uk p&i club case study

UK P&I Club

The UK P&I Club has been supporting The Mission To Seafarers for many years now. Their generous support has ranged from donations, participation in events and more recently sponsorship of our Family Support Network in the Philippines in 2017 and 2018.

We are delighted to share more news about our partnership with UK P&I

Building on this base and with health and safety of paramount importance for the Club and its members, the Club saw the benefit of developing of two new training programmes in recognition of its 150th Anniversary year.

Under the MtS new brand of WeCare, the social communications and financial literacy training programmes were launched in Athens on 13th May 2019. The first Train the Trainer session was conducted in the same week in Manila.

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We are also delighted to welcome Sophia Bullard, Director of the Crew Health Programme at Thomas Miller onto one of our panels for LISW 2019 on Crew Welfare.

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Advising Client On Authorisation Process To Create A UK P&I Club

The Client’s Needs

The client is an overseas P&I Club and wished to explore and understand the process and benefits of creating a UK-based business and operations including a P&I Club. It needed UK expertise to help it understand how the regulatory system worked and provide critical oversight of its high-level plans from the perspective of the PRA and FCA.

ICSR’s Solution

ICSR worked with the client to develop outline plans and timelines for the creation of a UK P&I Club, understanding how that process would support the client’s wider business plans and objectives. By being involved at the very early stages of the planning process, we were able to help shape the strategy and set clear expectations with the international leadership team on what could be achieved, and the timescales involved.

Our work with the client helped them think about what would be required to support an application, including:

• What the target operating model needed to outline;
• The requirement for a Governance and oversight structure;
• The need for Organisational Charts identifying the appropriate levels of resources required; and
• What needed to be covered in the financial plans for operating and maintaining the business.

The benefit of this approach was that it mitigated risk for the client in the event it concluded it was not able to meet the expectations of the UK regulators for authorisation, whilst ensuring that any work done was beneficial in the event the application proceeded.

Resources Deployed

This work was delivered by a director of the business with significant experience steering international firms through planning and decision-making cycles for expansion into new markets.

Client Outcome

The client has been able to validate its plans and confirm the business benefit of creating a UK P&I club, with the confidence that its plans will be approved by the regulators. Its application is now progressing smoothly.

Other similar work:

Assisting International Insurer Manage Its Operational Resilience Obligations

Digital Operational Resilience Act (DORA) Support For Client In The Irish Regulated Market

Assisting Client With Evolution Of An Outsourcing Framework

Support Setting Up UK Branch And Post-Authorisation Compliance Support

Advisory & Resourcing

In UK P&I Club ’s latest ‘Lessons Learned’ series of case studies, Captain David Nichol presents the case regarding improper ventilation after a maintenance operation, which could have led to the deaths of two surveyors during a third party survey on the emergency fire pump.

About the incident During a third party survey, the surveyor made a request to test the emergency fire pump, which was arranged with the assistance of the chief engineer. The emergency fire pump was located in a recessed well in the steering gear compartment, approximately 3 metres deep and accessed by an inclined stairway. At the start of the test, the surveyor asked to observe the pump being started locally and operating before proceeding on deck to check the hoses rigged fore and aft.

Shortly after descending into the fire pump well, the chief engineer urgently ordered the surveyors to get out and by the time both men reached the steering compartment deck, they were experiencing symptoms of dizziness with the chief engineer in a state of near collapse. They were taken on deck into fresh air by other crew members and recovered soon afterwards.

Analysis Investigation revealed that maintenance had recently been carried out on the provision store refrigeration machinery located in the steering flat. During this work, Freon refrigerant gas from the plant must have been released into the space and, being heavier than air, had migrated into the pump well displacing breathable air.

Both men were very fortunate to escape from the space unharmed. If the ladder had not been inclined but vertical, as is more usually the case, they may not have exited the well before passing out. The chief engineer was possibly more affected due to being of shorter stature than the surveyor and thus inhaling a higher concentration of the gas.

Lessons Learned – Improper maintenance procedures can cost lives. Refrigerant gas should be contained and in the event of accidental release, the immediate area and adjacent spaces must be checked and thoroughly ventilated – This is not an isolated incident involving Freon charged refrigeration plant. Ship managers should ensure that crew are made fully aware of the hazards associated with these systems – Where refrigeration machinery is present in a steering flat or other confined space, a risk assessment should be carried out to determine whether the space is to be treated as an “enclosed space” requiring pre-entry precautions and atmosphere tests – Consideration may be given to providing fire pump wells of this type with mechanical ventilation extraction from the bottom of the space and if fitted, to ensure it is always operated before entry

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This case arose out of a collision in 2020 between a Venezuelan navy patrol vessel, the BVL Naiguatá GC-23 , and the RCGS Resolute , an ice-class cruise liner engaged in tourism to Antarctica, which led to the total loss of the Naiguatá . The Resolute was insured by the first claimant, UK P&I Club NV (a subsidiary of the second claimant, United Kingdom Mutual Steam Ship Assurance Association Ltd; together, the Clubs). Following the loss, Venezuela brought civil claims in 2020 in the Courts of Dutch Curaçao and Caracas, Venezuela. In February 2021 the claimants sought an anti-suit injunction in this Court against Venezuela on the basis that those proceedings were in breach of the London arbitration clause in the contract of insurance with the Resolute' s owners. An interim anti-suit injunction was granted against Venezuela.

The main issues are whether Venezuela is bound to arbitrate in London the claims it has advanced in Caracas; and whether it is entitled to immunity under the State Immunity Act 1978 (the Act) from a permanent anti-suit injunction to restrain it from pursuing its foreign proceedings.

The Clubs' applications for anti-suit relief are on the basis that Venezuela’s overseas proceedings are, in substance, claims to enforce the terms of the contract of insurance between the Club as insurer and its members, especially the owners, as assureds: Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co (The Hari Bhum) (No 1) [2004] 1 Lloyd's Rep 206 (Moore-Bick J); [2005] 1 Lloyd's Rep 67 (CA). Accordingly, the parties are bound by the contract of insurance, including the London arbitration and English law clauses, so that it is contrary to its terms for Venezuela to pursue claims against the Clubs other than in London arbitration. Further, the Clubs contend, the parties are bound by any contractual defences available to the Clubs.

Venezuela contends that in Venezuelan law it has a direct claim against the Clubs, which is born of the law and independent of the contract of insurance. Therefore, the Clubs cannot rely on any arbitration or jurisdiction clause in the contract of insurance as against Venezuela’s claims in Venezuela. There is consequently no basis for an anti-suit injunction.

Held: The claim which Venezuela seeks to advance in the Caracas Court for loss of the Naiguatá is one which must be brought in London arbitration. It is subject to the terms of the contract of insurance which the Clubs entered into with the Resolute 's owners. However, in accordance with s 13(2)(a) of the Act, the Clubs are not entitled to a permanent anti-suit injunction against Venezuela in relation to the foreign proceedings which Venezuela is taking against them.

The first issue to be determined is whether Venezuela's claims in the Caracas Court are to be characterised as contractual claims asserted against them as liability insurers, or whether it is exercising an independent right of action born of the law which does not mirror the Clubs' liability under the contract of insurance. Both sides engaged experts to assist the Court. This evidence included an article in 2007 by Jose Alfedo Sabatino Pizzolante in which the author noted that the direct action of a third party victim against an insurer could be seen in international instruments, such as art 7.8 of the CLC. Venezuela has an arguable case that its law recognises that a third party victim may have a right of direct action against an insurer based on an analogy with what exists in the motor vehicle context. Venezuela contends that this right of direct action is born, not of contract, but of the law. Venezuela also submitted that the nature of the direct action of a third party victim against an insurer is comparable to that under the CLC. None of this is persuasive. To say that the claim is born of the law begs the question, as Hamblen J pointed out in The Prestige (No 2) [2013] EWHC 3188 (Comm), [2014] 1 Lloyd's Rep 309 [84]-[87]. The contention that the third party claim is along the lines of tortious liability, or is a form of strict liability, is beside the point when it is the nature of the right which is determinative, not its derivation. The only possible conclusion which can be drawn about Venezuelan law is that if there is a direct action by third parties against liability insurers based on an analogy with that against a motor vehicle insurer, it is subject to the terms of the insurance contract. The position in Venezuelan law is that, with any third party insurance claim in Venezuelan law outside the field of motor vehicle insurance, the insurer cannot raise personal defences it might have against an insured. However, defences in the contract are not precluded since they are not personal as between the insurer and insured, and necessarily precede the third party’s rights. Venezuela’s claims are thus subject to the London arbitration clause in the contract of insurance.

Venezuela has also raised state immunity. Two main issues need to be resolved: first, whether Venezuela has immunity from this Court's adjudicative jurisdiction under s 1 of the Act; and secondly, whether it has immunity from injunctive relief under s 13(2)(a) of the Act. As to adjudicative jurisdiction, Venezuela accepts that the activity which the Court must characterise in this case is its claims against the Clubs in Venezuela which are the basis of the application for relief in this Court. It submits that its claims in the Venezuelan proceedings are sovereign in character, because they relate to military or law enforcement activity by the Venezuelan state. The Naiguatá was patrolling as a coast guard vessel. The claims are for the loss of that vessel, including the military equipment on board, and for the environmental damage to Venezuela’s sovereign territory. However, Venezuela misstates the character of the claims it brings against the Clubs in the Caracas court. Certainly they are claims which arise out of a collision with the Naiguatá , a Venezuelan navy vessel on patrol, and are brought to recover compensation for its loss and associated environmental damage. However, even in their wider context they are ordinary civil claims in private law, brought in the ordinary civil courts, and those which a private individual could bring. They involve nothing more than what a non-sovereign would do in undertaking legal proceedings of this character. The claims seek to enforce an insurance liability for losses which have occurred, albeit that these might relate to military equipment and include environmental damage. That liability is under a commercial contract of insurance by which a P&I club has granted cover to the owners of the Resolute against the consequences of maritime casualties. The activity of Venezuela in seeking compensation in the Caracas court by virtue of this commercial contract is commercial in character: London Steam-Ship Owners' Mutual Insurance Association Limited v Spain, The Prestige (Nos 3 and 4) [2021] EWCA Civ 1589 [36]. Consequently, the commercial exception in s 3(1)(a) of the Act applies and Venezuela’s conduct in launching proceedings against the Clubs in the Caracas Court does not attract adjudicative immunity from this Court's processes provided for in s 1 of the Act.

As to enforcement immunity from injunctive relief, s 13(2)(a) of the Act provides that 'relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property'. Section 13(2)(a) contains a separate and additional immunity (or privilege) as to enforcement measures including injunctions, even if there is adjudicative jurisdiction by way submission to jurisdiction, prior consent, or (as in this case) the operation of one of the exceptions in ss 2-11 of the Act. Section 13(2)(a) is legitimate and proportionate and cannot be interpreted restrictively in the manner sought by the Clubs. The fact that the Clubs will not have an injunction preventing parallel proceedings does not render worthless their right to have Venezuela's claims determined by way of London arbitration. As well as an order to this effect, there may also be supportive remedies available to the Clubs including, at least in a contractual context, the compensation for breach of the arbitration agreement and declaratory relief which the Clubs are seeking in the arbitration, and which could be relied upon to resist enforcement of any judgment which Venezuela obtains in the foreign proceedings.

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UK P&I Club: Innovative salvage solution avoids serious casualty

Credit: The UK P&I Club

The UK P&I Club has reported a case which highlights the importance of considering innovative solutions and the exercise of prompt and decisive action in reaching the best possible outcome. It also demonstrates the effectiveness of combining the Club expertise, in both the Singapore and London offices with that of the appointed consultants and surveyors.  

Over a number of years the Club has issued a number of circulars and loss prevention bulletins focusing on the well known dangers arising from the carriage of nickel ore cargoes. Due to a continuing series of casualties involving ships carrying such cargoes, all the Clubs in the IG issued a circular in similar terms in June 2012. For the first time this circular made the mandatory notification of nickel ore loadings from Indonesia and the Philippines a requirement of the Club with failure to notify potentially prejudicing Club cover.

There has been a great deal of detailed advice provided by the Club in relation to the precautions that should be taken to minimise the risk when carrying nickel ore cargoes. However, in simple terms it is the moisture content of the cargo that is the key determinant of whether or not a cargo is likely to liquefy. The type of mining (whether open cast or not), local weather conditions and the method of storage are therefore all factors to consider before loading.

The rainy season in the Philippines started on 23rd June this year and by early July there were two ships experiencing difficulties having loaded nickel ore cargoes at Surigao, Philippines. One of those ships was entered in the UK Club.    

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Between 1st and 12th July, a cargo of about 54,000 mt of nickel ore was loaded for carriage to China.  The cargo was presented for loading in barges, and prior to allowing any cargo on board, the crew carried out can, drop and grab tests on samples drawn from each of the barges, all of which indicated that the cargo was suitable for loading.  In addition, the master was presented with certificates produced by the shipper, which recorded that the moisture content of the cargo, whilst high, was below the transportable moisture limit of 33%. 

Three days after departure from Surigao the ship developed a 13 degree list to starboard.  Upon opening the hatch covers, it was seen that the cargo in three of the holds had liquefied and over the following day the list became more severe, reaching up to 22 degrees.  Fearing imminent capsize the crew abandoned ship and were picked up by the tug which by that time had reached the ship.  Regrettably during the evacuation the chief officer suffered a heart attack and died. 

By this time the Member had advised their Club servicing office in Singapore of the matter and, in conjunction with individuals based in the London office consideration was being given to how best to deal with the salvage of the ship and the cargo. The owners agreed an LOF contract and SCOPIC was immediately invoked by the salvors.  The ship continued to drift, until she grounded by the stern off the north eastern coast of the Philippines, some 150 miles north of Manila.  Fortunately the seabed consisted of sand, and the weather conditions remained benign after the grounding. 

 As an initial precaution the Managers and the Member resolved to remove the bunkers from the ship at the earliest opportunity, which operation was performed under the salvage contract.  Initially, the salvors indicated that the cargo would have to be fully discharged from the ship before refloating could be attempted.  This ‘traditional’ solution anticipated a drawn out operation presenting significant logistical challenges and carried huge risks were the weather conditions to deteriorate. To minimise such risks , the Club immediately appreciated the importance of completing the salvage operation as soon as possible, investigating possible alternative solutions relating to the possibility of drying or stabilising the cargo.    Following full consideration of the possible methods of making the cargo safe and of the risks, specifically in relation to the continuing monsoon season, the salvors developed an innovative refloating plan which involved the redistribution of the cargo from hold nos. 2 and 4 into hold nos. 1, 3 and 5 using the ship’s own cranes.  This was anticipated to reduce the free surface effect of the liquefied cargo, providing sufficient stability to allow the ship to be refloated in relatively short order and towed to a port of refuge.  Aided by relatively benign weather conditions the operation to redistribute the cargo went well, and 3 weeks later the ship was refloated and towed into a port some 60 miles south of the grounding location. Here she was redelivered to the Member by the salvors.   At that stage, negotiations took place with the shipper who agreed to accept redelivery of the cargo from the owner.  Discharge was completed on 14th September, and the ship sailed on the following day for dry docking in China. 

The second bulk carrier, which loaded cargo from the same port and was entered with another International Group Club, encountered similar difficulties and was forced to seek shelter at a port of refuge. According to the local Club correspondents, the cargo loaded on both ships was of a particularly high clay content, which made the usual can tests less effective in detecting a high moisture content.

This is a case where a pragmatic approach from the salvor together with swift decision making avoided what could very easily have developed into a major casualty. However such cases are best avoided and the requirement to notify the Club Managers whenever Members intend to load nickel ore cargoes is a continuing one. It should be the expectation on each occasion that an independent surveyor will be retained to assess the condition of the cargo, and that the Club will meet the costs of this surveyor as a loss prevention exercise, with the costs placed against the Member’s loss record. 

Source: The UK P&I Club

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Britannia P&I Club: double fatality resulting from confined space entry

The Britannia P&I Club, as part of their BSAFE campaign have published a case study into a double fatality resulting from confined or enclosed space entry. 

What happened

 A bulk carrier was loading logs, and the Chief Officer entered a cargo hold which contained logs. Upon entry he rapidly lost consciousness and fell from the entrance ladder.  A fellow crew member who tried to rescue the Chief Officer suffered the same fate. They were later both pronounced dead due to asphyxia.

 It had been noted that a rubber seal on the hold access door needed replacing. The Chief Officer descended into the cargo hold and after only a few steps suddenly fell onto the logs below.  The bosun immediately alerted fellow crew members standing at the gangway, then made his way to the aft mooring station to get a rope. The Second Officer was at the gangway and alerted the master by radio. He then fetched a breathing apparatus (BA) set and also oxygen from the ship’s hospital.  An Able Seaman, having alerted the Third Officer, returned to the hold and started to climb down into the hold with another crew member about to follow. The Bosun managed to prevent the latter from entering but the Able Seaman collapsed and fell.

The two men were retrieved from the hold, not without some difficulty, but both were pronounced dead at the scene. 

Members can review further information as follows:

• BSAFE Incident Case Study No.5 – Summary
• BSAFE Incident case study no.5 – reflective learning form
• BSAFE Incident case study no.5 – presentation
• BSAFE Incident case study no.5 – britannia commentary
• Confined spaces: the dangers (“Are you prepared” series short video)
• HSSE 034 Working in confined spaces (longer training video)

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Rulebook 2021

Last updated: May 11, 2022 11:53 AM

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Foreword  

Rule 1 introductory  , rule 2 risks covered  , rule 3 special cover  , rule 4 special cover for charterers, specialist operations, passenger ships, and tt risks  , rule 5 conditions, exceptions and limitations  , rule 6 owners and successors bound by rules  , rule 7 applications for insurance  , rule 8 premium rating  , rule 9 fixed premiums  , rule 10 joint entries  , rule 11 group affiliate cover  , rule 12 certificate of entry and endorsement slip  , rule 13 reinsurance  , rule 14 membership  , rule 15 assignment  , rule 16 period of insurance  , rule 17 variation of contract  , rule 18 notice of termination  , rule 19 calls  , rule 20 mutual premium  , rule 21 supplementary premium  , rule 22 overspill claims, calls and guarantees  , rule 23 payment  , rule 24 reserves  , rule 25 closing of policy years  , rule 26 investment  , rule 27 laid-up returns  , rule 28 termination and its effects  , rule 29 cesser of insurance and its effects  , rule 30 release calls upon cesser of insurance  , rule 31 cancellation of insurance and its effects  , rule 32 sums due to the association for the purpose of application of the rules on cancellation  , rule 33 release calls upon cancellation  , rule 34 regulations and recommendations by directors  , rule 35 managers’ remuneration  , rule 36 claims  , rule 37 powers of the managers relating to the handling and settlement of claims  , rule 38 meetings of the members’ committee  , rule 39 forbearance and reimbursement  , rule 40 disputes  , rule 41 notices  , rule 42 law of contract  , rule 43 delegation  , rule 44 definitions  , appendix i appendix i: clauses  , appendix ii appendix ii: offshore/specialist operations  , appendix iii appendix iii: tt risks  , articles of association articles of association  .

P & I Club (Protection and Indemnity)

Introduction

The present day P&I market provides third party liability cover to the ship owners worldwide on a non-profit making “mutual” basis as opposed to the commercial insurers who understandably provide insurance for all other risks to earn profit in order to pay dividends to their share holders. The structure of this non profit “mutual” insurance market took root in England in the 18th century where “Hull Insurance Clubs” were established to counter the monopoly of the three institutions only who were, under the then prevailing law, allowed to insure British ships.

Hull Insurance Clubs

The basic principle of these Hull clubs was simple. A group of ship owners who formed the club would agree to share with other members of the club the cost of any hull claim, which an individual member suffered, rateably according to the value of their vessel or vessels owned by that member of the club. By pooling the risks, instead of paying the premium in advance to the profit making underwriters, they provided themselves with far cheaper security than was available in the market. In addition they were able to exercise a greater control over handling of the claims.

These clubs began to suffer from the increased competition after the Hull Insurance monopoly was abolished and their numbers reduced, However, they continued to exist in order to also cover new liabilities such as “personal injuries and loss of life” and “excess collision liabilities”, which the ship owners were made to accept, because these liabilities could not be covered under the hull policies. These clubs were the ancestors of the present day Protection & Indemnity clubs.

Modern Day P & I Clubs.

The rapid developments in the maritime law went hand in hand with the increase in volume and complexities of the world trade. The risks covered by protection & indemnity Associations expanded. By the beginning of 20th century most of the clubs, which constitute the modern P&I clubs, were established. The method of operation of these clubs was similar to their predecessors.

As the liabilities increased in value, few of the large P&I clubs established a “Pooling Agreement” in 1899. Under this, the members of the “Pool” agreed to share rateably large claims above a modern retention. These 15 clubs are known as “International Group of clubs.” Since they share their claims, all of them have similar Rules so that there is a level playing field. About 90% of the world’s tonnage is entered with the International Group of clubs.

Principle And Advantages Of Mutual Insurance.

As has been mentioned earlier, the P&I clubs operate as non- profit making mutual insurance organizations. The basic principle is that the ship owners entered with a P&I club share their claims and rateably contribute to the funds which pays the claims and clubs’ actual expenses. This provides following advantages:

1. Cost and spread: Being a non-profit making organization the cost to the members of insuring their liabilities is less than that of the commercial markets who have to make profit in order to pay dividends to their shareholders. The principle of fair sharing of claims provides the spread, which is further enhanced by additional spread through the Pooling Agreement.

2. Security: Security of P&I clubs is ultimately the credit worthiness of the whole membership because the mutual premium or calls to cover the claims is payable by the members themselves.

3 Adaptability: Since the P&I clubs exist for the benefit of the ship owners and are controlled by them, they are able to respond to the insurance needs of the members as the new developments in the legislation open up new requirements.

4. Claim handling services : Because the ship owners administer the affairs of the club themselves through their Board/ Committee, they take deep interest in the claims encountered and the manner they are handled. The owners have little time themselves to do the day to day administration, they appoint a Manager. The Managers have competent and experienced staff to handle the claims, do the underwriting and advise the members on their trading, claim prevention and other important issues. The managers also keep abreast of incoming legislations and render their advise as consultants to the International organizations such as IMO, BIMCO, Classification Societies etc. so as to protect the interests of the ship owners.

Scope Of Cover:

P&I clubs cover most of the third party liabilities to which a ship owner may become liable any where in the world. These could be under contracts (for example cargo liabilities), or in tort (for example Collision), or under any statute (for example wreck removal). In addition the clubs also cover certain fines and penalties levied against the ship or her owner.

Risks That Are Not Covered

a. Hull and War risks: the market underwriters insure these risks. Under the Indian Insurance Act, a ship owner must insure these risks with one of the Indian insurance companies,

b. Damage to the owner’s own property and their own financial losses: These are not mutual risks and an owner can insure some of these in the alternative markets.

c. Risks subject to double insurance: Under the club Rules, these risks are excluded.

d. Claims arising out of unlawful or extraordinary hazardous trade: Being a mutual non-profit principle that applies, there must be commonality of risks between the club members. Unlawful and risks from extraordinary trades are not common and therefore excluded.

e. Non-compliance with the statutory requirements: All members must maintain their vessels in Class and comply with all statutory requirements, viz, Safety Equipment; Load Lines etc. Claims arising due to breach of these are therefore excluded.

f. Member must act as a prudent uninsured: The Marine Insurance Act provides that an assured must act prudently in any given circumstances. If he feels that he can recover his loss from the underwriters and therefore need not bother, then he prejudices his cover. In order not to breach this statutory obligation, the test is that all his actions must be such as if he himself will bear the losses.

Principles Of Indemnity

“Protection & Indemnity” as the name suggests, means that the club protects a member from incurring or minimizing liabilities. If, however, the member becomes liable then the club will indemnify him for such losses in the terms of his entry. This means that as a principle, the member must first pay the claim and thereafter seek reimbursement from the club.

Specific Areas Of Cover

The risks that are covered by P&I clubs are set out in their Rule Book, a copy of which should be available on every ship. In brief they are:

(a) Personal injury claims: Cover is provided for a member’s liability for death or personal injury to passengers, crew or other third parties, such as stevedores who are injured as a result of any negligent act or omission which occurs on board, or in relation to an entered ship; or which arises out of an indemnity to the dock owners or operators, provided such indemnities have been approved by the club.

(b) Crew claims: This category of claims relate to the costs incurred by a member in relation to crew, following a causality or death, funeral expenses, illness or injury, it extends to ship wreck, unemployment indemnity, crew repatriation costs and cost of crew substitution. The compensation payable is in accordance with Compensation Act or similar enactments or under collective or special agreements approved by the club. Allied to this aspect of the cover, is a cover for loss of crews personal effects, liabilities in relation to deserters and stowaways as well as port and deviation expenses in certain circumstances.

(c) Collision liabilities: Damage to the owned ship arising out of a collision with another ship and 3/4th of the damage limited up to 3/4th of the hull value is normally covered under the Hull & Machinery Policy. The club covers the following:

• 1/4th of the collision liability under London Institute Time clauses (Hull)
• Excess collision liability . This aspect of the club cover comes into play when 3/4th of the vessel’s insured value (the extent of the hull underwriter’s liability under the hull policy) is less than 3/4th of the vessel’s liability to the colliding vessel. Subject to the proviso as to proper valuation of the vessel, the club covers this excess not recoverable under the hull policy.
• Normally an owner has defence to the loss of or damage to the cargo, carried on own vessel that is caused by the collision. Under certain jurisdiction, however, notably the U.S.A., an owner may become liable to the loss or damage to the cargo carried on the owned vessel. The P&I clubs cover such excess liability.
• Risks excluded under 3/4th collision liability clause : There are numbers of exclusions under the Institute Time Clauses (Hull) in respect of 3/4th collision liability, in particular wreck removal, personal injury and oil pollution. The club Covers these excluded claims.

(d) Fixed and floating object claims: This aspect of the club cover protects an owner against claims arising when his vessel causes damage to docks, shore , installations, mooring buys or any other fixed or floating object which is not classified as a vessel.

(e) Damage to vessels or property other than by collision ; Under this heading an Owner is Covered for liabilities for loss or damage suffered by another vessel or property, caused due to the negligent navigation or management of the entered ship.

(f) Liabilities under towage contracts: The club covers loss of or damage for which a member may become liable under the terms of a contract of towage of the entered ship in the ordinary course of trading, provided the risks fall outside the hull Policies. The club also covers loss or damage to which a member may become liable under a contract of towage by an entered ship provided that the towage contract is approved by the club.

(g) Pollution: The ship owner’s pollution liabilities under national or International Conventions or under common laws have become particularly onerous in recent years. The club covers these pollution liabilities up to a limit of US$ one billion.

(h) Wreck Removal: A member is covered for costs and expenses in raising, removal and destruction, lighting and marking of the wreck of the entered ship provided the owners are legally liable to do so.

(i) Quarantine expenses: The member is covered for the quarantine and extraordinary expenses due to an outbreak of infectious diseases, provided that the owner has taken all steps necessary to avoid ordering the ship to a port known to be or should have been reasonably anticipated that she would be quarantined.

(j) Cargo claims: The club covers-a member’s liability for loss of or damage to the cargo or other properties carried by, or intended to be carried on an entered vessel, provided always that the contract of carriage is subject to Hague or Hague- Visby Rules or similar. Under this heading, the member can also recover the extra costs (in excess of the costs which would normally have been incurred by him under the contract of carriage) of discharging or disposing of the damaged or worthless cargo, provided that he is liable for such costs and has no recourse to recover it from any other party. Allied to this risk, a member is also covered in respect of cargo’s proportion of General Average including special charges, which are not legally recoverable from the cargo solely by reason of a breach of the contract of carriage.

(k) Fines: A member is also covered in respect of certain fines imposed upon him in respect of an entered ship by a competent authority in respect of short or over delivery of cargo, or breach of documentary regulations, breach of immigration laws, pollution, smuggling etc.

(l) Legal and other costs: The club covers costs and expenses including legal costs, which are incurred with the consent of the club in avoiding any liability or expenditure, against which the club insures him.

Services provided

Because of the close relationship between each ship owner member and his club, a tradition of claim service developed which gave greater emphasis of handling of claims and related aspects of Members business by the club managers. than perhaps is the case of commercial market.

Network of correspondents

The Managers are based at their head offices. They have also developed a network of expert correspondents in all major ports around the world to assist any entered ship locally in case of any difficulty. They are listed in the club’s Rule Book and also on the club’s web site. The correspondents are chosen because of their expertise in local laws, customs and practices. They should be contacted in case of any need.

Appointment of surveyors

If there is an incident likely to give rise to a claim, which may concern the club, the club of its local correspondent must be advised. They will appoint a surveyor, or a lawyer who will collect evidence and generally look after the member’s interests The ships staff should make appropriate entries in the relevant log books and preserve all evidence, and should cooperate with the club correspondents and surveyor appointed by or on behalf of the club.

Gathering evidence

Very often the claims are raised well after the ship has departed from the port. By then it may be too late to collect evidence that will assist in denying or minimizing the ship’s exposure. It is therefore important that the evidence is collect as soon as is possible. As soon as a notice of incident is received, the club’s correspondent and or the surveyor/lawyer will visit the vessel to collect all necessary evidence in the form of copies of log books, cargo stowage plan, photographs or any other relevant evidence.

Appointment of lawyers

In case of any serious incident. Which may give rise to a potentially large claim, a lawyer may be appointed by the club or it’s correspondents. He will take statements from the witnesses and preserve the evidence to be used if the matter ultimately lands in a court of law.

Provision of a security

A further important aspect of the club service is the provision of a guarantee to prevent the arrest of, or to secure release from arrest of an entered ship. service of provision of security is not a contractual right of a member, but is always provided at the discretion of the club. Because of the net-work of the club’s correspondents and the fact that a club’s letter of guarantee is often accepted, the clubs are able to provide a guarantee speedily and at less cost than the banks, thus saving their members from the damaging delay that could result from the arrest of the vessel.

The International Group of P&I clubs has also developed as a representative of ship owner’s views in International and National discussions .For example, it has observers status at the I.M.O. and is affiliated to the International Union of Marine Underwriters. It is also involved with the Committee Maritime International, Classification Societies and Bimco. Thus the Group is able to monitor developments of international maritime legislation as it occurs, and present the ship owners case where appropriate.

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Nucleus Marine

The Maritime News & HSEQ Experts

P&I Clubs – All you want to know

May 5, 2020 by Admin 5 Comments

A P&I club is a mutual insurance association that provides risk pooling, information and representation for its members. Unlike a marine insurance company, which reports to its shareholders, a P&I club reports only to its members.

Ship owners insure against loss of or damage to their ships with hull underwriters. They look to the P&I Clubs for insurance against their liabilities to others. These include their exposure to claims for damage or compensation in respect of the following heads of cover:

• Personal injury to or illness or loss of life of crew members
• Personal injury to or loss of life of stevedores
• Personal injury to or illness or loss of life of passengers and others
• Loss of personal effects
• Diversion expenses
• Life salvage
• Collision liabilities i. One-fourth collision liability ii. Other risks excluded from the Running Down Clause iii. Excess collision liability
• Loss or damage to property other than cargo
• Towage contract liabilities
• Liabilities under contracts and indemnities
• Wreck liabilities
• Cargo liabilities
• Cargo’s proportion of general average or salvage
• Certain expenses of salvors
• Legal costs
• “Omnibus” cover
• Overall conditions of cover
• Exclusion of war risks
• Selection by shipowners of particular heads of cover and of deductibles
• Cover for charterers
• Additional Covers
• Personal injury to or illness or loss of life of crew members The ship owner may be exposed to such claims in tort or under statute law, although it is more usual for the claims to be made under the crew member’s collective agreement or particular contract of employment. The cost of medical treatment and of repatriation is covered, as are the funeral expenses of dead seamen and also the cost of sending abroad a substitute for a seaman who is sick or injured or for a seaman who dies. Where there is a particular employment contract and this provides for unusually generous compensation in the event of death, injury or illness, the ship owner will normally be expected to have cleared it in advance with the managers of the Club so that his additional exposure under the contract can be taken into account in the assessment of his premium.
• Personal injury to or loss of life of stevedores This is a frequent source of heavy claims in tort or under statute law against ship owners and thus by them against their Clubs. Claims have been specially heavy in US ports, although the number of these claims has been reduced somewhat since the introduction of the 1972 Amendments to the Longshoremen’s and Harbour Workers’ Compensation Act which narrowed the circumstances in which the ship owner, as opposed to the employer of the stevedores, is liable for stevedore deaths and injuries.
• Personal injury to or illness or loss of life of passengers and others The shipowner may be exposed to claims in respect of passengers carried on board his ship in respect of injury, illness or death. These claims may in certain jurisdictions be defeated or limited in amount by the terms of the passenger ticket but, whether this is so or not in the particular case, the shipowner is covered for this risk. He may also be liable in tort to persons other than crew, stevedores and passengers who come on board his ship for one purpose or another, including surveyors, Customs officials, pilots and so on. Cover in respect of liability to these persons is also included.
• Loss of personal effects Liability of the shipowner to crew, passengers and others in respect of loss of or damage to the personal effects of these persons is also covered.
• Diversion expenses The shipowner may suffer losses through having to divert his ship in order to obtain treatment for an injured or sick person on board or for the purpose of landing stowaways. Although there is no liability here in the usual sense, the Clubs give cover to the shipowner in respect of the basic running expenses of his ship during the diversion, including port charges incurred solely for this purpose. Similarly, the cost of providing food and other necessities for stowaways may be reimbursed to the shipowner by his Club. Several Clubs extend the cover given in respect of stowaways to include the like expenses in respect of refugees who have been picked up by the ship.
• Life salvage A shipowner may become obliged to pay a life salvage award to a person who has saved or attempted to save the life of persons on board the salvaged vessel. Where property has also been saved, the usual practice is for the property salvage award to be “enhanced” by an unspecified amount in recognition of the life salvage service. The whole award is then payable by the property underwriters. But should the owner have to meet a claim for life salvage alone, this will be recovered from his Club.
• Collision Liabilities i. One-fourth collision liability The English form of hull policy requires the ship’s hull underwriter to pay three-fourths only of the liability of the insured ship in respect of loss or damage to another ship or her cargo as a result of the collision (subject always to the maximum mentioned under (iii) below). The remaining one-fourth of such liability is insured by the ship owners Club. This one-fourth usually makes the Club the largest single insurance interest, and in practice the managers of the Club will usually be asked by the hull underwriters to handle the issue of collision liability with the other ship and her cargo on behalf of all the underwriting interests. It is also usual for the Club concerned to give, on behalf of the insured shipowner, any necessary guarantees to the other ship and her cargo, the Club taking appropriate counter-security from the insured shipowner and also from the hull underwriters (or brokers) to the extent of their respective interests. ii. Other risks excluded from the Running Down Clause There are a number of important exclusions from the liability of the hull underwriters in the Running Down Clause. For instance, wreck removal liabilities are excluded, as is consequent damage to shore side structures or to the cargo in the insured ship herself, and pollution from and loss of life or personal injury on board any ship is involved. All those liabilities are insured by the ship owner’s Club.The Club cover includes, and the hull underwriter’s cover excludes, not only the wreck removal of the insured ship herself, but also the removal of the wreck of any other ship involved. The same is true of liabilities incurred by the shipowner not in tort but because of the existence of a contractual obligation, as the words in the Running Down Clause “pay by way of damages” have been interpreted as being restricted to payments in respect of tortious liability. iii. Excess collision liability Under the terms of the Running Down Clause English hull underwriters and those writing hull risks on similar terms are not obliged to make payments in respect of collision liabilities beyond a sum representing three-fourths of the ship’s insured value under thehull policies. In certain countries the extent of the hull underwriters’ interest may be even smaller where the insured vessel herself is also heavily damaged or lost, as the local policies do not follow the scheme of the RDC in establishing for collision liability a fund separate from the ship’s basic fund, but instead provide that the hull underwriter may stop paying altogether when he reaches the insured value of the ship. The common theme, in any event, is that at some point the hull underwriter may limit his payments to the insured shipowner in respect of collision liabilities. The overspill beyond this limit is picked up by the ship owner’s Club. In view of the possibility of a ship of low insured value colliding with one or more ships of very high value, this part of the Club cover is more important than it may at first sight appear. As the Clubs’ cover under this head could be increased unfairly by a decision of the shipowner, for one reason or another, to insure his ship with his hull underwriters for an artificially low value, the Clubs provide in their Rules that a claim in respect of excesscollision liability can be reduced appropriately if in the opinion of the Directors of the Club the ship has not been insured with her hull underwriters for a proper value
• Loss or damage to property other than cargo The Clubs provide cover for damage caused by contact between the entered ship and property belonging to other persons, including docks, wharves, locks and so on. The shipowner will not need to insure with his Club for this risk where his hull policy accepts it, as is the case, for example, with the German and Scandinavian types of hull policy, although he may still wish to have Club cover for the excess above any limit imposed by the hull policy. The Club cover also extends to damage caused by the entered ship to other ships and their cargoes without any actual contact, as, for example, by causing damage to a moored vessel by passing her closely at excessive speed.
• Pollution It is well known that there has in recent years been a huge increase in the exposure of shipowners to liability claims in respect of pollution caused by cargoes from their vessels, in particular cargoes of oil. Most such liabilities are imposed by international convention such as CLC, domestic statute such as OPA 90 or common law, but some have been voluntarily assumed by shipowners in accordance with schemes such as STOPIA. All these liabilities are insured by the Clubs, although with a limit in respect of oil pollution claims which presently stand at US$1bn each entered ship each accident or occurrence. This oil pollution limit does not apply only to claims that are made directly against the entered ship by those who suffer the oil pollution, but also embraces those which come indirectly, as, for example, those which form part of the collision claim of another vessel. Towage contract liabilities Clubs provide cover in respect of liabilities which may be incurred during ordinary harbour towage and may by special arrangement offer cover on appropriate terms for situations beyond harbour towage. They also give cover for liabilities under the terms of the usual contracts for towage by the entered ship or another ship or object.
• Liabilities under contracts and indemnities Shipowners are often required to give contractual indemnities in order to secure services required by their ship, for example in order to obtain the services of a floating crane. Cover in respect of any resulting liability can be obtained from the Clubs in most such situations.
• Wreck liabilities The Clubs give cover for the liability which a shipowner may incur in respect of the raising, removal, destruction, lighting or marking of the wreck of his ship. From the cost of the operation will be deducted the value of the wreck or any part thereof that is recovered as a result of the removal operation.
• Cargo liabilities A very important part of the cover provided by the Club is that which relates to the liability of the shipowner under his contract of carriage to pay for any loss of or damage to cargo. Unless prior arrangements are made with the Club managers, this cover will be given on the basis that the shipowner’s contract with the owner of the cargo is on terms at least as favourable to the shipowner as the provisions of the Hague or Hague-Visby Rules, that is to say the Brussels Convention of 1924 and its Protocol of 1968 and the Hamburg Rules of 1978. The cover extends beyond the sea leg of the carriage and thus will protect the shipowner throughout a combined transport contract from an inland point to another inland point, provided only that the sea leg is performed by an entered ship. This part of the cover is extended beyond liabilities as such, in that the shipowner may recover from his Club any additional cost incurred by him in discharging or disposing of damaged cargo. Clubs’ Rules impose restrictions on the cover in respect of deviation from the contract voyage (for example an unreasonable departure from the agreed itinerary or the shipment on deck of cargo with underdeck bills) and in respect of other departures from the proper carrying practice, such as the delivery of cargo without production to the master of the relevant bills of lading, or the issue of a “clean” bill of lading for cargo which is patently damaged.
• Cargo’s proportion of general average or salvage As an extension of their cover for loss of or damage to cargo, the Clubs again go beyond the insurance of liabilities as such by agreeing to pay to the shipowner any contributions to general average, special charges or salvage which the shipowner would have been able to recover from cargo interests had he not disentitled himself from so recovering by committing some breach of his contract of carriage.
• Certain expenses of salvors The Lloyd’s Standard Form of Salvage Agreement provides that in certain circumstances the owner of an oil tanker may be required to reimburse a contractor who attempts to salve that tanker for his “reasonably incurred expenses”. These expenses, in contrast with ordinary salvage awards made under the Lloyd’s Form or under general maritime law, are not recoverable under hull insurance policies, and the Clubs have agreed to insure shipowners for them in an agreement known as SCOPIC, having in mind the interests of the Clubs in the avoidance of oil pollution incidents.
• Fines A variety of fines may have to be paid by a shipowner, either directly or because of an obligation to reimburse his seagoing employees in respect of fines levied on them. Most of these come within the cover of the Clubs.
• Legal costs The Clubs also pay for legal costs and similar expenses which a shipowner may incur in dealing with a liability insured by his Club. In practice, the defence to the claim against the shipowner is usually conducted by his Club’s managers or correspondents, who engage any lawyers, surveyors and other experts who may be required and have them paid directly by the Club.
• “ Omnibus” cover In recognition of the fact that the list of liabilities to which shipowners are subject is constantly increasing in unforeseen ways, the Rules of the Clubs give their Directors discretion to pass for payment certain claims that are not expressly covered by any of the heads of cover set out in their Rules, provided only that they are within the general scope of the Club cover and are not expressly excluded elsewhere within the Rules. This is a most unusual provision and is a reminder that the Clubs exist, not as profit making insurance companies, but as organisations for the benefit of the shipowners who are their Members. The Omnibus Rule gives the opportunity to the Directors to move rapidly in response to the needs of the Members, particularly where a new risk suddenly arises or when an exceptional case appears to fall outside the express provisions of the Rules.
• Overall conditions of cover The risks described above are insured under the Clubs’ Rules only where the relevant liability arises out of the Member’s interest in a ship entered by him in the Club and when it arises in connection with the operation of that ship by or on behalf of the Member. It is also provided by Club Rules that it is a condition of the cover that the Member must have paid the liability claim against him before he can recover from the Club. However, the failure of a bankrupt Member to pay the third party claimant may not provide a good defence to his Club when the Club is sued directly by the third party under the Third Party (Rights Against Insurers) Act 1930.
• Exclusion of war risks The Clubs’ cover does not include liabilities arising from the war risks listed in the Lloyd’s Free of Capture and Seizure Clause. Consequently it is usual for shipowners to attach to their war risks hull insurance policies a special clause giving cover for P&I risks to the extent that these may arise from such a risk and thus be excluded from the Club insurance.
• Selection by shipowners of particular heads of cover and of deductibles It should be particularly noted that a Member of a Club is not obliged to enter for all the risks set out above but may choose to take cover from his Club in respect only of certain risks which he perceives as most pressing from his point of view. Similarly, although some Clubs put in their Rules standard deductibles for the various risks, it is always open to a Member to negotiate specially large deductibles against a corresponding reduction in premium.
• Cover for charterers Although the above description of the Club cover speaks solely of shipowners, the cover is available also to charterers of ships, to the extent that they may incur any of the liabilities listed. Cover for charterers is usually subject to a provision that the charterer is deemed by the Club to have been entitled, as against the third party claimant, to any limitation rights that would have been available to a shipowner. Details can be found in Charterers’ Liability Cover .
• Additional Covers The UK Club provides or arranges a number of additional covers for Members requiring specific additional insurance. Details can be found in Extended Cargo Cover .

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