6. Finishing Remarks
The objective of this thesis has been to discuss how losses caused by faulty material and error in design are handled in the Nordic Marine Insurance Plan. The governing perspectives have been the considerations and principles that justifies the rules concerning error in design and faulty material, and the structure and internal logic in the Nordic Marine Insurance Plan.
The discussions have demonstrated how the structure of the Nordic Marine Insurance Plan is central in understanding how these losses are handled. Firstly, the thesis has demonstrated how the distinctions between the perils, the casualty and the damage are central throughout the contract. In relation to losses caused by error in design and faulty material, this distinction is particularly interesting, as latent defects challenge the standard concept of damage. Secondly, the discussions have shown how the structure of the contract influences the totality of cover under different types of insurances.
Another aspect is how the considerations and principles for the cover for losses caused by error in design and faulty material play a central role throughout the Nordic Marine Insurance Plan. The purpose of the insurance is to compensate the assured for unforeseen losses, not expected losses that the assured may budget for. This governing principle is represented in the calculation of premium and the entire contract is based on this risk allocation. As an example, expected losses within the assured’s control are specifically excluded in Cl. 10-3.
As faulty material and error in design may be the result of a subjective business risk taken by the assured, the rules in the Nordic Marine Insurance Plan seek to ensure that any losses resulting from these risks are for the assured’s account. This is demonstrated in the partial exclusion of cover in Cl. 12-4.
Another central principle in the Nordic Marine Insurance Plan is that the assured should not benefit from an insurance claim. The thesis has demonstrated how both Cl. 12-4 and Cl. 12-1 protect this principle. Cl. 12-4 primary focus on cover of the primary damage caused by error in design and faulty material, and thus excludes cover for the part that was defective due to the assured’s own risk. Cl. 12-1 is a more general clause, which ensures that all betterments are left for the assured’s account. Hence, both clauses seek to protect the same principle, but in slightly different manners. Still, they will both directly affect the cover in the event of a damage caused by faulty material or error in design.
The thesis has also discussed the distinction between faulty material and error in design, and demonstrated how the considerations and principles apply with different strength depending on the peril. Faulty material and subjective errors in design are more often a result of an unfortunate incident. Hence, the underwriters will to a smaller degree underwrite the assured’s business decisions. Consequently, it could be argued that the cover for these losses is somewhat unbalanced. Objective errors will, on the other hand, illustrate losses where the intended balance of countervailing considerations works better.
The thesis has pinpointed some challenges related to the structure of cover for losses caused by faulty material and error in design, such as the categorization of faulty material and error in design, and the term “part”. Still, the conclusion is that the Nordic Marine Insurance Plan is a balanced and fair contract in relation to losses caused by faulty material and error in design. The underlying considerations and principles justify the partial exclusion of cover and ensure a fair risk allocation. This balance is further protected as the contract is regularly revised by the involved parties, ensuring a dynamic set of rules where the parties may influence the direction of the amendments. The dynamic contract, the clear principles and the consolidated nature of the Nordic Marine Insurance Plan ensure that the contract is balanced and well equipped when facing losses caused by faulty material and error in design, both due to conventional material and designs, and new technologies.