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    Protection Indemnity HK 2002

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    Anonymous qT66pyK
    The document discusses the role of Protection and Indemnity (P&I) Clubs. It notes that P&I Clubs were formed in the mid-19th century by shipowners to insure liabilities that traditional hull underwriters were unwilling to cover. Today, there are 13 P&I Clubs that insure over 95% of ocean-going tonnage. The Clubs operate on a mutual basis and provide insurance, claims handling, legal advice, and casualty response services. In oil spills, P&I Clubs are often involved by providing insurance guarantees, liaising between parties, funding cleanup costs, and providing legal and technical advice through organizations like ITOPF.

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    Protection Indemnity HK 2002

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    Anonymous qT66pyK
    89 views6 pages
    The document discusses the role of Protection and Indemnity (P&I) Clubs. It notes that P&I Clubs were formed in the mid-19th century by shipowners to insure liabilities that traditional hull underwriters were unwilling to cover. Today, there are 13 P&I Clubs that insure over 95% of ocean-going tonnage. The Clubs operate on a mutual basis and provide insurance, claims handling, legal advice, and casualty response services. In oil spills, P&I Clubs are often involved by providing insurance guarantees, liaising between parties, funding cleanup costs, and providing legal and technical advice through organizations like ITOPF.

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    The document discusses the role of Protection and Indemnity (P&I) Clubs. It notes that P&I Clubs were formed in the mid-19th century by shipowners to insure liabilities that traditional hull underwriters were unwilling to cover. Today, there are 13 P&I Clubs that insure over 95% of ocean-going tonnage. The Clubs operate on a mutual basis and provide insurance, claims handling, legal advice, and casualty response services. In oil spills, P&I Clubs are often involved by providing insurance guarantees, liaising between parties, funding cleanup costs, and providing legal and technical advice through organizations like ITOPF.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    89 views6 pages

    Protection Indemnity HK 2002

    Uploaded by

    Anonymous qT66pyK
    The document discusses the role of Protection and Indemnity (P&I) Clubs. It notes that P&I Clubs were formed in the mid-19th century by shipowners to insure liabilities that traditional hull underwriters were unwilling to cover. Today, there are 13 P&I Clubs that insure over 95% of ocean-going tonnage. The Clubs operate on a mutual basis and provide insurance, claims handling, legal advice, and casualty response services. In oil spills, P&I Clubs are often involved by providing insurance guarantees, liaising between parties, funding cleanup costs, and providing legal and technical advice through organizations like ITOPF.

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    The Role of Protection and Indemnity (P&I) Clubs

    by
    Robert C Seward
    Deputy Chairman

    Tindall Riley (Britannia) Ltd

    During the mid nineteenth century shipowners found themselves with liabilities

    which their traditional hull underwriters (Lloyds) were unable or unwilling to


    cover. In order to solve the problem groups of shipowners formed themselves
    into mutual associations and agreed to share each others claims. These early

    organisations have now developed into thirteen Mutual Insurance Associations


    or so-called P&I Clubs, which between them insure the liabilities of some 95% of
    the worlds ocean going tonnage.

    Mutual
    The P&I Clubs all operate on a mutual or non-profit basis aiming to call up only
    sufficient money in each year to meet costs, expenses and claims for that year.
    There are no shareholders and the shipowner members of the Association insure
    each other.

    The International Group of P&I Clubs


    The thirteen P&I Clubs co-operate in two important areas.

    First the Clubs

    themselves share claims with each other and buy high levels of reinsurance on a
    collective basis. This enables each Club to provide much higher levels of cover
    than are normally available in the commercial market.

    The insurance thus

    operates in three tiers, firstly the Club will pay claims of up to USD5m, secondly
    the Pool of all Clubs will pay the next USD25m and thirdly the claims excess of

    USD30m (5 + 25) are reinsured as one collective contract which is said to be the
    biggest liability reinsurance contract in the world.

    The second area of co-operation is in matters of common interest, such as new


    legislation or discussions at the International Maritime Organization (IMO) or
    standard shipping contracts.

    The Cover
    The P&I Clubs provide cover for a shipowners liabilities, not the fabric of the
    ship itself. The risks covered will usually include:1.

    Death and personal injury of

    Seamen

    Passengers

    Third parties

    2.

    Liabilities in respect of stowaways or persons saved at sea.

    3.

    Liabilities arising from collisions.

    4.

    Liabilities arising from groundings.

    5.

    Liabilities arising from damage to fixed and floating objects.

    6.

    Liabilities arising from pollution.

    7.

    Liabilities arising from wreck removal.

    8.

    Liabilities arising from towage operations.

    9.

    Liability to cargo.

    together with other legal and other costs associated with dealing with these
    claims.

    The Service
    A P&I Club operates as a mixture of an insurance company, a law firm and a loss
    adjuster. This means that a Club should be able to assist a shipowner in dealing
    with every aspect of a casualty from finding experts and contractors to deal with
    the immediate casualty through to legal advice and paying claims.

    The P&I Club exists in order to help the shipowner and pay his liability claims.
    Almost always the shipowner and his Club will work together in order to solve
    the problems and it is very rare that a Club will be in dispute with a shipowner
    over cover.
    j:\ian\seminar\hong kong\protection indemnity hk 2002.doc

    The Clubs are unique organisations in that they provide not only insurance

    cover, but also claims handling (legal) advice and a casualty response service. In
    managing a shipowners liabilities a Club may have to deal with the loss of two
    bags of rice or the total loss of a fully loaded VLCC.

    The Clubs reaction

    therefore needs to be highly flexible and geared to the particular incident.


    The Clubs have access to a high quality network of specialist technical advisers,
    maritime lawyers and local commercial correspondents.

    Correctly used, that

    network should ensure that the shipowner and his Club will be properly advised
    on the essential elements of the claims which arise out of a casualty.

    The

    shipowner can expect to be told whether or not he is liable for the claim, how
    much it may cost, whether he is entitled to limit his liability and whether he may
    expect to recover all or part of his loss from some other party who may also be
    to blame.

    The Role of the P&I Clubs in Oil Spills


    The International Group of P&I Clubs will between them insure almost all
    internationally trading tankers. The Clubs will therefore have a role to play in

    nearly every oil spill of any consequence. Although in Civil Liability Convention
    (CLC) countries the clean-up operation will be conducted by government
    agencies and in the USA by the shipowner, the Club will almost always be closely
    involved, even if only to approve expenditure.

    Insurance Guarantor
    In the context of an oil pollution incident the Club will almost always have
    provided the insurance guarantee, the Civil Liability Convention Certificate. In

    the USA, which has its own Oil Pollution Act (OPA 90), there are separate
    guarantors, but they rely on the Clubs to provide the actual cover and service.

    Liaison with International Oil Pollution Compensation Fund (IOPCF)


    In larger oil spills where the IOPCF may be involved the P&I Club will liaise with
    the IOPCF, both so as to keep them informed and so as to ensure that there is a

    smooth flow of funding without different views being taken on the recoverability
    of expenditure at different levels. In practice the clean-up costs (which come at

    j:\ian\seminar\hong kong\protection indemnity hk 2002.doc

    4
    the beginning) are usually the concern of the Club and the IOPCF will only
    become involved in payments at higher levels for third party claims.

    Source of Funds
    Very few shipowners can afford the cash flow needed to fight a major oil
    pollution incident and even the oil companies do not like to be out of pocket for
    too long.

    The Club will therefore expect to act as banker for the clean-up

    operation and third party compensation payments.

    This means that it is

    important to agree expenditure in principle in advance of incurring it so that


    disputes can be avoided.

    Legal Advice
    This falls into two parts, the overall issues of liability and details of particular

    claims. In both areas the Club (using outside legal advice where appropriate)
    would expect to assist the shipowner.

    Casualty Response
    The Club will not itself conduct a clean-up or salvage operation but it will be in a
    position to find appropriate advisers, surveyors and through them contractors
    capable of doing the work.

    Tanker Casualties
    Some aspects of a casualty are reasonably predictable. For example, a sizeable

    oil spill is likely to involve a large clean-up operation. There will probably also
    be third party claims from fishermen, boat owners and the owners of shore-side

    property. There may be thousands of individual claimants. Each claim must be


    sifted and assessed.
    In other types of casualty different considerations will apply. A collision could
    involve death and injury claims, and probably salvage issues.

    Casualty response is essentially about practicalities. It is based upon systems


    which can be adapted for use in any type of casualty in any location.

    j:\ian\seminar\hong kong\protection indemnity hk 2002.doc

    Where does the Club fit in?


    The Club needs to be adaptable to deal with a casualty on any scale involving a
    ship of any type in any place. To achieve this the approach needs to be both
    flexible and simple.
    For example, an oil company owner will have a highly developed response plan

    which is driven and manned by the oil company often operating from its own
    building with its own staff. In such a case, the Club will usually interact with the
    oil company, providing advice and comment.

    Only rarely will the Club be

    expected to take the lead.


    At the other end of the scale is a shipowner who owns a few ships operated from
    a remote corner of the world and who simply does not have the manpower or
    resources to deal with a major casualty. In that case, the Club will be expected

    to play a prominent role in organising the response on behalf of the shipowner


    and may be called upon to provide a response centre and staff.

    Many

    shipowners have trained their own personnel to handle media enquiries but, for
    those owners who have not, the Club will be able to assist.

    International Tanker Owners Pollution Federation (ITOPF) and the Clubs


    The Clubs rely heavily on ITOPF in many of these areas.

    ITOPFs technical

    expertise and breadth of experience is unrivalled and ITOPF will normally be

    asked to assist in any oil spill of significance, be it from a tanker or non-tanker,


    wherever it may occur.
    The

    Federations

    practical

    experience

    of

    oil

    spill

    clean-up

    methods,

    environmental damage assessment and restoration techniques is invaluable in


    delivering common sense advice based upon sound scientific principles principles which, all too often, are not uppermost in the minds of government
    authorities.

    ITOPFs ability to deliver objective and practical advice on pollution issues is


    invaluable in two ways. Firstly, in helping those responsible for clean-up and
    damage assessment to respond more effectively and on a realistic scale.
    Secondly, having established its credibility as an objective technical adviser, by

    providing government agencies and private contractors with help in spill


    response planning.

    Once working relationships of this sort have been

    j:\ian\seminar\hong kong\protection indemnity hk 2002.doc

    6
    established, there will usually be a marked improvement in the technical
    efficiency of subsequent response activities as well as in the level of practical
    co-operation.

    Conclusion
    In every oil spill of any consequence there is likely to be a P&I Club involved at

    least in the critical area of approving and funding expenditure and most often in
    a wide ranging advisory and organisational role.

    R C Seward

    November 2002

    j:\ian\seminar\hong kong\protection indemnity hk 2002.doc

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