The P&I Clubs
are correctly called Protection and Indemnity Associations and number around 20 worldwide, with the majority being the United Kingdom-based. The shipowner in taking out insurance with a particular association becomes a member of that Club. The Clubs are mutual, which means that all costs involved in providing cover or paying out a claim to anyone are shared by all members. This is achieved by setting a rating or premium for the owner, known as an "advance call," and is based on the owner's history and exposure to risk.
This is added to by a "supplementary call," which is calculated to take into account any heavier than expected claims from the Club's members. The Clubs will attempt to be as accurate as possible in predicting the likely cost of paying out for claims in the year, and the calls are calculated accordingly.
The Clubs are non-profit making and are managed by firms of insurance, marine and legal experts, and controlled by directors who represent the ship owning members.
As well as insuring third-party risks, the Clubs also take on other functions including offering expert advice, keeping the members and the ships advised of relevant information by issuing circulars and magazines, having correspondents and lawyers appointed throughout the world and the production of Letters of Indemnity (L.O.I.) and protests.
A Certificate of Entry is issued by the Club at the start of the P&I year (February 20th) and is proof that the ship is covered by the P&I Club, setting out the classes of cover in force and quantifying the deductibles in force. Increasingly Port State Control is requesting copies to be produced during inspections; with some States, it is mandatory. A copy of this Certificate will be sent to the vessel once the original is received by the Company as will the Club Rule Book and List of Correspondents. The Master and Senior Officers must familiarise themselves with the contents of this Rule Book.
Risks Covered
The risks covered are specified in detail in the Club's Rule Book but can be summarised as follows:
- Liabilities in respect of the crew, passengers, stevedores, stowaways, visitors, etc
- Liabilities in respect of diversion e.g., landing a sick crewmember or proceeding to a distress
- Liabilities arising from Collision not included in H&M
- Damage to property including non-contact damage to other ships
- Pollution by oil and other substances
- Wreck removal
- Towage
- Liabilities in respect of cargo including loss due to fire, theft, jettison etc
- General Average (ship's proportion of G.A. when over the insured value and unrecoverable G.A. contributions
- Fines for innocent breaches of regulations and customs
- Legal Costs
- Salvor’s expenses under LOF
The Club covers not only the costs related to the specific damage of the above risks but also incidental costs and legal costs.
Limits, Restrictions and Risks not covered
Clubs will not normally cover the following risks:
- Delivery of Cargo without Bills of Lading (Note that even when a Club approved L.O.I. has been presented to the Owners by the Charterers for non-presentation of B/Ls, the Club will not cover any loss arising from the non-presentation)
- Delivery of the cargo to a port other than that specified in the carriage contract. (Note again that even with a suitable L.O.I. Club cover will not be given)
- Ante or post-dated Bills of Lading
- Arrest or detention
- Deck cargo carried on terms of an under deck B/L
- Fines where a Master is knowingly committing a breach of regulations
Liabilities regarding the vessel's towage will only be covered if the Club has first approved the towage contract. Towage of the vessel will be covered as long as a recognized contract is in place.
P&I Correspondents
The Clubs have contracts with correspondents worldwide. They will attend the vessel on request by the Company, the Master or Agent in order to protect the member's interests. They have the responsibility of reporting back to the Club's managers and document any necessary information and evidence relating to a potential claim and may arrange other surveyors to inspect the damage. The correspondent has the advantage of being based locally and knowing local custom and key shore personnel. The Master must cooperate with the Club correspondent fully as between them; they will formulate the main initial defense of any claim made against the ship and her owners.
A List of Correspondents is supplied to all Company vessels.
Condition Surveys
From time to time, the Club may require to survey the member’s vessel in order to ascertain her condition.
P&I Pollution Cover -Pollution insurances
The P&I Club will cover the owner for pollution liabilities in respect of;
- damages and compensation
- prevention or clean-up costs
- costs incurred in complying with local government directions
- special compensation to salvors
- fines for pollution
Under present Club Rules, the above liabilities are limited.
CLC
All tankers and other vessels such as O.B.O.s, which carry persistent oil as cargo, must carry a C.L.C. (International Convention on Civil Liability for Oil Pollution Damage 1992) Certificate. This Certificate is issued by Flag State and is confirmation that the vessel is entered with a P&I Association with cover for oil pollution. As it runs concurrently with the P&I Certificate of Entry, this Certificate is also valid for one year commencing February 20th.
COFR
Every vessel that trades to the U.S.A. must be issued a valid USCG Certificate of Financial Responsibility. This Certificate is granted once the shipowner has proved that he has established financial responsibility to meet with a pollution incident in U.S. waters and that he has an agent-based in the U.S.A. to accept the service of process. Masters should be aware that certain states in the U.S.A. issue their COFR, and it is recommended that Masters contact their management office to ensure their vessel is covered.
Details of the COFR can be obtained by searching the vessel's name on the USCG website, and by quoting the COFR number, a ship can be cleared in any U.S.A. port on demand of the Port Authorities.
Note of Reference
Types of losses - Total or Partial or general average losses
A Loss can be described as being either Total or Partial (Particular Average). A Total Loss may be either an Actual Total Loss (ATL) or a Constructive Total Loss (CTL). An Actual Total Loss is where the vessel is actually destroyed or wrecked or where the owner is irretrievably deprived of his vessel e.g. when a ship is sunk in deep waters where any salvage attempt would be impossible. A Constructive Total Loss is when it appears that the vessel is unlikely to be saved or recovered or when she can only be recovered and repaired at a cost, which exceeds her insured value....
P&I Clubs guideline
The P&I Clubs are correctly called Protection and Indemnity Associations and number around 20 worldwide, with the majority being the United Kingdom-based. The shipowner in taking out insurance with a particular association becomes a member of that Club. The Clubs are mutual, which means that all costs involved in providing cover or paying out a claim to anyone member are shared by all members. This is achieved by setting a rating or premium for the owner, known as an "advance call," and is based on the owner's history and exposure to risk.
War risks areas -related advisory
There are additional trading restrictions placed on the ship regarding so-called war risk areas. War risk areas do not necessarily mean an area where there is a war and may include hostile environments such as areas where civil commotion or revolution is taking place.
Cargo ship procedure - Deviation clause and port of refuge
A deviation is a departure from the intended voyage or contract of carriage. This can occur either where the course of the voyage is specifically stated and is departed from or where the course of the voyage is not stated, but the usual route or customary route is departed from. However, it should be noted that deviation does not necessarily mean a physical change in the course. It can occur in a simple case of slowing down to receive stores at an intermediate off-port-limits call. ...
Salvage contract -Using The Lloyd's Open Form for "No-Cure-No-Pay" salvage contract
The Lloyd's Open Form or "LOF" is the most widely-used "No-Cure-No-Pay" salvage contract. In return for salvage services, the salver receives a proportion of the salved value (the ship, its cargo, and bunkers).
The Master’s Responsibility during Salvage Operation
Request for Salvage -
The Master shall normally request salvage after consultation with the Company. However, he has complete authority to seek salvage assistance without referencing the Company if he considers this necessary.
Requirement of towing arrangement in oil tankers, readyness, & training onboard
All Oil, Chemical and Gas Tankers above 20000 DWT, constructed on or after July 1st, 2002, are equipped with an "Emergency Towing Arrangement (E.T.A.) both Forward And aft to provide the ship with a rapidly deployed towage capacity in an emergency.
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