On 1st November 2002 a new set of standard clauses applicable to policies of hull and machinery insurance became available for use. The traditional title of the Institute Time Clauses - Hulls has been discarded and the new clauses will be known as the International Hull Clauses. They have been developed by the London market Joint Hull Committee in consultation with shipowners, brokers and other interested parties and, although they contain many new provisions, those responsible for the drafting have avoided a major rewrite of the 1983 and 1995 Institute Time Clauses. Instead, they have concentrated on updating the earlier clauses to reflect current practices and the increased importance of the roles of ISM, flag states and classification societies in connection with ship safety. In addition, the new clauses reflect a conscious attempt to respond to developments in English law by placing less emphasis on the use of warranties and by specifying the consequences of a failure to comply with policy conditions. Where appropriate, minor changes in the wording of some of the standard clauses have been made to achieve greater clarity of meaning and the opportunity has been taken to re-arrange the clauses into a more logical order.

The International Hull Clauses are in 3 parts. Part 1 (Clauses 1 to 33) contains the "Principal Insuring Conditions". Part 2 (Clauses 34 to 44) comprises a set of additional clauses frequently required by assureds, most of which will now be included in the standard cover. Part 3 (Clauses 45 to 53) contains claims provisions setting out the rights and responsibilities of underwriters and assureds in relation to the handling of claims and are aimed at streamlining the claims process.

Any attempt to identify all the changes which have been made to the previous Institute Time Clauses ("the ITC") would necessitate a report of unmanageable length. Thus, for present purposes, we shall confine ourselves to drawing attention to the changes which are most significant.

Part 1 - Principal Insuring Conditions.

1. For the first time the standard conditions now include, in Clause 1.3, an exclusive English jurisdiction clause. The wording is, however, identical to that which is contained in the standard marine policy form MAR 91.
2. The list of insured perils is now set out in Clause 2. The more important revisions are these:
1. Cover for loss or damage caused by accidents in loading, discharging or shifting cargo or fuel has been extended to include stores and parts.
2. Clause 6.2.5 of the 1995 ITC has been extended to include contact with satellites as well as aircraft, helicopters or similar objects. Moreover, this particular provision is no longer subject to the want of due diligence proviso which previously applied to it.
3. The cost of repairing or replacing burst boilers or broken shafts is excluded from the cover in respect of loss or damage caused by such incidents.
4. Loss or damage caused by any latent defect in the machinery or hull continues to be covered - but only to the extent that the loss or damage caused by the defect is more expensive to repair than the defect itself.
5. All the perils previously listed in Clause 6.2 of the ITC 1995 were subject to a proviso whereby loss or damage caused by such perils was not recoverable if it was due to want of due diligence by "the assured, owners, managers or superintendents or any of their onshore management". The proviso has been retained - but with the omission of any reference to superintendents or onshore management. Their inclusion in the 1995 clauses was viewed with dismay by many shipowners and brokers and was one of the reasons why those clauses failed to gain wide acceptance.
3. Clause 3, entitled "Leased Equipment", is new. It provides cover in respect of loss or damage by an insured peril to "equipment and apparatus installed for use on the vessel" which is not owned by the assured but for which he has "assumed contractual liability", the value of which is stated to be included in the vessel's insured value. Underwriters' liability is limited to the assured's contractual liability for the loss or damage or the reasonable cost of repair or replacement, whichever is less.
4. Clause 4 is also new and provides cover for loss or damage by an insured peril to "parts taken off the vessel". Cover is limited to 60 days whilst the parts are not on board the vessel - periods in excess of 60 days being subject to a held covered proviso. Underwriters' liability is limited to 5% of the vessel's insured value and the clause contains further provisions relating to the measure of indemnity in respect of both leased parts and any parts covered by other insurance.
5. Clause 6 equates to Clause 8 of the ITC 1995, providing cover for 3/4ths collision liability. The only alteration of significance is that underwriters have sought to cap their exposure to costs by limiting their liability for the same to 25% of the vessel's insured value.
6. The navigation provisions which were previously contained in Clause 1 of the ITC are now relegated to Clause 10. This clause also now needs to be read in conjunction with a new Clause 11, which specifies the consequences of any breach of the navigation provisions. Any such breach can no longer be treated as a breach of warranty discharging underwriters from liability from the date of breach. Instead, Clause 11 provides in effect that underwriters are "off risk" during the period the assured is in breach and will not, therefore, be liable for any loss which occurs during that period. However, the clause provides for the re-instatement of cover if prompt notice is given to underwriters and agreement reached in relation to any amended terms and additional premium they may require.
7. Clause 13.1 deals with the assured's obligations relating to the classification of the vessel and related matters and is broadly similar to Clause 4 of ITC 1995. However, the need to agree the identity of the classification society with underwriters when the risk is placed is given greater emphasis. New provisions have been included requiring a valid Document of Compliance and Safety Management Certificate under the SOLAS Convention. Unless underwriters agree otherwise, any breach of any of these obligations results in automatic termination of cover (although, if the vessel is at sea at the date of the breach, automatic termination is deferred until arrival at her next port). In such event, the clause contains provisions for a pro rata return of premium, provided that a total loss of the vessel has not occurred during the period of insurance.
8. Clause 14.4 imposes a duty on the assured to comply with flag state requirements, including ISM and STCW, and the rules of the vessel's classification society regarding the reporting of accidents and defects in the vessel. Once again, these provisions are not to be treated as warranties - but the clause provides that underwriters will not be liable for any loss "attributable" to any breach.
9. Clause 21 deals with constructive total loss and contains a significant alteration to the wording of the equivalent provision in the ITC. Under the new clause, in order to ascertain whether the vessel is a CTL, 80% of the insured value is to be taken as its repaired value (and not 100% as provided in the ITC).

Part 2 - Additional Clauses.

This section comprises Clauses 34 to 44. Clauses 34 to 39 form part of the standard cover afforded by the new clauses. They deal with a range of subsidiary matters, several of which are based on existing wordings in use in the London market. Clauses 40 to 44 deal with: (i) 4/4ths collision liability; (ii) fixed and floating objects; (iii) returns for lay-up; (iv) general average absorption; and (v) additional perils otherwise excluded in Part 1. They will only apply to the insurance where underwriters have expressly so agreed in writing.

Part 3 - Claims Provisions.

1. Clause 45 authorises the leading underwriters designated in the slip or policy to deal with a range of claims related matters on behalf of all underwriters subscribing to the insurance. These include the appointment of surveyors, experts, average adjusters and lawyers; the provision of security; and all payments or settlements to an assured other than those agreed on an "ex-gratia" basis.
2. Clause 46 obliges the assured to notify leading underwriters as soon as possible of any accident or occurrence which may result in a claim. It further provides that, in the absence of agreement to the contrary, underwriters are discharged from liability for the claim if it was not notified within 180 days of the assured becoming aware of the accident or occurrence.
3. Clause 48 imposes obligations on the assured both to provide leading underwriters with documents and information reasonably required to consider a claim and to assist in the investigation of a claim by co-operating in arranging surveys of the insured vessel, the inspection of Class records and the interview of ship personnel and other witnesses.
   
   The clause further provides that the assured shall not at any stage (whether proceedings be commenced or not) knowingly or recklessly: (i) mislead or attempt to mislead underwriters in the proper consideration of a claim or the settlement thereof by relying in the presentation or maintenance of such claim on any evidence which is false; or (ii) conceal any circumstance or matter which might be material to the underwriters' proper consideration of a claim or a defence to it. The clause makes it clear that any breach of these "good faith" obligations will discharge underwriters from any liability to the assured in respect of the claim.
   
   In a series of recent decisions, including The "Star Sea" and The "Agapitos" the English courts concluded that the duty of good faith under section 17 of the Marine Insurance Act 1906 ceased on the commencement of proceedings, the parties' respective rights and duties thereafter being governed by the court procedural rules. An attempt has thus been made to circumvent the effect of those decisions by imposing contractual obligations which are stated to apply whether or not litigation has started.
4. Clause 50 requires underwriters to "give due consideration" to assisting the assured by providing security in respect of a third party claim in order to prevent the arrest of the insured vessel or to secure its release.
5. Third party recoveries are covered by Clause 52. This requires the assured to make an early assessment of the recovery potential and to take appropriate steps to protect the position, including the obtaining of security and, if necessary, the commencement of proceedings. In return, underwriters agree to pay their proportion of the costs incurred, taking into account any uninsured losses included in the claim.
6. Finally, Clause 53 provides for the resolution of any dispute by mediation or other form of alternative dispute resolution. Whilst this is not obligatory, any unreasonable refusal to co-operate in ADR could have adverse costs consequences should the matter proceed to litigation.