AUTOMATIC TERMINATION (MARINE INSURANCE IN CAMEROON)
A policy may either expire naturally at the specified time, or terminate prematurely as a consequence of an event.
‘Unless the Underwriters agree to the contrary in writing’, the insurance will terminate automatically at the time of:
• Change of the Classification Society of the vessel; or
• Change, suspension, discontinuance, withdrawal or expiry of her class therein; or
• Any of the Classification Society’s periodic surveys becoming overdue, unless an extension of time for such survey be agreed by the Classification Society.
Change of Classification Society
The status of a Classification Society (and of a vessel’s class) is, of course, a matter of great importance to underwriters, for the safety and seaworthiness of ships is to a very large degree dependent not only upon the vessel’s class, but also upon the standing and reputation of the Classification Society with which she is classed.
The purpose is to impose a duty on the assured, owners and managers to ensure that the vessel is classed with a Classification Society agreed by the underwriters at the inception of, and throughout the period of, the insurance. The words ‘throughout the period’ clarify that once an agreement has been reached, any subsequent change of Classification Society would also require the approval of the underwriters.
- Effect of an unauthorised change of Classification Society: Any change in Classification Society without the agreement of the underwriters will amount to a breach. This breach can be construed on one hand to lead to a discharge of the liability of the insurers and on the other hand in the automatic termination of the contract.
Change, suspension, discontinuance, withdrawal or expiry of her class
It is significant to note that here we are not concerned with a change of Classification Society, but a change of class within ‘that Society’.
A change, suspension, discontinuance, withdrawal or expiry of class could result from a loss or damage which is:
- Would be covered by an insurance of the vessel subject to current Institute War and Strikes Clauses Hulls – Time; or
- Which would not be covered by an insurance of the vessel subject to the current Institute War and Strikes Clauses Hull – Time.
In the case of the former, the assured could prevent the automatic termination by obtaining the prior approval of the Classification Society before she sails from her next port. But in the case of the latter, there does not appear to be any reprieve: the insurance terminates automatically, with or without the prior approval of the Classification Society, when the vessel arrives at her next port of call.
This type of change is voluntary and, in a sense, inexcusable, because it was not caused or brought about by an insured peril. This, perhaps, explains why there is no provision for the obtaining of prior approval for a change, suspension, discontinuance, withdrawal or expiry of class, as is available in the first case.
Overdue periodic survey
The cover would also terminate automatically if the Classification Society periodic survey was to become overdue. Unless an extension of time for such a survey can be agreed by the Classification Society, the insurance terminates automatically.
Change of ownership, flag, transfer to new management, or charter on a bareboat basis, or requisition for title or use of the vessel
The ownership and matters relating to the use of the ship under this head relates to:
• Change, voluntary or otherwise, in the ownership or flag;
• Transfer to new management;
• Charter on a bareboat basis;
• Requisition for the title or use of the vessel.
Its primary objective is to protect the insurer from material changes in the risk on significant and fundamental matters such as ownership, class, flag, management and the use of the vessel.
The occurrence of any one of the above events, voluntary or otherwise, would automatically terminate the insurance at the time of change. The automatic termination, however, may be deferred if:
• The vessel has cargo on board and has already sailed from her port of loading or is at sea in ballast; and
• A request for its deferment is made.
The automatic termination is deferred ‘whilst the Vessel continues on her planned voyage, until arrival at final port of discharge if with cargo, or at a port of destination if in ballast’.
In the event of a requisition for title or use of the vessel ‘without the prior execution of a written agreement by the Assured’, the automatic termination of the policy will be deferred, whether the vessel is at sea or in port, until after the requisition. The corollary of this is that, if the vessel is requisitioned with the prior execution of a written agreement by the assured, the policy would terminate automatically without any period of grace, whether the vessel is at sea or in port. As the above general ground for deferment is also applicable to requisition for title or use of the vessel, it could be argued that, if its terms are complied with, the automatic termination could be deferred.
Return of Premium
The ‘period covered by this insurance’ could mean either the period intended to be covered by the insurance or the period from the commencement of the risk right up to the time of the automatic termination or any extension thereof. It is submitted that the words ‘extension thereof’ refer to the extensions, where the automatic termination is deferred:
• Until the vessel arrives at the next port in the event of a breach; or
• Until the vessel arrives at the final port of discharge if with cargo, or port of destination if in ballast; or
• For the number of days after such requisition whether the vessel is at sea or in port in the event of requisition for title or use.