The Risks Covered
As seen in the Introduction chapter, there are many types of marine insurance covers available to the transport operators.
Whereas the hull underwriters cover the shipowners against loss of or damage to their vessels, the P&I clubs insure them for third parties liabilities as described in earlier chapters.
Each P&I club will have its own statutes and rules to decide on a number of issues, including the risks covered. The wording of the rules of the various clubs is similar to some extent, so is the scope of cover afforded by those clubs forming the International Group. Indeed, that could not be otherwise as these clubs pool common larger claims and purchase the reinsurance for the very high claims on a mutual and equitable basis; hence, have to be bound by the same criterion. The number of P&I risks to which the owners and charterers are exposed to is quite extensive, so are the covers available to protect them against such risks.
The list below is not exhaustive and enumerates the main categories of cover ordinarily available from most of the clubs:
- Death, illness and personal injury to crew, passengers and other persons on board
- Loss, shortage or damage to cargo
- Loss of damage to third party property other than cargo
- Damage to fixed and floating objects and to property
- Stowaways and refugees
- Persons saved at sea
- Diversion expenses
- Collision with another vessel not covered or in excess of the hull policy
- Wreck removal
- Quarantine expenses
- General average
- Towage contract liabilities
- Legal costs in defending third party claims
- Cover for charterers
Additionally, the Clubs have a unique arrangement whereby the club directors may at their discretion reimburse a claim owing to risks incidental to shipowning not specifically envisaged within the scope of cover nor expressly excluded by the club’s rules. The mechanism that allows such flexibility is known as the “omnibus” cover or rule.
An importation provision of the P&I clubs is the “pay to be paid” condition. In other words, unlike conventional commercial insurers, the clubs do not normally settle the claim in advance. The member is responsible to settle the claim in the first instance, with the club’s prior approval, before claiming reimbursement.