its courses to
be approved for Higher National Certificates (HNC) and Higher National Diplomas (HND). A degree
course has also been introduced in cooperation with the University of Portsmouth.
At the present time, there is an acute shortage of qualified and experienced seafarers interested in
becoming surveyors of large commercial vessels and this has led to recruitment, with limited success,
from university graduates.
One problem is that a lack of sea-going experience makes it difficult for those without sea-going
experience to understand the practical operational and commercial realities of ship operation. Apart
from the practical aspects, this is necessary to establish a rapport with ship masters and chief engineers
in the vessels which they are surveying. Without it their role becomes much harder and presents
difficulties in earning the respect and confidence of ships officers.
The growth of pleasure boating and the number of small commercial craft built today suggests no such
lack of opportunities in this field for surveyors. However, a different problem arises because the growth
of the pleasure boat industry has attracted too many cowboys who call themselves surveyors but lack
the skills, integrity and professionalism to perform to an acceptable standard.
Appointment of the Surveyor
When loss or damage occurs to commercial hulls and is reported by the master, the owners will usually
inform their insurance brokers or in-house insurance departments who, in turn, advise the underwriters.
The brokers are often then instructed by the underwriters to appoint a nominated surveyor on their
behalf and, in the London market, this frequently means Instruct the Salvage Association (SA) but other
firms of surveyors may sometimes also be instructed.
The SA has a much wider role than simply that of involvement with salvage. It will usually arrange for
a staff surveyor to attend survey, but sometimes, in a place or area where there is no SA office, a local
consultant surveyor, not an SA employee but one in whom the SA has confidence, will be instructed.
In the latter case, the SA provides comprehensive guidelines to a surveyor attending on their behalf if
he is not familiar with their usual requirements, or if they are varied in any way by special instructions
originating from the underwriter.

Alternatively, the broker (or the SA if it has been instructed) may ask a Lloyds Agent to appoint a
local surveyor or possibly, on the underwriters instruction, appoint a named surveyor with whom
they have confidence.
On occasions, and with the ship owners approval, the class surveyor who has attended the casualty
on behalf of the ships classification society may be requested to report also to the underwriter for a
fee. Such appointments are usually restricted to the smaller, or most common type of H & M claims.
Although conflict of interest may not be an issue, it is sometimes wiser for the underwriter (or his
agent) not to appoint the same surveyor who has carried out the survey for class.
When the underwriter or their agent makes the appointment it is usual for the surveyors fee to be paid
by the underwriter regardless of whether the claim is met or not.
The Surveyors Role
The surveyor instructed by the H & M underwriter is generally referred to as the underwriters
surveyor. This may seem obvious and not worthy of mention but surveyors appointed for these claims
tend to act rather more as an agent of the underwriter than is the case with cargo surveyors where
they are less often referred to as underwriters surveyors and are generally seen more as independent
experts and less as agents of the underwriter.
Although in hull insurance surveys the term underwriters surveyor is quite common, and the surveyor
is appointed partly to watch over underwriters interests concerning the repairs and their cost, it is
essential that he still maintain his impartial and objective attitude regarding them.
He rarely has authority to discuss insurance matters and is there to see that, as far as possible, the
underwriter is not called to meet a claim which the facts do not support or to consider more than the
reasonable cost of repairs or other appropriate compensation for the assureds loss.
The surveyors role, which is without prejudice to underwriters liability, is to concern himself principally
with facts concerning the nature, cause and extent of the damage or loss. It is his primary duty to search
out all the relevant facts and include them in his report.
It is then the underwriters and, usually in the case of commercial hulls, also the average adjusters,
concern to apply the surveyors findings to the terms and conditions of the insurance policy to consider
whether liability attaches to it and, if so, to what extent.
It is traditionally not the surveyors responsibility to consider whether liability attaches. He simply
provides the information upon which these conclusions can be reached and, in any event, he is rarely
aware of the terms and conditions of the actual policy involved.

Although it is the assureds responsibility, usually through the master or his superintendent, to take all
reasonable steps to mitigate the loss, the surveyor is expected to advise him, calling on his experience
and possibly local knowledge of repair facilities.
Any recovery action to be taken against a third party, typically the other vessel in a collision, is also very
dependent on the availability of certain essential and relevant information in the surveyors report.
Underwriters then appoint marine lawyers to investigate and pursue liability against any third parties.
Without all the relevant information the adjusters task is difficult if not impossible. Missing information
will somehow have to be obtained later, frequently at a considerable disadvantage and with loss of detail
once the survey has been completed. This does not reflect credit upon the surveyor who must diligently
seek out all the information.
This calls for the surveyor to think about the likely needs of the underwriter and/or average adjuster.
This is the reason why an understanding of their role can be so helpful to the thinking surveyor.
The question of the surveyors independence and impartiality sometimes arises and these qualities, and
the possession of these attributes, are important from the underwriters point of view because they help
to instill confidence in the assured that the surveyor is a reputable person of integrity.
Independence
The surveyor will certainly be independent in the sense that he is not an employee of the underwriter
although he receives a payment for his services. He will have been engaged because at the time of his
appointment he is independent of the underwriter. The receipt of a professional fee, without other
financial benefit in the outcome of the survey, is generally considered insufficient to counter the
contention that he is an independent expert.
However, it is difficult to suggest he is, in all respects, independent of the underwriter whose interests
he will be expected to look after at survey. He is the underwriters agent albeit with very limited
agency authority.
Once his services are engaged and he becomes the underwriters surveyor this tends to redress the
balance with the ship owner whose interests are looked after by his own expert representative at
survey, usually by his superintendent or the ships master.
In spite of the responsibility to look after his principals interests after appointment, the surveyor must
be fair-minded and objective, displaying complete integrity in arriving at, and stating, his findings. His
reports must be factual and unbiased in any conclusion they draw.

Impartiality
A cargo surveyor would, in many cases, be more easily able to support an assertion that he is impartial
than an underwriters hull surveyor, but in presenting his findings after survey and reporting of facts in
his formal report, the hull surveyor must act impartially with regard to them. (On occasions when a
surveyor may have some misgivings over the conduct and integrity of the assured and feel concern for
the underwriters position as a consequence, he should write a confidential letter to his principal but
should not include such information in his formal report.)
Any responsible underwriter will expect the surveyor to use his best endeavours following his
appointment to see justice done as far as he is able. The surveyor will not achieve this if he fails at
survey to discuss and consider the loss with complete impartiality and to see that reasonable steps
are taken to minimise the loss. He must leave the assured with a clear understanding that he is not
instructed by the underwriter to unfairly reduce any settlement that might be due under the policy but
equally to ensure the underwriter is not called upon to meet a fair claim.
The Surveyors Instructions
It is absolutely essential that the surveyor gets off to a good start by being clear on his principals
instructions; they form the basis of his contract. The importance of understanding and observing them is
so essential that this will be emphasised from time to time in this unit.
Sometimes a surveyor will have an ongoing relationship with an underwriter from previous
appointments which has allowed a good understanding to build up. This makes it easier for little more
than a brief phone call or e-mail to start the survey process. But even in this case it is wise to have
some basic written understanding which can be filed and probably never referred to again. It will be
available should the boundaries ever become blurred.
Where the instruction is a one-off with the surveyor and underwriter unfamiliar with one another
it is essential that the surveyor understands the boundaries of his expected performance and the
terms under which he is undertaking the role. While one likes to think that a mans word is still his
bond, there can be misunderstandings, and fax and e-mail in particular can simplify the task of confirming
telephoned instructions in writing.
Although there are some fairly clear customary expectations of the surveyor in a commercial hull
survey which the surveyor can expect to be in his principals mind, there may be some specific points
requiring emphasis or special instructions which differ from the normal.
One which especially comes to mind is the question of whether the surveyor is to state his opinion on
the cause of the casualty in his report or whether he is to omit it from the document. This is discussed
in some detail later under the heading of Reports.

A system adopted by the Salvage Association some years ago simplified the sending and receipt of
instructions by having several code words. (They were as simple as Instruction ONE or Instruction
TWO etc. which related to the details of an instruction already spelt out to the surveyor. Some such
arrangement is recommended.)
Another consideration, again mostly in need of clarification in the one-off situation, concerns the
remuneration for the survey. What are the surveyors charges? They too should be clarified at an early
stage although many surveyors are reluctant to press this point, but it is good business and surveyors
are advised to give adequate attention to running their businesses on good commercial principles.
The International Transport Intermediaries Club (ITIC) has drawn up a suitable form of contract entitled
ITICs Standard Terms for Surveyors and Consultants which it has made widely available for use by
other than its members. Even if not used in its entirety it forms a useful basis for a surveyor to draw up
his own terms and conditions with the Clubs permission. (See Appendix I)
What should instructions include?
The surveyor accepting an instruction is advised to make sure he has a clear understanding of all that his
principal expects him to do (and not do) and report.
While this is doubtless good advice it may not always be practical at the time of first receipt of
instructions as they may require almost immediate response and it may be necessary to obtain all the
information as soon as possible afterwards.
Apart from the obvious information on who to contact and what is to be surveyed, what else can the
surveyor expect to have included in his instructions as soon as practical?
It is suggested the following deserve consideration:
The survey
What is its purpose?
Is the surveyors role to be as is customary?
Any additional requirements?
Any exclusions from the customary requirement?
Remuneration
Clarify the basis on which the surveyor will charge fees
Reports
What timing/frequency required?
Are they to be in any special format?
Narrative or Question/Answer if a cargo claim?

To whom are they to be addressed?

The instructing principal?
Underwriters legal advisers?
Copies to anyone else?
Frequency with which required?
Any more than a preliminary report/advice and a final/formal report?
Any special requirements?
Is cause to be stated in the formal report ? (or simply that the surveyor concurs or not with
the assureds allegation)
Brokers involvement
Does a broker have the underwriters authority to discuss the claim with the surveyor?
Does the broker understand he is instructing the surveyor (not the underwriter) and is
responsible for the surveyors fee unless the underwriter directly advises the surveyor otherwise?

Consultants
Are surveyors at liberty to appoint consultants as required?
Or do underwriters require to give prior approval?
Surveyors relationship with assured

Does the underwriter wish the surveyor to assist the assured other than is customary, as
recognition of the assured being a special client?
Policy warranties
Is the surveyor to consider any policy warranties in making his enquiries?
(If so these need to be provided to the surveyor.)
Statements in the insurance proposal (Likely to apply only to pleasure craft)

Is the surveyor, in making his enquiries and observations, to consider any particular statements
made by the assured in the proposal.
Liabilities
Is the surveyor requested to comment on underwriters liabilities if provided with details of cover?
Is the surveyor requested to comment on third party liabilities?
Caution: In the absence of specific instructions, a surveyor might be unwise even to broach the last three
questions unless having good reason for believing the particular underwriter might require him to give special
consideration to them.
Relationship between surveyor and assured
In the paragraphs above under the heading , What should instructions include? the matter of the
surveyors relationship with the assured was mentioned.

This raises the question, Does the underwriter wish the surveyor to assist the assured other than is normally
expected in the customary role?
This point is valid only where the instructing principal wishes the surveyor to go a step beyond that
which is customary and is applicable almost entirely to small craft claims.
An assured owning substantial commercial vessels has little need or expectation that the surveyor will
exceed the customary role but the position is a little different with small craft, especially those used
only for pleasure purposes.
Many small craft insurers expect their surveyors to have little contact with the assured, limiting
themselves almost entirely to matters concerning the craft and with the loss or damage to her.
However, others having a long and valued business relationship with a client who may have all his
personal and corporate insurance with the insurer, may see the assured as a special client and expect
their surveyor to be especially helpful to the assured, performing more of a PR exercise.
Although it goes without saying that the surveyor must remain professional, objective and impartial at all
times, this can still be done with the provision of varying degrees of help and support.
It is now necessary to explain where the important differences lie between the way a surveyor may go
about his duties in surveying commercial vessels and small craft.
Commercial vessels
In the case of the Playa de las Nieves (1974), a commercial vessel, Donaldson J, at one time Master of the
Rolls, stated:
Marine Insurance is a technical matter and marine policies on large commercial vessels are not intended for
do-it-yourself enthusiasts. Those effecting such policies may be expected to have skilled advisers.
The former are operated by experienced professionals, both afloat and ashore, advised by
knowledgeable insurance and legal departments, and insurance brokers, whereas the operators of small
craft rarely possess much experience beyond the day-to-day nautical skills.
The degree of cooperation with surveyors, and understanding of the insurance claims process, will
vary enormously between the two extremes. Although in principle the surveyor will be expected to
adopt many of the same procedures with them all, in practice he will have to modify his approach and
expectations considerably, making some allowance for the lack of understanding displayed by the latter.
A reasonably strict adherence to a formal approach is called for by surveyors when dealing with masters
and superintendents of shipping companies whereas a more informal and helpful manner will often
materially assist in ensuring satisfactory progress with insurance claims on small commercial craft.

Pleasure craft
An underwriters attitude towards pleasure craft owners is usually quite different. Except when he has
a knowledgeable broker, owners of these craft are likely to lack an understanding of marine insurance,
claims practice or the more technical aspects of his crafts construction and repair.
Consequently underwriters tend to take much less of a hard line with these owners and may expect the
surveyor to be more helpful towards the assured in the presentation their claim.
The surveyor appointed by the insurers is strictly the underwriters surveyor and many underwriters
see the appointment as a service to their client too. They may expect him, while looking after their
interests impartially and objectively, to assist their pleasure craft client far more than a commercial
vessel owner.
Super-yachts
In recent years the growth of super-yachts has introduced a rapidly growing new category of craft
which require special consideration.
Some super-yachts are genuinely used for private recreation and pleasure but many are built to be
corporately owned, and used in their owners business for corporate entertainment or for charter work.
By and large they are commercial craft, many being insured as such.
The Average Adjusters role
For most commercial hull claims, unless they are very straightforward, it is usual for the assured to
appoint an average adjuster, an independent expert, to prepare a statement of claim in the form of an
average adjustment. Although the average adjuster is usually appointed by the ship owner or charterer,
he is, like the surveyor, an independent and impartial professional.
Following receipt of the surveyors report the underwriter will usually consider the claim overall under
the terms and conditions of the policy, keep a copy and pass the report to the average adjuster to adjust
the claim.
The surveyors report is then studied and the average adjuster consults with the surveyor as necessary
so that he fully appreciates the circumstances of the loss and the facts which will affect the extent to
which the policy should respond.

If the surveyor is in a location far away from the average adjuster, as will often be the case, or if the
surveyor has expressed concern or uncertainty on cause of damage or numerous other technical
issues which might arise, the average adjuster may need assistance to discuss the surveyors report and
other information he received. He will then instruct a marine consultant to assist him to draw proper
conclusions on any technical points.
The statement of claim when finally completed is submitted to the underwriter in support of
the owners claim for settlement. Although the average adjusters findings are not binding on the
underwriter, it is usual for his recommendations to be accepted in most cases. There may be some items
in the adjustment with which the underwriter may not concur and these are discussed. Hopefully a
solution acceptable to all parties can then be achieved.
Average adjusters are well versed in insurance and maritime law. They make a careful study of the cases
that come before the courts as they give an essential guide to interpretation of many of the more
obscure points that arise from time to time with ship operations and insurance matters.
The Association of Average Adjusters has drawn up rules agreed with underwriters and based on legally
accepted practices. The Rules provide the average adjuster with much needed guidance concerning the
reasonable cost of repairs and other areas of potential dispute, by ensuring uniformity in practice.
Apart from the adjustment of hull claims involving particular average, one of the average adjusters
other principal roles is the handling of general average on behalf of ship owners. This is not discussed in
this unit as the hull surveyors role in GA is likely to be limited to ship and machinery survey with only
general enquiries concerning the casualty.
Where small commercial craft are concerned the appointment of an average adjuster would be most
unusual. The adjustment would be handled in the underwriters office within his claims department
which is likely to include a claims adjuster.
Average Adjusters
In a lighter vein, the following is submitted to bring a smile to the students face after studying the
preceding pages. Some years ago it appeared in Lloyds Log magazine but its origin is uncertain.
For I am an average adjuster

And nobody knows what I do.
Do I add one here, subtract one there,
To make the sum come true ?
Now thats a secret I will not tell,
For if I did I know full well
Any Tom or Dick who had the trick
Could adjust an average, too.

The Consultant
Mention has been made of the possible need for the average adjuster to seek technical advice and,
although he may have discussions with the appointed surveyor, he may also need the advice of a
consultant with a more specialised expertise or whose location may be closer at hand and so make
consultation easier.
As is so often the case we tend to place greater faith in someone we already know and with whom
we have had previous satisfactory experience, rather than in a stranger. It is, therefore, not surprising
that average adjusters will sometimes favour the opinions of a local consultant rather than a surveyor
unknown to them, and possibly residing in another country.
In the cities where the principal firms of average adjusters are located, there are also a number of
consultants. In London, many are members of The Society of Consulting Marine Engineers and Surveyors,
and in Europe the several national organizations are members of the Federation of European Maritime
Associations of Surveyors and Consultants (FEMAS).
Cooperation Between Surveyor and Average Adjuster
It will be seen that both the surveyor and the average adjuster play an important but very different part
in processing a hull claim. If they are both appointed at the same time, the latter will often contact the
former, with the underwriters approval, to discuss the process and ensure that there is a good basis for
cooperation between them from the outset.
The average adjuster needs the facts. The surveyor is, in effect, his eyes and ears and very often the
information required by the adjuster will be much more than the surveyor may initially appreciate.
Thus a good liaison between them can be very effective in bringing the claim to early settlement by
underwriters.
Too often, for a variety of reasons, it is difficult to bring about this early liaison but the excellent
communications available today make it much more possible than it used to be. In providing the best
possible service to his appointing underwriter, it should be the aim of every surveyor to cooperate as
closely as possible with the average adjuster.
It is generally a requirement for the surveyor to reach the scene of the casualty as soon as possible.
Discussion, or any other communication, with the average adjuster will sometimes have to await a more
convenient time but this may not present any problems if the surveyor has some appreciation of how
the adjuster will approach his task. Then, well before the time when the surveyor prepares his formal
report, some discussion with the average adjuster will be beneficial.

A number of factors have to be considered by the adjuster in claims for hull damage. It is his
responsibility to consider what costs are reasonably recoverable under the terms of the policy whereas
it is the surveyors responsibility to consider whether, and to what extent, the repairs carried out are
reasonable regarding the damage repair.
In a nutshell He must report on the nature and extent of damages found, the cause(s), and
recommended repairs, together with the fairness and reasonableness of what is charged for the work
carried out, and finally, the extent to which, in his opinion, it relates to casualty damage.
Although basically the policy covers the reasonable cost of repairs the question, What is reasonable?
is not always easy to answer and, in any event, not all reasonable costs may be recoverable under the
terms of the policy this depends upon the wording of it.
There are some obvious and some not so obvious exclusions. This is where the diligent surveyor can
be of great assistance to the average adjuster by providing as many of the relevant facts as possible in
his report. If he is mindful of all the possibilities he can forestall a great deal of otherwise unnecessary
correspondence later.
It is important that the formal report contains all the information the adjuster needs for the adjustment
of the claim. For this the surveyor must have a reasonably good understanding of the adjusters role and
its often complex requirements. A knowledge of marine hull insurance will also assist the surveyor in
having a better appreciation of what the adjuster must consider.
Provided the surveyor has already given careful thought to gathering the essential detail, this may
not present a significant problem. However, in practice, there would be few adjustments for which an
adjuster does not later have to ask a surveyor for more information, or clarification of some of the
costs involved.

Chapter 2. THE CLAIMS PROCESS
Introduction
The claims process will have started with the notification of loss or damage to the broker and/or the
underwriter, followed by appointment of the surveyor.
When loss or damage occurs an assured expects to be able to make a claim under the terms and
conditions of his insurance policy. Once an underwriter becomes aware of a potential claim he requires
facts upon which to consider his liability and possibly that of others who might be responsible for
causing it. In short he needs facts upon which to base any decision and it is the surveyors role to
find and report them.
Once the survey has been carried out and a preliminary report provided, or at least advice on the
surveyors finding of fact, the underwriter will have some idea of the likely extent of the claim and can
make further contact with the assured if necessary towards making provision for settlement in due
course.
Meanwhile, the repairs will usually commence unless they are deliberately deferred by the assured for
operational convenience or unsuitability of repair facilities. On completion of both the surveyors formal
report and the repairs, the claim has to be adjusted by either the underwriters in-house adjuster, or
more probably by an average adjuster if a large commercial vessel is involved.
What is Meant by Adjusting a Claim?
In simple terms, adjusting means doing two things after the facts have been ascertained and reported:
(i) considering the cover provided by the policy and applying its terms and conditions to any claim
made under it;
and then, if the claim falls within the overall coverage of the policy:
(ii) eliminating any costs which are specifically excluded by policy conditions, together with those
which are excessive and unreasonable, or customarily not allowed.
The adjuster will principally consider, in (i) above:
(a) What date or time provisions, voyage, geographical and other warranties, exclusions or other
limitations are there in the policy?
(b) What was the proximate cause of the loss? Was it an insured peril?
(c) The onus of proof initially being on the claimant, has he met this requirement?
(d) Has the claimant taken proper steps to mitigate the loss?

Warranties, mentioned in (a) above can be either express or implied. They are undertakings by the
assured and, if they are not fulfilled the underwriter may avoid the claim or impose other sanctions on
the assured.
Express warranties are stated in the policy whereas implied warranties do not appear in it but, under
the terms of the Marine Insurance Act 1906, apply without the policy document having to say so.
The implied warranties are:

Seaworthiness (but see below)
Legality of the venture
There is no implied warranty in a time policy as distinct from a voyage policy that the ship shall be
seaworthy at any stage of the adventure, but where she is sent to sea in an unseaworthy state with the
privity of the assured, the insurer is not liable for any loss attributable to unseaworthiness.
Apart from the implied warranties a general appreciation of the type of express warranties to be found
in a marine hull policy will assist the surveyor in making sure he has sought as many relevant facts as
possible and included them in his report, although the surveyor will often not, or rarely, know of any
specific express warranties in the policy unless advised to him.
Typically these are concerned with geographical trading limits within which the ship is sailing, the use to
which the vessel may be put and possibly the exclusion of certain cargoes.
The importance of including dates and places where the casualty occurred, supported by log extracts,
is obvious as the adjuster has to be satisfied that the policy was current at that time and did attach at
that place.
But if the surveyors fact finding and reporting is as comprehensive as is reasonably practical, it will
almost certainly assist the adjuster and underwriter, saving them the need to ask questions about
matters which have not been addressed by the surveyor in his report.
However, unless sufficiently briefed, it is not likely that a surveyor will think of all the appropriate
questions requiring answering and he may not automatically look into all these important matters. (In
Part 2 the subject of warranties receives more detailed attention but if the surveyor has reported all the
relevant facts the adjuster can consider whether any warranties have been breached.)
Having overcome the wider hurdle and being satisfied that the policy should respond, the adjuster then
has to consider in (ii) above, the extent of its response. This is to check each cost claimed to ensure it is
covered in the policy and does not exceed that which is acceptable.
Most claims on hull underwriters are PA claims rather than for total loss (TL) or constructive total loss
(CTL). They are usually for repairs costs and their directly associated losses.

Although it may sound as though an adjustment of a particular average (PA) claim should be fairly simple
and straightforward, this is rarely the case with the majority of substantial commercial hull claims on
large vessels.
Determining the reasonable cost of repairs for which the policy provides, can be complex.
In the first instance the surveyor has to be satisfied repair costs are reasonable in quantum and are
applicable to the work necessary to rectify the damage, are in accord with any contractual agreement
and with the prevailing costs at the port or country in which they are incurred.
Then the costs have to be considered by the adjuster in relation to any special provisions in the policy,
the provisions of the Marine Insurance Act, the Rules of the Association of Average Adjusters and to any
applicable case law. This requires the expertise in most large claims of a qualified average adjuster and is
not the surveyors concern.
An example a ship owner will frequently take the opportunity of his ship being in dry dock, or
delayed elsewhere in port, for casualty repairs to carry out some of his own maintenance or survey
work. This is often an opportunity to consider progressive surveys and any work required for class.
When this occurs, it is likely that the adjuster will have to consider common charges and make an
apportionment of costs. This will not always be the case and depends largely upon whether there is a
need for the work to be carried out for seaworthiness. (This should be explained by the surveyor.)
The circumstances will, in each case, determine whether charges are to be treated as common charges
or not.
With pleasure craft there is no less desire on the part of owners to utilise the time their craft are
hauled out for casualty repairs, but underwriters are often less concerned with considering common
charges and the owner may be at liberty to take full advantage of the time on the slip. Of course, any
costs associated with delays in undocking (commercial vessels) or unslipping (pleasure craft) solely for
the benefit of owners, will not be for underwriters account.
The Rules of the Association of Average Adjusters, referred to above, have been drawn up following
consultation with underwriters and a study of relevant case law. Consequently, they have the approval of
the market and those for PA adjustments apply to claims with which we are concerned here. The Rules
also cover general average adjustments, of little concern to the hull surveyor and Appendix B to this unit
contains only the rules which relate specifically to hull surveys.
No claim can properly be adjusted without a thorough knowledge of the terms and conditions of the
policy. One of the first things an average adjuster has to do is to obtain a copy of the policy and study
it, but because there are many standard clauses in use in marine insurance an understanding of policy
content is simplified. Nevertheless, there may be deletions from the standard clauses and also additional
ones which often means that no two policies are identical and the adjuster needs to know what
variations apply in each case. (Pleasure craft insurance is much less subject to standard clauses and their
policies differ in many details between one insurer and another.)

Chapter 3. CLAIMS ON COMMERCIAL VESSELS
Introduction
Commercial vessels
The term covers a wide range of vessels used for a variety of business purposes.
At one extreme are the large cargo, passenger and specialist ships operated world-wide and owned
or chartered by major, well-established shipping companies. At the other extreme are the small firms
owning perhaps only one small ferry or work boat operating in sheltered waters.
They are all operated for profit, or as adjuncts to commercial organizations, and are therefore all
commercial vessels but their insurance policies may have widely different provisions.
The Order of Events
For obvious reasons every case of damage and repair differs but, in practice, PA claims usually follow a
reasonably consistent pattern with matters occurring in roughly the following order:
1. Owners report the casualty to underwriters through their brokers or insurance department.
2. Underwriters (possibly through the brokers) appoint the Salvage Association or their chosen surveyor.
3. The ship owner will probably appoint an average adjuster at this stage if the claim is likely to be large
or complex.
4. The underwriters surveyor proceeds to the casualty site. The attendance of the class and any other
surveyors ideally take place at about this time too.
5. The ship owner, with the surveyors advice, invites repair contractors to attend a joint survey
with surveyors and his own representative, usually the master or their companys superintendent,
for a preliminary discussion on the type and extent of repairs required. (If it was possible at this
survey to agree on details and dispense with a second survey, a specification for repair can follow.
Otherwise a second survey will be required when a better knowledge of the detail of the damage
has been ascertained.)
6. The specification is drawn up as a basis for tendering for repairs. (Ideally the surveyors and others
present at survey sign a field survey report in which they agree the details of damage and repairs to
be carried out.)

7. The underwriters surveyor reports back with preliminary advice to the underwriter, preferably
within 24 36 hours.
8. Unless repairs are to be deferred, tenders are called with local repairers, or other arrangements are
considered. Other nearby ports may be considered.
9. Discussions and negotiation take place with repairers over the proposed repair contract if it is
intended that repairs proceed at the present port.
10. Provided repair is the logical option and prices reasonable, the owner instructs repairs which then
proceed.
11. The surveyor provides a further report to the underwriters on progress to date and details of the
owners proposals for repairs. (This usually only arises if the time taken for repairs is likely to be
lengthy or if other, possibly contentious, matters arise once they have been started).
At about this stage the adjuster and the underwriter will have considered whether liability attaches to the
policy or whether the claim should be admitted or declined. Assuming the claim is accepted the process
carries on.
12. On completion of repairs or shortly afterwards (likely to be after the departure of the vessel
from the port) the surveyor submits his formal report. This provides full details of the casualty, the
damage and repairs, and the owners allegation as to cause, with log extracts but it is unlikely that
repair accounts will have been prepared at this stage.
The surveyor will probably be expected to submit with the report his fee for his services, taking into
account the likely cost of his time required to study the repair accounts when later received, and
make recommendations regarding them.
13 In due course, accounts will be sent to the owner for payment and, when settled, copies will be
submitted to the underwriters (probably through the brokers) and passed on to the average
adjuster.
14 Copies of these paid accounts are then sent by the average adjuster to the surveyor for approval as
being reasonable regarding quantum and in respect of the damage agreed by him as casualty damage.
(On rare occasions, if repairs are completed and costed, copies may be available to the surveyor
before he leaves the area,)
15. After annotating them as necessary, the surveyor then signs the accounts and submits an addendum
to his earlier formal report, with additional comments, to the underwriter who passes them to the
average adjuster. (These are usually paid accounts, but sometimes underwriters will make a progress
payment without accounts being already paid, subject to the surveyors approval).

16. The adjuster then considers to what extent the costs claimed in the accounts amount to the
reasonable cost of repairs and to any specific terms and conditions of the policy which may exclude
certain costs.
17. In all probability, unless the surveyor has been very perceptive and anticipated any difficulties, the
adjuster will write to the surveyor seeking clarification and perhaps an explanation of specific points.
(This correspondence can sometimes go back and forth for a while until the adjuster has all the
clarification needed and is satisfied on all the points raised; hence the desirability of the surveyor
forestalling them as much as possible with a detailed report).
It is possible that the average adjuster, who is not an expert or qualified in ship operations, may at
this stage engage the services of a marine consultant either because the surveyor may lack expertise
in some specific area, or the adjuster may need advice to consider certain costs that have been
incurred, or may wish an independent view.
18. The claim is adjusted and detailed in the average adjusters statement of claim passed to the ship
owner. He hands it on to the underwriter, probably through his broker.
19. The underwriter, through the brokers, then makes settlement of the adjusted claim if he accepts
all of the adjusters handling of costs as presented. (The underwriter usually includes the average
adjusters fee as part of the claim settlement.)
It is particularly with items 12, 15 & 17 above that the surveyor can be of considerable assistance to
the average adjuster or, unfortunately in some cases, less than cooperative. A busy surveyor who may
feel unable to make any further charge for his time, having submitted his fee at stage 12, may take an
unreasonable time to check and return accounts, or he may delay his reply to queries or may not fully
answer them. (It is usually considered reasonable for the survey fee, if submitted at stage 12, to include
the possibility of some such correspondence and to be charged accordingly).
Strictly speaking average adjusters should communicate with the owners who appointed them. Owners
then go to their brokers and they to underwriters. Instructions to the surveyor regarding checking of
accounts and the like should come from their appointing underwriter but this is usually an understood
and not in need of a separate instruction.
However, in practice, it is usual after the underwriter has passed the surveyors formal report to the
average adjuster (who will have also received the owners report and probably also the class report) to
agree to the average adjuster and the surveyor communicating directly with one another to hasten and
clarify any necessary details regarding the repair accounts.

The Survey
If the survey is being carried out on the vessel covered by the instructing underwriters policy, there
is unlikely to be any difficulty with the surveyor obtaining access to the vessel and receiving every
cooperation from the master and owners superintendent.
Surveys on third party vessels will often receive less cooperation, even hostility in some cases, depending
upon whether the third party sees himself as likely to be the winner or loser when claims are settled.
Winning the confidence of the master of the other vessel will be important. (There are important
differences in procedure where the surveyor is concerned with third party surveys and the following
paragraphs on surveys only partly apply to them. These differences are addressed later in this unit).
Surveys on own ship should be accompanied by a representative of the ship who may be an owners
superintendent, a ships officer or sometimes a surveyor appointed by the owner. It is highly desirable
for the class surveyor to be present too so that repairs can be agreed that will satisfy class as well as
underwriters. (In some cases the underwriters surveyor may be the same person as the class surveyor).
The Principal Purpose of the Survey
Survey on the assureds vessel usually involves three stages. They are to ascertain:
the nature of the casualty

the extent of the loss or damage
the cause of the loss or damage
Other matters may arise from these and further information may be required, such as the
recommendations for mitigating the loss, usually the type and extent of repairs, or the identity of any
party who may have a liability, i.e. the other party in a collision. (A brief study of the sample report in
Appendix A will assist in an understanding of the following few paragraphs).
The Nature of the Casualty
A general understanding of the nature of the casualty is required and it should include answers to the
obvious questions of what? where? when? who? and why? the latter not including a detailed
explanation of the cause which is a separate and sometimes complex issue discussed shortly. However,
a few words describing the incident as grounding, collision or fire or as appropriate are adequate at
this stage.

The Extent of the Loss or Damage
Following a general description, this calls for a record of the extent of loss or damage in detail and the
surveyor must provide exact dimensions of the damaged areas and their actual location.
Photographs, sometimes taken after numbering or other identification has been written on the steel
with a felt pen, are valuable for this. Often an indication of scale can be quickly conveyed if a ruler
appears in the photo.
This information is necessary so that it is available later in the event of a dispute, particularly as repairs
may be deferred and carried out at another port following temporary patching which may destroy
some of the evidence. With dimensions recorded, at least the steel content in the necessary repair can
be assessed and a knowledge of the quantity of steel required has a significant influence on the cost.
Estimating labour content in a repair can also be assisted from a knowledge of the quantity of steel
content.
The surveyor is also required to consider and record his recommendations for repair or whatever else
is necessary to minimise or rectify the damage and return the vessel to as near pre-casualty condition as
is practical. This will usually be done in association with the class surveyor.
The recording of the detail of the extent and repair is usually achieved by listing each item, starting at
bow or stern, in two columns as found and recommended. (To achieve this it is usually necessary for
the shell expansion plan, the general arrangement plan and others to be available.)
The Causes of Loss or Damage
Finding the cause of damage is all important in considering whether the proximate cause of the loss is
an insured peril and therefore whether the assured has a claim under the policy. In some cases it may
be quickly obvious but it can also be a complex matter requiring considerable thought and examination,
particularly when associated with machinery.
Even if liability is not an issue a surveyors part in investigating cause may result in the saving of lives and
substantial costs in the future. It is an essential part of a surveyors role.
If the casualty concerns a collision or other third party involvement, the discovery of the cause may be
relatively straightforward but will still require a thorough investigation and understanding so that the
liability attaching to either, or both, vessels can be considered. (This investigation may require a nautical
surveyors skills, often with legal input.)
When making a claim on underwriters it is usual for the assured (usually a ship owner or charterer)
to put forward his allegation as to the cause of the loss in support of his claim. This allegation will
have been arrived at after the assureds staff has considered all the evidence and, if necessary, retained
experts (i.e. metallurgists) to advise as well as the surveyors.

The onus of proving that damage or loss has been caused by an insured peril normally rests with the
assured but it is only necessary for him to present a prima facie case. If the underwriter contends that
the alleged cause falls within the exceptions in the policy, then the onus shifts to the underwriter to
prove that he has grounds for declining the claim.
For the underwriters surveyor, the requirement to determine cause is an important part of his role but
whether he should necessarily report his opinion in the formal report is a moot point. (This is covered
further under the heading of Reports.)
If the assured asserts a cause of the loss or damage which conflicts with that of the underwriters
surveyor, the latter must consider the matter very carefully and have good reason for his disagreement if
he is not to lose credibility.
Such disagreement is uncommon when there has been co-operation between the surveyor and the
assureds representatives but it does sometimes occur. It is then necessary for the surveyor to do all
he can to keep the evidence of anything upon which he might have based his contrary opinion, taking
samples to assist possible later determination of the cause by others.
The average adjuster will be called upon to consider cause and, especially where there is disagreement
between assured and surveyor, he can be expected to seek opinions from his consultant, based upon the
reported facts and other evidence.
Which of several possible causes?
Mention was made above of proximate cause. Section 55 of the MSA 1906 states that the insurer is
liable for any loss proximately caused by a peril insured against but not otherwise. Other causes are to
be disregarded.
Surveyors need to be mindful of the possibility that there may be several possible causes. The surveyors
care investigating all the relevant facts is likely to be fundamental to the underwriter/average adjuster
considering which to reject.
This possibility arises especially with machinery claims.
For example, if a bearing fails was latent defect responsible? (latent defect is explained in Part 2 when
considering marine insurance).
Or was it the consequence of ordinary wear and tear? Or was the wear aggravated perhaps by a
lubrication failure? If the latter what then was the cause of the lubrication failure? Was it a failure of the
oil filtering system or lack of oil in the lubrication system?

There are several possible root causes of the bearing failure and amongst them could be crew
negligence too. (A definition of negligence is Failure to do (act) or not do (act) as a reasonably
competent and prudent person would do (act) or would not do (act) under the circumstances at the
time. There can be negligent acts of commission or omission.)
When considering an owners allegation regarding cause as the basis for a claim the surveyor has to be
clear in his mind what factors led to the failure and can be considered causative.
More than one cause
There can be more than one cause and possibly a succession of causes. Few accidents arise simply
from one cause and most occur where several things have gone wrong in succession very often the
accident would not have occurred if any one of them had been absent.
If there is more than one cause, the surveyor needs to consider them all and be prepared to describe
them separately. This will assist the adjuster or his advisers to consider the proximate cause which is the
most dominant and effective cause of the loss. It is not necessarily the nearest in time to the actual loss
although often it will be.
It is also essential, after due consideration, to consider whether there may be an underlying cause
manifested in a later and, perhaps, more evident cause.
Superimposed damage
Another possibility for consideration is that damage may have occurred in an earlier incident and been
aggravated, or partly disguised, by subsequent damage caused in the incident which is now the subject of
the surveyors enquiry. The surveyor needs also to consider superimposed damage. This is sometimes
referred to as multiple damage, damage on damage or overlapping damage.
It arises where new damage occurs in the region of unrepaired earlier damage. The surveyor will
probably be concerned only with the latest damage and needs to consider its repair costs as though the
earlier damage was not present. Where damage occasioned by more than one incident is present, the
surveyor must be prepared to highlight it as necessary.
Damage can often be exacerbated when it occurs in an area where there is already weakness from
corrosion or general wear and tear. Although it is not the surveyors role to consider how this will affect
costs recoverable from underwriters or third parties, it is important that he identifies the facts and can
provide the costs of a normal repair and those now arising as a consequence of the pre-casualty condition.
Information of all aspects of cause are of great importance to those concerned with marine casualties
and, since surveyors are the eyes and ears in most cases a heavy burden of responsibility falls on their
shoulders. They must be thorough in determining and recording cause or causes so that costs associated
with them can be analysed.

Remote causes
Except in government agencies, few surveyors have training in accident investigation but for the
discussion above most have sufficient practical experience to be able to consider the more direct
causes of accidents.
What then of the possibly remote causes? Often a cause will lie further afield and many a failure in
a companys management (or mis-management) has played a major part in what went wrong. The
surveyor, or possibly the average adjuster, may need to look into this area to obtain an insight into a
cause of an accident.
Poor ship design is often a significant contributor in accidents. Naval architects often get it wrong and it
is surprising that so many ships are built with elementary problems which could have been prevented by
the attention of someone with an intimate knowledge of practical ship operations.
Fatigue is another well recognized cause of accidents at sea and enquiry into this aspect is well within
a surveyors capability. He needs to enquire into the work, rest and sleep patterns of the key players
the master, officers and crew during the 72 hours before the event. A surveyors investigation of
their work/rest periods may be revealing and reliance can often not be placed upon the official records
kept by the master which may be have been falsified.
Language difficulty lack of a common language is a common source of misunderstandings in ships

today, It needs considering.
The surveyor should be aware of, and consider, the many remote possibilities which can contribute to
accidents and major casualties.
Proof of the cause
There are two standards of proof required by the law. One applies to criminal cases and the other to
civil cases. In criminal cases an allegation has to be proven, beyond all reasonable doubt, as in a murder
trial. In civil cases (those with which surveyors are concerned) the standard of proof is, on the balance
of probabilities.
When surveyors are required by their instructions to establish the cause of loss, whether to be
expressed in their report or not, they sometimes have difficulty in understanding to what extent the
cause has to be proved. What constitutes proof they may ask? The above statement should suffice to
indicate that a prima facie case will be established if a cause is proved on the balance of probabilities.
This means that the surveyor has only to be satisfied it has been proved to the extent of being more
probable than not literally a 51% probability. If it is probable and not merely possible then, strictly
speaking, it has been proved.

Sometimes a surveyors opinion will conflict with an owners. Of course the surveyors opinion may be
questioned and evidence obtained that may suggest that it is in error. The assured might then allege the
cause as being due to something else and other experts are then likely to become involved.
In a marginal case where the surveyors opinion might conflict with an assureds opinion and the latter
be no more than say a 51/49 possibility, the surveyor would then, at least in theory, be entitled to
disagree with the allegation, contending that the owners opinion on cause had not been proved.
Although strictly speaking this would indicate a failure on the part of the assured to adequately
discharge his onus of proof, in practice, such a marginal situation is unlikely and, clearly, if the surveyors
counter-opinion is also marginal and lacking in conviction one way or the other, he would have to be
very cautious in disagreeing with the assured.
If a surveyors opinion is marginal in disagreeing with an assureds allegation the underwriter would
be likely to give the claimant the benefit of the doubt. It would save him incurring the further costs
of seeking other expert opinion and possibly ending up in court with the surveyors opinion being
discounted.
Where a surveyor feels obliged to disagree with an assureds alleged cause of damage, contending that
he has failed to satisfactorily discharge his onus of proof, the surveyor will need to be careful how he
expresses his dissenting opinion in the confidential letter that must accompany his final report.
It is, therefore, highly desirable that the surveyor, if disagreeing with an assureds allegation, should
state in the confidential letter the extent of his own conviction. He may need to explain that he is
almost certain that the allegation is incorrect, giving his reasons, or that his dissention is only marginally
supportable, or some shade between. The underwriter is then able to consider his position with a
reasonable understanding of it and thus make a balanced decision.
To decline the claim on slender grounds could cause the underwriter to seriously lose goodwill with his
client and possibly incur significant costs. In such cases he may prefer either to admit liability and make a
settlement, or possibly make an ex-gratia payment, although such payments are made reluctantly.
It is important to remember that it is not the surveyors responsibility to advance his findings as the
basis for the owner to make his claim but, of course, investigation of the cause is one of the surveyors
major responsibilities on behalf of the underwriters.
Depending upon the nature of the damage, and if the ship owner lacks adequate expertise within his
own organisation, he may need at some stage to seek expert help to establish essential details which
will assist in arriving at the cause of loss for his allegation.
It is possibly unnecessary for the surveyor to retain experts at this stage but he may be wise to take and
keep samples for later analysis. They may be required in the event of the ship owners experts presenting
an opinion which conflicts with his own, or if for any reason he feels unable to accept the opinion of the
ship owners experts.

In practice the surveyor and the owner work together to establish the cause and, in most cases, will
usually arrive at the same conclusions. Occasionally they will differ and the surveyor will then have to
accept that, either there is simply a lack of adequate proof either way, or that he holds a substantially
different view from the owner.
If the ship owners choice of experts has been made in consultation with the surveyor, as will often be
the case, it is unlikely any problem will arise but, if not, the surveyor may feel that the chosen expert
lacks adequate experience or may have a bias towards the party appointing him. He may then, probably
in consultation with the underwriter or average adjuster, seek alternative expertise himself.
Surveys of Third Party Vessels
Following collisions or other casualties involving a third party the underwriters of both assureds are
likely to appoint surveyors.
A surveyor, having surveyed damage to own vessel, will frequently be instructed to carry out a damage
survey of the other vessel and act to protect his principals interests. He attends as usual, without
prejudice to own underwriters liability and with no authority to discuss the cause of the collision with
the third party. Indeed he must avoid being drawn into any such discussion.
He surveys the damage and forms his own views on appropriate repairs so that the costs can later be
considered as it is likely the third party will claim against the surveyors own vessel even though the
claim may be all successfully refuted in due course. Under no circumstances should the surveyor sign
any third party repair accounts. (In most collision cases it is rare for the courts not to find some liability
attaching to both vessels and they apportion the costs accordingly).
Surveyors must attend to the survey with an open mind and report impartially as it will be important
for own underwriters lawyers to obtain a completely balanced view. As usual they are on a fact-finding
mission and it is important they distance themselves from the third party vessels concerns other than
for the reasonable approach to her repairs.
An important aspect of the survey and report will be the provision when possible of any information
which will assist an estimate of speed and the angle of blow so that relative courses at the time of
impact can be considered. (Sketches and photographs are particularly valuable.)
In collision cases, the following information will be required by the underwriters lawyers and consultant.
Some may be obtainable by the surveyor but much of it is likely to have changed since the collision.
The surveyor may have to rely upon information reported by own vessel and where this is the case he
should make it clear that he has not obtained the evidence himself.
Important items are:

Estimate of speed and angle of blow.

Weather conditions at the time of the collision .
Draft of each vessel before impact.
Types of cargo lost or damaged in way of the impact.
(Usually a cargo surveyor will be instructed for this.)
Condition and use made of navigation and safety equipment, light, sound signals, steering gear,
main engines, and where appropriate pumping and fire extinguishing systems.
(Alternatively a nautical surveyor may be instructed).
Log extracts.
(Ideally from both vessels but it is unlikely that from other vessel will be forthcoming).
As usual much depends upon instructions received and some of the above information may have to be
gathered by the lawyers who will almost certainly be appointed following a collision.
Surveyors Reports
Although there are no specific rules with which hull reports should comply, there is a good deal of
established custom and a surveyor will not go far wrong if he observes the practices indicated in this section.
The information in the report is, of course, based principally upon the observations and findings at the
survey. Apart from the surveyors observations of the actual casualty damage, there must be enquiries
too and this will often involve sighting documents on board.
Among the information which the adjuster will need and must be obtained by the surveyor,
are some or all of the following:
Expenses involved in removing a vessel for repair (she may have to go to another port for repairs).
Costs of repair to the hull or machinery.
Dry docking charges.
Port dues.
Ships costs associated with dry dock or a repair berth of which the following are often involved:
Gas freeing and tank cleaning.
Fire, security and gangway watchmen.
Fire-fighting equipment.
Tugs and pilot to shift berth.
Owners superintendents costs (or owners surveyors fees).
Water, electricity, shore telephone, garbage removal.
Ships agency fees.
Cargo discharge/loading costs (if solely for repairs).
Details and costs of any temporary repairs carried out.

Whether all or only part of the repairs were completed (if the latter, which ones were deferred
and their expected cost).
Whether previously deferred repairs were carried out (if so their cost if included in the repair).
Whether owners repairs and maintenance were carried out. If so estimated time afloat and in
dry dock.
Whether the above were necessary for seaworthiness.
Amount of overtime worked by repairers, if any.
Man hours at different overtime rates and with the number of days saved afloat and in dry dock
as a consequence.
Estimated times of working/running days, afloat and in dry dock.
Comparative costs of air freight and sea freight on parts and likely costs of delay if the latter
were used. (Today this usually only applies to very heavy and expensive air freight items).
Any credits for material removed during repairs.
Extent of the crew involvement with repairs.
Value of owners stores and parts used for the repairs.
Costs of scraping and painting the vessels bottom. (These should be identified for touch-up, anti-
corrosive and ant-fouling painting costs.)
Reporting on cause
Earlier, mention was made of the underwriters surveyor and his duty to investigate cause, but a caution
was indicated regarding the reporting of it.
One view is that the surveyor should do no more than report the facts upon which cause can be
considered and avoid expressing his opinion on cause in the formal report except to state whether he
agrees or disagrees with the assureds opinion.
He should include the assureds allegation in his formal report, stating whether he agrees or disagrees
with it, but without further comment. The commonly used wording is, The damage found was (was not)
considered attributable to the alleged cause on the information provided or simply, I concur or I do not concur.
More often than not he will probably agree with the assureds allegation but if not he will then be expected
to convey his own opinion to the underwriter in a confidential letter accompanying his formal report.
The contrary view is that the surveyor is required to express his opinion in his report. This is more
likely to occur where the surveyor is required to report specifically to the appointing underwriter
rather than in a formal report which is seen as a public document.
It often arises with relatively small claims or those involving small commercial or pleasure craft when no
average adjuster has been appointed and the claim will be adjusted in-house by the underwriter.
Surveyors need to know which of these two views are those of the appointing underwriter.

Reporting on new for old and betterment
This can be a difficult area. The surveyor, not being the claims adjuster, is not concerned with applying
any deductions of new for old or for betterment from the amount claimed, but he does have a
responsibility to report any facts relating to new for old and betterment.
A typical example of where any deduction new for old would be inapplicable is where old but sound
hull plating has to be replaced to effect a repair the owner is rarely likely to have benefited by the
replacement of old for new.
Although the Rules of Practice of the Association of Average Adjusters provide for the customary
deduction of one third new for old in particular average (except in the case of anchors which are
allowed in full and chain at one-sixth only) this provision is frequently overridden by clauses in the policy
which often clearly state when and where new for old deductions are applicable.
Generally, in the principal Institute Clauses attached to a policy and with which we are concerned in
this unit (Hull, Fishing Vessel and Yacht but excluding the latters Racing Risk Extension Clause) no
deductions new for old are applicable and, although the surveyor may rightly have drawn attention to
where new has replaced old, the adjuster is then in no quandary over what to do about it.
Betterment is a little different. There is no difficulty when the policy document covers a specific case, as
in the ITCHull and IYC which clearly provides for exclusion of Loss or expenditure incurred in remedying
a fault in design or construction or any cost of expense incurred by reason of betterment of alteration in design
or construction.
But what about other not uncommon cases where an owner is significantly benefited by work carried
out as the consequence of a casualty but where there is no specific provision in the policy covering it as,
for example, with damaged machinery where parts, substantially worn and aged, have to be replaced to
repair casualty damage.
Stripping down an engine may be necessary to replace damaged parts (for which there may be no new
for old provision) but a prudent owner may well take the opportunity for other work to be carried
out at the same time. Clearly the surveyor has to satisfy himself regarding the extent of any additional
work done and which may be chargeable to the owners account, but what about the benefit to him as a
consequence of the stripping down which also enabled him to carry out this additional work?
A useful guide by Richards Hogg, Average Adjusters, on hull claims states:
If, in the course of damage repairs, an owner decides to carry out improvements, either to prevent a re-
occurrence of the damage or to improve the efficiency or earning capacity of the ship, he must bear the
additional cost of this work. However, it may sometimes be impossible to replace exactly a particular part or
even a whole engine if the original is no longer available. In such a case a more modern replacement which
incorporates improved features may have to be fitted: the improvement is therefore unavoidable and no
disallowance would be made.

It may be debatable whether a betterment deduction is appropriate, for example, when such items as
wetted, almost outdated, distress flares have to be replaced following water ingress into the hull by an
insured peril. If they can be replaced with equally dated second-hand flares this is all that is required but
a prudent owner is likely to replace with new and might reasonably be expected to bear the additional
cost. (Whereas the Institute Clauses generally have only the one betterment provision, many company
pleasure craft policies have much wider exclusions stating where betterment applies and would see this
as betterment, for the owners account.)
The question of reasonableness must come to the fore and this is where both an adjuster and an owner
may have to be practical and reasonable, perhaps offsetting one concession against another. Adjusting is
an art as well as a science!
In general it may be said that betterment will often be beneficial to an owner but in the absence of a
specific exclusion of that benefit in the policy an adjuster will have to be very circumspect in disallowing it.
The simple advice to the surveyor is that he should make relevant and factual statements concerning
new for old and betterment, leaving it to the adjuster to decide how to handle it.
Format
In commercial hull claims there is probably more uniformity in the reports format than in other types
of marine surveying except cargo surveying. Printed forms are unusual and most reporting is in narrative
form, well signposted with headings.
The following inclusions in groups of paragraphs, are common in the surveyors formal report and
although there is no mandatory format, in most of them roughly the same sequence is followed:
1. HEADING AND OPENING PARAGRAPHS

A report reference number.
An opening paragraph prefixed by THIS IS TO CERTIFY.
Name of attending surveyor.
Firm, if any, on whose behalf he attended.
Name of appointing party (usually the underwriters, the brokers or the SA).
On behalf of whom, (if other than the appointing party usually the underwriters).
A statement that survey was attended with the consent of the owners. On what type
of vessel.
2. THE NAME OF THE VESSEL (Prominently).

Her Official Number (possibly also her IMO, and Lloyds Register number).
Her gross tonnage and (possibly also net or deadweight tonnage).
3. A statement that the survey was carried out, afloat, or in dry dock at (port and anchorage or at
berth name/number, or in named/numbered dry dock).

4. Purpose for which survey was required (nature, cause and extent of damage or whatever other
reason) Note that cause here requires only a simple statement e.g. following collision, fire,
machinery breakdown etc.
5. Date, location and general circumstances in which the casualty was said to occur.
6. In two columns, a detail of the Damage found and Repair recommended.
7. Names of other parties at survey and the organizations they represented.
8. The owners allegation as to the cause. (If agreed, the surveyor would state the damage found
was considered attributable to the alleged cause on the information provided or, if in doubt, or
disagreement, he should state that he does not concur.) Note that there is the alternative school
of thought that contends that the surveyor should state his opinion on cause.
9. Details of any relevant log entries
10. Where, when and by whom repairs have been or will be carried out, and whether permanent,
temporary or deferred.
11. Other damage and/or owners repairs carried out if applicable (if owners repairs whether for
seaworthiness or not and, if so, then estimated time required in dry dock and/or alongside for them).
The following information is important too and should be included where applicable:
Date casualty repairs started.

Date of last dry docking.
Date vessel dry docked for these repairs.
Date vessel undocked.
Estimated time required for casualty repairs (If carried out separately, working / running days,
afloat and in dry dock).
If overtime worked (number of days saved afloat and in dry dock).
Time under way between survey port and repair port and time on repair related trial trips.
Credits for scrap.
Repair costs (amount agreed, also amounts separately for dry docking and dues, tank cleaning
and general expenses) or, if no repair accounts had been sighted at the time of issuing the report,
a statement that If received and approved they will form an addendum to this report.
Overtime worked and time saved.
Date and port of issue,
Then follows the surveyors signature
Annexed to the report would be log extracts, classification survey report and any other
relevant documents.

Number and Timing of Reports
We must now consider the number and details of reports. They will vary to some extent depending upon
the nature of the casualty and the time taken to make good any damage and return the vessel to service.
Underwriters special instructions may also have to be taken into account but in the absence of any
special requirements the following is typical.
Preliminary advice
This is required promptly after the surveyor has made a first assessment of the situation. This can
usually be by fax or e-mail or possibly by telephone but, if the latter, it should be promptly followed up
in writing. This report is confidential to underwriters.
Typically, following a first attendance at a damage survey, the preliminary advice should include:
Brief circumstances of casualty.

Nature, cause and general extent of damage.
Owners proposals for repair and the surveyors comments regarding agreement or otherwise.
Estimate of repair costs.
Any other immediately relevant matters.
If a collision is involved the underwriters might require the surveyor to provide a without prejudice
survey of the other vessel with similar information in the preliminary advice. (This might depend on
whether the third party vessel is in the same port or not.)
Although it is not universal practice to prepare a field report there is a good deal of merit in it. This
report covers only the details of the survey and the recommended repairs. It is signed by the parties
involved with the survey, principally the owners representative, the repairers, the underwriters surveyor
and the class surveyor. It indicates and confirms a general agreement over the repairs required.
This report may be sent to underwriters but that is not its prime purpose which is to help in preventing
misunderstandings later between the various representatives with an interest in the repairs.
Progress report
Depending upon how long the repairs are taking and their complexity, the surveyor may be expected to
submit a report updating the situation. It should contain any necessary amendment to repair estimates
and is confidential to underwriters.

Formal report
Even though the repair accounts may not yet be available for the surveyor to check, the surveyor should
prepare and submit the formal report as soon as he has all the necessary facts as this will assist in
starting the adjustment process and avoid undue delays in settling the claim.
If the accounts are available for submission with the report so much the better but, if not, it is important
that no estimate of repair costs should appear in this report.
Note: The preliminary and progress reports are confidential to underwriters and assist in keeping them
informed whereas the field report, if any, and the formal report, are public documents. The formal report
will be made available to all parties and particularly to the average adjuster for his adjustment of the
claim. It then becomes part of, or at least an attachment to, the Statement of Claim.
The surveyor must be particularly careful to include all the essential details and keep the report factual.
The only exception is that he is likely to be required to give either his own opinion on the cause of loss
or only an opinion on the owners allegation, depending upon instructions.
In the formal report the surveyor should not express an opinion on the cause of the loss unless
instructed to do so but will probably be expected to indicate whether he agrees and accepts the
owners allegation or not. If no agreement is reached the surveyor should explain his reasons in a
separate, confidential letter to the underwriter.
If this occurs the average adjuster will almost certainly then have to consult with a technical adviser
with whom he will have to carefully consider the surveyors submissions when challenged on his
disagreement with the owners allegation.
Whenever a surveyor cannot agree with the owners allegation as to cause, or when he believes certain
information should be conveyed to them which is clearly not suitable in the formal report available
to any interested party, he should submit a letter of explanation in confidence as mentioned and
emphasised above.
Photographs
The value of photographs, particularly in amplification or clarification of damage details, should never
be underestimated. (When photographing shell damage it is helpful if the plate numbers have been first
identified by marking with a felt pen.)

Photos without explanation are limited in value and each should have an appropriate caption to explain
it and put it into context. Depending upon the complexity of the subjects illustrated either the actual
captions should be sufficiently detailed or a separate sheet of paper should accompany them to explain
the photos.
Addendum to the formal report
If the repair accounts are not available when the formal report is prepared, the surveyor will be
required to submit an addendum to it later commenting upon repairs as necessary after he has had the
opportunity of checking the accounts.
While there is no universally correct way of annotating repair accounts, when they are checked it is not
unusual to see red ink used with appropriate comments against items where the surveyor considers it
necessary to explain their exclusion or especially their inclusion.
The surveyor should be careful not to approve accounts which state For underwriters account or
Insurance damage or anything which, after he has signed them, might suggest that he was approving
costs claimable against underwriters. He is in no position to do this.
When signing, the surveyor should check each page and it might be convenient to use a rubber stamp
bearing the following or a similar legend:
Approved in the amount of , subject to underwriters liability and adjustment in the usual way.
Signed: . Report No: Date:.
He is approving accounts as to quantum only and as fair and reasonable for the work carried out. He is not
approving them for liability which is not his concern.
The work carried out, as stated in the accounts, must be in accord with the damage and repair
proposals stated in the surveyors formal report and the report must contain all the essential
information for the work in the repair accounts to be reasonably identified.
If the repair has been carried out against an estimate as distinct from a firm quote, the surveyor could
expect to examine any sub-contractors accounts included in the final accounts to satisfy himself that
they properly cover the work involved and have not been subject to an unreasonable add-on.
(The main contractor is entitled to make a profit from engaging a subby but little more than 10% is
usually acceptable but occasionally, for good reason, up to a maximum of 15%).

The surveyor must explain in the addendum to his report which accompanies the accounts the reason if
there are any differences and give reasons if there is not proper correlation.
A surveyor should never sign third party repair accounts nor give any indication whatever that
he approves them.
Labour in repair accounts
The surveyor should insist that in addition to itemizing work and materials in the accounts, there is also
a clear itemization of the labour content too.
Unless achieving an overall cost saving, underwriters do not normally expect to be called upon to
include overtime rates in a claim against them.
Overtime may be worked in shipyards for several reasons. It may be simply a standard practice for
so-many hours per week to be worked as overtime as an incentive bonus to the tradesmen, or a
requirement of the ship owner to hasten the return of his vessel to earning freight, or in some cases to
reduce overall costs of the repair.
The later case would typically involve the working of overtime in dry dock to reduce the time in it and
thereby the dry dock charges.
It is therefore not enough simply to show labour as a single item. A breakdown of overtime is required
and will be a target for the average adjuster in considering the reasonable cost of repairs.
The surveyor can be expected to analyse the labour content of the repair detailed. As an example:
Total labour: 1550 hours at ordinary time of 30 per hour

275 hours overtime at time & a half 40 per hour
85 hours overtime at double time 50 per hour
Included should be a statement that while in dry dock 125 hours are at ordinary time, 56 at time-and-a-
half and 25 at double-time.
(Time-and-a-half and double-time rates do not increase the charge-out rate by the amount their name
suggests because the overheads remain fixed and only the rate paid to the worker is increased.)
He would also consider the reason the overtime was worked in dry dock to consider what savings, if
any, were achieved that would otherwise be claimed against underwriters if the claim is admitted under
the policy (e.g. the overtime incurred saved a days dry dock dues @600 per day).
With this information the surveyor can indicate, in the addendum to his final report accompanying the
repair accounts, that certain other savings may have been achieved by working overtime.

Other cost considerations
Air freight was a bone of contention until it became the usual practice of the prudent uninsured ship
owner a test of reasonableness to pay extra to reduce idle time for the vessel.
It is usual today to allow air freight in the cost of obtaining parts except possibly for exceptionally heavy
items (i.e. a large crankshaft) and in any event there may be a clause in the policy allowing air freight.
While new for old is often permissible betterment in some items may have to be considered and
should be addressed by the surveyor who might suggest it as a percentage (e.g. replacing an old
electronic item with a new one when a second hand one could have been obtained).
If the surveyor can indicate what costs are attributable to certain specific work this will assist the
average adjuster in apportioning the costs between those which are insured and uninsured; in so doing
he may save unnecessary correspondence with the adjuster later.
However, in the absence of knowledge of the policy contents, it may be difficult for the surveyor to
identify them in advance of a possible query. He would have to be careful not to waste time on analysis
where there may be no need and early liaison with the adjuster will probably be well rewarded.
Salvage
Although this is not the place for salvage contracts to be considered in any detail, Part 1 would not
be complete without mentioning them as they involve surveyors. In many cases, the increased size of
vessels and the problems of salvaging them and their cargoes, is a major concern which can see a prolific
source of surveyor employment.
Surveyors will usually be instructed in cases involving a salvage operation and may be appointed by any
party who has an interest in its successful outcome. Depending on the casualties location there are
likely to be several surveyors involved in representing the interests of the many parties involve.
A salvage operation is likely to call for the following parties, and possibly others, to appoint
independent surveyors (also stated are some of the reasons for their likely involvement):
Hull underwriters costs of hull damage and salvage costs

P & I Club costs of pollution and for wreck removal
Salvors approval of professional competence and of costs incurred
Cargo underwriters care of cargo and salvage costs
Flag state investigation into cause of casualty
State where incident occurred Investigation into cause and pollution control

Although the legal aspects of salvage has not been explained, brief mention is now made of the following
which are some of the arrangements likely to form the basis upon which the salvage may be carried out:
Lloyds Open Form (LOF )

a lump sum in the event of successful outcome
a daily rate - with expenses, regardless of the outcome
a combination of the last two.
There was a time when the first consideration of a salvage operation was automatically to preserve
the ship and recover as much value as could be achieved for as little expenditure as possible. This has
dramatically changed with environmental concerns.
First consideration is now almost always the prevention of pollution by oil spilt as a consequence of
the casualty and during the salvage operation and it will be the P & I surveyor, rather than the hull
underwriters surveyor, who will be the most concerned with this on behalf of his principal.
Another relatively recent development is that today, cargo underwriters tend to become more actively
interested in salvage cases as they unfold rather than await the result when it is a fait accompli. This will
likely involve appointing their own surveyor to act for them.
The vessels underwriters will almost certainly instruct a hull surveyor, often from the Salvage
Association, to look after their interests, and this diploma course unit is principally concerned with
the role of the hull underwriters surveyor who needs to understand his role on behalf of his principal
which consists of cooperating with the owners representative, probably the master.
They can also be expected to appoint maritime lawyers who will be expected to provide guidance to
the surveyor in many instances but communication may be difficult once the surveyor has arrived at the
salvage site.
Although in no way assuming any of the masters responsibilities the hull surveyor may, often being one
of the first on the scene, be able to help the master with his knowledge of available salvage services in
the area and possibly advise on arranging a salvage contract.
However, recent practice is that modern communications have largely taken the responsibility for this
out of the masters hands and it is now usual for the owners head office to arrange the contract in
discussion with underwriters and others who have interests often especially the state whose shores
have the greatest potential for pollution.

Assuming the surveyor is on the scene sufficiently early it is suggested that the following should be
considered and recorded by him as soon as possible:
1. Precise position.
2. Heading.
3. Time of grounding, state of tide.
4. Speed.
5. Nature of the sea bed.
6. Any damage, pollution, ingress of water, bilge and tank soundings.
7. Pre-stranding draughts.
8. Drafts aground and the time when taken.
9. Cargo, dangerous goods etc. Any deck cargo that can easily be jettisoned?
10. Any ballast on board.
11. Soundings around ship.
12. Estimate of amount of sea bed in contact with ships hull and its location.
13. List.
14. Stability aground.
15. Calculate the ground reaction.
16. What divers and diving equipment is available locally?
17. What tugs and salvage gear is available locally?
18. What lighters and barges are available locally for discharging cargo or fuel?
19. What lifting equipment, cranes and helicopters are available locally?
20. Does the casualty have operational cranes and derricks?
21. Do all the pumping systems operate satisfactorily?
22. Is auxiliary power (electrical, steam etc.) available?
23. Is the crew still aboard and likely to remain?
24. Does she present a hazard to other shipping?
There will be many thoughts going through his mind and these will present a further opportunity for
early recording, after which he should keep a time record of every event that occurs, with remarks
as appropriate.
The hull underwriters representative will be there principally to advise and record the facts as they
unfold and a video film taken during the salvage operation will be of enormous value. Record keeping
during the entire operation is certainly one of the surveyors priorities as salvors may inflate their
records of the problems and dangers encountered.

The underwriter may later have to counter claims for costs which were not reasonably incurred by the
salvors and contest the amount of the award sought by them. For these, the surveyors evidence will be
vital but it is still important that he acts independently and impartially.
The surveyor will be concerned to ensure that all reasonable steps are taken by the assured to mitigate
the loss although the assured will rarely have much direct influence over the salvage operation once
salvors are appointed and the salvage master takes over.
Once a salvage contract has been agreed the surveyor will then liaise with the salvage master but
continue to assist the master and be primarily concerned with hull underwriters interests.
In most cases, owners wish to see the salvage operation completed as quickly and successfully as
possible but hull surveyors should not overlook the possibility that masters may have been told not to
cooperate with salvors and to hamper their efforts so that the vessel may be considered a CTL.

Chapter 4. CLAIMS ON PLEASURE CRAFT
Introduction
Much of what has been discussed for commercial vessel surveying and reporting also applies to pleasure
craft. The primary role of the surveyor in all types of claims is to find and report the facts but there are
often significant differences in the way he goes about this where pleasure craft are concerned.
The surveyor instructions, particularly where specialist yacht insurers are involved, will often be limited
to attending to the damage and obtaining repair quotations. This is often the case as surveyors trained in
the appropriate trade have a sound understanding of the practical aspects of small craft construction but
little if any of marine insurance. Their surveys will often be limited simply to damage and repair aspects
alone rather than an ongoing involvement with the repairs and their progress.
Their very limited knowledge or interest in marine insurance means that many yacht surveyors are
unable to make adequate enquiries regarding other aspects the underwriters claims departments
then usually attend to these matters.
These possibly start with a claim form to obtain an assureds written statements covering the
circumstances of the casualty, and other important information. The claims adjuster then processes the
claim making further enquiries as necessary while the surveyor completes his survey and reports on
damage and likely repair costs.
However, where a surveyor has a good working knowledge of marine insurance as it applies to claims,
together with a limited but adequate understanding of small craft operation and construction, he may be
instructed in some small craft claims to fulfill the role of a marine loss adjuster, the marine equivalent of
the many non-marine loss adjusters handling fire, motor and general insurance claims.
Beyond the requirement to survey and investigate the circumstances of the casualty, report on quantum
and determine the extent of the loss, the insurance knowledgeable surveyor may also be required to
investigate and pursue any potential third party liabilities too. His instructions will sometimes extend to
adjusting the claim and may require him to make recommendations to underwriters regarding liability
under the policy.
For small craft claims there are occasions when even non-marine loss adjusters may be instructed to
carry out limited surveys and make enquiries for the insurer. This particularly arises inland where more
experienced surveyors are not available.
Non-marine loss adjusters usually have only a limited knowledge of small craft construction but it may
be adequate for inspections of mass produced small runabouts and yachts, treating them in a similar
manner to a motor vehicle insurance assessors inspection. However, their lack of marine insurance
knowledge will often prevent them from adjusting the claim satisfactorily and making recommendations
to insurers on settlement although some pleasure craft policies are not unlike motor vehicle policies.

Just as some knowledge of the content of a marine policy can be very helpful to a surveyor of
commercial vessels, the same can be said for yacht surveyors. A study of the clauses forming part of a
marine policy can be tedious but an understanding of the essential points will help to focus his mind
during a damage survey. Furthermore, if so instructed, it will help him to include in his report the
essential points to provide the claims adjuster with answers to questions regarding liability and the
adjustment of the claim.
In concluding these introductory paragraphs students are reminded that the yacht surveyors role in
marine insurance claims depends entirely upon the wishes of the underwriters concerned. Instructions
should be clarified at the time of the appointment and strictly adhered to so as not to exceed or fall
short of the surveyors terms of reference.
How much is enough?
If a surveyor has instructions beyond assessing damage, drawing up a repair specification and obtaining
quotes the question then arises as to how far should he go with his enquiries and investigation.
Each case must be considered on its merit. There can surely be no specific answer (how long is a piece
of string?) and it can be difficult to know what further fact finding may be required.
A surveyor needs to exercise judgment. He needs to balance the requirement for adequate facts to enable
the underwriter to make sound decisions, against the time and cost involved in the fact gathering process.
The quantum of the potential claim will generally be a significant factor for him to take into account in
making his judgment.
The Claims Process
In the UK, particularly if a surveyor is instructed by a specialist yacht underwriter, he is likely to be

expected to:
Survey the damaged craft.

Consider repairs and prepare a specification for them.
Obtain quotations from boat yards, probably three in all.
Submit a formal report, enclosing the quotations, and his fee.

He will often not meet the assured and, as this will usually conclude his role, the underwriter will handle
the other details of the claim, namely:
Discuss the claim with the assured, making his own enquiries about the nature of the casualty,
and considering the cause provided it is not too complex.
Retain consultants if necessary to assist in determining the cause.
Consider liability under the policy.
If liability is accepted, advise the assured to proceed with repairs, usually on the lowest quotation.
Consider any third party liabilities and pursue claims if appropriate.
Receive copies of repair accounts and adjust the claim.
Obtain a clearance from the assured and settle the claim.

The alternative, which is quite common in countries with only a relatively small marine market and a
lack of underwriting expertise, is for a marine loss adjuster to handle all phases of the claim.
The Surveyors Appointment

(Also applicable to Marine Loss Adjusters appointments)
When loss or damage occurs to small craft, owners usually advise either their broker or, in many
cases, their underwriter directly. In the former case the brokers may have the authority to appoint a
surveyor on the underwriters behalf but quite frequently the appointment will come directly from the
underwriter to a surveyor.
The onus of proving that damage or loss has been caused by an insured peril rests with the assured but
generally underwriters take a more lenient view and may even expect the surveyor to assist the assured
to establish this.
Apart from actual damage it is often necessary for investigations to be carried out into the loss of gear
and equipment, or of the entire vessel. Losses by theft, sufficient to exceed the policy deductible, rarely
arise with large commercial ships but are quite a common occurrence with small craft, particularly
private pleasure craft which are more often left unattended.
Other causes of many small craft losses are through sinking by water ingress through the hull and for
which an assured may be unable to account, such as siphoning from the sea due to sea cocks not being
closed at the time of leaving the boat on a marina. Fire too is a common cause of damage often resulting
in total loss.
Many of these common small craft losses often result in a marine loss adjusters appointment who may
be expected to carry out an investigation and make appropriate enquiries with the authorities into this
type of loss.

The advent of super yachts and other especially fast, expensive power boats craft has led to an increase
in international crime, especially in Europe and North America.
This rarely involves surveyors unless the craft are recovered badly damaged or with missing and costly
electronics so this unit is little concerned with it. However, for those with an interest in this additional
role, advice can be obtained from the International Association of Marine Investigators Inc. whose role is
to combat marine theft, arson, fraud and other criminal activity in the marine environment.
Its address is: 711 Medford Centre #419 Medford. OR 97504 USA. Email: iamimarine@iamimarine.org
They also have a European Email: iamimarineeu@aol.com
As always, it is important that instructions are clearly understood as there are two quite distinct roles,
restated here. One concerns the fundamental and limited role of surveying, reporting and obtaining
repair quotes. The other is much wider in scope and often includes a requirement to manage a claim
from receipt of instructions to the stage where all the underwriter is required to do to finalise the claim
is to obtain the assureds signature on a discharge form and make settlement.
Experienced small craft and pleasure craft underwriters usually require only the former role from
the surveyor but those lacking marine experience in the smaller offices of fire and general companies
writing this type of business too, will often seek the wider services of a marine loss adjuster.
Surveys
To some extent the surveys and reports concerning small pleasure craft are often less formal than those
on commercial craft which follow the very clear procedure and format discussed earlier. Much will
depend upon the wishes of the appointing underwriter.
However, while assisting the assured is usually acceptable and possibly expected, the surveyor still has to
be careful that he does not convey an impression that underwriters have accepted liability unless they
have said so and this would be unusual before receipt of the surveyors report. If the surveyor has much
contact with the assured he must be careful that the assured understands that any recommendations as
to a suitable repairer or agreement on the nature and extent of repairs, is all without prejudice.
In most cases the repair contract is between the owner and the repairer. The surveyor, unless instructed
otherwise, should be particularly careful to avoid giving instructions to repairers in a manner which
might be seen as acting as an agent of the underwriters and contracting on their behalf, unless of course
he has been instructed to do so.
The surveyor must satisfy himself that the work and costs involved are fair and reasonable to restore
the craft as nearly as practical, to her pre-casualty condition. When possible it may be helpful if the
surveyor, the repairer and the owner reach agreement together on the extent of the necessary repair
and the cost but it must not appear to the other two that the underwriter will necessarily accept the
claim; that is a matter between the assured and the underwriter.

It is necessary for the surveyor to submit sufficient information in his report to enable the adjuster
to determine the extent of the costs which are recoverable under the policy. Even if, overall, the claim
does fall within its terms and conditions it may still be necessary for the costs to be apportioned
between the owner and underwriter although this is usually much simpler with pleasure craft than
commercial vessels.
Extent of Survey and Repair Monitoring
In popular yachting centres, especially in the Solent area of the UK, experienced yacht underwriters
can rely upon having yacht surveyors available whose specialist skills they can call upon. They, and
other yacht surveyors in the UK, if instructed by a specialist yacht underwriter, will probably have their
instructions limited to carrying out a survey, preparing a repair specification and obtaining quotations.
They may sometimes be accompanied at survey by a repairer and/or the assured with whom they can
discuss repairs but frequently they will be unaccompanied.
Their survey will be expected to be sufficiently comprehensive to locate all the damage arising from the
casualty. Unless there are obvious complications they will not usually be required to monitor repairs to
check on their progress and standard or to await their completion.
Less experience underwriters may also make use of them but may be inclined to use their services to
follow-up after survey and reporting, to assist the assured in arranging the repair contract and keeping
an eye on repairs as they progress.
Alternatively, underwriters may call upon marine loss adjusters, often less experienced than surveyors
in small craft construction but more familiar with marine claim procedures. When this arises a slightly
different procedure will often be called for and, because loss adjusters are frequently required to
manage claims from start to finish, they are accustomed to having closer contact with the assured and
will usually expect to attend survey with him and the repairer.
In many places, rivers, lakes and reservoirs are used extensively by pleasure craft, with runabouts and
sailing dinghies being commonplace. In many of these areas, often remote from the sea, there may be no
more than one suitable repairer and no opportunity for alternative quotations; furthermore it may even
be necessary for a non-marine loss adjuster to be appointed in the absence of marine specialists. It is
quite possible too that the insurers in inland areas may be general insurers rather than specialist yacht
underwriters and will be more familiar with the role of loss adjusters.
Although marine loss adjusters can be expected to have a reasonably sound knowledge of small craft
construction, they will rarely have the trained expertise and qualifications of the specialist yacht
surveyor. Non-marine loss adjusters will generally have no more than an acquaintance with the subject.

This prompts two questions:
Can these alternative surveyors (non-marine loss adjusters) be expected to carry out a
sufficiently in-depth survey to discover all the damage in need of repair?
Can they be expected to monitor repairs as they progress and be responsible if they are
not satisfactory?
Except perhaps in the case of runabouts and dinghies the answer must usually be, no to both questions.
They can certainly be expected to inspect the damaged craft and agree or disagree the nature and
extent of damage claimed by the assured, supported by the repairers advice and recommendations.
In doing so, they place the onus upon the assured to demonstrate his loss, claim for all the necessary
repairs and be satisfied that the builder with whom he contracts has carried out a satisfactory job.
Marine loss adjusters are experienced in dealing with marine claims and many have considerable small
craft experience. Like other loss adjusters they are accustomed to dealing with claimants and repairers,
and soon learn to make sound judgments in assessing people, their integrity and their competence.
Although possibly lacking technical expertise in some aspects of the repair, their value to an underwriter
who may lack marine claims experience or staff to adequately handle the claim, is that they are able to
see the claim and its settlement through all stages of development until the underwriter is in a position
to settle it.
It is undoubtedly true that more is expected from one who holds himself out to possess expertise in a
particular subject than one who claims no more than a limited knowledge.
The point is raised here in connection with the above paragraphs because it is important that neither a
yacht surveyor nor a loss adjuster, marine or general, gives a false impression as to his skills and areas
of competence.
If underwriters instruct a yacht surveyor they, and the assured, will expect to rely upon a very thorough
survey seeking the full extent of casualty damage. If the underwriters instruct him to monitor the
repairers performance they will expect a satisfactory outcome, or if the surveyor is unable to endorse
the standard of the repair, they will expect him to report any shortcomings before any accounts are paid.
If things go wrong the assured may look to see where a liability might lie and although the finger may
first be pointed at the repairer, if the underwriters appointee gave the impression that he was a skilled
yacht surveyor he may find himself with a potential liability. Should the case go to court he would
probably be joined with the repairer as a defendant. Provided the less experienced surveyor does not
publicly advertise or promote himself as possessing the yacht surveyors skills, he will probably have little
need for concern if a repair proves inadequate.
Neither an instructing underwriter nor the assured should entertain any doubts about the extent of
the competence of the person who attends a small craft claim and this word of caution is injected here
because there are probably more pitfalls in small craft surveying than in commercial ship surveying, and
this is an area in which surveyors (in the widest sense of the term) can be particularly vulnerable.

Salvage
This subject was discussed in the earlier section on commercial vessels and the position with small craft
salvage is strictly the same, although in practice a very uncertain situation often prevails.
Claims staff in too many insurers offices appointing surveyors lack a knowledge of proper procedures with
salvage and, understandably, many small craft owners are also unfamiliar with them. The situation is not
helped because some small craft surveyors, largely in ignorance, tend to leap in where angels fear to tread.
Underwriters who know their business are reluctant to instruct surveyors to do more than advise
their assured on salvage. Particularly in the early stages underwriters would probably be unaware of
the circumstances leading up to the casualty and will only be able to do so later after the surveyor has
reported all the facts.
It is possible that after the surveyor has made his enquiries it may be established that underwriters may
not have a liability to the assured.
An example of this could arise where a fishing vessel becomes stranded on a lee shore, drifting
onto the rocks when all her crew have been asleep and no anchor watch or lookout has been kept. (In
some places it is a practice to drift off shore and for the skipper and crew to turn-in after a tiring days
fishing an illegal practice, contrary to the collision regulations and sometimes condoned by owners.)
Although underwriters have the right in most marine policies, under the clause often still referred
to as the Waiver Clause, to act to preserve the property without prejudicing their position, prudent
underwriters are unlikely to instruct the surveyor to actually carry out or arrange the salvage on their
account without good reason.
Insurance Damage Surveys for Hull Surveyors
Salvage costs reasonably incurred as a result of a surveyors advice will almost certainly be recoverable
under a marine policy provided the loss has occurred as a result of the operation of an insured peril
and, of course, unless the casualty has resulted from the breach of a warranty.
The surveyor has to consider the most appropriate way in which salvage should be arranged. He may
recommend that a salvage attempt be mounted by the owner employing contractors e.g. hiring divers,
tugs, floating cranes, flotation bags etc. but it might be wiser for the owner to contract with one party
on a fixed sum or a no cure no pay basis.
The paragraphs on salvage for commercial vessels have explained the principles but it is recognised
that it is very much easier said than done to get pleasure craft owners to act on the surveyors advice
when it may involve incurring the costs of engaging costly services and the necessary equipment before
underwriters have admitted liability.

But, as time is usually of the essence in such situations, the surveyor may have to use all his powers of
persuasion and tact to see the salvage completed successfully.
A good liaison with underwriters is highly desirable but this may be very difficult as salvage operations
often occur in the most unfavourable conditions and in the hours when underwriters offices are closed.
Possibly in some situations the underwriter may instruct the surveyor to take appropriate salvage
measures at their expense and it is a point worth resolving if possible at the outset.
Reports
When appointed only to survey, report and obtain quotations, preliminary advice from the surveyor
followed by a short report containing the essential facts of the casualty in an easily assimilated form, is
all that is required in many small claims on pleasure craft.
As with almost all surveyors instructions, the report should contain information on the nature and
extent of the casualty. It will generally also be expected to contain the surveyors opinion on cause but
this point should be clarified with instructing underwriters.
Unless the appointing underwriter has already obtained the information a yacht surveyor will generally
not go far wrong if he answers the following simple questions in his report: who?, what?, where?, when?,
why? and how? It should include a reference to damage and repairs.
In the case of small pleasure boats, runabouts and dinghies for example, there is probably no
requirement for any more and repairs can be covered simply by attaching a copy of the specification
given to the repairers, together with the quotations obtained by the surveyor. To save unnecessary
survey costs underwriters are likely to be happy if these surveys and repairs are handled with the simple
and routine practice of motor car assessors when reporting to motor vehicle insurers and often not
going as far as to seeing repairs carried out.
Unless repairs are deferred or are likely to include either contentious issues or major difficulties, the
underwriter will not require much more and will rely upon the competence of the surveyor to have
discussed the necessary work adequately with the repairers.
A lot will depend upon how much detail the underwriter expects and surveyors should check the
requirement with their appointing underwriters.
Important note: Reference to motor vehicle assessors above acknowledges that today the drafting of
many pleasure craft policies employs some common philosophy with that of motor vehicle polices.
However, it is emphasised that there are major differences between the environment in which they
operate and, consequently, many very different risks to which they are exposed. Marine insurance is still
very different from motor vehicle insurance.

Format
There is no set format for reporting pleasure craft surveys unless an underwriter has his own format.
For small claims a printed survey form will suffice and many surveyors devise their own format for
these. (A template in a computer may be more practical today than a printed form.)
In more extensive casualties, particularly on the larger pleasure craft, a narrative format is commonly
used and may justify a section which reports damage more fully, particularly if there is likely to be any
delay in undertaking or completing the repairs or if there are any contentious issues concerning the
repair which may need to be pointed out to the underwriter.
Sometimes these pleasure craft reports will follow the format for large commercial vessels and, where
intended for claims on small commercial craft, it is often wisest to stick to this tried and tested format.
If the requirement is more for an investigation into a casualty than detail of damage and repairs, a
narrative report will almost certainly be most suitable. Such a report would need to contain a general
description of damage but would also concentrate on the nature and cause of the casualty.
In small craft surveying there is no really correct way in which reporting should be carried out. Much
will depend upon circumstances and the wishes of the underwriters concerned who may require the
surveyor to act more as a marine loss adjuster, managing the claim through each stage from receipt of
instructions to recommendation for settlement. But this should never be assumed and would require a
specific instruction if required.
Number and Timing
The size of the claim may have some bearing on the number and frequency of reports required but so
much depends upon the underwriters wishes that it is difficult to give much guidance.
Where the surveyor is required only to survey, prepare a repair specification and obtain quotations, his
work may be soon completed and, after providing preliminary advice of a few important details, probably
by email, he may need to do no more than provide a final report with attached quotations. If the
underwriter is making almost all of his own enquiries even that report may be brief.
If expected to have an ongoing involvement to see the repairs completed, possibly even to adjust and
pursue third party liabilities, more reporting is likely to be expected from the surveyor and all the
reports below will probably be required.
Preliminary advice
Required promptly after the first assessment of the situation. It is confidential to underwriters and
serves the same purpose as when used with large commercial vessel surveys.

First report
Also confidential to underwriters, this may be required as a follow-up to the preliminary advice if the
former is lacking in information and the surveyor is acting as a loss adjuster in a claim management role
wishing to keep the underwriters informed of the situation.
These are not usually provided in the same way as is common with commercial vessels although the
surveyor would be wise to leave the repairer with a hand written specification for the repairs agreed
without prejudice, with a copy to the assured, as it assists in avoiding disputes and difficulties later.
For this purpose, some surveyors have carbon impregnated paper in pad form with a printed
explanation of the procedures. An alternative is either to prepare it on a laptop/tablet at survey or on
return to the office and email it.
Progress reports
Updating the situation may be required if the matter becomes protracted. These are confidential and
should contain an update on progress and any necessary amendment to the repair estimate.
Final report
The form this takes will depend very much upon underwriters wishes.
It may be seen as a formal report covering the nature and cause of the casualty with detail of the extent
of damage as with commercial craft but it may be treated less formally seen by some underwriters as
confidential although they make copies available to other parties.
While this procedure may suit small commercial craft surveys, it is often not adopted with private
pleasure craft. More often than not final pleasure craft survey reports do not follow such a stereotyped
approach and when repairs are completed, with copies of repair accounts received for checking, the
surveyor will report less formally.
The report should cover the nature and outline extent of damage, or fuller details if called for, and
report completion of repairs attaching accounts with the surveyors opinion that the repair costs are
satisfactory (or otherwise) and relate to the casualty damage. Any reasons why the surveyor disagrees
with any of the expenses submitted should appear in the final report. Cause will likely also be required
but this depends upon instructions.

Although probably expected by the underwriter as a confidential report the surveyor should bear in
mind that occasionally the underwriter may elect to pass a copy on request to his assured or insurance
broker. It should be written with this in mind.
The appointment may have included an instruction to adjust the claim too. This adjustment may appear
in the final report or it may be preferred that it be submitted separately so that, in the event of any
dispute with the assured over reasonable costs, the underwriter will feel less inhibited by the surveyors
treatment of expenses in the adjustment.
If separate, the survey report and adjustment can be made available to the assured if the underwriter
wishes or the adjustment withheld and the underwriters preferred adjustment substituted.
It will be noted that nothing has been mentioned here, unlike the case of large commercial vessels, about
the owner submitting an allegation as to the cause of the damage and the surveyor doing no more than
commenting on the allegation. In these claims the surveyor is frequently expected to give his opinion on
the cause in his report as the assured owner may not be technically competent to do so.
The same considerations apply as with commercial vessels.
Addendum to final report
Unlike the situation with commercial vessels where the surveyor is likely to have an ongoing
correspondence with an average adjuster the pleasure craft surveyor can usually expect to conclude his
involvement following submission of his final report.
Photographs
These are seen today as an essential part of most survey reports. Digital cameras make this easy and
enable plenty to be made available.
Burglary Claim Reports
The losses considered so far have almost entirely been in the nature of damage and its consequences.
A very common cause of loss in pleasure craft concerns burglary and may involve the loss of the entire
craft or only some of its contents.

Apart from listing the missing items in the report, the surveyor should also state:
If forced entry was involved.

How the missing item was secured.
If second hand replacement articles of similar standard can be readily obtained.
If the boat, a trailer or an outboard motor were secured against removal by a locking device.

If the surveyor, rather than the underwriter, is required to make enquiries relating to these items, the
following details should be obtained if possible:
If a damaged or missing item was purchased since the inception of the insurance policy.
Serial number.
Model number.
Age.
Condition.
Purchase price.
When and where purchased.
Estimated value at time of the loss.
Documentary evidence of reporting the loss to the Police.
It is important for a valid claim that burglary losses have been reported by the assured to the Police and
a Crime Reference Number obtained to substantiate the claim, apart from the chance of recovering the
stolen items.
In the paragraphs on cause of damage to commercial vessels it was pointed out that surveyors need to
consider the possibility of more than one cause and superimposed damage. While these considerations
apply also to pleasure craft and must be reflected in consideration of the repair costs, there is less
concern with them here.
Reference later to clauses applicable to machinery claims will also indicate that the question of crew
negligence, as a cause of internal machinery damage, is less of a consideration in pleasure craft whose insurance
policies are generally kinder to the assured on the subject of negligence, so long as it is not deliberate.
However, it is just as essential that where the surveyor has been instructed to see repairs through to
conclusion he checks and confirms that details and costs in the accounts are fair and reasonable for the
work carried out, or parts supplied.

His approval, or disagreement over certain items, is usually indicated by appropriate remarks in the
final report. The practice of using a rubber stamp and signing repair accounts is often disregarded for
pleasure craft claims but nothing is lost by doing so.
There is not the need for surveyors to analyse costs to the same extent as with commercial vessels
although, if involved until completion of repairs, they still need to be satisfied that repair accounts are
fair and reasonable especially with overtime being considered in the same way.
Adjustment of the Claim
Although the adjuster is responsible overall for the adjustment of the claim, a responsibility rests in the
first instance with the surveyor to consider carefully what is a reasonable repair in the circumstances
and this can be influenced by a number of factors discussed shortly.
With few exceptions, it would be rare for an average adjuster to be involved with pleasure craft claims
adjusting except perhaps for a large claim on a super-yacht. Adjusting small craft claims, particularly
those applying to pleasure craft, is usually relatively straightforward and does not call for the same
expertise, and consequently the expense, of instructing an average adjuster.
Most pleasure craft claims are adjusted by in-house marine claims adjusters when employed unless,
for some good reason such as a conflict with the assured, it is thought wise to retain the services of
an independent claims adjuster. Also, as has been mentioned elsewhere, underwriters will sometimes
instruct a surveyor to act as a marine loss adjuster and see the claim beyond the survey stage and
include adjustment and possibly recovery when applicable.
The adjustment of pleasure craft claims is the same in principle as that of commercial vessel claims.
The adjuster needs the facts and applies them to the terms and conditions of the policy and other
considerations as explained.
No claim can properly be adjusted without a thorough knowledge of the terms and conditions of the
policy. Because there are standard sets of clauses in use in marine insurance, the understanding of policy
content is, in some cases, simplified. This certainly applies where the Institute Yacht Clauses (IYC) are
used but the proliferation of companies motor boat and yacht policies has introduced an uncertainty
which can only be resolved by a careful study of the relevant policy and in some cases may have to be
resolved in the courts.
In many cases these policies employ similar IYC phrases which is helpful, and they use plain English in
parts, but there are some very significant differences too.

There are a number of considerations relating to pleasure craft repair costs which do not apply to
commercial craft where the clauses may be more specific as to their handling, or for some obvious
reasons they do not apply. A number are discussed below.

Overtime worked to speed up a repair for an owners convenience (unlike a commercial need
as in trading vessels) is not normally allowable unless it saves costs by reducing time on a slipway,
or similar reason.
Air freight. With pleasure craft underwriters will sometimes insist on sea freight if cheaper than
air freight if it results in saving of costs for which the underwriter would be liable. However, the
usually small, and relatively light in weight, parts for yachts can often be cheaper by air freight.
Deductions new for old. Most pleasure craft policies make these deductions on sails,
protective covers, rigging and outboard motors. Some can be tough on the owner whereas some
do not make a deduction if the craft is less than a specified age, often 3 years. An outboard
motor may be subjected to this deduction even for total loss.
Excesses and deductibles. Their application can vary from policy to policy. Some apply to each
and every claim, some do not apply to total loss or third party claims, some not to fire claims
and some policies have no excess (rare). They may be for a fixed sum or for a percentage of the
sum insured on the items claimed, and with a minimum and a maximum excess applicable.
The reasonable cost of repairs. Although the adjuster will expect to have some input into
considering the reasonable cost of the repairs when the surveyor has reported all the relevant
facts, the first burden inevitably falls on the surveyors shoulders to discuss the matter with
the repairers.
It is the surveyor who is first required to consider reasonable costs when he attends survey and
repairs are discussed with the repairer (and the owner too in some cases). Hopefully, they will
then be agreed as to nature and extent.

In answering the question What is reasonable? the surveyor needs to consider a number of
factors. What is reasonable in one situation may not be so in another. A well constructed,
sound and carefully maintained craft almost certainly deserves a higher standard of repair than a
cheaply built and poorly maintained one.
The extent of actual repair necessary to achieve seaworthiness may be the same in all cases but
the standard of workmanship, fittings and equipment, and ultimately that of the paint finish, may
well be justified at a different levels.
It could be helpful for the surveyor to consider what a prudent uninsured person might do in
the circumstances. While such thinking does have its limitations it is often useful to consider
this yardstick.

Depending on policy wording and the underwriters attitude, an owner will usually choose his
own repairer. If he insists on one whose standards and costs are known to be unreasonably high
for the repair that is reasonable, an insurer can expect an alternative quotation for the work or
alternatively a contribution to the higher costs.
Temporary repairs are usually not covered if for the owners convenience but, if required to
get the craft to a cheaper repairer they may be allowable together with the extra fuel costs, at
least to the extent of the savings.
Betterment has been discussed in earlier paragraphs This can especially be a problem in
relation to the amount of painting carried out as some yachts are painted to a very high
standard at great expense. The extent of painting warranted after casualty repairs can be a
very contentious issue and it is to be expected that yacht standard will be much higher than
commercial vessel standard.
Fading paint on topsides often make it difficult to restrict painting to a touch-up after a repair.
Sometimes the repainting of a large area is justified. It may even be necessary for this to be to
one full side, even both if the damage occurs around the stem or stern.
Due to drying out by air exposure ashore during repairs, anti-fouling paint, depending on its type,
may need renewing. In both of the above situations there may be a case for betterment to be
considered and the costs apportioned between the underwriter and the assured.
If the policy does not allow new for old and provides for depreciation and deductions for
betterment, the following are also areas where it is likely and the surveyor may have to make
appropriate enquiries:
Batteries.
Distress flares.
Charts.
Carpets, curtains and soft furnishings.
Motors and outboards.
Stereos and radios.
Electronic navigation equipment.
While these may not be issues which necessarily call for a surveyors decision, they are certainly matters
which may need to be reported by him in sufficient detail to allow the adjuster to address them.
The crafts equipment. Although most policies define the vessel as the hull, machinery, boat(s),
gear and equipment such as would be sold with her if she changed hands, or use similar terms, it
is not always easy to determine exactly what falls within each of the terms within the definition.
Where theft by forcible entry has occurred and a claim arises on stolen equipment, a typical
question arising is, What navigation equipment, for example, is normally sold with a boat?


Charts, chart instruments and binoculars are all necessary items of equipment but would they be
sold with this particular boat?
Each case has to be considered on its merits and the word reasonable is paramount. The items
mentioned may well be sold with her if a large ocean going yacht but not if a small runabout. Few
cases have come before the courts to give much guidance and common sense must prevail.
Personal effects. This is another contentious area unless specified in the policy or its schedule.
Where does wet weather gear fit in? Also items such as safety harnesses?
Again probably the size and type of craft is the guiding factor but unless a yacht is very large and
expensive, items of wet weather clothing and personal safety harnesses are unlikely to change
hands with her. They would usually be seen as personal effects. (Many owners have their personal
effects covered under their householders policy when on their boat and may be able to claim
separately under that policy.)
Small craft surveying for underwriters calls for a full measure of goodwill, common sense and a sense
of proportion. Surveying and adjusting these claims is, as stated earlier, an art as well as a science.
The surveyor, and particularly the adjuster, often requires the wisdom of Solomon and the hide of a
rhinoceros!
While all these considerations in the adjustment of the claim are ultimately the responsibility of
the person who carries out the adjustment, his work can be considerably assisted by the surveyors
diligence in considering them at survey and making appropriate comment in his report.
Without all the relevant information in the report the adjusters task is difficult if not impossible. Missing
information will have to be obtained somehow, frequently at a considerable disadvantage and with loss
of detail, after the survey is completed and this does not reflect credit upon the surveyor.

Part 2. MARINE HULL INSURANCE
Chapter 5. INTRODUCTION
The Hull Surveyor and Marine Insurance
It has already been stated that a knowledge of marine insurance is not an essential requirement of a hull
surveyor and numerous good surveyors lack an understanding of it. Then why, the student might ask, is
the subject given prominence in this unit?
There can be considerable benefit in understanding it. It may not only help to make a good surveyor
even better but it can also open up an extended role for surveyors, especially with small craft claims.
The first few sections that follow cover the background to drawing up a marine insurance policy for
commercial vessels and, except where comment is made otherwise, the principles and practice applies in
a similar manner to small craft insurance too.
There is a good deal of common ground between all aspects of marine insurance although there are also
some quite distinct and different provisions for cargo, hull and other forms of marine insurance.
The Marine Insurance Act of 1906 (MIA) which follows is considered in some detail because of its
importance to marine insurance in the UK; the position is not very different in much of the British
Commonwealth where many countries initially copied the British act in full and have subsequently
refined it to suit their needs.
The MIA covers so many of the essential principles of marine insurance that working step by step
through the important sections applicable to hull insurance, while excluding any of little relevance,
provides an excellent introduction.
The Marine Market
Ancient in origin, marine insurance is a vital part of commerce without which world trade could not
function as we know it today. It covers the insurance of ships, their cargoes, their freight earnings and
many other aspects of international trading.
Air cargoes are also usually covered under marine policies although with different clauses providing the
detail of the cover. The conveyance of goods in transit on land may be covered by marine insurance too.

These insurances are placed with underwriters in the marine market that is to say, with underwriters
who handle marine business. The market may be a local one, in a ship owners home port or country, or
in an international one such as the London or New York markets.
Marine insurance is largely an international business. If the local market is restricted in scope, as is often
the case in small countries, risks are usually placed overseas but in each case marine policies cover an
interest the subject-matter insured which may be involved in international trade.
As we are largely concerned in this unit with the practice in the United Kingdom, also applicable to a
great many marine insurers around the world, we will consider the London market consisting principally
of Lloyds and The Companies.
Almost all corporate business is placed through intermediaries, insurance brokers, although both
individuals and corporate bodies have direct access to the insurance companies in the London market,
but not to Lloyds.
Brokers act for their clients to obtain the most satisfactory cover for the type of risk involved and place
that business with a suitable underwriter on behalf of their clients. To facilitate this business, many of the
principal insurance companies in the London market (both British and foreign) transact business through
the London Underwriting Centre (LUC).
Although the companies are in competition with one another, the LUC provides services to its
members which include premises in the City of London where they can have a small branch office.
There is also the Lloyds market situated nearby in Leadenhall Street in the Lloyds Building. It has a
similar role, providing access for brokers to the many different underwriters in their boxes (cubicles
containing their desks) in the Room at Lloyds (the underwriting room).
The underwriters represent the syndicates whose members have put up the money to insure the risks,
and members of Lloyds are now both individual and corporate, the latter of recent origin.
The insurance brokers interested in placing risks on behalf of their clients come to these two
convenient market places to transact their business but access to the Lloyds market is only through
Lloyds brokers; the small number of brokers who have been approved to transact business at Lloyds. In
many cases, Lloyds brokers also transact business in the companies market too.
Provision of these market places greatly simplifies the brokers task of seeking the most suitable cover
for their clients and often more than one company or Lloyds syndicate will take a line; by which is
meant, accept part of the risk.
By spreading the risk, both the assured and the underwriter have the advantage that, in the event of a
claim, the loss will not fall too heavily on any one party.

It is important to understand that the marine insurance market does not become involved to any
extent with the insurance of ship owners liabilities (as distinct from the ships themselves). This cover is
provided by Protection & Indemnity Clubs (P & I Clubs).
These P & I Clubs are mutual associations of ship owners who make contributions (referred to as calls)
to provide mutual protection against liabilities which they may incur, e.g. the cost of loss or damage to
cargo and injuries to crew or the costs of wreck removal.
It is important to be clear on the difference. In general terms hulls are covered by Lloyds and the
companies but liabilities by the clubs.
Placing the Risk
There is no need for lengthy explanations here on how marine hull business is transacted in the London
market, but briefly it is carried out as follows:
A broker approaches an underwriter who is considered the most suitable for the clients insurance.
(Underwriters tend to specialise in various types of marine insurance, i.e. hull, cargo, offshore
exploration etc.)
The smaller risks may sometimes be placed with one underwriter, particularly in the case of companies,
but in many cases the cover is provided by a number, each taking a part until 100% has been covered.
A line (a percentage of the risk) may be taken by either a company or a Lloyds underwriter, or by both
especially if the risk is large in financial terms and the broker has a record of the agreed percentage he
has been able to place with an insurer, on a piece of paper known as the slip.
Part of the facilities offered to members by both the Corporation of Lloyds (the name of the
organization as a whole, as distinct from the its members and underwriters) and the LUC, is the
provision of a central office to issue the policy which follows the completion of a slip. The policy
includes the terms and conditions of the cover and the percentage taken by each underwriter.
Occasionally full cover is not obtained, either by default or choice, in which case the policy is issued for
the lesser amount of cover and the ship owner carries the uninsured risk.
It needs to be understood that both the Corporation of Lloyds and the LUC, in providing the
market place and facilities to members, are quite distinct from the underwriters themselves. Neither
organisation actually underwrites the risks but, when a claim arises, they will often handle a claim and its
settlement on behalf of the underwriters.
Both organisations also provide whatever additional services may be required to facilitate the resolution
of a claim and this may also include seeking recoveries from carriers or other third parties.

Marine Insurance Policies
In some instances, policies are tailor-made to suit a particular clients situation, but even where
provisions differ there is no difference in the basic principles and the cover provided by both Lloyds and
the insurance companies in the London Market is generally very similar.
The above paragraphs have explained principles and practices applicable to all hull insurance except in
pleasure craft insurance where an owner often approaches the companies transacting pleasure craft
business himself although he may also do so through a broker. In the case of the Lloyds syndicates
which specialize in insuring yachts, the approach has to be through a Lloyds broker but there are
companies which specialize in small craft insurance often writing the cover under an arrangement
with a Lloyds underwriter.
Fortunately, the world-wide insurance of ships relies to a significant extent on some fairly standard
provisions. Even those policies written in the USA and Scandinavia for example, conform to a significant
extent with the UK pattern although they differ in some detail, but in this brief introduction to hull
insurance we can only deal with cover originating in the UK and subject to its law.
In recent years, especially in pleasure craft insurance and following many in which the policy language
was colourful and legalistic with its meaning difficult to comprehend, we have seen a radical change to
modern, and much more easily comprehended, plain English.
This does not mean, however, that everything is now so clear that misunderstanding cannot occur. All
may not be exactly what it seems! Not everything is fully spelt out and interpretation still requires a
knowledge of customary practices which have developed over time.
Some knowledge of case law (the law resulting from the finding of our courts) is also essential to assist
in interpreting any ambiguities in the Marine Insurance Act or any policy. A knowledge of some case law
is, therefore, essential to an understanding of marine insurance.
Although we refer loosely to the policy in the above paragraphs, it should be explained that the basic
marine policy document is quite a simple affair today following a major rethink towards the end of the
20th Century. It is the added clauses which provide the details and extent of cover and they are not
always quite so simple and straight forward.
The name by which this policy form is known is, quite simply, MAR. In keeping with the requirements
of the Marine Insurance Act 1906, this document provides for the inclusion of some essentials, such as
the name of the assured (a reminder that in marine insurance the term is assured rather than insured),
the name of the insurer, the ship, the cargo the latter only where the insured interest is the cargo
or other insured interest, and the sum insured.

It has a brief preamble indicating that in return for the premium the underwriter agrees to provide
insurance cover. Then, in keeping with the requirements of the Marine Insurance Act, it provides for the
Schedule and the inclusion of such essentials as:
Policy number.
Name of assured.
Vessel.
Voyage or period of insurance.
Subject-matter insured.
Agreed value (if any).
Amount insured.
Premium.
Clauses, endorsements, special conditions and warranties.
There is then a statement that the attached clauses and endorsements form part of this policy. Clearly,
it relies upon the attachment of a number of clauses to the basic document in order to expand it and
define the scope of the cover.
This is the so-called small print, essential to express the details of the contract between insurer and
assured and, until recently, was almost always expressed in clauses referred to as Institute Clauses.
However, the principal set of hull clauses for large commercial vessels, The Institute Time Clauses
Hulls underwent a major rethink as recently as 2002 and the outcome was an alternative set of clauses
named The International Hull Clauses although these have not seen ready favour in the market and the
older clauses have prevailed. Both sets of clauses are explained more fully later.

Chapter 6. THE MARINE INSURANCE ACT 1906
Introduction
The principal legislation which covers marine insurance in the United Kingdom is the Marine Insurance
Act of 1906 (MIA). It covers all marine insurance.
This Act is a remarkably successful example of UK legislation and has formed the basis upon which
much of the marine insurance legislation of many English speaking countries has since been drafted. In
particular, the corresponding acts in Canada, Australia and New Zealand initially followed very closely
that of the UK although each has since introduced a number of modifications.
There are similarities with the legislation of the USA too but a very different code of laws applies
throughout much of the continent of Europe. Surveyors practicing outside the UK will need to become
familiar with their own national laws on the subject.
The UK Act of 1906 codified much of the case law up to that time. It has done this with considerable
success having stood the test of time remarkably well although some argue that it now calls for a more
complete updating. Indeed serious thought is now being given to changes which are more likely to be made
shortly to accommodate legislation more in line with modern consumer developments in other legislation.
Although over 100 years old, this Act continues to play a very important part in marine insurance and
where there is ambiguity in marine insurance contracts, the courts fall back heavily upon some of the
provisions of this Act and judgments which have arisen out of it.
It is important to appreciate that while making some provisions which are basic and unalterable
principles, the Act also makes it clear that in some areas underwriters may vary its provisions in their
own policies. It achieves this with the words, subject to any express provision in the policy and unless the
policy otherwise provides or similar words which are to be found in several sections of the Act.
The reader must appreciate this point when reading the Act because one can easily become confused
and assume that all the provisions of the Act must apply to all marine insurance contracts regardless of
underwriters wishes.
While certain provisions are essential, such as that of legality, the underwriters still enjoy a fair measure
of freedom to widen the scope of their policies. This flexibility is essential to meet the needs of modern
international trade and, in practice, this freedom is demonstrated in the wording of many of the clauses
which form part of the policy and will be mentioned shortly.

Students with the interest and the time to do so are well advised to make a quick reading of the Act
after they have completed studying the sections which are discussed below. A skim through the Act just
once, will help in a better appreciation of it. This Act can play such an important part in surveyors lives
if they become involved further with the broader aspects of marine hull surveying.
The most important sections of the Marine Insurance Act 1906 which have a bearing on the work of
the hull surveyor will be discussed below. An understanding of them should assist the surveyor to obtain
a feel for marine insurance and understand why the adjuster may require certain information from the
surveyor which may at first appear quite unnecessary.
Each section of the Act is numbered and the bold headings which follow are as they appear in the Act.
The wording that then follows is not the wording of the Act except where quoted, but is intended to
assist in explaining the meaning to the extent that it relates to hull insurance.
In the following paragraphs reference is frequently made to loss or damage. This has been deliberately
done to convey, at an early stage, that insurance covers both the loss or damage of an insured item, the
correct insurance terms for which is the insured interest or subject-matter insured. In the Marine
Insurance Act the word loss also includes damage.
Useful Sections of the Marine Insurance Act 1906 for Hull Surveyors
Although a study of the whole Act is not a requirement of this unit it is important that the student
understands the important provisions of it which relate to hull surveying and are discussed below.
Note that none of the underlining in this section on the wording of the MIA appears in the actual Act but
for the purposes of this unit it has been considered to be of sufficient importance to emphasise warranties.
Section 1 - Marine Insurance Defined
At the outset the Act defines the marine insurance contract as one whereby:
the insurer undertakes to indemnify the assured, in manner and

to the extent thereby agreed, against marine losses, that is to say,
the losses incidental to a marine adventure.
Insurance is fundamentally a contract of indemnity which means it provides for an assureds financial
position to be restored as nearly as practical to that which existed before the loss occurred. However,
in marine insurance the maximum extent of the indemnity is a matter for agreement between the
parties at the outset and, in practice, the policy indicates the measure of indemnity provided by it.

Section 3 - Marine Adventure and Maritime Perils Defined
Subject to the provisions of the Act, every lawful marine adventure may be the subject of a contract of
insurance. This includes both physical objects like ships and cargoes and financial benefits such as freight
and passage money or loans and disbursements at risk from maritime perils, or liabilities arising by
reason of them.
Maritime perils are defined in the Act. They are: the perils consequent on, or incidental to, the
navigation of the sea.
It lists the perils at the end of the section under Rules for construction of policy as :
perils of the seas, fire, war perils, pirates rovers thieves, captures, seizures,
restraints and detainment of princes and peoples, jettison, barratry, and any
other perils either of the like kind, or which may be designated in the policy.
Section 5 - Insurable Interest Defined
Section 5 defines insurable interest, an essential element of a marine insurance contract. Its definition has
been restated more clearly by Victor Dover in his excellent Handbook of Marine Insurance, as follows:
The assured must stand in such relationship, legal or equitable, to the physical object
[covered by the policy] that he may have benefit from its safety or due arrival;
prejudice from its loss, damage or detention; or may incur liability in respect thereof.
Note that the words in italics within the brackets and the bolding do not appear in the original.
There are types of policies in which an assured can have an insurable interest where the subject-matter
of that insurance is not physical but the risk nevertheless concerns a physical object. An example would
be a policy covering freight or disbursements. Here, the subject-matter of the insurance is a financial
one but the survival of the ship (the physical object) is paramount.
Section 17 - Insurance is Uberrimae Fidei (Utmost Good Faith)
In the words of the Act:
A contract of marine insurance is a contract based upon the utmost

good faith, and, if the utmost good faith be not observed by either
party, the contract may be avoided by the other party.
It is appropriate that the motto of Lloyds is uberrimae fidei as this doctrine is so fundamental.

Section 18 - Disclosure by Assured
The first paragraph of this section of the Act reads:
Subject to the provisions of this section, the assured must disclose to the
insurer, before the contract is concluded, every material circumstance which is
known to the assured, and the assured is deemed to know every circumstance
which, in the ordinary course of business, ought to be known to him. If the
assured fails to make this disclosure, the insurer may avoid the contract.
The section goes on to specify several circumstances in which there is not the same need for disclosure.
However Section 18 is, in essence, placing a very significant duty upon the assured not to hold back
information which might influence a prudent underwriter in deciding whether or not to insure a risk or
in establishing an appropriate premium commensurate with the risk if he accepts it.
In recent years, some countries have enacted legislation, or their courts have moderated their
interpretation, which has slightly reduced the burden of disclosure on the assured but the importance
of this section cannot be over emphasised. Over the years it has probably been the subject of more
litigation than almost any other section of the Act. The section is inextricably linked with the previous
one requiring utmost good faith between the parties.
Section 25 - Voyage and Time Policies
The Act makes provision for both voyage and time policies and defines them.
On comparatively rare occasions when a vessel is to make a single voyage, as may occur before being
sold or laid up, she may be insured for that particular voyage only. In practice today most vessels are
insured under time policies, the period of cover usually being 12 months.
Section 27 - Valued Policy
Stating that a policy may be either valued or unvalued, the section goes on to point out that a valued
policy is one in which the agreed value of the subject-matter insured is specified in it. It is sometimes
called an agreed value policy which clearly differentiates it from an unvalued policy, defined in section
28, in which a value of the subject-matter insured is not specified in the policy and other considerations
come into play. The latter would be unusual today in commercial hull policies but not uncommon in
pleasure craft insurance.
Over-valuation made in good faith is not a ground for avoiding the policy or reducing the amount
payable under it but, if deliberate gross over-valuation occurs, this is likely to be construed as fraud.

Section 33 - Nature of Warranty
A warranty is very important in marine insurance. It is a condition which must be exactly complied with
whether it is material to the risk or not and, unless the policy provides otherwise (unusual), the insurer
is discharged from liability from the date of the breach.
The latter point is also very important. It means that if a loss occurs sometime after a breach has
occurred, even if the cause of the loss has nothing whatever to do with the breach, the insurer is
discharged from liability.
This may appear harsh but it helps to keep the assured honest and it should be remembered that
generally the underwriter has absolutely no control of, or opportunity to check on, the operation of
the assured.
This is certainly the position as the MIA makes clear but we have to recognize that the subject of
warranties has come under the spotlight in recent years and the courts have been less inclined to
support quite such a rigid interpretation.
It is probable that the MIA will receive the increased attention of the legislators in the near future
and the Act be subject to some revision. When this occurs the function of warranties will likely see
changes as has occurred in several countries in which the UK MIA has historically shown a significant
guiding influence.
Comparatively recent legislation in these countries has softened the effect of some warranties and,
before they can be invoked, it is often necessary for the insurer to show that the breach of the warranty
was causative of the loss.
However, returning now to the MIA as currently enacted, it must be said that there are provisions in
section 34 for a breach to be excused or for the underwriter to waive their right. (This has recently
arisen with the drafting of the new International Hull Clauses see later under Clauses which
excuse a breach of the Navigation Warranties and make certain provisions for cover following a breach.)
Section 35 - Express Warranties
In marine insurance there are two types of warranties. They are:
(a) express warranties and

(b) implied warranties.
This section is concerned with express warranties which must be :
included in, or written upon the policy, or must be contained in

some document incorporated by reference into the policy.

Warranties, are attached to a policy and form an essential part of its terms and conditions.
Although not forming a part of this section, reference is made subsequently to two important implied
warranties. They are:
(a) The implied warranty of seaworthiness (see section 39).

(b) The implied warranty of legality (See section 41).
Section 39 - Warranty of Seaworthiness of Ship
In a voyage policy there is an implied warranty that, at the commencement of the voyage, the ship shall
be seaworthy for the purpose of the particular adventure insured.
In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the
adventure but where...
with the privity of the assured, the ship is sent to sea in an unseaworthy state,
the insurer is not liable for the loss attributable to unseaworthiness.
The question of seaworthiness has been the subject of many court cases but it is sufficient to remark
that seaworthiness refers here not only to the ships structure, machinery and equipment but also to
her crew, stores, navigation equipment and nautical publications and the safe stowage of her cargo. It has
been held that a ship was unseaworthy when inadequate provisions were made available for the voyage.
The essential point to note is that for the underwriters to decline liability under a time policy the
ship must have gone to sea in an unseaworthy condition with the privity of the assured. (In the case of
corporate ownership the assured would be the companys alter ego probably the Managing Director
/Chief Executive.)
Section 41 - Warranty of Legality
As indicated in section 35 this is an implied warranty that the insured adventure is a lawful one and that,
as far as the assured can control the matter, the adventure shall be carried out in a lawful manner.
Section 55 - Included and Excluded Losses
(Underwriters have freedom to vary the exclusions provided in the Act and, in practice, they sometimes
do so by extending cover for an increased premium.)

This very important section indicates that :
the insurer is liable for any loss proximately caused by a peril

insured against, but, subject as aforesaid, he is not liable for a loss
which is not proximately caused by a peril insured against.
This liability is subject to the provisions of the Act and to any in the insurance policy, as indicated by the
words but subject as aforesaid in the quote above.
This section goes on to say :
The insurer is not liable for losses arising from the willful misconduct
of the assured, but unless the policy otherwise provides, he is liable for
any loss proximately caused by a peril insured against, even though the
loss would not have happened but for the misconduct or negligence of
the master or crew.
It also tells us, subject to the proviso that the policy could say otherwise, losses proximately caused by
delay, even where the delay may have been caused by an insured peril, are excluded and other losses
covered in this section exclude those:

from ordinary wear and tear, ordinary leakage and breakage, inherent
vice or nature of the subject-matter insured, or for any loss proximately
caused by rats or vermin, or any injury to machinery not proximately
caused by marine perils.
The term proximate cause (not approximate as is sometimes used in ignorance) is used above. It is
an important doctrine in marine insurance and its importance is emphasised.
The proximate cause is the effective or dominant cause. It has been described as the root cause. It is
not necessarily the cause nearest in time to the actual loss but there must be a direct and uninterrupted
sequence or chain of events between the originating cause and the ultimate loss.
There must be a direct relationship of cause and effect of which the cause must be proximate in effect
though not necessarily in time.
The subject is complex and many hours have been spent in the courts deciding the proximate cause
in some well known cases. It is not the surveyors role to pin-point the proximate cause but unless he
considers the matter carefully he may fail to draw attention to all the relevant facts which brought about
the loss thereby preventing others who read his reports from later determining the proximate cause.
(Cause has already been discussed in Part 1.)

Section 56 - Partial and Total Loss
Perhaps rather obviously the Act states that a loss may be either partial or total and that any loss other
than total loss, as hereafter defined, is a partial loss.
It then goes on to say that a total loss may be either an actual total loss (TL) or a constructive total
loss (CTL) and that unless a different intention appears from the terms of the policy an insurance
against total loss includes a constructive total loss. (The expression is often misstated as total
constructive loss).
Section 57 - Actual Total Loss
Actual total loss is defined in this section as being a loss where the subject-matter insured is destroyed,
or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably
deprived thereof.
Section 60 - Constructive Total Loss defined
A very important doctrine in marine insurance is that concerning constructive total loss. The Marine
Insurance Act defines it in this section by stating :
Subject to any express provisions in the policy, there is constructive total

loss where the subject-matter insured is reasonably abandoned on account
of its actual total loss appearing to be unavoidable, or because it could not
be preserved from actual total loss without an expenditure which would
exceed its value when the expenditure had been incurred.
Quite simply, the Act is taking a very practical view and recognising a couple of commercial
considerations which often arise in practice. It goes on to be a little more specific in several paragraphs
which start with In particular, there is a constructive total loss ... and then cites them.
Sections 61, 62 and 63 cover the Effect of Constructive Total Loss, Notice and Abandonment
and Effect of Abandonment. These sections are not usually matters that concern the surveyor
very closely.
Although, in the event of abandonment, the underwriter is entitled to take over the interest of the
assured in whatever remains of the subject matter insured and all proprietary rights incidental thereto,
In practice, this very rarely occurs in hull insurance. This is largely because liabilities, as well as benefits,
are likely to attach to an abandoned vessel. (For example, pollution and its likely attendant costs are
certainly a major concern today and an underwriter will often prefer to avoid the risk and forgo any
financial benefit there might otherwise be in the hull.)

Section 64 - Particular Average Loss

Section 66 - General Average Loss
These two sections of the Act refer to Particular Average (PA) and General Average (GA) losses
respectively. While every surveyor should understand them they are of more concern to the cargo
surveyor. PA was defined in Part 1.
A PA claim arises when a ship or cargo suffers an entirely accidental loss or damage. Ship and cargo
owners would claim on their respective underwriters or meet the loss themselves if not insured.
Section 65 - Salvage Charges
Numerically this clause belongs between the last two discussed but for convenience it is being explained
after them.
Salvage charges are charges recoverable under marine law by a salvor independent of contract.
Salvage charges do not include the expenses incurred for services in the nature of salvage rendered by
the assured or his agents, or any person employed for hire by them, for the purpose of averting a peril
insured against. Such expenses, where properly incurred, may be recovered as particular charges (See
the comments for Section 78, Suing and Labouring clause) or as a general average loss, according to the
circumstances under which they were incurred.
Unless a policy expressly provides otherwise, salvage charges incurred in preventing a loss by perils
insured against may be recovered as a loss by those perils.
A salvor who voluntarily goes to the assistance of another vessel and is successful in bringing her to a
place of safety is usually entitled to claim a salvage award; that is a sum of money which can be claimed
against the salved party.
The amount of the award for salvage is based upon a number of factors present at the time the salvage
is carried out. They are often assessed by the court but may be decided in arbitration but in either case
the determination of its value is complex.
Sometimes a salvage will follow the signing of a contact. In this case, it is not considered to have been
carried out voluntarily or subject to an award for salvage. The payment is then not salvage services as
provided for in the Act and becomes payment for services in the nature of salvage.
The difference between pure salvage and contractual salvage is important to the surveyor and it is
pointed out that the signing of a Lloyds Open Form (LOF) is not considered for this purpose as signing
a contract. The principles of pure salvage are still preserved.

Section 67 - Extent of Liability of Insurer for Loss
As most commercial hulls are insured under valued policies it is sufficient here to accept the second
part of the explanation in Section 67 (1) that:
The sum which the assured can recover in respect of a loss on a policy, by which he
is insured ... in the case of a valued policy, to the full extent of the value fixed by the
policy, is called the measure of indemnity.
In the above quotation the words relating to an unvalued policy have been omitted (as indicated by ...)
because undervalued policies are rarely found in commercial hull insurance today. The bold lettering
does not appear in the Act.
Section 68 - Total Loss
Here, the Act gives a definition of Total Loss and again, because of the rare case of an unvalued policy,
except in pleasure craft insurance, it is sufficient now to understand that, unless otherwise provided the
measure of indemnity in the case of total loss is the sum fixed by the policy.
Section 69 - Partial Loss of ship
When a ship is damaged but not totally lost the measure of indemnity is the reasonable cost of repair
less certain appropriate deductions. If only partially repaired then a depreciation allowance is made for
the balance.
Section 73 - General Average Contributions and Salvage Charges
Although this section is of importance in cargo insurance it is of little concern to the hull surveyor. It is
mostly to do with general average adjustment and the role of the average adjuster.
Section 78 - Suing and Labouring Clause
The need for this clause arises because, as stated towards the end of the clause :
It is the duty of the assured and his agents, in all cases, to take such measures
as may be reasonable for the purpose of averting and minimising a loss.
It is an important tenet of all insurance that an assured must act at all times as a prudent
uninsured person would expect to do in the circumstances. Particularly when faced with a potential
accident by an insured peril he is expected to take whatever reasonable action is appropriate to prevent
a loss from occurring or, if unsuccessful, to minimise its effect as far as is practical.

This requirement, as stated in the Act, is actually a common law responsibility in any event.
As this action is, of course, to the underwriters benefit, it is only appropriate that reasonable expenses
so incurred should be recoverable under the policy.
The Institute Time Clauses Hulls, the Fishing Vessel Clauses and the Yacht Clauses (as well as others)
all incorporate a Sue and Labour Clause.
Section 79 - Rights of Subrogation
Upon payment of a claim, an insurer becomes subrogated to all rights and remedies of the assured and
in respect of that subject-matter as from the time of the casualty causing the loss.
This is another important doctrine in marine insurance and in effect means that the insurer stands
in the shoes of the assured in exercising any right of recovery against a third party that may be
responsible to some extent for the loss. The underwriter thus acquires the rights of his assured in
this regard.
In hull insurance it typically applies after a collision when the underwriters will instruct marine lawyers
to pursue a claim for damages against the colliding vessel.
This completes the main sections of the Act but also forming a part of it are the rules for construction
of policy, of which the following should also be carefully noted:
Rule 7 - Perils of the Seas
Rule 7 of the Marine Insurance Act gives us a definition as follows :
The term perils of the sea refers only to fortuitous accidents or casualties of
the sea. It does not include the ordinary action of the winds and waves.
In the case of the Xantho, as far back as 1887, Lord Herschell said:
I think it clear that the term perils of the seas does not cover every accident
or casualty which may happen to the subject-matter of the insurance on the sea.
It must be a peril of the sea.
He went on to say that:
Again, it is well settled that not every loss or damage of which the sea
is the immediate cause is covered in these words.

They do not protect, for example, against that natural and inevitable action of the winds and waves which
may be described as a form of wear and tear. There must be some casualty, something which could not
be foreseen as one of the necessary incidents of the adventure.
However, striking a rock or foundering following a collision with another ship, although on the seas
falls within Lord Herschells accepted losses by perils of the seas as they come about fortuitously and
not inevitably.
The most common forms of accident which comes within the term are probably:
Heavy weather (damage arising from exceptional weather conditions)
Collision. Stranding (not including a touch and go grounding or a bumping on a

harbour bar)
Accidents of a non-fortuitous nature would include:
Taking the bottom due to the fall of the tide (a routinely natural and expected event)
Sinking following water ingress upon the failure of a badly wasted hull fitting or shell
plating (wear and tear)
Rule 12 - All Other Perils
The essential point brought out in this rule is that the term includes only perils similar in kind to the
perils specifically mentioned in the policy. It does not give a freedom to interpret the perils any wider.
Rule 15 - Ship
This rule tells us that this term includes the hull, materials and outfit, stores and provisions for the
officers and crew and, in the case of vessels engaged in a special trade, the ordinary fittings requisite for
the trade. It also adds that in the case of a steamship, the machinery, boilers, coals and engine stores, if
owned by the assured, are included too.
* * * *
This completes the discussion on the content of the MIA but will suffice to introduce the hull surveyor
to the importance of some of the sections in the United Kingdom Marine Insurance Act which may be
of interest and value to hull surveyors. It also shows the desirability for hull surveyors to be familiar
with provisions in any marine insurance related legislation which apply in their own country but, as
has earlier been pointed out, a knowledge of marine insurance is not an essential requirement for hull
surveyors although it is certainly likely to be of benefit to them.

It is questionable whether one can suggest any one section as being more important than any another
but for students with limited time perhaps concentrating on Sections 33, 35, 39, 41, 55, 60, 65, 78, 79 and
the Rules will be most beneficial, particularly since they are the most likely parts of the Act to provide
examination questions.
Attention is again drawn to the fact that many marine policies now give very much wider cover
than a reading of the Act alone would suggest. For example, underwriters often give cover for
losses well beyond the provisions of Section 55 Included and Excluded Losses.

Chapter 7. COMMERCIAL VESSEL INSURANCE
Until this stage, the discourse on marine insurance has been applicable to both commercial vessels and
pleasure craft but each is now considered separately.
The distinction between the purpose for which the two types of vessel are intended needs little
explanation, one employed in pursuit of profit and the other excluding this motive. It is an important
difference and a fundamental one in the thinking of the underwriter when he insures the different risks
associated with them, so it is important that surveyors also bear it in mind when fulfilling their instructions.
Surveying and claims adjusting has been discussed in Part 1 but it will be useful to remind readers that
there is considerable difference in their practice between sea-going commercial vessels and pleasure
craft. Somewhere between lie the commercial craft which are confined to local waters, much of them
inside harbours.
This section concerning commercial vessels covers the insurance of both categories although, as will be
seen, they are treated somewhat differently where insurance cover is concerned.
Note: Students are advised to purchase a copy of the Marine Insurance Act 1906 from HM Stationery
Office or, for a much fuller understanding of it, a copy of the book Chalmers Marine Insurance Act 1906
published by Butterworths & Co Ltd. Alternatively, it may also be available on loan from some libraries.
Hull Clauses
As explained, there is a basic marine insurance policy containing details of the insured interest and other
essentials but it is the attached clauses which provide the details of the terms and conditions under
which an insured interest is covered.
Although some useful progress has been made in the past decade or two in simplifying and clarifying
marine insurance for the layman, some of the wording still remains a little difficult to understand
without a fuller understanding which can only be acquired by study and experience.
The reason for this wording is simply that the words and phrases have, in many cases, already been
considered by the courts and their legal meaning clarified. Every time words and phrases are changed in
a policy, some uncertainty is likely to creep in again. To avoid this, the tried and tested ones have been
left in place even though their interpretation may be difficult for the layman.
The relatively new International Hull Clauses were drawn up by a committee which is administered by
Lloyds Underwriters Association whereas the current Institute Hull Clauses, which have been revised
from time to time, were drawn up by the joint committee which worked in close association with the
then Institute of London Underwriters, hence the name, Institute clauses.

With the closure of the Institute, the new commercial hull clauses have dropped the name. Although
little other change has occurred with rergard to the nameInstitute Clauses generally perhaps we may
assume that, when the other Institute clauses are revised, they too may have a different name. However,
this name has been in use for many years and, although a change is taking place, it is likely to be quite a
while before the name disappears.

The Joint Hull Committee comprises representatives of the UK marine insurance market, both Lloyds
and companies. The companies including many overseas companies which have a London office and
write business in the UK.
Underwriters invariably attach these standard clauses to their policies and then delete some if
inappropriate to the risk being covered, or add others with their own wording if they see a need for
them in a particular case.
By relying on standard clauses, there is likely to be a better understanding of their meaning throughout
the market and by ship owners. Generally, where there may be a need for clarification between
the underwriter and the assured, the wording may already have been interpreted by the courts but
unfortunately this is not always the case and disputes still go to court to be resolved.
Additional clauses, known as brokers clauses, are sometimes added to a policy. As their name suggests,
they are often included at the request of brokers, usually to widen the cover for their clients, but these
have rarely been subjected to the same scrutiny by the courts but are usually simpler and less likely to
be misunderstood.
The standard clauses are used for both voyage and time policies. There are two sets of voyage clauses,
one more restrictive than the other (the second at a reduced premium) and several sets of time clauses
covering a number of different types of vessels and situations.
The Institute Time Clauses Hulls received their last revision late in the last century and are
dated 1/11/95 but their older version of 1983 still have a strong following. The newer International Hull
Clauses dated 1/11/02 have attracted less support.
A number of policies now incorporate the International Clauses but many underwriters continue to use
the older Institute ones.
The Institute voyage clauses are:
(a) Institute Voyage Clauses Hulls.

(b) Institute Voyage Clauses Hulls Total Loss, General Average and 3/4ths.
Collision Liability (including Salvage, Salvage Charges and Sue and Labour).
Voyage clauses are not often used today as most vessels are insured under time clauses. However,
they still have a value when required for a single voyage such as when a ship sale takes place requiring
delivery elsewhere, or when a ship is to be scrapped or to undergo major reconstruction at a
different port.

The principal Institute time clauses are shown below. Only (a) has the alternative of the International
Hull Clauses 1/11/02.
(a) Institute Time Clauses Hulls.

(b) Institute Time Clauses Hulls Restricted Perils.
(The latter is similar to the first apart from the significant restriction in the perils covered.)
There are two further sets of time clauses both reduce the cover still further and the second provides
total loss only but includes the same salvage, salvage charges and 3/4ths collision liability cover.
In passing it should be noted that there are also:
Institute War and Strikes Clauses, Hulls - Time
These clauses extend the time clauses to provide cover in all sorts of situations to which the terms war
and strikes might be said to apply very loosely, i.e. politically motivated acts of violence, lockouts, riots
and civil commotions etc. The subject of terrorism is presently under very close scrutiny.
It is not intended that these should be discussed further as surveyors are not usually concerned with
them in the ordinary course of their duties but should be aware of their existence.
Also providing hull cover, but in entirely different circumstances, are:
Institute Clauses for Builders Risks
The current clauses are dated 1/6/88. As their name indicates they cover the period when a ship is
under construction or rebuilding. They receive a little more mention shortly as surveyors are often
required to carry out survey at ship builders yards.
While the above clauses, except the last named, are generally only intended for use for commercial
vessels, provision is also made for fishing vessels, craft in harbour use, and yachts. These clauses are:
Institute Fishing Vessel Clauses.

Institute Time Clauses Hull Port Risks including Limited Navigation.
Institute Time Clauses Hulls Port Risks.
Institute Yacht Clauses.
The Institute Yacht Clauses are included above as they are Institute Clauses but they are not generally
suitable for commercial vessels although sometimes used for small commercial charter yachts.

An important note: One of the significant differences with the fishing vessel, yacht and port risks
clauses is that the hull underwriters also provide cover for liabilities. This cover is very restricted under
the Time and Voyage clauses and is normally provided by the P & I Clubs for most commercial operators.
The Institute Time Clauses - Hulls 1/ 11/ 95
To keep things relatively simple only time policies will now be considered in detail; those written subject
to the Institute Time Clauses Hulls 1/11/95.
There is, not surprisingly, a good deal in common between all the hull clauses mentioned, although some
are very much more restrictive than others.
The term All Risks is sometimes used in connection with these clauses. However, this is something of
a misnomer as in the Institute hull clauses (other than Builders Risks) the actual insured perils are
specified and do not follow the usual all risks interpretation. Nevertheless, the term is loosely used to
distinguish the cover from the more restrictive ones mentioned above.
(The student should refer to the set of these clauses in Appendix C to this module while studying the
following explanation of the important ones.)
The ITC Hulls 1/11/95 run to just over five pages of fairly small print, but only a few of the clauses have
much direct bearing on the surveyors work.
Clause 6, the Perils clause is first of importance to the surveyor as the current hull clauses clearly
enumerate the perils covered. There are some express exclusions but these are more concerned with
liabilities than with the ship herself.
However, in noting them, it must be remembered that, first and foremost, there are two essential
requirements before a claim can be considered that the loss must have been fortuitously
caused (i.e. not be inevitable) and, as explained earlier, must have been proximately caused by an
insured peril.
As we have already seen, there are some specific statutory exclusions mentioned in the Marine
Insurance Act so there is no need to repeat them in the clauses. These include, amongst others, those
that result from an illegal adventure and ordinary wear and tear which is specifically excluded later in
any event. (Such is the competition between underwriters that in a few very rare cases, wear and tear
may now be specifically included!)
(Note that emphasis below is for the students benefit. It does not appear in the original text.)
Cover is given against specified perils. The perils clause states that This insurance covers loss of or
damage to the subject-matter insured caused by , and lists them.

Group 1 perils includes losses caused by:
Perils of the seas, rivers, lakes or other navigable waters.

Fire and explosion.
Violent theft by persons from outside the vessel.
Jettison.
Piracy.
Contact with a land conveyance, dock or harbour equipment or installation.
Earthquake volcanic eruption or lightning.
Accidents in loading discharging or shifting cargo or fuel.
Although the above perils may at first sight appear quite self-explanatory, the first of them perils
of the seas etc. needs to be considered carefully. It has already been mentioned in the paragraph
concerning Rule 7 of the Marine Insurance Act 1906 and, because there has been some ambiguity and its
full meaning questioned in the past, a full understanding of the term requires a knowledge of case law on
the subject too.
The Perils Clause goes on to list a second group of perils but restricts them to ones which have not
resulted from want of due diligence by the assured, owners, managers or superintendents or any of their
onshore management. However it adds, masters and officers crew pilots not to be considered owners
within the meaning of Clause 6 should they hold shares in the vessel.
Group 2 perils in Clause 6, which are subject to the above qualifications are:
Bursting of boilers, breakage of shafts or any latent defect in the machinery or hull.
Negligence of master, officers, crew or pilots.
Negligence of repairers or charters provided such repairers or charterers are not an
assured hereunder.
Barratry of master, officers or crew.
Contact with aircraft, helicopters or similar objects, or objects falling therefrom.
Some years ago the list of perils covered was very much more restrictive but an accident, causing
damage to machinery, arose as a consequence of the negligence of a member of the crew. The
subsequent court case led to the Additional Perils Clause, generally known as the Inchmaree Clause
after the name of the ship involved.
Latent defect
The Inchmaree Clause added a number of additional perils which are largely taken care of in the
wording of the second group of clauses. Although the Inchmaree Clause has now disappeared as such it
has left a valuable legacy for the assured. One of the most important referring to latent defect. These
two words are defined in one English dictionary as:

Latent not visible or apparent; dormant; hidden; concealed.
Defect flaw; a weak point or imperfection.
The guiding principle in determining whether a defect is latent or not has been handed down by the courts.
A latent defect is a defect which would not be discovered by the exercise of ordinary care by a
competent person. (Such a person would have been expected to have taken reasonable care and to have
employed the usual skills of one familiar with the subject but without going to unusual lengths to seek
out the perhaps vague possibility of a hidden defect,) It is not one that can be discovered simply by the
exercise of due diligence.
One learned judge expressed his view that a defect, to be considered latent, would have to be such that
it would be missed on inspection by a reasonably careful man skilled in the matter; he did not consider
that every possible method had to be used to detect whether the defect existed.
Latent defects will commonly be discovered following the failure of machinery or equipment arising
from a defect or flaw in the material used in their manufacture or subsequent repair. Neither error in
design nor fatigue failure in service constitute latent defect. The former is in a class by itself and the
latter is a form of normal wear and tear.
Under Clause 6 the underwriter is not liable for the cost of replacing the defective part but is liable for
the cost of repairing any of the insured interest damaged as a consequence of its failure.
Latent defect is a problem that arises quite frequently and calls for a surveyors careful attention when
considering the cause of many accidents, particularly those concerning machinery.
It is necessary for the adjuster to know whether the failure was a consequence of latent defect or
some other cause. He also needs to know which part contained the latent defect so that its cost can be
eliminated from the repair costs for underwriters account. Sometimes the part price may be trivial in a
major repair or it may constitute a significant part of the costs.
Also in the second group of perils is, Negligence of Master Officers Crew or Pilots. This is another
area calling for a surveyors careful attention to cause, particularly in machinery.
When considering an owners allegation regarding cause as the basis for a claim the surveyor has to
be clear in his mind what factors led to the failure and can be considered causative. (This has been
discussed in Part 1.)
The next two clauses mentioned below are of little direct concern to the surveyor but are mentioned
here out of interest because surveyors do become involved in the consequences of both collision and a
declaration of general average.

Clause 8, 3/4ths Collision Liability considers an area of potential liabilities which arises as a
consequence of a collision. A ship owner may become legally liable by way of damages to the other party
following a collision and may also incur substantial legal costs.
It provides cover for this to the extent of three quarters of the sum insured, subject to certain
provisions in the second part of the clause. This clause is sometimes referred to as 3/4th. RDC with the
letters referring to a previous name for the clause, namely, Running Down Clause. (The one quarter
shortfall is generally covered by the P & I Insurance, and under the new International Hull Clauses the
assured has the alternative of having it covered under the hull policy.)
Underwriters exempt themselves in the Exclusions (Part of Clause 8) from any sum which the assured
shall pay for, or in respect of, a number of potential liabilities following collision which might arise and
are generally covered under the owners P & I Insurance.
The principal liabilities in the exclusions concern wreck or cargo removal, property (except the other
vessel or on board her), loss of life, personal injury or illness and, finally, pollution or contamination in
many circumstances. There are some exceptions to the pollution/contamination exclusion when another
vessel is involved in collision or where the environment is affected and article 13 paragraph 1 (b) of the
International Convention on Salvage 1989 has been invoked.
Clause 10 is concerned with General Average and Salvage. It covers the ships contribution to
general average and salvage. Useful as a knowledge of this subject is to the surveyor, its mention in these
clauses is of more significance to the average adjuster.
Clause 11 is very important. It touches upon a fundamental responsibility of an assured and is entitled
Duty of Assured (Sue and Labour). As mentioned earlier in the discussion in the Marine Insurance
Act, this clause reinforces a common law responsibility and places upon the assured (and his servants
and agents) the responsibility of taking all reasonable steps to avert or minimise a loss that would be
recoverable under the policy.
It requires him, not only to avert or minimise a loss, but to cooperate with underwriters in obtaining
information and evidence concerning third parties having possible liabilities for an incident.
One paragraph in it is sometimes known as the Waiver Clause. Under it, any measures taken by either
the assured and the underwriter with the object of saving, protecting or recovering the subject-matter
insured shall not be considered as a waiver or acceptance or otherwise prejudice the rights of either
party. Of course any such actions taken by the assured would need to be reasonable and not reckless,
otherwise they might not be seen as being taken with the objective outlined.
There are a number of associated provisions in the clause including ones affecting the amount
recoverable. However, it makes it clear that a loss incurred in fulfilment of this duty is covered in
addition to a loss otherwise recoverable under the policy, although not in excess of the sum insured in
the policy.

Clause 12. Deductible. Except in the case of a total loss (actual or constructive) there is almost
always a deductible or deductibles in the policy which apply to each and every accident or occurrence.
The surveyor is concerned with them only because of a need to include separate mention of loss if
caused by more than one incident and to provide separate costs for each. In practice, it is usually better
to prepare separate survey reports for each incident.
Not unreasonably there is provision in the Notice of Claim and Tenders (Clause 13) requiring
prompt notice of any potential claim so that underwriters may appoint a surveyor. There is also a
provision for taking tenders and for underwriters to veto a place of repair or a repair firm.
As owners may be disadvantaged by this stipulation, this clause gives the assured cover for additional
costs incurred in complying with it. This would not be the surveyors concern and would be taken care
of by the average adjuster.
There are penalties should the assured fail to notify underwriters as required or comply with the
requirement regarding the repair port and/or the tendering provision.
Reference is made in Clause 14, New for Old, that claims are payable without deductions new for old.
This provides for the fact that, in most cases, when renewing a shell plate for instance, the repair may
do little or nothing towards extending the overall life, or adding to the value of a vessel. There could be
other instances where an owner may be almost unavoidably better off following some repairs but the
principle of replacement new for old might still apply.
This does not mean that new will always replace old. From time to time it may be possible and
reasonable to replace damaged equipment with comparable second hand items.
Consideration of the extent of any betterment in any work carried out is principally that of the
average adjuster but will be assisted in this if the surveyors report mentions it where appropriate and
indicates the value of betterment either in monetary terms or as an estimated percentage. He can then
leave it to the adjuster to decide how to handle the costs in the claim adjustment.
Another clause which may involve the surveyor is entitled Bottom Treatment (Clause 15). As part
of the reasonable cost of repairs to bottom plating when caused by an insured peril, grit-blasting and/or
other surface preparation, including the first coat of primer/anti-corrosive, will be covered on:
(a) new bottom plates ashore, and supplying and applying any shop primer;
(b) the butts or area of plating immediately adjacent to any renewed or refitted plating
damaged during the course of welding and/or repairs;
(c) areas of plating damaged during the course of fairing, either in place or ashore.
Claims for scraping, grit-blasting and/or surface preparation and painting of the vessels bottom are
otherwise excluded under this clause.

The inclusion of the above permitted bottom treatment costs in the claim adjustment is, of course,
the adjusters role but he would be very reliant upon the survey report including all the relevant
information. This would probably require every strake and plate to be identified with a separation of
costs in the accounts for any other bottom treatment. Exact costings may not be essential if they are
difficult to provide but the surveyor would then need to estimate the costs of bottom repairs covered
by this clause as a percentage of all those involved.
Clause 16 is the Wages and Maintenance clause but, except in general average, it only arises when a
vessel is removed from one port to another for repair. Then a claim for the costs of maintenance of the
master, officers and crew may be recoverable for time actually under way between ports and on repair
related trial trips. In such circumstances, the surveyor may be able to identify them and include them in
his report.
The inclusion of Clause 18, Unrepaired Damage, serves to remind the surveyor that he needs to
specifically identify any repairs that may be deferred for attention at a later date.
There is provision for a reasonable allowance for depreciation in value resulting from damage still not
repaired on expiry of the policy, provided the ship is not a total loss before the policy expires. Valuing
the actual depreciation would rarely be within the surveyors experience or competence but his report
should give adequate details so as to enable others to consider this depreciation.
Constructive Total Loss, the subject of Clause 19, has been covered in an earlier paragraph on the
Marine Insurance Act. Its inclusion in this clause has more bearing on the adjusters role but including it
here helps to reminds the surveyor of the matters mentioned earlier.
Actual total loss of a vessel would be covered under the first part of Clause 6 but a situation can arise
where a vessel may be a total loss for all practical and economic purposes but not actually be totally
lost in a physical sense. Clause 19 would then apply to it. It requires the insured value to be taken as the
repaired value.
This is the last clause with which the surveyor need have any familiarity but it is important to remember
that, with certain exceptions, hull policies are mainly concerned with damage to the insured vessel
herself but P & I cover given by the clubs then provides for the majority of ship owners liabilities.
The International Hull Clauses 1/ 11/ 02
Although there are a number of major changes in the new clauses which apply to policies to which
they are attached, many policies will remain subject to the older Institute Time Clauses Hulls, at
least for a while.
Most changes are relatively small but the new clauses contain additional provisions. Many are not really
new in principle but simply spell out practices which have been observed in the past but needed to be
clarified as they have sometimes resulted in misunderstandings.

The clauses are in three parts. The first is concerned with the principal insuring conditions, the
second with additional clauses and the third with the duties of underwriters and the assured
regarding claims handling.
Although many provisions of the new clauses are of considerable importance to the assured and their
underwriters (therefore to average adjusters too), they do not bring any changes to the surveyors role
or to much of the detail of his survey.
Surveyors should be aware that an important additional clause concerns the assureds need to comply
with class and ISM requirements. This means that surveyors may be expected, at the time of survey, to
check the following:
(a) Any outstanding conditions of class affecting seaworthiness

and
(b) Valid ISM documentation
(i) Document of Compliance
and
(ii) Safety Management Certificate.
When discussing the Marine Insurance Act earlier, emphasis was placed upon the importance of
observing warranties and the penalties for failing to do so. Under the new clauses navigation
warranties are now clearly to be treated differently and, in the event of a breach of them, the penalty
will only be loss of cover during the period of the breach, but this too can be covered provided the
underwriter is notified promptly.
Although the Perils Clause remains almost in tact, the sub-clause concerning cover for latent
defect is differently worded. The changes have no bearing on the meaning of latent defect itself but the
revised wording may make it more important than ever for the surveyor to clearly indicate the costs of
repairing the consequences of a defect as distinct from costs of repairing the defect itself.
Other minor alterations could now require a surveyor to consider damage to stores and parts under
the sub-clause which covers accidents in loading and discharging cargo and fuel.
Parts damaged when ashore, and also leased parts and equipment, are now included, subject to
a time limit and certain financial limits.
All in all, the changes and additions to the new clauses have little bearing on the surveyors work. They
do add a few matters to which he might reasonably expect to give a little more consideration but, of
course, the surveyor will probably not even know under which clauses the vessel is insured. However,
apart from a little extra effort for more thought at survey and when reporting, no loss will occur if the
added considerations called for in the new clauses are applied to the surveyors work regardless of
which clauses are relevant to the policy.

A vessel may spend many months, even years, under construction and during this time the builder
requires insurance cover against the risks which can arise during that time. Cover is also required for
vessels undergoing major refits or reconstruction as the builder faces a different combination of perils
involving his input from those encountered in the normal course of the vessels operation.
These situations are taken care of under the Institutes Builders Risks Clauses which are designed to
cover ship, machinery and materials that are actually at the builders risk. (There are some different
conditions for each.)
A consideration which does not normally arise with a marine policy is the almost certain increase in
value of the craft as her construction proceeds. The clauses make provision for this.
Unlike ITC Hulls, the perils covered are not specified but are against all risks of loss of or damage to the
subject-matter insured. They also include expenses in the event of a failure in launching the vessel.
Another rather different concern from that of an assured with a ship in operation is that a builder
requires adequate cover, not only for the materials which have already gone into the vessels
construction, but also for others that are also at his risk.
While primarily providing for materials at the builders yard already allocated to the craft under
construction, cover may be extended (sometimes for an increased premium) to parts, gear and
equipment under construction elsewhere or purchased by the builder and in transit to the building site,
provided they are at the builders risk.
Not surprisingly the underwriters contemplated the possibility of faulty design becoming an issue
during construction. These clauses do not provide cover for repairs or replacement arising from faults
in design which are ordinary commercial risks but they do cover damage caused to the vessel under
construction caused by them. There is a proviso that causation and discovery must be during the
period of the insurance.
Latent defect is also considered and any part condemned solely in consequence of latent defect will be
repaired or replaced under the policy provided the fault is discovered before the insurance expires.
After completion, the builder will be responsible for sea trials. Liability for collision with other vessels
(including the fourth 4th) is covered under Clause 17, and Clause 19, the Protection and Indemnity
Clause, covers damage to fixed or moveable objects, wreck removal, customary towage, life and
personal injury. This is necessary because ship builders do not have vessels under construction entered
with P & I Clubs.
The normal exclusions in hull insurance for war, strikes, malicious acts and nuclear mishaps apply but can
be reinstated by relevant additional builders risk clauses covering them.

The Institute Time Clauses - Hulls - Port Risks
As indicated earlier, there are two sets of Port Risks clauses, one includes limited navigation and the
other does not. As their name indicates, they are not concerned with vessels which make lengthy
voyages; they are used for commercial vessels which suspend their normal trading activities temporarily
or for small commercial craft employed almost exclusively within harbours and confined waters.
They provide a cover based upon the ITC Hulls but with the inclusion of P & I cover, the deletion of
references to trading activities and the exclusion of some other risks. As may be expected in view of the
purpose for which the clauses were introduced, there are other minor differences including that in the
deductible clause, which logically excludes reference to heavy weather between ports.
Beyond a knowledge of the existence of these clauses, and an understanding of the ITC Hulls, the
surveyor need be little more concerned with them unless instructed as a marine loss adjuster.
Institute Fishing Vessel Clauses
The clauses discussed so far are for use with policies covering sea-going commercial shipping and to
some extent by smaller commercial craft such as ferries, workboats, dredgers and similar local craft.
Fishing vessels, because of the nature of their special employment, fall into a very different category of
small commercial craft.
There are some significant differences between the way fishing vessels and large commercial ships are
operated but it was not until 1971 that this was fully recognised by a set of standard Institute Clauses
applying to them.
A number of the provisions of the ITC Hulls apply and one of the principal differences lies in the
provision in fishing vessel clauses of the P & I cover for many liabilities likely to be incurred by fishing
vessel operations. There are a number of exclusions on the cover, including ones which relate to
liabilities associated with catch and fishing gear and also equipment on board being the property of
builders or repairers.
Liability cover is also provided in these clauses for the fourth 4th following collision which is excluded
under the appropriate ITC clause. (It will be recalled that the ITC Collision Clause only provides three-
fourths cover for collision liabilities with the fourth 4th being picked up by the P & I Clubs.)
Although the insured perils are similar, albeit slightly altered, the Institute FV Clauses make some slightly
different provisions in several of the other clauses.
For obvious reasons these clauses include reference to fishing gear. This is covered if a loss or damage
is caused by fire, lightning or violent theft by persons outside the vessel or as a result of the total loss
of the vessel but, understandably, loss or damage caused in the normal course of fishing operations or

by negligent use, is excluded. Fishing vessels often need to remove some of their gear ashore for repairs
and overhaul. This too is covered under Clause1.
The General Average and Salvage Clause is much simpler than in the corresponding ITC clause and the
Wages and Maintenance Clause allows these costs for members of the crew to be treated differently by
being included while the vessel is undergoing repairs.
A clause with no equivalent in the ITC Hulls clauses is the Machinery Damage Additional Deductible
Clause. It provides, except in the case of total loss, for a deductible (the amount to be specified) to be
applied to machinery and electrical equipment before application of the traditional deductible which
appears in a separate clause.
None of these differences between ITC Hulls and IFV clauses is of great importance to surveyors
but, as with all surveys, a knowledge of their existence may improve the quality of information provided
in the report.
Small Commercial Craft
As will become more apparent in the next section, there are many differences between the handling
of the insurance and claims on pleasure craft and those on commercial vessels. In some respects there
is much that is common between pleasure craft and small commercial craft such as small passenger
launches and fishing vessels, many of which are also of wooden and GRP construction.
The reasons why commercial vessel and pleasure craft insurance is treated differently will become clear
later in this module but, nevertheless, there is some common treatment regarding claims if only because
of the nature of the survey. They are both commonly constructed of similar materials which will often
call for surveyors possessing similar skills; their size also provides some common link.
With small commercial craft there is often a need for some compromises to be adopted. Many aspects
of their claims handling call for a mix of the practices which apply to both large commercial vessels and
pleasure craft.
On the one hand, there is usually the same firm attitude towards the assured in the requirement to
comply exactly with the terms and conditions of the insurance and also in the expectation that he will
take a full responsibility for arranging repairs.
However, there may be a relaxation in some of the formalities in recognition that fishermen and
passenger boat skippers have little of the formal training of shipmasters and company superintendents.
But it should not be overlooked that there is usually a broker behind the scene who is a professional
with insurance knowledge but unfortunately, many so-called marine insurance brokers outside the larger
marine markets are woefully lacking in marine knowledge.
As will be repeated throughout this unit, much also depends upon the surveyors instructions and a
surveyor should always be mindful of the expectation of his principal.

Chapter 8. PLEASURE CRAFT INSURANCE

For many obvious reasons, principally those relating to the lack of professional nautical experience of
most owners (although legally they are masters in most situations) and the use to which the craft are
put, pleasure craft are treated as a class of their own.
However, the growth of super-yachts has blurred the boundaries and many have to be considered as
commercial vessels. Some are genuinely pleasure craft but, more and more, super-yachts have to be
seen as belonging to a new class of vessel of their own.
Some have grown so large and are equipped with such sophisticated machinery and equipment, that
this has introduced a new dimension into yacht surveying. The number of surveyors competent to carry
out surveys on them is limited and, depending on the nature of the loss or damage to be considered, in
many cases the need is often to involve several surveyors possessing different skills.
The Growth of Yachting and Pleasure Craft Insurance
In the years before World War II, yachting began to grow quite rapidly as a popular sport. It soon
became evident that the commercial type of cover then given to the large yachts with wealthy owners
and paid crews, was no longer suitable for smaller yachts now in a wider range of ownership and use.
In the mid-1920s, the Institute Yacht Clauses were introduced and they served well until the post
Second World War explosion in yachting. Although the number of ordinary yachts has continued
to grow over the past decade or two, we now see something of a reversion with super-yachts, the
equivalent of the late 19th and early 20th Century steam yachts of the wealthy gentry and their
professional crews.
By the 1960s, numerous smaller craft began to appear on almost every available waterway in and around
Britain and, with them, yacht racing on a scale never previously conceived.
One type of pleasure craft which developed in ever increasing numbers during this period was the
outboard motor powered runabout and, since then, personal water craft. Almost all of these craft,
together with the numerous sailing dinghies, are trailer borne for much of their life and there is a
significant difference between the requirements of the owner of a racing yacht and of a trailer borne
runabout used for leisure fishing.
The new breed of owner requires insurance which is more readily comprehensible to amateurs. They
are not professional ship owners or wealthy yacht owners possessing, or having readily available,
expertise in the operation and management of their vessels.

Pleasure Craft Policies
Having learnt about the Marine Insurance Act and commercial hull clauses, the student is already familiar
with many policy provisions and, although easier to understand, pleasure craft policies can be said to
have grown out of the insurance of commercial vessels.
Cover for pleasure craft is available at Lloyds through Lloyds brokers, but much of it is underwritten
by the companies and their agents. Many boat owners will already be familiar with some of them as the
insurers of their homes and motor cars.
Several brokers and insurance companies specialising in pleasure craft insurance have a direct
underwriting authority derived from Lloyds and the companies where the policies are underwritten.
In recent years, pleasure craft underwriters have made some radical changes to modern insurance
policies and use much more readily comprehended English.
Reference has been made earlier to the standard policy document introduced in London late last
century known, quite simply, as MAR. For some pleasure craft, the Institute Yacht Clauses (IYC) define
the scope of the cover, with a schedule attached detailing the subject matter of the insurance more fully,
often with separate values for different parts of the cover.
For pleasure craft, most of the companies now use their own form of policy. This includes, in the body
of the policy (often a single two sided or two page folded document), all the applicable terms and
conditions, some of which are very similar to those in the Institute Yacht Clauses.
These clauses vary considerably from company to company but in many cases can be seen to have their
origin in the IYC.
Overall, the result may be somewhat similar albeit in many cases with less generous provisions although
the provisions and extent of cover will often differ markedly. A surveyor cannot hope to be familiar with
the details of the many policies on the market and all that can be expected is that he has some idea of
what has been generally the case in the past and recognize that there are now many variations but still
fundamentals unchanged.
The Proposal
Before considering the policies and cover available for genuine pleasure craft, attention is drawn to an
important prelude to the issue of any cover on this type of craft.
When an owner seeks insurance on his yacht it is usual for the insurer to require a proposal form to be
completed and signed. It asks a number of questions concerning the proposer and the boat which are
important to the underwriter in evaluating and considering the risk.

The statements made by the assured in the proposal are very important and have a significant bearing
upon the contract of insurance. Full and accurate information is required as untrue statements and failure
to disclose material facts are likely to result later in a claim being repudiated and the policy voided.
Sometimes the underwriter will provide the surveyor with a copy of the proposal form so that, when
attending survey, he can check the accuracy of relevant statements made in it by the assured.
The Institute Yacht Clauses (IYC)
Whether the majority of the terms and conditions of the cover in a policy are provided as an
attachment, or as an inclusion, is of little concern here. Those which go under the name Institute Clauses
are attached to the policy while those embedded in the policy document of the companies have no
specific name but may be loosely referred to as the companys clauses.
There is only one set of Institute Yacht Clauses (IYC) but the provisions appearing in the companies
policies (reviewed from time to time) differ from company to company although the majority are
roughly similar but with some additions and some deletions.
In fact, the wording of the companies clauses are in many cases, word for word, the same as those of
the Institute Clauses for the good reason that they have been well tried and tested, often as the result
of a court case.
Because of this similarity in stock phrases and often complete clauses, we will first discuss the
Institute clauses relating to small craft insurance and then consider how and where those of the
companies may differ.
The analysis that follows of the Institute Yacht Clauses is far from comprehensive nothing less than a
thorough study of the Clauses and the excellent marine insurance texts available, will provide a sound
knowledge of the subject.
The IYC have a certain amount in common with the Institute Time Clauses Hulls, but also some
significant differences because they are primarily for non-commercial craft although they may be used
for charter yachts with some minor modifications and additional clauses.
Note that in the policy clauses that follow emphasis has been added and does not appear in the
actual clauses. It has been added to make a point considered especially important.

The IYC 1/11/85 run to three and a half pages but, like the ITC Hulls Clauses there are several
supplementary clauses. These are:
Personal Effects Clauses.

Racing Risks Extension.
Speedboat Clauses Special conditions and further excluded risks.
Transit Clause. Machinery Damage Extension Clause.
Institute War and Strikes Clauses Yachts.
Fortunately for the surveyor, many of the IYC clauses have little or no direct bearing on the surveyors
work and so receive little or no mention here.
Opening with Clause 1. Vessel. These clauses get away to a good start by clarifying an important point
at the beginning by stating that:
Vessel means the hull, machinery, boat(s), gear and equipment, such as
would normally be sold with her if she changed hands.
Because yachts in Britain normally lay-up during the winter months Clause 2, In Commission and
Laid Up states that, subject to the provisions of this insurance the vessel is covered in a variety of
situations which arise both while in commission and when laid-up. Gear and equipment, including
outboard motors, while in storage or repair ashore is similarly covered.
Clause 3, Navigating and Charter Hire Warranties is relevant to surveyors if instructed to make
enquiries beyond the damage and its repair, if required to answer the questions:
Where did the casualty take place?

Was the craft used solely for private pleasure purposes?
Another warranty appears in Clause 4, Laid Up Warranty and has some bearing on the previous
clause.
Clause 5, Speed Warranty contains yet another warranty and concerns the maximum designed
speed of the vessel not to exceed 17 knots. However, there is a provision that underwriters may agree
to delete this warranty, in which case the Speedboat Clause will apply instead.
Clause 9, Perils is very important and it lists them. They are a little different from those of the ITC - Hulls.

The perils fall into three groups.
The first group covers loss caused by specified perils.
The second group is for losses which must not have resulted from want of due diligence by the assured,
owners, managers.
The third, which is also subject to the provision of the second group, has the further restriction that it
excludes motors and their connections (but not struts, shafts or propellers), electrical equipment, and
batteries and connections.
Group 1 perils losses caused by:
Perils of the seas, rivers, lakes or other navigable waters.

Fire.
Jettison.
Piracy.
Contact with a dock or harbour equipment or installation, land conveyance, aircraft or similar
objects or objects falling there from earthquake, volcanic eruption or lightning.
Group 2 perils (subject to due diligence) apply to losses caused by:
Accidents in loading, discharging or moving stores, gear, equipment, machinery or fuel.

Explosions.
Malicious acts.
Theft of the entire vessel or her boat(s), or outboard motor(s) provided it is securely locked to
the vessel or her boat(s) by an anti-theft device in addition to its normal method of attachment,
or following upon forcible entry into the vessel or place of storage or repair, theft of the
machinery including outboard motor(s), gear or equipment.
Group 3 perils (subject to due diligence and some machinery exclusions) apply to losses caused by:
Latent defect in hull or machinery, breakage of shafts and bursting of boilers (excluding the cost
and expense of replacing or repairing the defective part, broken shaft or burst boiler).
The negligence of any person whatever, but excluding the cost of making good any defect
resulting from either negligence or breach of contract in respect of any repair or alteration work
carried out for the account of the assured and/or the owners or in respect of the maintenance
of the vessel.
(There is a Machinery Damage Extension Clause which can be used to reinstate some of this
deleted cover.)

The IYC clause concludes with an important statement that the expense of sighting the bottom after a
stranding is included if reasonably incurred specially for that purpose, even if no damage is found.
Compared with the ITC Hulls clauses, the additions which are subject to the due diligence provision
clearly provide for the very different type of vessel and situations arising with pleasure craft.
The same can be said of Clause 10, Exclusions. The exclusions are also, for the most part, not ones
which are applicable to vessels insured under the ITC Hulls clauses.
The exclusions are given here in full because of their importance. They form the basis of clauses
to be found in many of the companies yacht policies with, in some cases, identical or nearly
identical wording.
Outboard motors dropping off or falling overboard.

Ships boat having a maximum designed speed exceeding 17 knots, unless such boat is specially
covered herein and subject also to the conditions of the Speedboat Clause 19 below, or is on
the parent vessel or laid up ashore.
Ships boat not permanently marked with the name of the parent vessel.
Sails and protective covers split by the wind or blown away while set, unless in consequence of
damage to the spars to which the sails are bent, or occasioned by the vessel being stranded, or
in collision, or in contact with any external substance (ice included) other than water.
Sails, masts, spars, standing rigging and running rigging while the vessel is racing, unless the loss
or damage is caused by the vessel being stranded, sunk, burnt, on fire or in collision or in contact
with any external substance, ice included, other than water.
Personal effects.
Consumable stores, fishing gear or moorings.
Sheathing, or repairs thereto, unless the loss or damage has been caused by the vessel being
stranded, sunk, burnt, on fire or in collision or in contact with any external substance (ice
included) other than water.
Loss or expenditure incurred in remedying a fault in design or construction or any cost or
expense incurred by reason of betterment or alteration in design or construction.
Motors and connections (but not strut, shaft or propeller) electrical equipment and batteries
and connections, where the loss or damage has been caused by heavy weather, unless the loss or
damage has been caused by the vessel being immersed, but this sub-clause shall not exclude loss
or damage caused by the vessel being stranded or in collision or in contact with another vessel,
pier or jetty.
(Refer to the Machinery Damage Extension Clause which can reinstate most of this cover).
Clause 11 Liabilities to Third Parties. This very important and necessary clause provides P & I
cover because yachts are rarely entered in P & I Clubs and, therefore, need some other source of this
cover. Clause 11 provides it and allows for it to be for a higher amount than that of the sum insured on
the hull and machinery as will often be required.

It has to be remembered that this cover is for any sum or sums which the assured shall become liable to
pay and shall pay, by reason of interest in the insured vessel and arising out of accidents occurring during the
currency of this insurance, in respect of...
The list includes, amongst other things, cover for collision liabilities (all 4 fourths), loss of life, personal
injury or illness, damage to other property, wreck removal costs and legal costs. A rather complicated
sub- clause provides cover in many cases for others navigating the craft with the assureds permission.
Like the Fishing Vessel clauses one of the principal ways in which these clauses differ from the ITC
clauses is in the inclusion of P & I cover and the 4/4ths collision liability.
These clauses, however, have several sub-clauses in the Liabilities Section Exclusions. They exclude
liability in certain circumstances amongst which is one concerning a boat belonging to the vessel having
a designed speed exceeding 17 knots unless specially covered and subject to the Speedboat Clause 19.
Clause 12 Excess and Deductible. As one might expect there is provision for an excess to apply to
PA claims. It does not apply to a CTL claim.
This clause also makes a most important provision for a new for old deduction at underwriters discretion in
respect of loss or damage to:
Protective covers, sails and running rigging.

Outboard motors whether or not insured by separate valuation under this insurance.
Clause 13 Notice of Claim and Tenders Clause is much as one might expect, following the line of
its corresponding one in the ITC Hulls, except that there is also a requirement to report promptly to
the police any theft or malicious damage.
Clause 14 Salvage Charges generally allows for these charges to be recovered when incurred in
preventing a loss by perils insured against.
The next, Clause 15 Duty of Assured, reinforces the common law requirement to avert or minimise
a loss and goes on to require the assured to cooperate with underwriters in obtaining information and
evidence concerning third parties having possible liabilities for an incident.
One sub-paragraph is, in effect, much the same as in the ITC Hulls and is sometimes known as the
Waiver Clause. Under it, any measures taken by either the assured and the underwriter with the object
of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or
acceptance or otherwise prejudice the rights of either party. Of course, any such actions taken by the
assured would need to be reasonable and not reckless, otherwise they might not be seen as being taken
with the objective outlined.
There is provision in Clause 16 Unrepaired Damage for a reasonable allowance against loss of
market value in the event of damage not being repaired when the cover terminates.

Clause 17. Constructive Total Loss. The Marine Insurance Act sensibly makes a provision for an
economic type of total loss. In this clause there is further mention of it with the basis under which it is
to be considered in a policy to which this set of clauses is attached.
It states that, for the purpose of the equation, the vessels insured value is to be taken as the repaired
value without any allowance for the damage or break-up value of it or the wreck coming into it. So
unless the cost of recovery of the vessel together with repair costs exceed the insured value, there is
no CTL. Only costs of, or arising from, a single accident are taken into account.
The next important clause for the surveyor is Clause 19 Speedboat Clause which overrides any
earlier clauses which conflict with it.
Its first provision is that the assured or other competent person must be on board and in control of
the vessel.
Then follows an exclusion from a claim for loss or damage to the craft, or liability to a third party, for
salvage services:
Caused by stranding, sinking, swamping, immersion or breaking adrift while moored or anchored
unattended off an exposed beach or shore.
Arising while participating in racing or speed tests or any trials connected therewith.
There follows a sub-clause excluding any claims for rudders, struts, shafts or propellers arising from any
of the circumstances included in the bullet points above or for losses caused by heavy weather unless
the vessel is immersed as a result of it. Water damage is otherwise excluded as is contact with other
than another vessel, pier or jetty.
The final sub-clause refers to craft with inboard machinery. It excludes claims caused by or arising
through fire or explosion unless the vessel is equipped with a properly installed and maintained
automatic, or steering position controlled, fire extinguishing system. (The surveyor may need to
comment on its pre-casualty serviceability.)
The final four clauses which follow in the Institute Yacht Clauses are of little concern to the surveyor.
However, this is not the end of our interest because there are separate additional clauses which, if
attached to the policy, widen the scope of the cover and may be of concern to the surveyor. They
provide cover for many of the additional risks which the small craft owner needs and were mentioned
at the beginning of this section dealing with the IYC.
Racing Risk Extension Clause
For an extra premium, cover can be arranged when taking part in yacht races to override part of the
exclusions contained in two of the sub-clauses of Clause 10.

These relate to the cost of repairing sails, masts, spars, standing and running rigging lost or damaged by
an insured peril. There is a stipulation that the sum recoverable is calculated upon the basis that the full
replacement cost of all sails carried, masts, spars, standing and running rigging shall not exceed the sum
stated for this purpose in the schedule to the policy.
The cost is covered:
To the extent of two thirds and is not subject to the policy excess or deductibles.
OR
In full if caused by a stranding, sinking, burning, fire, collision etc. as mentioned in Clause 10, but it
is then subject to the policy excess and to the new for old deductible.
Transit Clause
Normal road cover for trailer boats is provided without any extra premium but an extra payment will
extend to cover craft in transit by road, rail, car-ferry or air.
It has the following exclusions:
Scratching, bruising and/or denting arising out of the transit and the cost of consequent
repainting or revarnishing.
Liability to third parties arising from any accident while the vessel is being towed by or is
attached to a motor vehicle or has broken away from or become accidentally detached from a
motor vehicle. (This liability cover is usually provided by the motor vehicle policy when towing
a trailer.)
Personal Effects Clause
This gives cover to these items only if not covered under any other policy, although it does extend
to cover any excess applicable to such other policy. (Many domestic home policies cover personal
effects when out of the home.)
Like several others in the IYC, the Personal Effects Clause is subject to a separate amount being
specified in the policy schedule.
It covers the personal effects of the assured and family, and crew clothing provided by the assured when
used in connection with the insured vessel. There are exceptions and, understandably, they include wear
and tear and other deterioration of various kinds.
They are subject to other exclusions of which an all-encompassing one is losses caused by perils
associated with war, strikes and political acts, and nuclear activity.

Also subject to these exclusions are items of a brittle nature, currency in various forms, and water skis
and diving equipment unless resulting from fire, theft and other specified circumstances commensurate
with a vessels operation.
This personal effects clause is subject to non-marine average. This means that if these items are under-
insured then the assured must bear a part of the loss appropriate to the extent of that under-insurance.
Finally, it draws attention to the limit of indemnity for personal effects under this extention, as stated in
the policy schedule, and with a requirement that any article valued at 100 or more must be specifically
declared. (The figure will often be increased.)
Machinery Damage Extension Clause
This clause provides cover for loss of, or damage to, the motor and connections, electrical equipment,
and batteries and connections, caused in some situations for which both the Perils Clause and its
Exclusion Clause would otherwise exclude them. These relate principally to latent defects, negligence
and heavy weather.
As with commercial vessels this cover is available for builders of pleasure craft but they are used much
less often, except for super-yachts where they do form an important part of marine insurance.
The Company Policies
The provision above of details and discussion on the Institute Yacht Clauses has been fairly extensive but
very necessary in order to assist an understanding of small pleasure craft insurance, particularly as the
wording of many of the company policies is based upon the IYC.
In some cases the layout and wording is reasonably similar while in others the format of the policy is
quite different and the wording altered, in some important instances, quite significantly.
Pleasure craft insurance forms a substantial part of the marine insurance market today. The Institute
Yacht Clauses are still used for some of the larger yachts and motor cruisers, particularly by Lloyds
underwriters but most of the policies written specially for the smaller pleasure craft differ considerably
in the extent of cover they provide. Furthermore, they provide for several different types of craft and
their use.

In recent years insurers have come to realise that even the Institute Yacht Clauses bore too much of
traditional marine insurance practice and language to be understandable to the average small craft
owner. Policies now employ plain English and concepts derived from motor vehicle insurance had to be
introduced to assist understanding by the man in the street. They developed slowly with the recognition
that there was a need for policies more akin to the more familiar types of domestic insurance.
There are now numerous plain language policies on the market for small pleasure craft. Some are
available from specialist small craft insurers, many of whom are underwriting agencies with the risks
they write being underwritten at Lloyds, but there are also policies available from the large international
insurance companies directly from them or their agents or through brokers.
Pleasure craft insurance policies have now progressed well beyond simply giving cover for only physical
loss or damage to the craft and liabilities arising from its operation. Some now include cover for
personal accident and for medical expenses.
The following are some of the areas where variations will be found:
Repairs and replacement. Whereas, in commercial hull cover, an owner has traditionally been
paid a sum of money to replace his vessel or any of her equipment in his own way (subject to
the costs being reasonable and subject also to the sum insured), some pleasure craft policies
specifically allow the insurer, at his option, to vary the manner in which he indemnifies the
assured. Using motor vehicle wording some policies even go as far as to provide the insurer with
several options, including payment, reinstatement, replacement or repair, all of which may be
actually arranged by the insurer.
Permanent moorings. There is usually, but not always, a requirement for inspection at
specified intervals, often of 2 - 3 years. Some policies require moorings to comply with specified
standards such as those required by some harbour authorities. This is likely to be in the form of
a warranty.
Mooring warranties. Some policies apply them to craft unattended at anchor and some on
temporary moorings. In either case they usually have specified maximum periods during which
they are acceptable and these vary between 6,12,18, or 24 hours.
Cruising warranty. Most policies provide cruising limits but they vary quite considerably,
principally depending upon the type of craft.
Seaworthiness. Under the Marine Insurance Act this is not an implied warranty at the
commencement of a voyage under a time policy. But. In the Act it is an implied warranty at the
commencement of a voyage in a voyage policy. In many pleasure craft policies it is an express
warranty and may be applicable at the commencement of any voyage.
Absence of alcohol and drugs. This is not an implied warranty under the MIA (less of a
problem in 1906!) but is an express warranty in some policies.

Fire extinguishers. In some policies the provision of a fixed installation in an engine room,
and the maintenance of it and other fire extinguishers in sound working order, is also an
express warranty.
Due dilligence. In some cases this is required of the assured as a precedent to any claim,
whereas in others it applies only to certain claims resulting from additional perils.
New for old. Except in the case of protective covers, sails, running rigging and outboard motors
(all clearly items which suffer deterioration in use) and as mentioned below under Racing
Risks Extention, deductions for repairs and replacements may not be subject to new for old
deductions. There are policies which clearly make provision for deductions in a number of cases.
Racing Risks Extention. When applicable most policies provide for two-thirds recovery
without application of the policy excess, on sails, masts, spars standing and running rigging but
there are some variations on the percentage recovery.
Separate valuations. Some policies attach great importance to the separate valuations being
given by the assured for hull, machinery, electronic equipment and the like. These separate
valuations place a limit upon the sum insured on each of them even though the combined loss
may be less than the overall sum insured by the policy.
Miscellaneous. Only a careful study of each individual policy will provide all the information
and there are many other differences beside those mentioned above, including the following
three examples:
A restriction in the size of outboards appropriate to the crafts overall length.

A requirement for the assureds immediate action to clean and oil the motor and dry all
electrical equipment following the immersion of an outboard.
The restricting of a crafts operation without adequate freeboard and in rapids or shallow
river reaches where limited water depth creates conditions of marginal or zero navigability.
The Surveyor and Warranties
The significance of breaching a warranty, and therefore the importance of the assured in observing them,
was explained in the section above on the Marine Insurance Act.
Express warranties appear in many marine insurance policies and special mention was made above
of the variations in them between different companies. Many pleasure craft policies include a
seaworthiness warranty as an express warranty and, although the policies are time policies, this
warranty applies at all times.

An underwriters surveyor may see fit to remark in his report on the assureds observation of a
warranty if he feels it appropriate, or he may be specifically asked to comment when an underwriter is
concerned one may possibly have been breached.
Regrettably it is not uncommon to see a survey report stating that a vessel is seaworthy when only a
survey of the structure has been carried out. The most a surveyor can say without a more complete
survey and enquiry is that the structure is, or is not, seaworthy for a certain voyage.
A ship may be said to be seaworthy only when she is in all respects reasonably fit to encounter the
ordinary perils of the sea on a contemplated voyage. This does not mean that she will necessarily
be fit to undertake every voyage and many factors have to be taken into account before she can be
considered seaworthy.
Typically these considerations are likely to include:
structural soundness (by design, build and condition)

adequately manned (a competent master and crew)
cargo (if any) safely stowed
adequate bunkers
adequate stores
adequate equipment (especially, suitable navigation equipment including current/updated charts
and nautical publications, i.e. tide tables /almanacs etc.)
Unless a surveyor is fully conversant with the intended voyage and has satisfied himself that all the
above considerations have received proper attention, he is not in a position to express an unqualified
opinion that a vessel is seaworthy.
* * * *
The variation in policies and their variable provisions as discussed above should be enough to convince
the surveyor of the need to give his role careful thought. He must appreciate the importance that
his report plays in providing the adjuster with all the information required to enable him to give the
claim the attention that may be required. From the surveyors point of view much will depend on the
instructions received from his principal they are paramount.
In concluding the information and advice in this module the surveyor is again reminded that the extent
of his role is entirely a matter for his principal to determine. So fundamental is this understanding that it
behoves the surveyor to ensure he is absolutely clear on his principals instruction and his expectations.

Appendix A.
example of a formal survey report
A Report Format For A Substantial Commercial Vessel
SURVEY REPORT
Reference No.:
THIS IS TO CERTIFY THAT, at the request of (appointing party), on behalf of the underwriters and
with the consent of the owners, survey was held on the (type of vessel)
(Vessels name)
gross tons, IMO number, of the port of (home port)

lying afloat at (berth number and side alongside) (or in dry dock) at (name of port) and
subsequently for the purpose of ascertaining... (nature, cause and extent of damage) reported to have
been sustained in the following circumstances:
(Date, location and general circumstances)
Damage found Recommended
(State item by item)
(Damage noted to be stated in sufficient details to enable others later to visualise the full extent of the
repair required, i.e. each plate and strake identified, each frame identified, each machinery part listed etc.
together with the surveyors recommendations. In many cases the extent of damage will also need to be
recorded by the dimensions of the damage and the replacement material required.)
Log books and extracts (detail those examined and attach copies).
Survey was attended by:
Owners representative.
Third partys representative.
Repairers representative.
Classification surveyor.
Government surveyor.
Others.

The owners allegation as to the cause was (state the owners allegation) If agreed add the
damage found was considered attributable to the alleged cause on the information provided OR if in
doubt, or if not agreed state which:
Repairs are being / have been carried out by (contractors).

Permanent repairs carried out (state those carried out).
Temporary repairs (state if any and which were carried out).
Deferred repairs (ditto).
Other damage / owners repairs (state those carried out if any).
State whether owners repairs necessary for seaworthiness or not. If so, state estimated time afloat /
dry dock, repair commenced (date):
Last dry docking (date).

Vessel dry docked (date).
Vessel undocked (date).
Estimated time required (if carried out separately, working / running days, afloat and in dry dock).
If overtime worked (number of days saved afloat and in dry dock).
Excess cost of overtime over ordinary time (amount).
Time under way between survey port and repair port and time on repair related trial trips.
Credits for scrap.
Repair costs (amount agreed, also amounts separately for dry docking and dues, tank cleaning and
general expenses). OR At the time of issuing the report no repair accounts had been sighted. If received
and approved they will form an addendum to this report.
At (Port of issue) Date
*Annex (attach the following to the report)

Log extracts
Classification Survey Report
Any other relevant documents
* Include when applicable
Surveyors signature

Appendix B. The Rules of Practice of the Association

of Average Adjusters
The Rules of Practice of the Association of Average Adjusters are in six sections with an introduction
and a resolution.
The current Rules of Practice are dated 1997 (amended 2008)
The following extracts from the Introduction and Sections A & D are of particular interest to hull surveyors:
From the Introduction

In the middle of the 19th Century, when average adjusting as a separate profession was in its infancy,
there was very little in the way of established law to guide the practicing adjuster, and consequently
many points of practice had to be decided in accordance with custom. Some of these customs were
subsequently ratified by legal decisions, but others were disapproved, and it became evident that
unless steps were taken to establish a reasonable measure of uniformity among average adjusters, the
profession would fall into disrepute. Those wishing to read further on this topic are recommended to
the addresses delivered from the Chair of the Association by Mr. Richard Lowndes (1873), Mr. Charles
McArthur (1883) and the Right Hon. Lord Merrivale (1927), re- printed in From the Chair, published
by the Association in 1976.
It was to remedy this situation that the Association of Average Adjusters was founded in 1869, with
the object, among others, of the promotion of correct principles in the adjustment of Averages and
uniformity of practice amongst average adjusters.
After the formation of the Association, one of its first tasks was to consider the areas of divergence in
practice, and decide how the various so-called customs could be brought together into a uniform, if
not universal, practice. This aim was largely achieved by the Association in the first fifteen years of its
existence, by a two-fold approach:
(a) By the collection and refinement of the Customs of Lloyds.This task was undertaken by
a Special Committee which reported to the Association in 1876. In the preamble to the
Customs it was stated: Nothing can be called a Custom of Lloyds which is determined
by a decision of the superior Courts; for whatever is thus sanctioned rests on a ground
surer than custom. A Custom of Lloyds then must relate to a point on which the law is
doubtful, or not yet defined, but as to which, for practical convenience, it is necessary that
there should be some uniform rule.
(b) By the adoption of Rules of Practice, relating to the adjustment of averages and the
duties of adjusters in connection therewith. In the early days of the Association it was
hotly debated whether these Rules of Practice should bind Members or not, and in the
event it was decided that they would not be binding, although, naturally, they would carry
considerable authority. Even now, if an average adjuster draws up a statement which is at
variance with a Rule of Practice, he must place a note in his adjustment referring to the
Rule of Practice and stating why he differs from it.

Since 1890, when the Customs of Lloyds were reviewed and assimilated into the Rules of Practice,
various new Rules and amendments to existing Rules have been adopted from time to time in order to
regulate the practice of average adjusters in areas where the law is silent.
The procedure for establishing a Rule of Practice is as follows:
By the Rules of the Association, representatives (who are appointed by underwriting bodies as well
as by ship owners, merchants and similar institutions) are entitled, equally with members, on giving
appropriate notice, to move resolutions intended to become Rules of Practice at any General Meeting
of the Association. After discussion, such resolution will be voted upon by members, and if carried by
the votes of a simple majority of the members voting, it becomes a probationary Rule until the next
following General Meeting. During the intervening period the probationary Rule is considered by the
Advisory Committee (or a Special Committee) of the Association, who may recommend its acceptance,
rejection or amendment. At the next following General Meeting the probationary Rule, in the form
approved by the Advisory Committee (or Special Committee), is again discussed, and if it is confirmed
by a two-thirds majority, it becomes a Rule of Practice.
From Section A - the General Rules
A4 DUTY OF ADJUSTERS IN RESPECT OF COST OF REPAIRS

That in adjusting particular average on ship or general average which includes repairs, it is the duty
of the adjuster to satisfy himself that such reasonable and usual precautions have been taken to
keep down the cost of repairs as a prudent ship owner would have taken if uninsured.
A5 CLAIMS ON SHIPS MACHINERY

That in all claims on ships machinery for repairs, no claim for a new propeller or new shaft shall
be admitted into an adjustment, unless the adjuster shall obtain and insert into his statement
evidence showing what has become of the old propeller or shaft.
From Section D - Damage and Repairs to Ship
D1 EXPENSES OF REMOVING A VESSEL FOR REPAIR

1. For the purpose of ascertaining the reasonable cost of repairs, and subject to any express
provisions in the policy, where a vessel is at any port place or location (hereinafter referred to as
port) and is necessarily or reasonably removed to some other port for the purpose of repairs,
either because the repairs cannot be effected at the first port, or cannot be effected prudently, the
additional expenses reasonably incurred by the ship owner in removing the vessel (other than any
expenses allowable in general average) shall be treated as part of the reasonable cost of repairs.

2. (a) Where the vessel after repair forthwith returns to the port from which she was removed,
the expenses incurred both in removing the vessel to the port of repair and in returning shall be
treated as part of the expenses of removal.
(b) Where the vessel loads a new cargo at the port of repair or proceeds thence to some other
port for the same purpose, the expenses shall be calculated as though, but for the repairs, the
vessel had previously been engaged to proceed direct from the port from which she was removed
to the loading port.
(c) Where, immediately following a casualty, or upon completion of the voyage on which the
casualty occurred, the vessel is removed solely to enable repairs to be effected which are essential
for continued trading, the expenses may, at the owners option, be calculated only for the single
passage to the repair port.
3. (a) The expenses of removal shall include, inter alia, the cost of any necessary temporary repairs,
wages and provisions of crew and/or runners, pilotage, towage, extra marine insurance, port
charges, bunkers and stores.
(b) Where by moving the vessel to or from the port of repair any new freight or hire is earned,
such net earnings shall be deducted from the expenses of removal.

4. The expenses of removing the vessel for repair shall be charged as follows:
(a) Where the vessel is removed to the port of repair as an immediate consequence of damage
for the repair of which underwriters are liable, or the vessel is necessarily taken out of service
especially to effect repairs arising from that damage, the whole cost of removal shall be treated
as part of the cost of repairing that damage, notwithstanding that the ship owner may have taken
advantage of the removal to carry out survey for classification purposes or to effect other average
repairs or repairs on his own account.
However, where the vessel is removed for owners purposes, other than a routine overhaul as
in 4(b) below, or as an immediate consequence of damage for which underwriters are not liable,
no part of the cost of removal shall be charged to underwriters, notwithstanding that repairs for
which they are liable may be carried out at the port of repair.
(b) Where the vessel is removed to the port of repair for routine overhaul at which repairs
on both owners and underwriters accounts are effected, the expenses of removal shall be
apportioned pro rata to the cost (including drydock dues and general services) of all work
effected at the port, other than to any damage sustained after the commencement of the removal
passage and the cost of any major parts shipped to the repair port from elsewhere.
D2 FUEL AND STORES USED IN REPAIRS OF DAMAGE TO THE VESSEL

That the cost of replacing fuel and stores consumed either in the repair of damage to a vessel, in
working the engines or winches to assist in the repairs of damage, or in moving her to a place of
repair within the limits of the port where she is lying, shall be treated as part of the cost of repairs.

D3 RIGGING CHAFED
Rigging injured by straining or chafing is not charged to underwriters, unless such injury is caused
by blows of the sea, grounding, or contact; or by displacement, through sea peril, of the spars,
channels, bulwarks, or rails.
D4 SAILS SPLIT OR BLOWN AWAY

Sails split by the wind, or blown away while set, unless occasioned by the ships grounding or
coming into collision, or in consequence of damage to the spars to which the sails are bent, are
not charged to underwriters.
D5 DRY DOCK EXPENSES

1. That, in practice, where repairs, for the cost of which underwriters are liable, are necessarily
effected in dry dock as an immediate consequence of the casualty, or the vessel is taken out of
service especially to effect such repairs in dry dock, the cost of entering and leaving the drydock,
in addition to so much of the dock dues as is necessary for the repair of the damage, shall be
chargeable in full to the underwriters, notwithstanding that the ship owner may have taken
advantage of the vessel being in dry dock to carry out survey for classification purposes or to
effect repairs on his account which are not immediately necessary to make the vessel seaworthy.
2. (a) Where repairs on owners account which are immediately necessary to make the vessel
seaworthy and which can only be effected in dry dock are executed concurrently with other repairs,
for the cost of which underwriters are liable, and which also can only be effected in dry dock,
(b) Where the repairs, for the cost of which underwriters are liable, are deferred until a routine
dry-docking and are then executed concurrently with repairs on owners account which require
the use of the dry dock, whether or not such owners repairs affect the seaworthiness of the
vessel, the cost of entering and leaving the dry dock, in addition to so much of the dock dues as is
common to both repairs, shall be divided equally between the ship owner and the underwriters,
irrespective of the fact that the repairs for which underwriters are liable may relate to more than
one voyage or accident or may be payable by more than one set of underwriters.
3. Sub-division between underwriters of the proportion of dry-docking expenses chargeable to

them shall be made on the basis of voyages, and/or such other franchise units as are specified in
the policies.
4. In determining whether the franchise is reached the whole cost of dry-docking necessary for
the repair of the damage, less the proportion (if any) chargeable to owners when Section (a)
of paragraph 2 applies, shall be taken into consideration, notwithstanding that there are other
damages to which a portion of the cost of dry-docking has to be apportioned in ascertaining the
amount actually recoverable.
An earlier Rule of Practice dealing with this subject was accepted in 1891, confirmed in 1892, and amended
in 1903/4 after reference to a Special Committee. It was again referred to a Special Committee in November
1926, further amended in 1927/28, and rescinded in 1970/71. The texts are printed in the reports for 1892,
p.28; 1904, p.42 and 1928, p.31.

D6 TANKERS TREATMENT OF THE COST OF TANK CLEANING AND/OR GAS-FREEING

1. That, in practice, where repairs, for the cost of which underwriters are liable, require the tanks to
be rough cleaned and/or gas-freed as an immediate consequence of the casualty, or the vessel is
taken out of service especially to effect such repairs, the cost of such rough cleaning and/or gas-
freeing shall be chargeable in full to the underwriters, notwithstanding that the ship owner may
have taken advantage of the vessel being rough cleaned and/or gas-freed to carry out survey for
classification purposes or to effect repairs on his account which are not immediately necessary to
make the vessel seaworthy.
2. (a) Where repairs on owners account which are immediately necessary to make the vessel
seaworthy and which require the tanks being rough cleaned and/or gas-freed are executed
concurrently with other repairs, for the cost of which underwriters are liable, and which also
require the tanks being rough cleaned and/or gas-freed,
(b) Where the repairs, for the cost of which underwriters are liable, are deferred until a routine
dry-docking or repair period, at which time repairs on owners account which also require the
tanks being rough cleaned and/or gas-freed are effected, whether or not such owners repairs
affect the seaworthiness of the vessel, the cost of such rough cleaning and/or gas-freeing as is
common to both repairs shall be divided equally between the ship owners and the underwriters,
irrespective of the fact that the repairs for which underwriters are liable may relate to more than
one voyage or accident or may be payable by more than one set of underwriters.
3. The cost of fine cleaning specifically for a particular repair or particular repairs shall be divided in
accordance with the principles set forth above.
4. Sub-division between underwriters of the proportion of rough tank cleaning and/or gas-freeing
and/or fine cleaning chargeable to them shall be made on the basis of voyages, and/or such other
franchise units as are specified in the policies.
5. In determining whether the franchise is reached the whole cost of rough cleaning and/or gas-
freeing and/or fine cleaning necessary for the repair of the damage, less the proportion (if any)
chargeable to owners when Section (a) of paragraph 2 applies, shall be taken into consideration,
notwithstanding that there are other damages to which a portion of the cost of rough tank
cleaning and/or gas-freeing and/or fine cleaning has to be apportioned in ascertaining the amount
actually recoverable.
D7 PARTICULAR AVERAGE ON SHIP: DEDUCTION OF ONE THIRD

The deduction for new work in place of old is fixed by custom at one-third, with the following
exceptions:
Anchors are allowed in full. Chain cables are subject to one-sixth only.
Metal sheathing is dealt with, by allowing in full the cost of a weight equal to the gross weight of
metal sheathing stripped off minus the proceeds of the old metal. Nails, felt, and labour metalling
are subject to one-third.

The rule applies to iron as well as to wooden ships, and to labour as well as material. It does not
apply to the expense of straightening bent ironwork, and to the labour of taking out and replacing it.
It does not apply to graving dock expenses and removals, cartages, use of shears, stages, and
graving dock materials.
It does not apply to a ships first voyage.
D8 SCRAPING AND PAINTING. Where the Policy includes a Clause to the effect that:
No claim shall in any case be allowed in respect of scraping or painting the vessels bottom.
(a) Grit-blasting and/or other surface preparation of new bottom plates ashore and supplying and
applying any shop primer thereto;
(b) Grit-blasting and/or other surface preparation of:
(i) the butts or area of plating immediately adjacent to any renewed or refitted plating
damaged during the course of welding and/or repairs
(ii) areas of plating damaged during the course of fairing, either in place or ashore;
(c) Supplying and applying the first coat of primer/anti-corrosive to those particular areas
mentioned in (a) and (b) above;
shall be allowed as part of the reasonable cost of repairs in respect of bottom plating damaged
by an insured peril and shall be deemed not to be excluded by the wording of this Clause. The
grit-blasting and/or other surface preparation and the painting of all other areas of the bottom is
excluded by the Clause.
Note that many insurance policies clearly make their own specific provision for some of the
matters covered above.

Appendix C. Institute Time Clauses-Hulls, 1/ 11/ 95
This insurance is subject to English law and practice.
1. NAVIGATION
1.1 The Vessel is covered subject to the provisions of this insurance at all times and has leave to sail
or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in
distress, but it is warranted that the Vessel shall not be towed except as is customary or to the
first safe port or place when in need of assistance, or undertake towage or salvage services under
a contract previously arranged by the Assured and/or Owners and/or Managers and/or Charterers.
This Clause 1.1 shall not exclude customary towage in connection with loading and discharging.
1.2 This insurance shall not be prejudiced by reason of the Assured entering into any contract with
pilots or for customary towage which limits or exempts the liability of the pilots and/or tugs and/
or towboats and/or their owners when the Assured or their agents accept or are compelled to
accept such contracts in accordance with established law or practice.
1.3 The practice of engaging helicopters for the transportation of personnel supplies and equipment
to and/or from the Vessel shall not prejudice this insurance.
1.4 In the event of the Vessel being employed in trading operations which entail cargo loading or
discharging at sea from or into another vessel (not being a harbour or inshore craft) no claim
shall be recoverable under this insurance for loss of or damage to the Vessel or liability to any
other vessel arising from such loading or discharging operations, including whilst approaching, lying
alongside and leaving, unless previous notice that the Vessel is to be employed in such operations
has been given to the Underwriters and any amended terms of cover and any additional premium
required by them have been agreed.
1.5 In the event of the Vessel sailing (with or without cargo) with an intention of being (a) broken up,
or (b) sold for breaking up, any claim for loss of or damage to the Vessel occurring subsequent to
such sailing shall be limited to the market value of the Vessel as scrap at the time when the loss or
damage is sustained, unless previous notice has been given to Underwriters and any amendments
to the terms of cover, insured value and premium required by them have been agreed. Nothing in
this Clause 1.5 shall affect claims under Clauses 8 and/or 10.
2 CONTINUATION
Should the Vessel at the expiration of this insurance be at sea and in distress or missing, she shall,
provided notice be given to the Underwriters prior to the expiration of this insurance, be held
covered until arrival at the next port in good safety, or if in port and in distress until the Vessel is
made safe, at a pro rata monthly premium.
3 BREACH OF WARRANTY
Held covered in case of any breach of warranty as to cargo, trade, locality, towage, salvage services
or date of sailing, provided notice be given to Underwriters immediately after receipt of advices
and any amended terms of cover and any additional premium required by them be agreed.

4 CLASSIFICATION
4.1 It is the duty of the Assured, Owners and Managers at the inception of and throughout the period
of this insurance to ensure that
4.1.1 the Vessel is classed with a Classification Society agreed by the Underwriters and that her
class within that Society is maintained,
4.1.2 any recommendations requirements or restrictions imposed by the Vessels Classification
Society which relate to the Vessels seaworthiness or to her maintenance in a seaworthy
condition are complied with by the dates required by that Society.
4.2 In the event of any breach of the duties set out in Clause 4.1 above, unless the Underwriters agree
to the contrary in writing, they will be discharged from liability under this insurance as from the
date of the breach provided that if the Vessel is at sea at such date the Underwriters discharge
from liability is deferred until arrival at her next port.
4.3 Any incident condition or damage in respect of which the Vessels Classification Society might
make recommendations as to repairs or other action to be taken by the Assured, Owners or
Managers must be promptly reported to the Classification Society.
4.4 Should the Underwriters wish to approach the Classification Society directly for information and/
or documents, the Assured will provide the necessary authorization.
5 TERMINATION
This Clause 5 shall prevail notwithstanding any provision whether written typed or printed in this
insurance inconsistent therewith.
Unless the Underwriters agree to the contrary in writing, this insurance shall terminate
automatically at the time of
5.1 change of Classification Society of the Vessel, or change, suspension, discontinuance, withdrawal
or expiry of her Class therein, or any of the Classification Societys periodic surveys becoming
overdue unless an extension of time for such survey be agreed by the Classification Society,
provided that if the Vessel is at sea such automatic termination shall be deferred until arrival at her
next port. However where such change, suspension, discontinuance or withdrawal of her Class or
where a periodic survey becoming overdue has resulted from loss or damage covered by Clause
6 of this insurance or which would be covered by an insurance of the Vessel subject to current
Institute War and Strikes Clauses Hulls - Time such automatic termination shall only operate
should the Vessel sail from her next port without the prior approval of the Classification Society
or in the case of periodic survey becoming overdue without the Classification Society having
agreed an extension of time for such survey,
5.2 any changes, voluntary or otherwise, in the ownership or flag, transfer to new management,
or charter on a bareboat basis, or requisition for title or use of the Vessel, provided that, if the
Vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, such
automatic termination shall if required be deferred, whilst the Vessel continues her planned voyage,
until arrival at final port of discharge if with cargo or at port of destination if in ballast. However,
in the event of requisition for title or use without the prior execution of a written agreement by
the Assured, such automatic termination shall occur fifteen days after such requisition whether the
Vessel is at sea or in port.
A pro rata daily net return of premium shall be made provided that a total loss of the Vessel,
whether by insured perils or otherwise, has not occurred during the period covered by this
insurance or any extension thereof.

6 PERILS
6.1 This insurance covers loss of or damage to the subject-matter insured caused by
6.1.1 perils of the seas rivers lakes or other navigable waters
6.1.2 fire, explosion
6.1.3 violent theft by persons from outside the Vessel
6.1.4 jettison
6.1.5 piracy
6.1.6 contact with land conveyance, dock or harbour equipment or installation
6.1.7 earthquake volcanic eruption or lightning
6.1.8 accidents in loading discharging or shifting cargo or fuel.
6.2 This insurance covers loss of or damage to the subject-matter insured caused by
6.2.1 bursting of boilers breakage of shafts or any latent defect in the machinery or hull
6.2.2 negligence of Master Officers Crew or Pilots
6.2.3 negligence of repairers or charterers provided such repairers or charterers are not an
Assured hereunder
6.2.4 barratry of Master Officers or Crew
6.2.5 contact with aircraft, helicopters or similar objects, or objects falling therefrom provided
that such loss or damage has not resulted from want of due diligence by the Assured,
Owners, Managers or Superintendents or any of their onshore management.
6.3 Master Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 6
should they hold shares in the Vessel.
7 POLLUTION HAZARD
This insurance covers loss of or damage to the Vessel caused by any governmental authority
acting under the powers vested in it to prevent or mitigate a pollution hazard or damage to
the environment or threat thereof, resulting directly from damage to the Vessel for which the
Underwriters are liable under this insurance, provided that such act of governmental authority
has not resulted from want of due diligence by the Assured, Owners or Managers to prevent or
mitigate such hazard or threat thereof. Master Officers Crew or Pilots not to be considered
Owners within the meaning of this Clause 7 should they hold shares in the Vessel.
8 3/4THS COLLISION LIABILITY

8.1 The Underwriters agree to indemnify the Assured for three-fourths of any sum or sums paid by
the Assured to any other person or persons by reason of the Assured becoming legally liable by
way of damages for
8.1.1 loss of or damage to any other vessel or property on any other vessel
8.1.2 delay to or loss of use of any such other vessel or property thereon general average of,
salvage of, or salvage under contract of, any such other vessel or property thereon
8.1.3 where such payment by the Assured is in consequence of the Vessel hereby insured coming
into collision with any other vessel.
8.2 The indemnity provided by this Clause 8 shall be in addition to the indemnity provided by the
other terms and conditions of this insurance and shall be subject to the following provisions:

8.2.1 Where the insured Vessel is in collision with another vessel and both vessels are to blame
then, unless the liability of one or both vessels becomes limited by law, the indemnity under
this Clause 8 shall be calculated on the principle of cross-liabilities as if the respective
Owners had been compelled to pay each other such proportion of each others damages
as may have been properly allowed in ascertaining the balance or sum payable by or to the
Assured in consequence of the collision.
8.2.2 In no case shall the Underwriters total liability under Clauses 8.1 and 8.2 exceed their
proportionate part of three-fourths of the insured value of the Vessel hereby insured in
respect of any one collision.
8.3 The Underwriters will also pay three-fourths of the legal costs incurred by the Assured or which
the Assured may be compelled to pay in contesting liability or taking proceedings to limit liability,
with the prior written consent of the Underwriters.
8.4 EXCLUSIONS
Provided always that this Clause 8 shall in no case extend to any sum which the Assured shall pay
for or in respect of
8.4.1 removal or disposal of obstructions, wrecks, cargoes or any other thing whatsoever
8.4.2 any real or personal property or thing whatsoever except other vessels or property on
other vessels
8.4.3 the cargo or other property on, or the engagements of, the insured Vessel
8.4.4 loss of life, personal injury or illness
8.4.5 pollution or contamination, or threats thereof, of any real or personal property or things
whatsoever (except other vessels with which the insured Vessel is in collision or property
on such other vessels) or damage to the environment, or threat thereof, save that this
exclusion shall not extend to any sum which the Assured shall pay for or in respect
of salvage remuneration in which the skill and efforts of the salvors in preventing or
minimising damage to the environment as is referred to in Article 13 paragraph 1(b) of the
International Convention on Salvage, 1989 have been taken into account.
9 SISTERSHIP
Should the Vessel hereby insured come into collision with or receive salvage services from another
vessel belonging wholly or in part to the same Owners or under the same management, the
Assured shall have the same rights under this insurance as they would have were the other vessel
entirely the property of Owners not interested in the Vessel hereby insured; but in such cases the
liability for the collision or the amount payable for the services rendered shall be referred to a
sole arbitrator to be agreed upon between the Underwriters and the Assured.
10 GENERAL AVERAGE AND SALVAGE

10.1 This insurance covers the Vessels proportion of salvage, salvage charges and/or general average,
reduced in respect of any under-insurance, but in case of general average sacrifice of the Vessel
the Assured may recover in respect of the whole loss without first enforcing their right of
contribution from other parties.

10.2 Adjustment to be according to the law and practice obtaining at the place where the adventure
ends, as if the contract of affreightment contained no special terms upon the subject; but where the
contract of affreightment so provides the adjustment shall be according to the York- Antwerp Rules.
10.3 When the Vessel sails in ballast, not under charter, the provisions of the York-Antwerp Rules,
1994 (excluding Rules XI(d), XX and XXI) shall be applicable, and the voyage for this purpose
shall be deemed to continue from the port or place of departure until the arrival of the Vessel
at the first port or place thereafter other than a port or place of refuge or a port or place of
call for bunkering only. If at any such intermediate port or place there is an abandonment of the
adventure originally contemplated the voyage shall thereupon be deemed to be terminated.
10.4 No claim under this Clause 10 shall in any case be allowed where the loss was not incurred to
avoid or in connection with the avoidance of a peril insured against.
10.5 No claim under this Clause 10 shall in any case be allowed for or in respect of
10.5.1 special compensation payable to a salvor under Article 14 of the International Convention
on Salvage, 1989 or under any other provision in any statute, rule, law or contract which is
similar in substance
10.5.2 expenses or liabilities incurred in respect of damage to the environment, or the threat of
such damage, or as a consequence of the escape or release of pollutant substances from
the Vessel, or the threat of such escape or release.
10.6 Clause 10.5 shall not however exclude any sum which the Assured shall pay to salvors for or
in respect of salvage remuneration in which the skill and effort of the salvors in preventing or
minimising damage to the environment as is referred to in Article 13 paragraph 1(b) of the
International Convention on Salvage, 1989 have been taken into account.
11 DUTY OF ASSURED (SUE AND LABOUR)

11.1 In case of any loss or misfortune it is the duty of the Assured and their servants and agents to take
all measures as may be reasonable for the purpose of averting or minimising a loss which would be
recoverable under this insurance.
11.2 Subject to the provisions below and Clause 12 the Underwriters will contribute to charges
properly and reasonably incurred by the Assured their servants or agents for such measures.
General average, salvage charges (except as provided for in Clause 11.5), special compensation and
expenses as referred to in Clauses 10.5 and collision defence or attack costs are not recoverable
under this Clause 11.
11.3 Measures taken by the Assured or the Underwriters with the object of saving, protecting or
recovering the subject-matter insured shall not be considered as a waiver or acceptance of
abandonment or otherwise prejudice the rights of either party.
11.4 When expenses are incurred pursuant to this Clause 11 the liability under this insurance shall not
exceed the proportion of such expenses that the amount insured hereunder bears to the value
of the Vessel as stated herein or to the sound value of the Vessel at the time of the occurrence
giving rise to the expenditure if the sound value exceeds that value. Where the Underwriters have
admitted a claim for total loss and property insured by this insurance is saved, the forgoing provisions
shall not apply unless the expenses of suing and labouring exceed the value of such property saved
and then shall apply only to the amount of the expenses which is in excess of such value.

11.5 When a claim for the total loss of the Vessel is admitted under this insurance and expenses have
been reasonably incurred in saving or attempting to save the Vessel and other property and there
are no proceeds, or the expenses exceed the proceeds, then this insurance shall bear its pro rata
share of such proportion of the expenses, or the expenses in excess of the proceeds, as the case
may be, as may reasonably be regarded as having been incurred in respect of the Vessel, excluding
all special compensation and expenses referred to in Clause 10.5; but if the Vessel be insured for
less than its sound value at the time of the occurrence giving rise to the expenditure, the amount
recoverable under this clause shall be reduced in proportion to the under-insurance.
11.6 The sum recoverable under this Clause 11 shall be in addition to the loss otherwise recoverable
under this insurance but shall in no circumstances exceed the amount insured under this insurance
in respect of the Vessel.
12 DEDUCTIBLE
12.1 No claim arising from a peril insured against shall be payable under this insurance unless the
aggregate of all such claims arising out of each separate accident or occurrence (including claims
under Clauses 8, 10 and 11) exceeds the deductible amount agreed in which case the sum shall
be deducted. Nevertheless the expense of sighting the bottom after stranding, if reasonably
incurred specially for that purpose, shall be paid even if no damage be found. This Clause 12.1 shall
not apply to a claim for total or constructive total loss of the Vessel or, in the event of such a claim
to any associated claim under Clause 11 arising from the same accident or occurrence.
12.2 Claims for damage by heavy weather occurring during a single sea passage between two successive
ports shall be treated as being due to one accident. In the case of such heavy weather extending
over a period not wholly covered by this insurance the deductible to be applied to the claim
recoverable hereunder shall be the proportion of the above deductible that the number of days of
such heavy weather falling within the period of this insurance bears to the number of days of heavy
weather during the single sea passage. The expression heavy weather in this Clause 12.2 shall be
deemed to include contact with floating ice.
12.3 Excluding any interest comprised therein, recoveries against any claim which is subject to the
above deductible shall be credited to the Underwriters in full to the extent of the sum by which
the aggregate of the claim unreduced by any recoveries exceeds the above deductible.
12.4 Interest comprised in recoveries shall be apportioned between the Assured and the Underwriters,
taking into account the sums paid by the Underwriters and the dates when such payments were
made, notwithstanding that by the addition of interest the Underwriters may receive a larger sum
than they have paid.
13 NOTICE OF CLAIM AND TENDERS

13.1 In the event of accident whereby loss or damage may result in a claim under this insurance, notice
must be given to the Underwriters promptly after the date on which the Assured, Owners or
Managers becomes or should have become aware of the loss or damage and prior to survey
so that a surveyor may be appointed if the Underwriters so desire. If notice is not given to the
Underwriters within twelve months of that date unless the Underwriters agree to the contrary
in writing, the Underwriters will be automatically discharged from liability for any claim under this
insurance in respect of or arising out of such accident or loss or damage.

13.2 The Underwriters shall be entitled to decide the port to which the Vessel shall proceed for
docking or repair (the actual additional expense of the voyage arising from compliance with
the Underwriters requirements being refunded to the Assured) and shall have a right of veto
concerning a place of repair or a repair firm.
13.3 The Underwriters may also take tenders or may require further tenders to be taken for the repair
of the Vessel. Where such a tender has been taken and a tender is accepted with the Insurance
Damage Surveys For Hull Surveyors approval of the Underwriters, an allowance shall be made at
the rate of 30% per annum on the insured value for the time lost between the despatch of the
invitations to tender required by the Underwriters and the acceptance of a tender to the extent
that such time is lost solely as the result of tenders having been taken and provided that the
tender is accepted without delay after receipt of the Underwriters approval. Due credit shall
be given against the allowance as above for any amounts recovered in respect of fuel and stores
and wages and maintenance of the Master Officers and Crew or any member thereof, including
amounts allowed in general average, and for any amounts recovered from third parties in respect
of damages for detention and/or loss of profit and/or running expenses, for the period covered
by the tender allowance or any part thereof. Where a part of the cost of repair of damage other
than a fixed deductible is not recoverable from the Underwriters the allowance shall be reduced
by a similar proportion.
13.4 In the event of failure by the Assured to comply with the conditions of Clauses 13.2 and/or 13.3 a
deduction of 15% shall be made from the amount of the ascertained claim.
14 NEW FOR OLD

Claims payable without deduction new for old.
15 BOTTOM TREATMENT
In no case shall a claim be allowed in respect of scraping gritblasting and/or other surface
preparation or painting of the Vessels bottom except that
15.1 gritblasting and/or other surface preparation of new bottom plates ashore and supplying and
applying any shop primer thereto,
15.2 gritblasting and/or other surface preparation of: the butts or area of plating immediately adjacent
to any renewed or refitted plating damaged during the course of welding and/or repairs, areas of
plating damaged during the course of fairing, either in place or ashore,
15.3 supplying and applying the first coat of primer/anti-corrosive to those particular areas mentioned
in 15.1 and 15.2, above, shall be allowed as part of the reasonable cost of repairs in respect of
bottom plating damaged by an insured peril.
16 WAGES AND MAINTENANCE

No claim shall be allowed, other than in general average, for wages and maintenance of the Master
Officers and Crew or any member thereof, except when incurred solely for the necessary removal
of the Vessel from one port to another for the repair of damage covered by the Underwriters,
or for trial trips for such repairs, and then only for such wages and maintenance as are incurred
whilst the Vessel is under way.

17 AGENCY COMMISSION
In no case shall any sum be allowed under this insurance either by way of remuneration of the
Assured for time and trouble taken to obtain and supply information or documents or in respect
of the commission or charges of any manager, agent, managing or agency company or the like,
appointed by or on behalf of the Assured to perform such services.
18 UNREPAIRED DAMAGE
18.1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable
depreciation in the market value of the Vessel at the time this insurance terminates arising from such
unrepaired damage, but not exceeding the reasonable cost of repairs.
18.2 In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent
total loss (whether or not covered under this insurance) sustained during the period covered by
this insurance or any extension thereof.
18.3 The Underwriters shall not be liable in respect of unrepaired damage for more than the insured
value at the time this insurance terminates.
19 CONSTRUCTIVE TOTAL LOSS

19.1 In ascertaining whether the Vessel is a constructive total loss, the insured value shall be taken as
the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck
shall be taken into account.
19.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel
shall be recoverable hereunder unless such cost would exceed the insured value. In making this
determination, only the cost relating to a single accident or sequence of damages arising from the
same accident shall be taken into account.
20 FREIGHT WAIVER
In the event of total or constructive total loss no claim to be made by the Underwriters for freight
whether notice of abandonment has been given or not.
21 ASSIGNMENT
No assignment of or interest in this insurance or any monies which may be or become payable
thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such
assignment or interest signed by the Assured, and by the assignee in the case of subsequent
assignment, is endorsed on the Policy and the Policy with such endorsement is produced before
payment of any claim or return of premium thereunder.
22 DISBURSEMENTS WARRANTY
22.1 Additional insurances as follows are permitted:
22.1.1 Disbursements, Managers Commissions, profits or Excess or Increased Value of Hull and
Machinery. A sum not exceeding 25% of the value stated herein.
22.1.2 Freight, Chartered Freight or Anticipated Freight, insured for time. A sum not exceeding 25% of
the value as stated herein less any sum insured, however described, under 22.1.1

22.1.3 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 22.1.2 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.
22.1.4 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 22.1.2 to be taken into account and only the excess thereof may be
insured.
22.1.5 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 22.1.2 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 22.1.2 and 22.1.5 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.
22.1.6 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.
22.1.7 Return 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 peril or otherwise.
22.1.8 Insurance irrespective of amount against:
Any risks excluded by Clauses 24, 25, 26 and 27 below.
22.2 Warranted that no insurance on any interests enumerated in the foregoing 22.1.1 to 22.1.7 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 this insurance without knowledge of such breach.
23 RETURNS FOR LAY-UP AND CANCELLATION

23.1 To return as follows:
23.1.1 Pro rata monthly net for each uncommenced month if this insurance be cancelled by
agreement.
23.1.2 For each period of 30 consecutive days the Vessel may be laid up in a port or in a lay- up
area provided such port or lay-up area is approved by the Underwriters (with special
liberties as hereinafter allowed)

(a) ................................................... per cent net not under repair

(b) ................................................... per cent net under repair
23.1.3 The Vessel shall not be considered to be under repair when work is undertaken in respect
of ordinary wear and tear of the Vessel and/or following recommendations in the Vessels
Classification Society survey, but any repairs following loss or damage to the Vessel or
involving structural alterations, whether covered by this insurance or otherwise shall be
considered as under repair.
23.1.4 If the Vessel is under repair during part only of a period for which a return is claimable, the
return shall be calculated pro rata to the number of days under (a) and (b) respectively.
23.2 PROVIDED ALWAYS THAT

23.2.1 A total loss of the Vessel, whether by insured perils or otherwise, has not occurred during
the period covered by this insurance or any extension thereof.
23.2.2 In no case shall a return be allowed when the Vessel is lying in exposed or unprotected
waters, or in a port or lay-up area not approved by the Underwriters.
23.2.3 Loading or discharging operations or the presence of cargo on board shall not debar
returns but no return shall be allowed for any period during which the Vessel is being used
for the storage of cargo or for lightering purposes.
23.2.4 In the event of any amendment of the annual rate, the above rates of return shall be
adjusted accordingly.
23.2.5 In the event of any return recoverable under this Clause 23 being based on 30 consecutive
days which fall on successive insurances effected for the same Assured, this insurance
shall only be liable for an amount calculated at pro rata of the period rates 23.1.2(a) and/
or (b) above for the number of days which come within the period of this insurance and
to which a return is actually applicable. Such overlapping period shall run, at the option of
the Assured, either from the first day on which the Vessel is laid up or on the first day of a
period of 30 consecutive days as provided under 23.1.2(a) or (b) above.
The following clauses shall be paramount and shall override anything contained in this insurance
inconsistent therewith.
24 WAR EXCLUSION
In no case shall this insurance cover loss damage liability or expense caused by
24.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any
hostile act by or against a belligerent power
24.2 capture seizure arrest restraint or detainment (barratry and piracy excepted), and the
consequences thereof or any attempt thereat
24.3 derelict mines torpedoes bombs or other derelict weapons of war.
25 STRIKES EXCLUSION
25.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil
commotions
25.2 any terrorist or any person acting from political motive.

26 MALICIOUS ACTS EXCLUSION

In no case shall this insurance cover loss damage liability or expense arising from
26.1 the detonation of an explosive
26.2 any weapon of war and caused by any person acting maliciously or from a political motive.
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 radiations from or contamination by radioactivity from any 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 nuclear or atomic fission and/or fusion or other like reaction
or radioactive force or matter.

Appendix D. Institute Yacht Clauses - 1/ 11/ 85

This insurance is subject to English law and practice.
1 VESSEL
Vessel means the hull, machinery, boat(s), gear and equipment, such as would normally be sold with
her if she changed hands.
2 IN COMMISSION AND LAID UP

2.1 The Vessel is covered subject to the provisions of this insurance
2.1.1 while in commission at sea or on inland waters, or in port, docks, marinas, on ways,
gridirons, pontoons, or on the hard or mud or at place of storage ashore, including lifting
or hauling out and launching, with leave to sail or navigate with or without pilots, to go on
trial trips and to assist and to tow vessels or craft in distress, or as is customary, but it is
warranted that the Vessel shall not be towed, except as is customary or when in need of
assistance, or undertake towage or salvage services under a contract previously arranged
by Owners, Masters, Managers or Charterers
2.1.2 while laid up out of commission as provided for in Clause 4 below, including lifting or
hauling out and launching, while being moved in shipyard or marina, dismantling, fitting
out, overhauling, normal maintenance or while under survey, (also to include docking and
undocking and periods laid up afloat incidental to laying up or fitting out and with leave
to shift in tow or otherwise to or from her lay-up berth but not outside the limits of the
port or place in which the Vessel is laid up) but excluding, unless notice be given to the
Underwriters and any additional premium required by them agreed, any period for which
the Vessel is used as a houseboat or is under major repair or undergoing alteration.
2.2 Notwithstanding Clause 2.1 above the gear and equipment, including outboard motors, are
covered subject to the provisions of this insurance while in place of storage or repair ashore.
3 NAVIGATING AND CHARTER HIRE WARRANTIES

3.1 Warranted not navigating outside the limits stated in the Schedule to the policy or, provided
previous notice be given to the Underwriters, held covered on terms to be agreed.
3.2 Warranted to be used solely for private pleasure purposes and not for hire charter or reward,
unless specially agreed by Underwriters.
4 LAID UP WARRANTY
Warranted laid up out of commission as stated in the Schedule to the policy, or held covered on
terms to be agreed provided previous notice be given to the Underwriters.
5 SPEED WARRANTY
5.1 Warranted that the maximum designed speed of the Vessel, or the parent Vessel in case of a Vessel
with boat(s), does not exceed 17 knots.
5.2 Where the Underwriters have agreed to delete this warranty, the conditions of the Speedboat
Clause 19 below shall also apply.

6 CONTINUATION
Should the Vessel at the expiration of this insurance be at sea or in distress or at a port or place
of refuge or of call, she shall, provided prompt notice be given to Underwriters, be held covered
at a premium to be agreed until anchored, moored or placed ashore at her next port of call in
good safety.
7 ASSIGNMENT
No assignment of or interest in this insurance or in any monies which may be or become payable
thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such
assignment or interest signed by the Assured, and by the assignor in the case of subsequent
assignment, is endorsed on the policy and the policy with such endorsement is produced before
payment of any claim or return of premium thereunder.
8 CHANGE OF OWNERSHIP
This Clause 8 shall prevail notwithstanding any provision whether written typed or printed in this
insurance inconsistent therewith.
8.1 Should the Vessel be sold or transferred to new ownership, or, where the Vessel is owned by a
company, should there be a change in the controlling interest(s) of the company, then, unless the
Underwriters agree in writing to continue the insurance, this insurance shall become cancelled
from the time of such sale transfer or change and a pro-rata daily net return of premium be made
calculated on the premium charged for the in commission and/or laid up period.
8.2 If however the Vessel shall have left her moorings or be at sea at the time of sale or transfer
such cancellation shall if required by the Assured be suspended until arrival at port or place of
destination.
9 PERILS
Subject always to the exclusions in this insurance
9.1 this insurance covers loss of or damage to the subject-matter insured caused by
9.1.1 perils of the seas rivers lakes or other navigable waters
9.1.2 fire
9.1.3 jettison
9.1.4 piracy
9.1.5 contact with any dock or harbour equipment or installation, land conveyance, aircraft or
similar objects or objects falling therefrom
9.1.6 earthquake, volcanic eruption or lightning
9.2 and, provided such loss or damage has not resulted from want of due diligence by the Assured
Owners or Managers, this insurance covers
9.2.1 loss of or damage to the subject-matter insured caused by
9.2.1.1 accidents in loading, discharging or moving stores, gear, equipment, machinery
or fuel
9.2.1.2 explosions
9.2.1.3 malicious acts

9.2.1.4 theft of the entire Vessel or her boat(s), or outboard motor(s) provided it is
securely locked to the Vessel or her boat(s) by an anti-theft device in addition to
its normal method of attachment, or, following upon forcible entry into the Vessel
or place of storage or repair, theft of machinery, including outboard motor(s), gear
or equipment
9.2.2 loss of or damage to the subject-matter insured, excepting motor and connections (but not
strut shaft or propeller) electrical equipment and batteries and connections, caused by
9.2.2.1 latent defects in hull or machinery and breakage of shafts or bursting of boilers
(excluding the cost and expense of replacing or repairing the defective part broken
shaft or burst boiler)
9.2.2.2 the negligence of any person whatsoever, but excluding the cost of making good
any defect resulting from either negligence or breach of contract in respect of any
repair or alteration work carried out for the account of the Assured and/or the
Owners or in respect of the maintenance of the Vessel
9.3 this insurance covers the expense of sighting the bottom after stranding, if reasonably incurred
specially for that purpose, even if no damage is found.
10 EXCLUSIONS
No claim shall be allowed in respect of any
10.1 outboard motor dropping off or falling overboard
10.2 ships boat having a maximum designed speed exceeding 17 knots, unless such boat is specially
covered herein and subject also to the conditions of the Speedboat Clause 19 below, or is on the
parent Vessel or laid up ashore
10.3 ships boats not permanently marked with the name of the parent Vessel
10.4 sails and protective covers split by the wind or blown away while set, unless in consequence of
damage to the spars to which sails are bent, or occasioned by the Vessel being stranded or in
collision or contact with any external substance (ice included) other than water
10.5 sails, masts, spars or standing and running rigging while the Vessel is racing, unless the loss or
damage is caused by the Vessel being stranded or in collision or contact with any external
substance (ice included) other than water
10.6 personal effects
10.7 consumable stores, fishing gear or moorings
10.8 sheathing or repairs thereto, unless the loss or damage is caused by the Vessel being stranded or in
collision or contact with any external substance (ice included) other than water
10.9 loss or expenditure incurred in remedying a fault in design or construction or any cost or expense
incurred by reason of betterment or alteration in design or construction
10.10 motor and connections (but not strut shaft or propeller), electrical equipment and batteries and
connections, where the loss or damage has been caused by heavy weather, unless the loss or
damage has been caused by the Vessel being immersed, but this Clause 10.10 shall not exclude loss
or damage caused by the Vessel being stranded or in collision or contact with another Vessel or
craft, pier or jetty.

11 LIABILITIES TO THIRD PARTIES

This Clause only to apply when a sum is stated for this purpose in the Schedule to the Policy
11.1 The Underwriters agree to indemnify the Assured for any sum or sums which the Assured shall
become legally liable to pay and shall pay, by reason of interest in the insured Vessel and arising out
of accidents occurring during the currency of this insurance, in respect of
11.1.1 loss of or damage to any other vessel or property whatsoever
11.1.2 loss of life, personal injury or illness, including payments made for life salvage, caused on or
near the Vessel or any other vessel
11.1.3 any attempted or actual raising, removal or destruction of the wreck of the insured Vessel
or the cargo thereof or any neglect or failure to raise, remove or destroy the same.
11.2 LEGAL COSTS
The Underwriters will also pay, provided their prior written consent has been obtained,
11.2.1 the legal costs incurred by the Assured or which the Assured may be compelled to pay in
contesting liability or taking proceedings to limit liability
11.2.2 the costs for representation at any coroners inquest or fatal accident enquiry.
11.3 SISTERSHIP
Should the Vessel hereby insured come into collision with or receive salvage services from another
vessel or craft belonging wholly or in part to the same Owners or under the same management,
the Assured shall have the same rights under this insurance as they would have were the other
vessel or craft entirely the property of owners not interested in the Vessel hereby insured; but in
such cases the liability for the collision or the amount payable for the services rendered shall be
referred to a sole arbitrator to be agreed upon between the Underwriters and the Assured.
11.4 NAVIGATION BY OTHER PERSONS
The provisions of this Clause 11 shall extend to any person navigating or in charge of the insured
Vessel with the permission of the Assured named in this insurance (other than a person operating,
or employed by the operator of, a shipyard, marina, repair yard, slipway, yacht club, sales agency or
similar organisation) and who while so navigating or in charge of the Vessel shall in consequence of
any occurrence covered by this Clause 11 became liable to pay and shall pay any sum or sums to
any person or occurrence covered by this Clause 11 become liable to pay and shall pay any sum or
sums to any person or persons other than to the Assured named in this insurance, but indemnity
under this Clause shall inure to the benefit of the Assured and only to a person navigating or in
charge of the Vessel as described above, at the written request of and through the agency of the
Assured. Nothing in this extension shall increase the Underwriters liability beyond the limitation
of liability imposed by Clause 11.8 below and this extension shall be subject to all other terms
conditions and warranties of this insurance.
Nothing in this Clause 11.4 shall be deemed to override the provisions of Clause 3.2 above.
11.5 REMOVAL OF WRECK EXTENSION
This insurance also to pay the expenses, after deduction of the proceeds of the salvage, of the
removal of the wreck of the insured Vessel from any place owned, leased or occupied by the Assured.

11.6 LIABILITIES SECTION EXCLUSIONS

Notwithstanding the provisions of this Clause 11 this insurance does not cover any liability cost or
expense arising in respect of
11.6.1 any direct or indirect payment by the Assured under workmens compensation or
employers liability acts and any other statutory or common law liability in respect
of accidents to or illness of workmen or any other persons employed in any capacity
whatsoever by the Assured or by any person to whom the protection of this insurance is
afforded by reason of the provisions of Clause 11.4 above, in on or about or in connection
with the Vessel hereby insured or her cargo, materials or repairs.
11.6.2 any boat belonging to the Vessel and having a maximum designed speed exceeding 17
knots, unless such boat is specially covered herein and subject also to the conditions of the
Speedboat Clause 19 below, or is on the parent Vessel or laid up ashore
11.6.3 any liability to or incurred by any person engaged in water skiing or aquaplaning, while
being towed by the Vessel or preparing to be towed or after being towed until safely on
board or ashore
11.6.4 any liability to or incurred by any person engaged in a sport or activity, other than water
skiing or aquaplaning, while being towed by the Vessel or preparing to be towed or after
being towed until safely on board or ashore
11.6.5 punitive or exemplary damages, however described.
11.7 WATER-SKIERS LIABILITIES
Should Clause 11.6.3 and/or Clause 11.6.4 above be deleted, the liabilities mentioned in such Clause(s)
shall be covered hereunder, subject to the warranties, conditions and limits of this insurance.
11.8 LIMIT OF LIABILITY
The liability of the Underwriters under this Clause 11, in respect of any one accident or series of
accidents arising out of the same event, shall in no case exceed the sum stated for this purpose
in the Schedule to the policy, but when the liability of the Assured has been contested with the
consent in writing of the Underwriters, the Underwriters will also pay a like proportion of the
costs which the Assured shall thereby incur or be compelled to pay.
12 EXCESS AND DEDUCTIBLE

12.1 No claim arising from a peril insured against shall be payable under this insurance unless the
aggregate of all such claims arising out of each separate accident or occurrence (including claims
under Clauses 11, 14 and 15) exceeds the amount stated for this purpose in the Schedule to the
policy, in which case this sum shall be deducted. This Clause 12.1 shall not apply to a claim for
total or constructive total loss of the Vessel or, in the event of such a claim, to any associated claim
under Clause 15 arising from the same accident or occurrence.
12.2 Prior to the application of Clause 12.1 above and in addition thereto, deductions new for old not
exceeding one-third may be made at the Underwriters discretion in respect of loss of or damage to
12.2.1 protective covers, sails and running rigging
12.2.2 outboard motors whether or not insured by separate valuation under this insurance.

13 NOTICE OF CLAIM AND TENDERS

13.1 Prompt notice shall be given to the Underwriters in the event of any occurrence which may give
rise to a claim under this insurance, and any theft or malicious damage shall also be reported
promptly to the Police.
13.2 Where loss or damage has occurred, notice shall be given to the Underwriters prior to survey
and, if the Vessel is abroad, also to the nearest Lloyds Agent so that a surveyor may be appointed
to represent the Underwriters should they so desire.
13.3 The Underwriters shall be entitled to decide the port to which the Vessel shall proceed for
docking or repair (the actual additional expense of the voyage arising from compliance with
Underwriters requirements being refunded to the Assured) and shall have a right of veto
concerning a place of repair or a repairing firm.
13.4 The Underwriters may also take tenders or may require tenders to be taken for the repair of
the Vessel.
14 SALVAGE CHARGES
Subject to any express provision in this insurance, salvage charges incurred in preventing a loss by
perils insured against may be recovered as a loss by those perils.
15 DUTY OF ASSURED
15.1 In case of any loss or misfortune it is the duty of the Assured and their servants and agents to take
such measures as may be reasonable for the purpose of averting or minimising a loss which would
be recoverable under this insurance.
15.2 Subject to the provisions below and to Clause 12 the Underwriters will contribute to charges
properly and reasonably incurred by the Assured their servants or agents for such measures.
General average, salvage charges, collision defence or attack costs and costs incurred by the
Assured in contesting liability covered by Clause 11.2 are not recoverable under this Clause 15.
15.3 The Assured shall render to the Underwriters all possible aid in obtaining information and
evidence should the Underwriters desire to take proceedings at their own expense and for their
own benefit in the name of the Assured to recover compensation or to secure an indemnity from
any third party in respect of anything covered by this insurance.
15.4 Measures taken by the Assured or the Underwriters with the object of saving, protecting or
recovering the subject-matter insured shall not be considered as a waiver or acceptance of
abandonment or otherwise prejudice the rights of either party.
15.5 The sum recoverable under this Clause 15 shall be in addition to the loss otherwise recoverable
under this insurance but in no circumstances shall amounts recoverable under Clause 15.2 exceed
the sum insured under this insurance in respect of the Vessel.
16 UNREPAIRED DAMAGE
16.1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable
depreciation in the market value of the Vessel at the time this insurance terminates arising from
such unrepaired damage, but not exceeding the reasonable cost of repairs.
16.2 In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent
total loss (whether or not covered under this insurance) sustained during the period covered by
this insurance or any extension thereof.

16.3 The Underwriters shall not be liable in respect of unrepaired damage for more than the insured
value at the time this insurance terminates.
17 CONSTRUCTIVE TOTAL LOSS

17.1 In ascertaining whether the Vessel is a constructive total loss, the insured value shall be taken as
the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck
shall be taken into account.
17.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel
shall be recoverable hereunder unless such cost would exceed the insured value. In making this
determination, only the cost relating to a single accident or sequence of damages arising from the
same accident shall be taken into account.
18 DISBURSEMENTS WARRANTY
Warranted no amount shall be insured policy proof of interest or full interest admitted for
account of the Assured, Mortgagees or Owners on disbursements, commission, profits or other
interests or excess or increased value of hull or machinery however described unless the insured
value of the Vessel is over 50,000 and then not to exceed 10 per cent of the total amount insured
in respect of the Vessel as stated in the Schedule to the policy.

Provided always that a breach of this warranty shall not afford the Underwriters any defence to a
claim by a Mortgagee who has accepted this insurance without knowledge of such breach.
19 SPEEDBOAT CLAUSE
WHERE THIS CLAUSE 19 APPLIES IT SHALL OVERRIDE ANY CONFLICTING PROVISIONS IN
THE CLAUSES ABOVE.
19.1 It is a condition of this insurance that when the Vessel concerned is under way the Assured
named in the Schedule to the policy or other competent person(s) shall be on board and in
control of the Vessel.
19.2 No claim shall be allowed in respect of loss of or damage to the Vessel or liability to any third
party or any salvage services
19.2.1 caused by or arising from the Vessel being stranded sunk swamped immersed or breaking
adrift, while left moored or anchored unattended off an exposed beach or shore
19.2.2 arising while the Vessel is participating in racing or speed tests, or any trials in connection
therewith.
19.3 No claim shall be allowed in respect of rudder shaft or propeller
19.3.1 under Clauses 9.2.2.1 and 9.2.2.2
19.3.2 for any loss or damage caused by heavy weather, water or contact other than with another
vessel, pier or jetty, but this Clause 19.3.2 shall not exclude damage caused by the Vessel
being immersed as a result of heavy weather.
19.4 If the Vessel is fitted with inboard machinery no liability shall attach to this insurance in respect of
any claim caused by or arising through fire or explosion unless the Vessel is equipped in the engine
room (or engine space) tank space and galley, with fire extinguishing system automatically operated
or having controls at the steering position and properly installed and maintained in efficient
working order.

20 CANCELLATION AND RETURN OF PREMIUM

This insurance may be cancelled by the Underwriters at any time subject to 30 days notice to
the Assured or by mutual agreement, when a pro rata daily net return of premium shall be made
calculated on the premium charged for the in commission and/or laid up period.
THE FOLLOWING CLAUSES SHALL BE PARAMOUNT AND SHALL OVERRIDE

ANYTHING CONTAINED IN THIS INSURANCE INCONSISTENT THEREWITH
21 WAR EXCLUSION
21.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by
or against a belligerent power
21.2 capture seizure arrest restraint or detainment (barratry and piracy excepted), and the
consequences thereof or any attempt thereat
21.3 derelict mines torpedoes bombs or other derelict weapons of war.
22 STRIKES AND POLITICAL ACTS EXCLUSION

22.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions
22.2 any terrorist or any person acting from a political motive.
23 NUCLEAR EXCLUSION
In no case shall this insurance cover loss damage liability or expense arising from
23.1 any weapon of war employing atomic or nuclear fission and/or other like reaction or radioactive
force or matter
23.2 ionising radiations from or contamination by radioactivity from any nuclear fuel or from any
nuclear waste from the combustion of nuclear fuel
23.3 the radioactive, toxic, explosive or other hazardous properties of any explosive nuclear assembly
or nuclear component thereof.

The following is provided to allow comparison between the Institute Yacht Clauses
(Appendix D) and the Pleasure Craft policy of Noble Marine (underwritten by Royal Sun
Alliance). It is reproduced here with their kind permission.
Appendix E.
NOBLE MARINE PLEASURE CRAFT POLICY
Section 1
Physical Loss or Damage
Subject to the terms and conditions of this Policy the Vessel and Tenders insured herein are covered
for private pleasure purposes only, unless otherwise shown on the Schedule, up to the sum insured
and whilst being used within the Cruising Range stated in the Schedule against physical loss or damage
caused by an accidental cause.
Accidental cause includes but is not limited to theft, negligence and Malicious Acts provided that the loss
occurs during the Period of Insurance.
In case of a recoverable claim for physical loss or damage following an Insured Event, the amount
payable by Insurers will be determined as follows:-
Actual and Constructive Total Loss of the Vessel
i. Up to theVessels value stated in the Schedule.The Excess will not be applied in this case.
ii. Where the Vessel is lost or damaged within three years of completion of its manufacture Insurers
will pay for:
a. A new Vessel of the same make, model and specification
OR
b. if the Vessel is no longer in production a new Vessel of a similar model and specification costing up
to 120% of the value shown on the Schedule. This provision does not apply to outboard motors.
Partial Loss or damage to the Vessel
The reasonable cost of repairing the Vessel or replacing any individual item(s) lost, damaged or stolen
with a similar item and limited to the values shown on the Schedule.
Claims in respect of the Actual or Constructive Total Loss of protective covers, sails, masts, spars,
standing and running rigging, the age of which exceeds three years at the time of loss, shall be
recoverable only to the extent of two-thirds of their new replacement cost.
The reasonable reduction in the market value of the Vessel at the expiry of this Policy due to damage
covered by the Policy remaining unrepaired. The amount payable shall not exceed the cost of repair
based on estimates provided by mutually acceptable parties.
The Excess will be applied as detailed in the Schedule.

Exclusions relating to Section 1

Insurers have no liability in respect of physical loss or damage under this section, arising from: -
1.1 the failure to maintain the Vessel in a Seaworthy condition
1.2 the Wilful Act of the Insured, a member of his family or any Permitted User
1.3 the operation of the Vessel by the Insured or any Permitted User whilst under the influence of
alcohol or drugs other than drugs taken for a medical condition
1.4 wear, tear, gradual deterioration, Inherent Vice, frost, mould, fungi, marine life, electrical and
mechanical derangement
1.5 Latent Defect of a part of the Vessel or tender however the damage caused by the latently
defective part is recoverable
1.6 fault or error in design and construction and any expense incurred in design or construction
alterations
1.7.1 theft or unauthorised removal of the Vessel by any Permitted User
1.7.2 theft of outboard motor(s) unless secured, by an anti-theft device or unless following forcible
entry into a locked compartment or locked place of storage
1.7.3 theft of gear and equipment unless following Total Loss of the Vessel or following violent or
forcible entry into a locked compartment or place of storage
1.7.4 theft of the trailer or the Vessel whilst on the trailer unless the trailer is immobilised or fitted with
a suitable anti theft device
1.8 unrepaired damage, any failed repair, alteration, modification or maintenance work carried out on
the Vessel
1.9 scratching, denting, bruising of the Vessel whilst in transit by road, rail or ferry.
Insurers have no liability in respect of physical loss or damage to the following:

1.10 the Vessels mooring or any part thereof with the exception of the mooring lines/warps, anchor
and anchor chain
1.11 loss of or damage arising through or consequent upon the ordinary action of the wind and waves
or natural decay
1.12 loss of or damage to the Vessels outboard motors through dropping off or falling overboard,
unless secured to the Vessel at the time of loss by a suitable safety chain or strap.
Where a Vessel has a maximum designed speed in excess of 17 knots Insurers have no liability in respect
of physical loss or damage to the Vessel or liability to third parties or any salvage services for claims
caused by or arising from:
1.13 the Vessel racing or taking part in any speed tests or time trials
1.14 fire or explosion on the Vessel or Tenders if fitted with inboard machinery, unless the engine room
or engine space is fitted with a properly maintained automatic fire fighting system or with fire
fighting equipment which is properly installed and maintained in working order in accordance with
manufacturers and flag safety regulations.
Furthermore where a Vessel has a maximum design speed in excess of 17 knots Insurers will exclude
claims in respect of the following:
1.15 craft less than 5 metres (16 feet 5 inches) in length, being swamped, stranded, sunk, or breaking
adrift whilst moored afloat and with no responsible able bodied adult on board.

Section 2
Personal Effects
Subject to the Terms and Conditions of this Policy, this insurance covers Personal Effects belonging to
the Insured and the Insureds family against theft, loss or damage whilst on board the Vessel and whilst
being used in connection with the Vessel.These items are also covered whilst in transit to and from the
Insureds place of residence to the Vessel.
The amount recoverable under the Personal Effects section shall be limited to the amount stated in the
Schedule. Any single item valued in excess of 250 must be specifically declared and agreed by Insurers,
prior to the item being covered.
If at the time of loss the value of all Personal Effects exceeds the amount shown in the Schedule the
Insured shall only be entitled to recover such proportion of the loss as the amount shown in the
Schedule bears to the total value of Personal Effects.

Insurers herein have no liability in respect of physical loss or damage to Personal Effects caused by the
following:
2.1 wear, tear, gradual deterioration, Inherent Vice, frost, mould, fungi, marine life, electrical and
mechanical derangement
2.2 Wilful Act or theft by the Insured, a member of his family or any Permitted User
2.3 loss of diving equipment, water-skis or fishing gear, unless as a result of Total Loss of the Vessel or
theft following violent or forcible entry into a locked compartment aboard the Vessel.
Section 3
War, Strikes,Terrorism and Associated Risks
Subject to the exclusions indicated below, Insurers will insure the Vessel for the sum insured indicated in
the Schedule against physical loss or damage caused by the following:
3.1 war, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act
by or against a belligerent power
3.2 capture, seizure, arrest, restraint or detainment and the consequences thereof or any attempt thereat
3.3 derelict mines, torpedoes, bombs or other derelict weapons of war
3.4 strikers, locked out workmen, or persons taking part in labour disturbances, riots or civil commotions
3.5 any terrorist or any person acting from a political motive
3.6 confiscation or appropriation.
Detainment
In the event of the Vessel being subject of capture, seizure, arrest, restraint, detainment, confiscation or
appropriation and the Insured has been deprived of the Vessel for a continuous period of 12 months and
without the likelihood of recovery Insurers will pay the Vessel value as indicated in the Schedule.

Insurers have no liability under this Section for loss or damage arising from the following:
3.7 any detonation of any weapon of war employing atomic or nuclear fission or fusion or other like
reaction or radioactive force or matter
3.8 any outbreak of war between any of the following countries: United Kingdom, United States of
America, France,The Russian Federation, the Peoples Republic of China
3.9 requisition or pre-emption
3.10 capture, seizure, arrest, restraint, detainment, confiscation or expropriation by or under the
authority of the government or any public authority of the country in which theVessel is owned
or registered
3.11 arrest, restraint, detainment, confiscation or expropriation under quarantine regulations or by
reason of infringement of any customs or trading regulations
3.12 the operation of any ordinary judicial process, failure to provide security or to pay any fine or
penalty or any financial cause
3.13 any claim for any sum recoverable under any other insurance on the Vessel or which would be
recoverable under such insurance but for the existence of this Policy
3.14 any claim or expense arising from delay.
Termination
Section 3 of the cover provided herein may be cancelled by either party by giving 7 days notice of
cancellation.The cancellation becomes effective on the expiry of 7 days from midnight of the day
on which notice of cancellation is issued by or to the Insurers. Notice by either party should be by
registered post to the Insureds insurance advisor. Insurers however agree to reinstate Section 3 subject
to prior agreement being reached as to the new rate of premium to be charged and conditions or
warranties to be applied.
Whether or not such notice of cancellation has been given, Section 3 will automatically terminate in the
event of any of the following:
3.15 hostile detonation of any weapon of war by any of the countries indicated in section 3.8, anywhere
in the world
3.16 the outbreak of war between any of the countries indicated in section 3.8
3.17 The requisition of the Vessel either for title or use.
Section 4
The institute extended radioactive contamination exclusion clause (cl 370) and the
institute chemical, biological, bio-chemical, electromagnetic weapons and cyber attack
exclusion clause (cl 380) are incorporated in this policy and are detailed in full below:
Institute extended radioactive contamination exclusion clause (cl 370)
This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith.

In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or
contributed to by or arising from:-
ionising radiations from or contamination by radioactivity from any nuclear fuel or from any
nuclear waste or from the combustion of nuclear fuel
the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear
installation, reactor or other nuclear assembly or nuclear component thereof
any weapon or device employing atomic or nuclear fission or fusion or other like reaction or
radioactive force or matter
the radioactive, toxic 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
any chemical, biological, bio-chemical, or electromagnetic weapon
Institute chemical, biological, bio-chemical, electromagnetic weapons and cyber attack exclusion clause (cl 380)
subject only to clause below, in no case shall this insurance cover loss damage liability or expense
directly or indirectly caused by or contributed to by or arising from the use or operation, as a
means for inflicting harm, of any computer, computer system, computer software programme,
malicious code, computer virus or process or any other electronic system
where this clause is endorsed on policies covering risks of war, civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power,
or terrorism or any person acting from a political motive, the above clause shall not operate
to exclude losses (which would otherwise be covered) arising from the use of any computer,
computer system or computer software programme or any other electronic system in the launch
or guidance system or firing mechanism of any weapon or missile.
Section 5
Third Party Liability
This cover is applicable only if indicated in the Schedule.
Subject to the Terms and Conditions of this policy Insurers will indemnify the Insured or any Permitted
User against claims arising from their legal liability for:
5.1 death or bodily injury to any person
5.2 loss of or damage to property not belonging to the Insured
5.3 any action taken by the Insured and any Permitted User in an attempt to avoid or reduce any
insured liability

5.4 attempted or actual raising, removal and destruction of the wreck of the Vessel or the Tenders.
The maximum amount recoverable under this Section is shown on the Schedule and is limited to
any one accident or series of accidents arising from the same event.
In addition to any claim for which coverage is provided under this section and with prior written
consent and agreement Insurers will pay:
5.5 the reasonable expenses incurred by the Insured in relation to Coroners inquests and Official Enquiries
5.6 the legal costs incurred in defending or pursuing any action following an event covered under this
policy whether or not such action results in Court proceedings

Insurers have no liability in respect of the following:
5.7 any form of personal or bodily injury or death in respect of persons employed in any capacity by
the Insured in connection with the Vessel or employed by any Permitted User
5.8 accidents caused to or by waterskiers, whilst being towed or preparing to be towed by the insured
Vessel or Tenders unless the Schedule provides for such an extension
5.9 accidents caused by any person engaged in any form of diving activities
5.10 accidents caused to or by any person engaged in water-sport activities such as towing of bananas
or rings, aquaplaning, kiting or any other airborne activities including whilst preparing to be towed
5.11 punitive, exemplary damages, fines or penalties imposed under any statutory code or law
5.12 any third party loss or damage caused during land, road, rail or ferry transit.
Section 6
Personal Accident
Subject to the Terms and Conditions of this Policy, whilst the Vessel is used for private pleasure
purposes, cover is extended to include bodily injury or death (as detailed in the Indemnity Schedule
below) to the Insured or to any person on board the Vessel with the Insureds permission including
whilst embarking or disembarking.
In the event of a claim under Section 6 Insurers may require the claimant or the person on whose behalf
the claim is being made to agree to a medical examination by Insurers appointed medical experts.
Indemnity Schedule
The limits any one occurrence for which Insurers will be liable under this section are as follows:
Death 20,000
Loss of one or more limbs 20,000
Total loss of sight in one or both eyes 20,000
Permanent Total disablement after 52 weeks 20,000

Insurers have no liability for:

6.1 any pre existing illness or injury
6.2 pregnancy
6.3 death or disablement arising after 12 months from the date of the accident
6.4 bodily injury or death to any person aged 75 years or over at the time of the accident
6.5 an amount exceeding 100,000 in the aggregate in any one Period of Insurance
6.6 bodily injury or death to any person under a contract of employment with the Insured
6.7 any suicide or attempted suicide
6.8 bodily injury or death to any Permitted User whilst under the influence of alcohol or drugs other
than drugs taken for a medical condition.
Section 7
Medical Expenses
This policy covers the cost of medical, surgical, ambulance, hospital or other professional medical
services, up to a limit of 5,000 or equivalent in any other currency, any one occurrence, where such are
incurred following injury occurring during the Period of this Insurance to the Insured or to any person
on board the Vessel with the Insureds permission including whilst on board, embarking or disembarking.
Insurers have no liability for:

7.1 any pre-existing illness or injury
7.2 pregnancy
7.3 any person under a contract of employment with the Insured
7.4 any person whilst the Vessel is used for purposes other than private pleasure
7.5 any suicide or attempted suicide
7.6 The Insured or any Permitted User whilst under the influence of alcohol or drugs other than
drugs taken for a medical condition.
The injured person shall as soon as practicable furnish Insurers with all information relating to the accident.
Section 8
Additional Benefits
Bottom inspection following a grounding

Subject to prior agreement Insurers will pay reasonable costs for the inspection of the bottom of the Vessel
following a grounding incident even if no damage is found and without application of the policy Excess.

Duty of the Insured

In circumstances which are likely to cause physical loss or damage to the Vessel, or otherwise to result
in a claim under the Policy, it is the duty of the Insured and any Permitted User to take such measures
as may be reasonable to avert or minimise such loss. Subject to the application of the Excess Insurers
will reimburse the Insured for any expense reasonably incurred in taking such measures up to but not
exceeding the sum insured of the Vessel.
No Claims Bonus Clause

Where the Insured has not made a claim in an expiring Period of Insurance he/she will be entitled to a
No Claims Bonus which will be deducted from the premium for the following Period of Insurance. This
discount will be calculated at 5% of gross premium for each claim free year up to a maximum of 25%.
If only one claim is made during any Period of Insurance the bonus allowed will be:
No Claim Bonus at last renewal No Claim Bonus at next renewal

5% Nil
10% Nil
15% 5%
20% 10%
25% 15%
If more than one claim is made in any Period of Insurance the No Claims Bonus will be reduced to Nil
at next renewal.
If this Policy applies to more than one Vessel, the No Claims Bonus will apply as if a separate Policy had
been issued for each Vessel.
No Claims Bonus is not transferrable from one person to another.
Protected No Claims Bonus

No Claims Bonus will be unaffected at renewal by any claims made in the current Period of Insurance if:
I. the Insured is entitled to the maximum No Claims Bonus (25%)
AND II. the Schedule indicates that No Claims Bonus is protected .
Salvage
This Policy covers salvage charges reasonably incurred in averting or minimising a loss recoverable under
Section 1. It is a condition of this insurance that the Insured shall not agree to compensation relating to
salvage services without Insurers prior consent. It is, however, agreed that the Insured is permitted to take
the necessary and reasonable actions to preserve the property covered under this insurance.

Transits
The cover provided under Section 1 of this insurance is extended to cover the Vessel whilst in transit
by road, rail, ferry or air and during loading and unloading. However, for Vessels with an overall length of
9 metres (29 feet 5 inches) or over, cover is limited to transits conducted by a professional haulier not
exceeding 16.1 km (10 miles).
Section 9
General Conditions
These conditions apply to all sections of this Policy
Duties of the Insured

It is a condition of this Policy that the Insured will take all reasonable steps to maintain the Vessel in
a proper state of repair and Seaworthiness and take all reasonable steps to avert or minimise a loss.
Failure to comply with this Condition may prejudice a claim under the Policy.
Facts Omitted and Misrepresented

This Policy or any subsequent renewal will be deemed null and void if the Insured or anyone acting on
the Insureds behalf have obtained cover through the omission, misrepresentation or non-disclosure of
any fact or circumstances known to the Insured or which the Insured could reasonably be expected to
know and which could have influenced the Insurers assessment and acceptance of the risk or decision
to invite renewal. In the event that Insurers avoid the Policy a refund of premium will be made.
Continuation
If the Vessel is at sea or in distress or at a place of refuge at the time this insurance expires, Insurers will
automatically continue cover. Upon arrival at the next port of call the Insured must notify Insurers and
make any necessary premium payments without any undue delay.
Capture and Seizure of persons

This Policy excludes loss, damage, ransom, expense or any other liability whatsoever arising from
or connected to the capture, seizure, arrest, restraint, detainment, hijack or kidnap of the Insured,
Permitted Users, charterers, guests or any other persons.
Assignment or Transfer of this insurance

This insurance is a contract between the Insured and the Insurers and is not assignable or transferable
unless agreed in writing by Insurers prior to any assignment or transfer taking place.
Contracts (Rights of Third Parties) Act 1999 Exclusion Clause

Neither this Policy nor any document issued pursuant to this Policy shall confer any benefits on any
third parties. No Third Party may enforce any term of this Policy or of any provision contained in any
document issued under this Policy. The Contracts (Rights of Third Parties) Act 1999 is hereby expressly
excluded from this Policy, including the Schedule or any other document issued pursuant thereto.
This clause shall not affect the rights of the Assured (as assignee or otherwise) or the rights of any loss payee.
JH 2000/007 13 June 2000

Contracts (Rights of Third Parties) Act

A person or company who is not a party to this Policy has no right under the Contracts (Rights of Third
Parties) Act 1999 to enforce any term of this Policy but this does not affect any right or remedy of a
third party which exists or is available apart from that Act.
Sale or transfer of Ownership

It is hereby noted that if the Vessel is sold or transferred to new ownership, unless agreed by Insurers,
this insurance is cancelled from the time of sale or transfer.
Return of Premium
If the Vessel is sold or transferred to new ownership, this Policy shall be automatically cancelled from
the time of sale or transfer and a pro-rata daily return of premium will be paid, subject to Insurers
retaining any minimum premium as detailed in the Schedule.Where an additional premium (AP) has
been charged for a specific voyage, or event or to include cover for Racing Risks, such premium shall be
non-refundable.
If a claim is paid under this Policy no return premium will be paid in respect of the unexpired period.
In the case of an extension to this Policy which has not taken place the return premium for the
extension will not be reimbursed unless Insurers are advised of the non-occurrence of the event within
7 days of its intended commencement.
Policy cancellation
If having checked the Policy the Insured decides not to proceed with this insurance the Insured has a
statutory right (in UK) to cancel within 14 days starting on the date Policy documentation is received by the
Insured. If the Insured wishes to cancel the Policy the Insured should write to his yacht insurance advisor.
Insurers will refund any premium paid except when a claim has already been made under the Policy.
Beyond this 14 day period this insurance may be cancelled by either party at any time by giving a
minimum of 30 days notice in writing or by mutual agreement.
Governing Law
Unless the parties have agreed otherwise in writing any dispute concerning the interpretation of this
Insurance shall be governed and construed in accordance with English law.
Jurisdiction
If the Insured is domiciled in a Member State of the EU bound by the provisions of Council Regulation
EC No 44/2001, namely Belgium, Greece, Spain, France, Italy, Luxembourg,The Netherlands,The Czech
Republic, Germany, Estonia, Ireland, Cyprus, Latvia, Lithuania, Hungary, Malta, Austria, Poland, Portugal,
Slovenia, Slovakia, Finland,Sweden or the United Kingdom or in Gibraltar then, in the event of a dispute
between the Insured and the parties the Insured must bring proceedings against the parties:
In the courts of England and Wales

OR

In the courts of the Member State of the EU where the Insured is domiciled, or in Gibraltar if
the Insured is domiciled there
OR
In respect of liability cover under this insurance, in the courts of the place where - the event
giving rise to the claim against the Insured occurred
OR
In respect of liability cover under this insurance in the courts in which the party pursuing a
claim against the Insured has brought proceedings against the Insured, if the law of those courts
permits us to be joined in such proceedings
AND
Parties may bring proceedings against the Insured only in the courts of the Member State of the
EU in which the Insured is domiciled, or in Gibraltar if the Insured is domiciled there
If the Insured is domiciled in a place other than those listed above then in the event of a
dispute between the Insured and the parties the Insured may bring proceedings against parties
only in the Courts of England and Wales and parties may bring proceedings against the Insured
only in the Courts of England and Wales which shall have exclusive jurisdiction to determine
any such dispute.
Section 10
Claims and Accidents General Conditions and Procedures
Notification of Claims
In the event of any occurrence which may give rise to a claim under this Policy, notice must be given
to Insurers in writing as soon as practicable with brief details of the incident along with names and
addresses of witnesses and any third party claimants and potential claimants to Noble Marine, Clinton
House, Lombard Street, Newark, Nottinghamshire, NG24 1XB or via the appointed Broker.
As soon as practicable all claims, letters, summonses, writs or documents which are received from
third parties need to be given to Insurers unanswered, and the Insured must provide any assistance and
information reasonably required.
This may include any evidence that could be required by Insurers concerning the cause and value of any
claim. The following should be provided, however, this is not an exhaustive list of information which may
be required:
Insureds name, address, and contact details

policy number
the date of the incident
the cause of the loss or damage
repair estimates if already obtained
details of the loss or damage together with claim value if known

police details where applicable including crime reference numbers

names and addresses of any other parties involved or responsible for the incident
details of any injuries sustained by anyone covered under the Policy or any loss of or damage to
property or injury suffered by any third party
names and addresses of any witnesses.
This information will enable Insurers to make an initial evaluation on Policy liability and claim value.
Insurers may, however, request additional information depending upon circumstances and value which
may include the following:
Original purchase receipts, invoices, instruction booklets or photographs

Purchase dates and location of lost or damaged property.
Sometimes Insurers may wish to appoint their representative to discuss the circumstances of the claim,
to inspect the damage, or to undertake further investigations.
Admission to Third Parties

No liability of any sort may be admitted and no undertaking given, nor should any offer, promise or
payment be made or legal expenses incurred by the Insured or any person on board the Vessel without
Insurers prior written consent.

Appendix F. ITICs Recommended Terms & Conditions

for Surveyors and Consultants
These standard terms and the note preceding them are reproduced here by kind permission of the
International Transport Intermediaries Club Ltd (ITIC).
See Section 4.1 The Role of the Cargo Surveyor under the sub-heading of Principals instructions.
STANDARD TERMS FOR SURVEYORS AND CONSULTANTS
Almost all cargo transported throughout the world is carried according to some form of contractual
conditions. Ship owners, freight forwarders and others carry on their businesses protected by their
trading conditions. It is perhaps surprising therefore that few surveyors and consultants, who after all
deal with the same ships and cargoes, take steps to obtain the same benefits.
Following consultation with a number of industry bodies, we have produced ITICs Standard Terms
for Surveyors and Consultants, a set of draft clauses for members to consider using in their own
trading conditions.
These terms and conditions are published for the general interest of members of ITIC. The specific
requirements of individual businesses vary and accordingly no responsibility can be taken for the
suitability of these terms and conditions to a specific business. As with all contractual terms it is
important that the user ensures that they are properly incorporated in their dealings with other parties.
Members should seek the advice of their usual legal adviser prior to using such terms and conditions.
ITIC reserves all rights, including copyright, trademarks and other intellectual property rights, in these
standard trading conditions and no part thereof can be redistributed, republished or stored in any
format without the express written permission of ITIC.
For further information, we would also recommend that you consult The Intermediary 2001 article on
Standard Trading Conditions.
1. Definitions
Surveyor/Consultant is the Surveyor/ Consultant trading under these Conditions.
Client is the party at whose request or on whose behalf the Surveyor/ Consultant undertakes
surveying services.
Report means any report or statement supplied by the Surveyor/ Consultant in connection with
instructions received from the Client.

Disbursements means the cost of all reasonable photography, reproduction of drawings, diagrams,
sketches and printing, duplicating and, where applicable, electronic transmission fees, and all
reasonable and appropriate expenses including travel, refreshments and hotel accommodation where
an overnight stay is necessary.
Fees means the fees charged by the Surveyor/ Consultant to the Client and including any value
added tax where applicable and any Disbursements.
2. Scope
The Surveyor/ Consultant shall provide its services solely in accordance with these Terms
and Conditions.
3. Work
The Client will set out in writing the services which it requires the Surveyor/Consultant to provide.
The Surveyor/Consultant will confirm in writing that it accepts those instructions alternatively what
services it will perform in connection with the Clients instructions. Once the Surveyor/Consultant
and the Client have agreed what services are to be performed any subsequent changes or additions
must be agreed by both parties in writing.
4. Payment Terms
The Client shall pay the Surveyor/Consultants fees punctually in accordance with these Conditions
and in any event not later than 30 days following the relevant invoice date, or in such other manner
as may have been agreed in writing between the parties. Any delay in payment shall entitle the
Surveyor/ Consultant to interest at 4% above the Base Lending Rate of HSBC Bank Plc prevailing at
the time of default.
5. Obligations and Responsibilities
(a) Client
The Client undertakes to ensure that full instructions are given to the Surveyor/Consultant and are
provided in sufficient time to enable the required services to be performed effectively and efficiently
and to procure all necessary access for the Surveyor/Consultant to goods, premises, vessels,
installations and transport and to ensure that all appropriate safety measures are taken to provide
safe and secure working conditions.
The Surveyor/Consultant shall not be liable for the consequences of late, incomplete, inadequate,
inaccurate or ambiguous instructions.
(b) Surveyor
The Surveyor/Consultant shall use reasonable care and skill in the performance of the services in
accordance with sound marine surveying/consulting practice.

(c) Reporting
The Surveyor/Consultant shall submit a final written Report to the Client following completion of
the agreed services describing the Surveyors/Consultants findings and the condition and/or quality
of the object and/or purpose of the assignment, unless otherwise expressly instructed by the Client
not to do so.
(d) Confidentiality
The Surveyor/Consultant undertakes not to disclose any information provided in confidence by the
Client to any third party and will not permit access to such information by any third party unless the
Client expressly grants permission save where required to do so by an order of a competent court
of law.
(e) Property
The right of ownership in respect of all original work created by the Surveyor/Consultant remains
the property of the Surveyor/Consultant.
(f) Conflict of Interest/Qualification

The Surveyor/Consultant shall promptly notify the Client of any matter including conflict of interest
or lack of suitable qualifications and experience, which would render it undesirable for the Surveyor/
Consultant to continue its involvement with the appointment. The Client shall be responsible for
payment of the Surveyors/Consultants fees up to the date of notification.
6. Liability
(a) Without prejudice to Clause 7, the Surveyor/ Consultant shall be under no liability whatsoever to
the Client for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect
and howsoever arising UNLESS same is proved to have resulted solely from the negligence, gross
negligence or wilful default of the Surveyor/Consultant or any of its employees or agents or sub-
contractors,
(b) In the event that the Client proves that the loss, damage, delay or expense was caused by the
negligence, gross negligence or wilful default of the Surveyor/ Consultant aforesaid, then, save where
delay or expense would probably result, the Surveyors/Consultants liability for each incident or
series of incidents giving rise to a claim or claims shall never exceed a sum calculated on the basis of
ten times the Surveyors/Consultants charges or 125,000 whichever is the greater.
The Surveyor/Consultant shall not be liable for loss of or damage to equipment and other items
placed at its disposal by or on behalf of the Client however such loss or damage occurs.

7. Indemnity
Except to the extent and solely for the amount therein set out that the Surveyor/Consultant would
be liable under Clause 6, the Client hereby undertakes to keep the Surveyor/ Consultant and its
employees, agents and sub-contractors indemnified and to hold them harmless against all actions,
proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought
against them or incurred or suffered by them, and against and in respect of all costs, loss, damages
and expenses (including legal costs and expenses on a full indemnity basis) which the Surveyor/
Consultant may suffer or incur (either directly or indirectly) in the course of the services under
these Conditions.
8. Force Majeure
Neither the Surveyor/Consultant nor the Client shall, except as otherwise provided in these
Conditions, be responsible for any loss, damage, delay or failure in performance hereunder arising
or resulting from act of God, act of war, seizure under legal process, quarantine restrictions, strikes,
boycotts, lockouts, riots, civil commotions and arrest or restraint of princes, rulers or people.
9. Insurance
The Surveyor/Consultant shall effect and maintain, at no cost to the Client, Professional Liability
Insurance for such loss and damage for which the Surveyor/Consultant may be held liable to the
Client under these Terms and Conditions.
10. Surveyors/Consultants Right to Sub-contract
The Surveyor/Consultant shall have the right to sub-contract any of the services provided under the
Conditions, subject to the Clients right to object on reasonable grounds. In the event of such a sub-
contract the Surveyor/Consultant shall remain fully liable for the due performance of its obligations
under these Conditions.
11. Time Bar
Any claims against the Surveyor/Consultant by the Client shall be deemed to be waived and absolutely
time barred upon the expiry of one year from the submission date of the Report to the Client.
12. Jurisdiction and Law
These Conditions shall be governed by and construed in accordance with the laws of England and
Wales and any dispute shall be subject to the exclusive jurisdiction of the English Courts.
ITIC reserves all rights, including copyright, trademarks and other intellectual property rights, in these standard
trading conditions and no part thereof can be redistributed, republished or stored in any format without the
express written permission of ITIC.

Appendix G. Definitions
Words in the masculine include the feminine and vice versa.

Words in the singular include the plural and vice versa.
Actual Total Loss The subject matter of insurance is completely destroyed or the Insured
is irretrievably deprived of it
Appropriation/requisition Capture, seizure, arrest, restraint, detainment, confiscation,

nationalisation, requisition or pre-emption and the consequences of, or
any attempt at any of these
Bodily Injury Bodily injury means sudden and accidental physical injury, excluding any
sickness, disease or degenerative medical process
Constructive Total Loss The subject matter of the insurance is damaged to such an extent that the
cost of effective repair or reinstatement would exceed the sum insured
Cruising Range The waters, as defined in the Schedule, in which the Vessel will be used
and Policy cover will apply. Use of the Vessel outside the Cruising Range
shown in the Schedule is only covered if specifically agreed by the Insurer
Due Diligence The duty of care expected from, and ordinarily exercised by, a reasonable
and prudent Insured
Endorsement An amendment to the Policy or to a Condition of the Policy which

supplements or modifies its terms. It may be added when the Policy is
issued, or subsequently
Excess The amount shown on the Schedule against each section for which the
Insured is responsible in respect of each and every claim arising out of
any one event, except in the case of Actual or Constructive Total Loss,
where the claim will be paid in full. If an incident produces a claim under
more than one section of the Policy, the highest Excess will apply
Fair and Reasonable An amount which would be paid by a prudent Insured. For example this
Costs would not include overtime and accelerated costs in order to reduce the
repair time
Inherent Vice A natural characteristic of a good or property which of itself is the cause
of (or contributes to) its deterioration, damage, or wastage without the
intervention of any fortuitous external cause

Insured The person or legal entity shown in the Schedule who has a financial
interest in the Vessel
Insured Event The happening of an event or series of events causing loss or damage
covered by this insurance
Insurers Royal & Sun Alliance Insurance plc
Latent Defect A defect which cannot be discovered by a person of competent skill

using ordinary care
Loss of Limb Permanent loss by separation of a hand at or above the wrist or a foot at
or above the ankle and includes total and irrecoverable loss of use of the
hand, arm or leg
Machinery The Vessels main or auxiliary engine(s), outboard motor(s) and

generators together with all associated electrical equipment, piping,
fittings, cables, shafts and propellers
Malicious Act An intentional disregard of the rights or safety of others and the
deliberate act or the deliberate failure to act where there is a risk of
loss, damage or personal injury
Period of Insurance The period shown on the Schedule during which this insurance is in force
Permanent Disablement Lasting for 12 consecutive months and being without any hope of
improvement after such period
Permitted User Any person using or in control of the Vessel with the Insureds permission
Personal Effects Property of a personal nature not normally sold with theVessel but
excluding the following items:
- Jewellery
- Fur
- Antiques and works of art
- China, glass
- Consumable stores
- Documents, negotiable instruments, securities
- Travellers cheques and currency
- Collectable items such as coins and stamps
Policy This document which incorporates the Schedule, any Endorsements, the
Proposal Form and any other information provided by the Insured

Proposal Form A means by which the Insured advises the Insurer of details of the risk to
be insured and which ultimately is incorporated in the Policy
Schedule Part of a Policy in which details specific to that particular Policy are inserted
Seaworthy/ Fit to encounter the ordinary perils of the seas, rivers, lakes or other
Seaworthiness navigable waters, properly crewed, equipped, fuelled, provisioned and
with all equipment in proper working order. Seaworthiness applies not
only to the physical conditions of the hull but to all its parts, equipment
and gear
Tenders Other craft used in connection with the operation of the Vessel and
permanently marked with the Vessels name or other significant markings
Total Disablement Disablement preventing engagement in a persons usual occupation and

where there is no prospect of recovery
The Vessel The Vessel named on the Schedule including her machinery, electronics,
gear and equipment as would normally be sold with the Vessel
Underwater Gear Rudder, strut, shaft and propeller
Usage The Vessel insured herein will be used for private pleasure purposes
only. Any other usage must be specifically agreed by Insurers and will be
shown on the Schedule.
Wilful Act A deliberate act or the deliberate failure to act in circumstances where
there is a risk of loss or damage

Appendix H.
RECOMMENDED READING
There are many excellent books on marine insurance published and sold by Witherby & Co. in London
but as the surveyor does not require a thorough knowledge of marine insurance, he only needs a
general understanding of it for which the following are recommended:
Marine Insurance, Volume 1, Principles and Practice by R.H.Brown.

Volume 1 is an excellent general introduction to the principles involved. (The other two volumes are
concerned with marine insurance cargo practice (Vol.2) and hull practice (Vol. 3) but they go well
beyond anything that normally concerns the surveyor.)
Surveying Marine Damage by Captain C.B.Thompson. Second Edition.

Also published by Witherbys and recommended for the more practical aspects of hull insurance from a
surveyors perspective.
Marine Claims Handbook by N.G.Hudson.

Useful, but only necessary if the student wishes to obtain a more thorough understanding of the
Institute Time Clauses Hulls, and of the work of the average adjuster.



IIMS, Murrills House, 48 East Street,
Portchester, Hampshire PO16 9XS, UK
Tel: +44 (0)23 9238 5223
Email: education@iims.org.uk
www.iims.org.uk

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2 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

Call +44 (0)23 9238 5223 or visit www.iims.org.uk - IIMS 3

4 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

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Appendix A - Example of a Formal Survey Report ......................................................................... 111

Appendix C - Institute Time Clauses-Hulls, 1/11/95 ........................................................................ 119

Appendix D - Institute Yacht Clauses, 1/11/85 .................................................................................. 130

Appendix E - Noble Marine Pleasure Craft Policy .......................................................................... 138

Appendix G - Definitions ....................................................................................................................... 154

Appendix H - Recommended Reading ............................................................................................... 157

6 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

This module is in two main parts:

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8 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

Part 1. HULL SURVEYS

Some Definitions and Explanations

An individual so named is usually employed by either a syndicate (as at Lloyds) or by an insurance

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10 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

Marine claims adjuster

Marine loss adjuster

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12 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

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Appointment of the Surveyor

14 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

The Surveyors Role

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16 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

The Surveyors Instructions

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What should instructions include?

It is suggested the following deserve consideration:

18 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

To whom are they to be addressed?

Surveyors relationship with assured

Statements in the insurance proposal (Likely to apply only to pleasure craft)

Relationship between surveyor and assured

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20 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

The Average Adjusters role

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For I am an average adjuster

22 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

Cooperation Between Surveyor and Average Adjuster

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24 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

Chapter 2. THE CLAIMS PROCESS

What is Meant by Adjusting a Claim?

The adjuster will principally consider, in (i) above:

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The implied warranties are:

26 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

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Chapter 3. CLAIMS ON COMMERCIAL VESSELS

The Order of Events

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30 IIMS - Call +44 (0)23 9238 5223 or visit www.iims.org.uk

The Principal Purpose of the Survey

the nature of the casualty

The Nature of the Casualty