P&I Cover for Charterers: Vessel Owner's Liability Insurance | UK IP (2023)

Dr. Petar Kragić

Asesor legal de Tankerska plovidba

Repeal or logical step?


1. If one wants to introduce an innovation, one must present arguments against the prevailing views that support the current one.Actual state. In this article we will try to answer the question: is it time to introduce compulsory liability insurance for carriers?

Current situation of carrier civil liability insurance

2. Over 90% of the world's merchant fleet is a member of P&I clubs that offer liability insurance to shipowners. Shipowners who have not joined the P&I club are some large shipping companies that have their own insurance arrangements (such as liability insurance) and those shipowners who insure their liability on the commercial insurance market together with comprehensive or separately.

3. To the question: "Is the shipowner's civil liability insurance voluntary?", the answer can be: "Yes, it is, but as a general rule the shipowner cannot market his ship without taking out said insurance". In particular, charterers in principle, as a condition of renting a boat, proof of valid third party insurance is required, regularly provided in the form of a P&I entry certificate, by the boat owner or directly by the yacht club. relevant P&I. The banks that finance this type of insurance require it as a condition to approve a loan guaranteed by a mortgage on the boat.

4. To obtain an ITF Blue Card [1] for a ship, the shipowner must ensure his responsibility in the payment of the amounts agreed in the contract with the union for death or permanent disability of the crew.

5. Some countries (Greece, Australia, Sri Lanka) require proof of wreck removal liability insurance (accept P&I certificate of entry) to allow vessels to enter their territorial waters. Other countries such as the United States of America (subOil Pollution Law 90) y California (subState Law, California S.B. 1644) require evidence of financial responsibility (Financial Responsibility Certificate) for oil pollution. In Australia there has been compulsory insurance for ships over 400 GT since 2001 (except oil tankers covered by the CLC).Financial Responsibility Law7.06. 2000 requires proof of oil pollution liability insurance for non-oil tankers over 400 GT to obtain permission to enter their territorial waters. Could be P&Ientry certificate, bank guarantee, endorsement, deposit or similar instrument. As of March 1, 2005, Japan introduced mandatory insurance for non-tankers over 100 GT entering its territorial waters. As of April 20, 2005, these vessels must have original insurance policies (P&IA registration certificate is accepted.) as proof of financial guarantees. Taiwan did the sameSea Pollution Control Lawwhich entered into force on July 1, 2005.

6. International maritime conventions establish compulsory shipowner liability insurance. The first was the International Convention on Civil Liability for Oil Pollution Damage ("CLC") of 1969. Followed by the International Convention on Liability and Compensation for the Carriage of Dangerous and Noxious Substances by Sea, 1996. The International Convention on Civil Liability for Damage Due to Fuel Oil Pollution, 2001. The Nairobi International Convention on Wreck Removal, 2007. All of these contracts require insurancespiralNon-contractual liability against third parties The Athens Convention on the Carriage of Passengers and their Luggage by Sea, 1974, is the first convention to introduce compulsory insurance forof the contractresponsibility of the shipper, in this case the liability towards the passengers is based on the contract of carriage entered into between the shipper and the passenger. The 2006 Maritime Labor Convention introduced compulsory insurance of the shipowner's contractual liability towards seafarers based on the employment contract and the ML certificate and declaration as prima facie evidence of compliance with the Convention's standards.

7. The IMO recommended that shipowners take out liability insurance [2]. It is accepted that the insurer pays the insurance only if the shipowner's liability is established by law (by judgment or otherwise) and if the shipowner as insured has complied with all his obligations to the insurer arising from the insurance contract. [3] 8. The European Parliament approved the documents that make up the Third Maritime Safety Package on March 10, 2009, including the Directive on Civil Liability and Financial Guarantees for Shipowners (the "Insurance Directive"), which will require Member States obtain evidence of insurance for ships flying their flag or entering their maritime territory of a type insured by International Group Clubs, and that such cover is valid up to the liability limits set out in the 1996 LLMC Protocol. cargo are ship claims, so insurance relates to cargo liability.

Arguments against compulsory civil liability insurance

9. One of the arguments against compulsory cargo liability insurance is that cargo contracts and insurance contracts covering cargo liability are private companies that do not need public intervention.

10. Therefore, the public protection of claimants in damages proceedings is necessary when the claimant does not have a contractual relationship with the shipowner and cannot protect their interests. For example, in an oil contamination case, where a fish farmer whose cages were contaminated by an accidental oil spill from a ship must be compensated for the losses and damages he suffered because he had nothing to do with the ship except accidental wind and wind. streams that carry spilled oil to your fish farm. Since it failed to protect his interests, public policy must step in and ensure that he receives adequate compensation. On the other hand, in contractual relationships, one of the parties can assess its own risks. he chooses a partner, negotiates the terms of the contract and is therefore able to protect his interests.

11. This line of thought is illustrated in the following examples. In an unprecedented arbitration award in London, the arbitrator dismissed the shipyard's counterclaimparent companythe buyer who breached the shipbuilding contract. The arbitrators explained that the skver and the customers entered into a contractual relationship and that the skver can protect its interests in the negotiations, for example by requesting a guarantee from the parent company or some other insurance against the buyer's liability. The shipyard did not do this and assumed the risk for the customer. On the contrary, in your caseAmoco Cadiz[4], where it was a tort, caused by a problem with the rudder and the consequent stranding of an oil tanker that spilled enormous amounts of oil into the sea. The oil damage was caused by third parties who had nothing to do with the ship and the transportation of its cargo. The court lifted the corporate veil and awarded compensation to the parent company that controlled the company that owned the ship and profited from its operations.

12. In the early 19th and 20th centuries, the same argument about freedom of contract prevailed until, first, the Harter Act of 1893 and then the International Convention [5] made the minimum liability regime mandatory for the transport of goods. .

13. In the 1980s, some countries introduced compulsory insurance forintermediariesand liability insurance for many occupations.

14. Maritime transport contracts were not limited to regulating the liability regime, but sought to increase the claimant's chances of recovery. Hehamburg rules[6], (copying aviationGuadalajaraair convention of 1961 [7]) led to his conceptroyal carrierwho is bound to the carrier's side. The idea was to allow the plaintiff to sue the contract carrier and the actual carrier that transported the cargo and caused the damage.

15. As we can see, maritime law invades the contractual freedom of transportation by defining a minimum liability regime and expanding the circle of people who could be sued for cargo loss or damage.

16. Another argument against compulsory insurance is that the claimant would getcurrent actionagainst liability insurance providers (i.e. P&I associations), so insurers may lose any defense under the insurance contract they may have against the insured for payment of insurance money. The defenses are due to the violation of conditions such as that the ship is not in class, that the insurance contract is terminated for non-payment of premiums, that the insurance money must be compensated with the unpaid premium, that the insured does not notifies the insurer of the accident or damage, the insured does not pay the damage (pay to payrule) and so on.

17. English law empowers P&I clubs where they are sued directly by third parties [subThird Party Law (Rights Against Insurers)1930 applicable in bankruptcy] use the defenses against the insurance policy and those ofMarine Insurance Law1906. In cases of thepedestriansiok father[8] defense according to club rule"pay to pay" is allowed. This rule requires the insured to pay the claim to a third party to obtain the right to claim the insurance money from the insurer. Of course, if the insured is bankrupt, they will not be able to pay the claim. a plaintiff who would substitute the rights of the insured (according toThird party law (rights against insurers).-in 1930) to comply with the "payment for payment rule", he would have to pay for the damages himself instead of claiming the insurance money from the insurer. Legally, this is an impossible condition. Despite this impossible conditionthe house of the lordspermissible defense based on "pay to pay" rule. However, Lord Justice Goff cautioned clubs against using this defense against claims for loss of life or personal injury. Under his rules, P&I clubs, subject to terms and conditions, waivedpay to paydefense against crew claims; 18. The introduction of compulsory insurance would change the nature of P&I insurance. I would cease to be oneinsuranceand it would happenliability insurance. The first type of insurance compensates for damage to the insured's property caused by payment of damages to the claimant, and the last type compensates for damage suffered by the claimant himself through payment of insurance.


19. Under the CLC, P&I Clubs issue certificates of insurance ("blue card") to the governments of the Convention countries, which in turn issue their state certificates to ships on the basis of such blue cards. Since the insurer is liable under the articles of the Convention and, in principle, cannot, since that there are exceptions, use the defense of the insurance contract against the applicant.

Any claim. It can be exercised directly against the insurer. In this case, the defendant can, regardless of the actual fault or the privacy of the owner, benefit from the limitations of liability specified in article V, ... This can additionally benefit the defenders (except bankruptcy or liquidation of the owner) whom you would be entitled to refer to as the owner. In addition, the defendant may use the defense that the pollution damage was caused by the owner's willful trespass, but the defendant will not useany other defense that he has the right to oppose in a process initiated against him by the owner.


20. Depending on the commitment reached during the creation of the CLC, the insurer may useintentional misconductowner as a defense, not only against the insured, but even against the plaintiff. [11] Thereforeintentional misconductthe risk lies with the applicant.

21. In addition, to avoid the defense that the insurance contract has been canceled before the expiration date specified in the certificate of insurance placed on board, the CLC states that the insurance does not comply with the terms of that contract if it can be terminated, for reasons other than the expiration of the period of validity of said insurance in the certificate, before the expiration of three months from the date on which the authorities were notified of its termination, unless the certificate has been presented to that authority or a new certificate was issued within the period [12].

22. P&I clubs have adapted to the loss of some of the defenses they were able to use prior to the introduction of the CLC and have continued to take responsibility for pollution regulated by the CLC. We can assume that when they come into force, the associations will adapt to other contracts that require compulsory insurance. Proof of this is the Bunker Agreement, for which the Associations have begun to issue their certificates. It remains to be seen if the clubs will change their rules to avoid shock risks, requiring, for example, premium payment in advance for the entire validity period of the certificate to avoid a situation where liability is claimed and not paid. the cousin. . Perhaps a future contract will provide further defenses to the insurer against liability, allowing it to use certain defense policies against third-party claimants.

2009 United Nations Convention (Rotterdam Rules)

23. From the first draft, the New "United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea" (Rotterdam Rules) was intended, like the Hamburg Rules, to make it easier for the claimant to collect his credit allowing two parties to claim. This time the concept ofthe real carrierreplaced byexecutive partConcept copied from COGSA draft 99. later concept ofnavy partyadded meaning the executor to the extent that he performs or undertakes to perform any of the carrier's obligations during the period between the arrival of the goods at the ship's port of loading and their departure from the ship's port of discharge. An inland waterway carrier is a marine contractor only if it provides or undertakes to provide its services exclusively within the port area.


24. However, the contracting party is not only liable for damages caused by its own actions, but also for the actions of any other person to whom it has entrusted the execution of the work.


If that person meets the criteria of the depositary, the plaintiff can, in addition to the carrier, also claim against the depository and its subcontractor (let's call it a secondary party) and so on indefinitely.

25. At the CMI working group meeting in Madrid in November 2001, the Croatian delegation together with FIATA


proposed changes to the definition of executive party. Under the proposal, a foreign contractor would not be "...a person other than the carrier who performs or undertakes to perform any of the carrier's obligations under the contract of carriage." but a person whophysicallyperformed by [16]. This will avoid the problem of breach of contract. For example, if a stevedore entered into a cargo unloading contract with a shipowner, but did not unload perishable cargo on time because the shipowner failed to pay the advance specified in the contract or because working conditions on the ship they were not reasonably secure. and the cargo was lost, the question arises as to whether or not the stevedore can use the plaintiff's defense to the stevedore's contract. If he can't, it would be unfair. and if he can, then the plaintiff cannot invoke his right to sue the stevedore because he has a defense against the stevedore's contract that he was unaware of. Furthermore, how would the plaintiff prove the existence of the stowage contract, that is, the obligation to perform, if the stevedore did not appear? Can you ask the court to search the stevedore's or shipowner's office where the contract is located?

26. There is an additional problem. The stevedore, barge operator, hook operator and other parts of the shipping business enter into their own standard contracts and do not need to know whether or not the Rotterdam Rules apply. Cargo can be transported in short trade or transported tocharter party-Oh, and so on. The transfer of enforceable parts under the terms of the Rotterdam Rules is not a comfortable solution as they have their own contractual conditions and liability regimes.

27. On the other hand, the Rotterdam Rules are intended to provide all such parties with the protection that an airline enjoys under the Rules. Today we are faced with a liability issue that is best illustrated by two well-known cases.Adler vs. Dixon1955[17]iMidlands Silicones protiv Scruttona1962 [18]. In the first case, a passenger was injured while boarding the gangway of a cruise ship anchored in the port of Trieste when the ship suddenly pulled away from the dock in a gusty northern storm. Since his ticket contained an exculpatory clause that protected the owner, the passenger sued the captain for negligence in mooring the ship. The court held that the exculpatory clause did not expressly or implicitly protect the captain.

28.visby rules(1968) [19] extended the protection to carrier employees:

If such claim is brought against an employee or agent of Carrier (such employee or agent is not an independent contractor), such employee or agent shall be entitled to the defenses and limitations of liability to which Carrier is entitled under this Agreement. .... (Article 3, Paragraph 2)

29. tuMidlands Silicones protiv ScruttonaIn 1962 the position of independent contractor was up for grabs. A London peasant, while unloading a drum of chemicals, dropped it, the drum exploded and the contents spilled out. Because the shipment came from New York, the bill of lading called for COGSA 36, limited carrier liability at $500 per package, which was 179 pounds. The cargo owner sued the stevedore for damages of £593. The court held that the stevedore was not a party to the contract of carriage and therefore could not enjoy the protection afforded by the contract.

30. The Rotterdam Rules extend protection to independent contractors whose defenses and limitations... apply if proceedings are brought against the carrier or shipper. whether the action is based in contract, tort, or otherwise. (Article 4)

31. Of course, the Rotterdam Rules protect airline employees and executives.


32. The basic idea of ​​the Rotterdam Rules seems to be to include all parties and assignors in their liability regime. In other words, impose obligations on them, but at the same time provide them with the protection provided by the Ordinance.

33. This approach violates the principle that contractual relationships exist solely between the parties. Latin American lawyers say it this way:Agreements with third parties are neither harmful nor beneficial. Anglo-Saxon law hasPrivacy Policy:"A contract cannot confer material rights or impose obligations on those who are not parties to the contract.. "

34. Now, in the above there are some questions and answers.

Question: Why did the Rotterdam Rules introduce the concept of "Executive and Maritime Contracting Party" which complicates the contract and may be the source of many future disputes?

Answer: To increase the applicant's chances of recovery.

Question: Is there any other way to achieve this?

Answer: Yes, mandatory carrier liability insurance.

35. Nothing is perfect. If the introduction of the concepts of contractor and shipping executor violates the principle that the contract creates rights and obligations only between the contracting parties, then the introduction of compulsory insurance against shipowner's liability violates the same principle becauseprivatemakes the insurance contract entered into between the shipowner and his insurer available to third parties who acquire rights against the insurer, regardless of the insurance contract. Again, awork done in the middle, creates obligations towards a third party.

36. We are now faced with a dilemma. Which is more practical? Create contractual rights and obligations of third parties involved in the transportation process (actual carriers, road carriers, warehousemen, road carriers, carriers, etc.) or introduce mandatory liability insurance for carriers. The second option seems more practical and facilitates collection in the sense that two or more people can be sued. The logic is the same as with CLC. A person is responsible (channeling of responsibility). the liability regime is clear and, ultimately, the insurer guarantees payment of damages. It is not necessary to prove who caused the damage, conflict of jurisdiction and applicable laws, etc.

37. Professor Jakaša [21] told his students: "Study insurance law, which is the law of the future." "This prophecy is true in the maritime sector. In addition to international conventions that have already introduced compulsory liability insurance for shipowners, some states require such insurance to allow a ship to navigate in their territorial waters or economic zone. IMO has introduced liability insurance for shipowners and the EU has adopted its directive on shipowners' liability, should we expect the amended Rotterdam Rules or a future convention to cross the line?


International Federation of Transport Workers


IMO Resolution A.898 (21) no. 1999


(Article 4)... the insurance must respond only if:

1. the liability of the owner has been legally established and

2. that the owner has complied with all the coverage conditions stipulated by the insurance policy


1984, US Naval Cases, 2123-2199.


International Convention for the Unification of Certain Legal Rules Relating to Bills of Lading ("The Hague Rules"), 1924.

[6] United Nations Convention on the Carriage of Goods by Sea (Hamburg Rules) Hamburg, March 30, 1978.


Supplementary Convention to the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air by a Person Other than a Hired Carrier, Signed at Guadalajara on September 18, 1961 (Guadalajara Convention of 1961)


[1990] 2 Lloyd's Rep 191 (HL)


Steven J. Hazelwood: P&I Clubs - Law and Practice, Londres 1994, pág. 323.


Art. CVX. 7 (8)


Wu Chao: Oil Pollution by Sea: Liability and Compensation, Londres 1966 pp 70-72.


CVX, art. 7 (5)


Article 1, paragraph 7.


Art. 19. The sender is responsible for the breach of his obligations. caused by the acts and omissions of any person to whom it belongsbelievedshow.


International Federation of Freight Forwarders Associations


Report of the International Subcommittee (ISC) CMI Madrid, 12-13. in 2001.


Adler contra Dickson


the himalayas

), [1954] 2 Lloyd's Rep. 267, [1955] 1 Q.B. 158 (C.A.);


Midland Silicones Ltd protiv Scruttons Ltd [1962] AC 446 HL

[19] The Hague-Visby Rules - The Hague Rules as amended by the Brussels Protocol of 1968.


If proceedings are brought [against an employee or agent of the carrier or shipper], that person shall be entitled to the exceptions and limitations of liability available to the carrier under this Convention... (Article 19)

[21] The late and famous professor of the Faculty of Law of the University of Zagreb


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