These insurances are designed to protect the builder against loss of interest and financial penalties in the shipbuilding contract following delay or non-completion of a vessel under construction. The trigger for a claim under the Delay in Delivery policy is generally linked to an insured peril under the Builders’ Risks insurance. Cover may also be provided where a buyer lawfully refuses delivery of a vessel, following a delay. The nature of this cover means it is normally available only to established shipyards with a proven track record of delivering vessels within acceptable parameters.
Losses arising from delay are covered separately from those arising from total loss or contract cancellation. The risks covered as defined by the insured events are, however, the same. There are four classes of insured events each one has, as a starting point, that all events within the group are covered subject only to the specified exclusions. This approach makes for simpler clauses and is more favourable to the Assured. It also means that we can avoid the notorious phrase ‘latent defect’ which has caused so much confusion and litigation.
All damage to the vessel or any part of it is regarded as an insured event unless proximately caused by one of a limited number of standard exclusions. The Insured Events can be categorised as follows:
- Physical loss of or damage to the vessel or any part thereof including loss or damage during transportation
- Damage to the premises, plant or equipment of the Builder or any sub-contractor including any contractor for Buyer’s supplies
- Failure during launching, even though there is no damage to the vessel or yard or the blocking of any waterway, harbour etc., or any transport way or facility on land by any physical obstruction
- Any event defined as force majeure in the construction contract
Dependent on the location of the yard and facilities it is possible that more than one vessel could be damaged in the same accident; a common cause would be fire, which could spread to other vessels in the yard awaiting repair or re-delivery.