2. Princess Cathrine (Counts for about 70 %) Princess Cathrine is a 15-year old bulk carrier with two cranes. The market value of the ship is about USD 15 million. The owners of the ship had made the decision to minimize the insurance premium costs. For that reason, they had not taken out Loss of Hire insurance and the sum insured and the agreed insurable value for the ship was USD 10 million. The insurance was based on the Plan. One of the cranes was new and had recently been installed as the former one had to be replaced due to wear and tear. October 2020 Princess Cathrine was on a voyage from Rotterdam to Haugesund at the Western coast of Norway. It was misty and the wind was strong. The master and the first mate were on the bridge and were thus responsible for the maneuvering and navigation of the ship. Both of them were watching a football match on a laptop and they had been drinking a couple of beers. The match was important and exciting they watched the match closely. An oncoming ship (Anna) was coming closer and closer to Princess Cathrine, but as the two men on the bridge paid no attention to anything but the football match, they did not realize that the other ship was approaching. A collision between the two ships occurred and it was later on established that 100 % of the fault was on the part of Princess Cathrine. Furthermore, it was established that the sole reason why the collision occurred was that the two men on the bridge failed to keep their eyes on the sea. The conduct of the master and the first mate represented a significant violation of a number of safety regulations and both of them lost their jobs and they certificates were revoked. The two ships were towed to a yard nearby and they were repaired. The repair costs for Anna amounted to USD 7 million and for Princess Cathrine to USD 6 million. The owners of Princess Cathrine presented a claim of USD 7 million covering the repair costs related to Princess Cathrine and a claim of USD 6 million in relation to the collision liability towards the owners of Anna. With reference to the Plan chapter 3, the hull underwriters refused to pay anything. Furthermore, they argued that even if the owners had a claim both claims should be reduced because the ship was underinsured. They also argued that at any rate they are not liable for total claims of USD 13 million when the sum insured is USD 10 million.

a. Do the hull underwriters have the right to refuse to pay under the hull policy with reference to the Plan chapter 3? You should refer to the relevant clauses when discussing this issue.

b. Regardless of your conclusion on question a, you should in question b and c assume that the underwriters have no right to refuse to pay pursuant to Chapter 3. Do the underwriters have the right to reduce any payments under the hull policy on the basis that the market value of the ship is USD 15 million and the agreed insurable value and the sum insured is USD 10 million.

c. Is the maximum payment obligation for the two classes of claims (USD 7 million + USD 6 million) USD 10 million or USD 13 million?

During the repairs of Princess Cathrine the new crane was tested. During the test it was found out that the arm of the crane was of a model that was meant to be connected to another type of crane from the same manufacturer. A new arm had to be ordered from the manufacturer in Germany. The costs of sending the crane on a ship was USD 5.000 and the time spent from the manufacturer to the yard in Norway would be about 12 days because it would be waiting time for a ship out of Hamburg to the Western coast of Norway. The cost involved in sending the carne arm by plane was USD 20.000 (including transportation on truck in each end.) The cost of the crane arm was USD 150.000. The manufacturer was willing to pay USD 100.000 (including transportation costs) for the crane arm that was to be disconnected and returned. The costs for disconnecting the old arm and connecting the new one totaled to USD 20.000. It was no doubt that the old arm had to be replaced by the new one. If not, it was a risk that the crane could collapse within a few years. The Owners demanded that the crane should be transported by plane. The hull underwriters argued that the replacement of the crane arm and the connected costs are not covered by the hull policy and refused to pay any part of these costs.

d. Are the costs related to the replacement of the crane arm covered by the hull insurance?

e. Assume that the costs involved are covered; Calculate the Owners claim under the policy.