Vessel Incident And Its Various Aspects

We have experienced multiple vessel incidents in recent times. Generally, we remain concerned regarding cargo damage and how it will fall under marine cargo policy. But rarely, we think about other aspects of marine transit which may trigger in case of accident to ship.

  • Cargo Damage.
  • Hull and Machinery damage
  • Freight Loss
  • Shipowners Liability
  • Damage to container or lost in sea
  • Physical loss or bodily injury to crew
  • Environmental damage/Damage to Marine life due to leakage or spillage

Cargo Damage

When any ship/vessel incident takes place, cargo onboard is exposed to multidimensional losses like fire losses, water damage, Damage to perishable items due to delay, Consequential losses, spillage etc. These sorts of losses are covered under marine cargo policy taken by Manufacturer or traders. Partial losses may be incurred in form of General average or particular average but when cargo is damaged beyond repair, total loss becomes inevitable. India being a major exporter in Pharma, Agri commodities, specialties chemical, engineering goods poses a greater amount of transit risk for Indian insurers.

Hull and Machinery damage

Another exposure that is a vital aspect in case of accident to vessels is loss or damage to vessels or machinery. Such exposures are insured under marine hull policies, specially designed to take care of Vessel structure including propelling machineries and equipment’s. Hull policies may be voyage (For single journey), or time based(annual), fleet based, Floater basis or ship which docks at port or jetty. These hull policies cover more or less perils like cargo policy. Ex: – Fire, Collision sinking risk, damage due to natural calamities, theft, Etc.

Shipowners Liability

Shipowners’ liability arises in case there is loss or damage to third party property and cargo losses including shortage, contamination, improper handling, loading Etc. It should also be noted that any loss due to misdeclaration of hazardous material will not fall under shipowners’ liability. Although liability of carriers is limited to certain extent under different conventions like Hague Rule, Hague-Visby rule, Hamburg rule, Rotterdam rule. But approx. 80 % of the world transit takes place by sea route hence it becomes an essential part of shipowners to get their liability covered. Such liabilities are covered by P&I club. Which is a body formed on a mutual basis by 12 global members to insure each other on a non-profit basis to cover their third-party liability. These clubs are commonly classified on basis of protection, indemnity, war, strike, Charterer’s liability.

Every shipowner is provided with a rule book in place of policy copy. Major exposure covered by P&I Insurance are liability for third party, passengers, allision, collision, Pollution liability, wreck removal, towage, Liability in respect of cargo, GA contribution, fines, legal cost, cargo liability, sue and labor, Salvors fee, repatriation expenses, etc.

Damage to container or lost in sea

Containers are the lifeline for sea transit, but these boxes become highly susceptible to loss when any sea transit is exposed to danger. containers are Either lost or too damage to be used further. Although it becomes the responsibility of the shipping company/container owners to ensure its safety and smooth sailing, but in case of capsizing, rough weather, sinking of ship, it becomes inevitable to ensure its safety. Coverage for containers under marine policy can be taken under Institute container clause (Time). This clause provides the widest cover for the container whether in transit or at rest.

Physical loss or bodily injury to crew

Physical loss or bodily injury to crew members are the liability that will be covered under P&I insurance taken by shipowners.

Environmental damage/Damage to Marine life

A vessel carrying tankers or containers stuffed with hazardous substances or oil posses’ greater level of spillage and contamination risk which is a threat to marine life. Severity from these sorts of losses cannot be contained or quantified due to its catastrophic exposure. Such liability covers issues such as the costs of clean up, loss to fishermen, and measures taken to prevent or minimize the damage.

There are some IMO conventions which impose penalties for spillages from Bunkers, tankers and shipowners for compensation for oil pollution damage. However, claimants don’t receive an adequate claim amount due to limitations of ship-owners’ liability. These conventions have many restrictions like on quantum liability, tonnage and territorial limitations. Yes, there are exceptions also if it is proved that the pollution damage resulted from the shipowner’s personal act or omission then he cannot limit his liability.

MSC ELSA incident has raised concern for authorities to take all pre-cautionary steps to avoid any environmental damage or impact on marine life.

We welcome your views.

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