Payment under hull and machinery insurance depends not on whether the vessel has been damaged, but on whether the loss falls within the coverage and conditions of the policy. The H&M policy, additional clauses, the insurance period, the vessel's operation and the cause of the damage are examined together. In files governed by Turkish law, the provisions on notice, proof, maturity and limitation must also be taken into account. The insurer's grounds for rejection should be assessed on the basis of the relevant contract provision and the concrete technical findings.
This article addresses the commercial vessel's own hull and machinery damage. "H&M", the abbreviation of "Hull and Machinery", is used in practice to mean hull and machinery insurance. Cargo insurance taken out by the cargo owner, and the P&I cover that protects the shipowner against third parties, are separate relationships. A single incident may engage more than one policy; however, these should not be treated as a single claim file.
Which documents should be read together under the policy?
The initial review should not be limited to the summary page of the policy. The insured interest, the full legal name of the insured, the identity of the vessel, the period, the sum insured, the deductible, voyage or operating limits, additional coverages and exclusions must all be identified. The dates of the clauses added to the contract matter as much as their names. Texts with similar names but different dates may not produce the same result.
Article A.3 of the Hull Insurance General Conditions (Tekne Sigortası Genel Şartları), published by the Insurance Association of Türkiye (Türkiye Sigorta Birliği), provides that the scope of coverage and the exclusions are determined by the special conditions added to the policy. Accordingly, the statement that "the vessel is insured" is not enough to show that a particular machinery failure or collision liability is covered. It is also checked whether the general conditions were incorporated into the contract and whether the mandatory rules of the applicable law apply.
Under a contract with a foreign insurer, English law or another law may have been chosen. The choice of law under Article 24 of Law No. 5718 on Private International Law and Procedure (MÖHUK) may affect the interpretation of the contract and the consequences of a breach of obligation. The fact that a Turkish court has jurisdiction does not mean that Turkish law governs every substantive issue in the policy. An arbitration clause and the valid channel for a claim must also be examined.
The position of any other person named as mortgagee, liability claimant or payee should also be considered. A difference between the insured and the policyholder may raise questions about who may make the claim and to whom payment is to be made. Notice and consent requirements in the financing documents should not be left separate from the insurance file. For ship mortgages and registry transactions, the article on yacht financing and ship mortgages may also be consulted.
Which losses may fall within coverage?
Events such as stranding, collision, fire, sinking, severe weather and machinery damage may be covered, depending on the wording of the policy. However, the name of the event alone is not sufficient. For example, a stoppage of the engine may be the result of an external marine peril, but it may also arise from normal wear, inadequate maintenance or another exclusion. The underlying cause and the way the consequential damage is treated must be examined separately.
| Loss or expense | First check | Commonly confused issue |
|---|---|---|
| Damage to the vessel's hull | Insured peril, period and cause of damage | Assuming that every physical damage is automatically covered |
| Damage to main or auxiliary machinery | Cause of the failure, maintenance and the relevant clause | Treating the damaged part itself and the consequential loss as the same |
| Damage to another vessel | Collision liability clause and its scope | Assuming that H&M and P&I share the loss at a fixed rate |
| Loss of use or earnings | Separate loss-of-hire cover and waiting period | Assuming that the repair cost also covers lost income |
| Salvage and protection costs | Nature of the expense and the contract provision | Presenting all operational invoices under one heading |
Some H&M provisions may also cover a specific part of collision liability. However, the proportions seen in practice are not fixed rules for all policies. Reading the H&M and P&I files together prevents coverage gaps and prevents the same item from being claimed twice. The treatment of damage to fixed and floating objects is also checked against the contract.
The distinction between an actual total loss, a constructive total loss and a partial loss depends on the policy and the applicable law. High repair costs alone do not give rise to total loss compensation under every contract. The value, the salvage and repair costs, the notifications and any abandonment provisions are examined together. In this area, stating a universal percentage or an automatic payment rule without reviewing the contract would be misleading.
Notice, cooperation and duty to mitigate loss
Where Turkish law applies, TTK 1446 of the Turkish Commercial Code (TTK) requires notice to be given without delay once the occurrence of the risk has been learned. The full calculation of the loss should not be awaited before the first notice. The location and time of the event, the vessel details, the known loss and the measures taken may be notified, and the documents can then be completed in an orderly manner.
A late notice does not automatically result in the complete loss of the indemnity. Under TTK 1446, the increase of the loss caused by the failure or delay in notice, and the degree of fault, are important. Whether the insurer already knew of the event is also taken into account. On the other hand, it cannot be said that late notice will have no consequence in a file where it actually prevented the investigation or the mitigation of loss.
Under TTK 1447, the information and documents that the insurer may reasonably request must be provided, and the insurer must be allowed to carry out the necessary investigations. The relevance of a requested document, whether it can be obtained, and who holds it may be clarified. Where a claim is made that a document request was not answered, the date on which the request was received, the answer given and the effect of the missing item on the investigation must be shown by records.
TTK 1448 regulates the duty to prevent and reduce loss and to protect the insurer's recourse rights against third parties. Intervention necessary for the safety of life and the environment should not be delayed while waiting for approval. On the other hand, before an extensive dismantling or repair that is not necessary for safety, the insurer's opportunity to inspect and give instructions should be respected. The costs of reasonable measures may be considered even if they did not achieve the desired result.
Settlements and releases made with the other vessel, the shipyard or the maintenance company are also important. Waiving all third-party rights before the insurer has made payment may affect the later right of recourse. Acceptance of liability, waivers and the disposal of damaged parts should be planned in light of the policy and the applicable law.
What evidence is used to prepare the claim file?
The claim file must connect the documents showing that the event occurred with the financial calculations. The survey report is important, but it is not the only evidence. The technical cause analysis, maintenance history and damage photographs must be compared with the quotation, invoice, payment and repair records. It cannot be said that every insurance payment requires a lawsuit or a court-appointed expert report.
The initial file should contain the following groups of documents:
- The policy, additional clauses, endorsements, premium and documents evidencing the insured interest.
- The incident notice, ship's logs, navigation and machinery records, and the marine report if any.
- Class, survey, maintenance, failure and crew competence certificates.
- Photographs, video, measurements, samples and delivery records for the damaged parts.
- The survey report, cause analysis, repair quotations and a breakdown of the work carried out.
- Invoices, payment documents, tax and exchange rate explanations, and correspondence with third parties.
Where the cause of the damage to a part is disputed, merely showing that the part was replaced may not be sufficient evidence. Metallurgical examination, oil analysis or operating records may be required. These investigations should be selected according to the needs of the event; the same technical method is not mandatory for every file. If it is not stated which part the sample was taken from and by whom, the connection between the report and the event may become disputed.
In the repair calculation, planned maintenance, old damage and mandatory renewal due to the accident must be separated. If the shipyard's lump-sum invoice does not show this distinction, the work order and the itemised breakdown may be requested. The reasonableness of expedited repairs, temporary repairs or towing to another port must be explained in light of the circumstances. The existence of an expense and the question of whether all of it is covered are different questions.
How are underinsurance, deductibles and the grounds for rejection examined?
Under TTK 1462, if the sum insured is lower than the insurable value, proportional payment for a partial loss arises unless otherwise agreed. For example, to show only the effect of this rule, assume an insurable value of 10,000,000, a sum insured of 8,000,000 and an accepted partial loss of 1,000,000 units. In the absence of a different agreement, the proportional calculation is 800,000 units. Deductibles, valuation agreements and other conditions are assessed separately; this example is not a final payment commitment.
An agreed value, a first-loss arrangement or other special provisions may affect the calculation. It should be clear from the policy whether the deductible applies per occurrence, per machinery item or on another basis. Whether several damages are treated as one occurrence may also cause a dispute, particularly in the case of consecutive failures.
The rejection letter should clearly state which clause is applied to which fact. Expressions such as "lack of maintenance", "unseaworthiness", "class problem" or "use outside coverage" do not by themselves complete the examination. The provision relied on by the insurer, the validity of that provision, the event that occurred, the burden of proof and, where necessary, the causal link must be considered together. The insured must also explain, with supporting evidence, that the event falls within coverage and set out the loss.
For example, against a rejection based on delayed maintenance, the maintenance plan, the manufacturer's recommendations, previous failure notices and the technical cause of the damage should be compared. Not every deficiency in the maintenance records removes the entire indemnity; however, a serious deficiency that shows the real cause of the failure cannot be made insignificant merely by describing it as "crew error". Foreign law, the duty of disclosure or a breach of a contractual undertaking may attach different consequences.
When can payment be demanded and which time limits apply?
Under Turkish law, TTK 1427 governs the maturity of insurance indemnity. When the investigation started with the risk and the relevant documents is completed, and in any case as a rule forty-five days after the notice under TTK 1446, the payment obligation becomes due. However, where the investigation is delayed for a reason that cannot be attributed to the insurer, the period does not run. For this reason, the forty-five-day period is not an unconditional and fixed payment guarantee in every file.
The same article provides that if the investigations cannot be completed within three months of notice, an advance of at least fifty percent of the amount determined by agreement of the parties or by a preliminary expert examination ordered by the court must be paid. Automatic payment based only on an estimated total loss should not be expected without a basis for calculating the advance. When the obligation becomes due, default and interest are assessed separately.
Under TTK 1420, claims arising from an insurance contract are subject to a two-year period running from the maturity of the claim. For insurance indemnity and sum insured, a six-year outer limit from the occurrence of the risk applies, subject to any special provision. The wording in the policy or in old general-conditions texts must be read together with the law in force. For liability insurance such as P&I, the special provision in TTK 1482 is also important; the H&M period should not be carried directly into those files.
The route to take against a rejection depends on the circumstances of the file: an objection to the decision, a supplementary survey, negotiation, a lawsuit or, where valid, the arbitration route. The possibility of applying to insurance arbitration in Türkiye cannot be accepted automatically for every foreign H&M policy. The participation of the insurer in the system, the scope of the dispute and the relevant conditions for application must be separately verified. It should not be assumed that correspondence or keeping the file open suspends the limitation period.
The subrogation of the insurer that has paid the claim under TTK 1472 must also be monitored. To the extent of the amount paid, the insurer proceeds against the third party, while the insured may have losses that are not covered due to the deductible or the exclusions. Claims and recoveries should be tracked in a common account, so that double recovery or the loss of the principal claim's time limit is avoided.
Conclusion
Successful preparation of an H&M claim requires the policy text and the technical record of the event to answer the same questions. Determining the coverage, giving notice on time, preserving the cause of the damage and separating the expenses make it possible to evaluate the claim for payment. In the event of a rejection, the response should proceed on the basis of the relevant clause, concrete evidence and the applicable law rather than general objections. Time limits for rights against third parties should be preserved together with the insurance claim.
Related articles: First steps after a ship accident in Türkiye; Fault and compensation in ship collisions; Claims and applications in Türkiye under P&I insurance; Damage and payment rejection under yacht insurance.
Frequently Asked Questions
Does H&M insurance cover all machinery failures on a vessel?
No. The cause of the failure, the coverage clause, exclusions, and maintenance and operating conditions are examined. The damaged part itself and the damage it causes to other parts may be governed by different provisions.
Does the insurer's sending of a surveyor mean that it has accepted coverage?
Not by itself. Carrying out an inspection and accepting a payment obligation are different things. Written statements and the policy conditions must be assessed together.
Does late notice eliminate the whole indemnity?
In a file governed by Turkish law this result is not automatic. Under TTK 1446, the increase of the loss, the degree of fault and whether the insurer already had prior knowledge are examined.
Can lost freight during repairs be claimed under H&M?
Not under every policy. Separate coverage, time periods and deductibles for loss of earnings or use may exist. Paying for the hull repair does not show that loss of income has also been accepted.
Must the insurer pay within forty-five days in every case?
No. The investigation provisions of TTK 1427 and the provisions on delay not attributable to the insurer apply together. The start and running of the period are assessed on the basis of the concrete notice and document records.
When the insurer pays, do all rights against the other party pass to it?
Subrogation is limited to the amount of the indemnity paid. The insured's unpaid losses may remain. The claims and recoveries of the parties should be coordinated so that payment is not received twice for the same loss.
Sources and legal bases
1 — Turkish Commercial Code No. 6102, in particular Articles 1420, 1427, 1446–1448, 1462, 1472 and 1482. Ministry of Trade text.
2 — Insurance Association of Türkiye, Hull Insurance General Conditions, in force from August 1, 1996, last amended on May 11, 2002; in particular Articles A.2–A.5 and B.1–B.3. The text incorporated into the contract and the Turkish law in force must be assessed together.
3 — Law No. 5718 on Private International Law and Procedure, in particular Articles 24 and 46–47. Ministry of Justice text.