Importance of- P&I club in shipping and Marine Hull Insurance-ITC Hull & P&I Clause.

On 8^th November 2018, the oil tanker Sola Ts owned by ship-owner Tsakos was involved in a collision with the military vessel Helge Ingstad off the coast of Bergen, Norway.

The ship-owner Tsakos is a member of P&I club Britannia, head quartered at London.

As per the local media report the frigate sustained heavy damage & is in danger of sinking. All 137 crew members abroad the frigate were evacuated. Out of this 8 crew members have sustained slight injuries.

The oil tanker have not suffered the serious damage but it is reported the detection of oil slicks on water which may result in pollution/environment liability.

Losses stemming from this incident could reach $500mn.

This incident revels the importance of interface between Hull & Machinery Insurance and P&I from the P&I claims handler’s perspective.

Apart from insurance for Hull & Machinery and P&I (Protection & Indemnity) Insurance, the protection is also provided by P&I Club to its members. The P&I club is a non –governmental, non profitable mutual or co-operative association of marine insurance providers to its members. The member can be ship owners, operators and seafarers under the member companies.

P&I clubs covers:

• Personal injury, illness & death claims from the crew, passengers etc.
• Stowaways and its repatriation arrangement.
• Cargo claims for damage or loss of the same.
• Unrecoverable GA contributions.
• Liability due to collision.
• Liability under approved towage contracts.
• Removal of wreck.
• Salvage operations.
• Civil liability imposed due to pollution or OIL SPILL.
• Other fines.

Insurance protection is also there under 1) Marine Hull Insurance for Hull & Machinery and 2) Insurance under Institute Protection & Indemnity clauses.

Hull & Machinery insurance is basically an insurance of insured’s own vessel. The Institute Time clauses Hull 1-10-1983 is the most widely used version.

P&I insurance is primarily intended to cover a ship-owner’s or operator’s liability towards Third Party. It generally excludes damage to the insured’s own property or direct loss of the insured.

However, Hull & Machinery insurance and P&I insurance are often complementary when it comes to Collision Liability and liability for damage to Piers, Boyos, Load Cranes and other Third Party property generally known as damage to Fixed & Floating Objects (FFO).

Hull & Machinery (H&M) insurance may include cover for liability towards Third Party depending upon the type of policy and scope of that specific policy. Under standard English clause- ITC Hull (Institute Time Clauses Hull) collision liability cover is limited to 3/4^th of the owner ship’s liability towards the other vessel in a collision. Under Norwegion & German Hull & Machinery insurance terms the liability cover provided is 4/4^th i.e. 100%. This terms are not in practice in India. However some times insurers in India agrees to cover 4/4th collision liability.

Hull & Machinery cover is required to deal with the loss of or damage to the own vessel. However to cover 100% collision liability P&I cover is important. The cornerstone of the P&I cover is that it responds to liability that are not covered under Hull & Machinery cover/clause.

It is important that the Master of the vessel and the Ship’s officer have a full understanding of what is covered under the Hull & Machinery insurance policy as this determines what is covered under P&I insurance. The Master will thus be in a position to understand whose insurer’s representative should be contacted in case of any accident.

To obtain effective insurance protection and also effective claims handelling in high value claims following factors needs to be focused.

1. Before deciding on placing the Hull &n Machinery, RDC & FFO risks with a particular Hull Underwriter, consider the service aspects that come with the insurance i.e. what will be the likely response to the incident from the underwriter when the need for assistance arise?
2. Effective claims handling in high value property losses and liability cases rests on the ability of the claim handlers to understand how the facts of the incident may interplay between hull terms and P&I. There will be more effective decision- making regarding the roles of the various insurers, if the interplay between hull terms and P&I is determined early.