Nautical Institute P&I Claims

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1 Nautical Institute P&I Claims

2 P&I Claims Philosophy of Lodestar/RSA is to provide fixed premium P&I and mutual service levels this means an Assured should expect the same level of coverage and support that he would get from his IG Club from his fixed provider - and that is what we try to provide. Presenting Claims the Claims adjuster/handler/executive etc. will be advised of claims arising from owners, brokers, masters, correspondents and also from claimants either via lawyers or recovery agents. First establish the vessel is covered (make sure you have the right vessel if the advice comes from a third party)

3 Establish on what basis the vessel is covered i.e. 1/4 th RDC, 4/4ths or none at all, ex crew, ex cargo etc. Try and establish whether you have a potential P&I exposure and determine the best response appoint a surveyor, medical expert, lawyer, fire expert, pollution control etc. Sometimes we appoint a surveyor to attend when there is an allegation of wet/mouldy cargo to find that in fact there are maybe a couple of oil drums full of damage certainly not enough to exceed a deductible and of course the surveyor may well have travelled to the job - so even if it only takes an hour to establish it is minor incident there will be a charge.

4 Claim Types P&I covers: crew claims: injuries, illness, death and disability, personal effects, loss of employment following a casualty Passenger and third party claims (people) Diversion expenses to land sick or injured crew or landing stowaways or persons rescued at sea Stowaways and persons rescued at sea Life salvage Quarantine Pollution Cargo Unrecoverable General Average Collisions Non Contact Damage to other ships (infringement of rights) Wreck removal Loss or Damage to property - Fixed and Floating Objects Special Compensation to Salvors Scopic Towage of the insured ship Towage by the insured ship Fines Sue and Labour

5 Collisions Collision claims are hopefully not too frequent but are usually interesting in as much as the reports seem to be

6 Surveyors and lawyers get appointed by both sides but you generally only get to see your ship s version of the events unless the matter actually gets to the discovery stage in legal proceedings. This happens very rarely as the Collision Regulations have been tried and tested over the years in the courts and the lawyers can usually agree to a division of liability that is acceptable to both sides. If this does not happen costs can be very expensive to take the matter to court so usually a compromise is agreed. As before P&I Clubs can be covering ¼ of the liability or 4/4ths generally regardless of the percentage P&I will lead the claim and H&M will follow and contribute to costs. Security can be an issue when the coverage is split. Historically P&I would provide 100% security and obtain counter security from H&M but these days that is not so easy due to some issues on wordings that can leave the 100% security issuer holding the baby if one of the H&M underwriters goes out of business for instance. To overcome this P&I will provide 25% and H&M their own 75%.

7 Salvage & Wreck Removal P&I insurance covers the liability for an owner to remove the vessel if it is determined she has become a wreck and a wreck removal order is issued by the state whose waters the vessel is in including exclusive economic zones which can be a long way offshore. P&I Clubs issue letters to Flag states guaranteeing that the P&I insurers will pay for wreck removal directly as a result of the Nairobi International Convention on the Removal of Wrecks 2007 which came into force in certain signatory states as of April However there is the right to limit liability at 1976 LLMC rates which can be quite small when it comes to wreck removal. As yet we do not believe any P&I facility has been required under their certificates to carry out a wreck removal so we will see how this progresses.

8 Salvors invariably predict blue skies around the corner with a bit more effort (and money) will see the vessel safely re-floated and services terminated. P&I Claims handlers appreciate it is quite difficult to predict how long these jobs will take and as such with hindsight we are sure some jobs should have been stopped well before they were. The trouble of course when you do stop a salvage job is that the contractors stop and remove all their equipment which maybe in a weeks time the same contractor will remobilise - at a cost of course. If P&I do step in to remove wreck all property rights must be relinquished by H&M (in writing) we have known of cases where P&I have stepped in and re-floated a vessel and then H&M claim they are entitled to any value it may still have to offset against the CTL they have paid out. Normally P&I will recover any proceeds of sale of the wreck to offset against the costs incurred.

9 When there is a casualty it is not known whether there is enough value in it to make salvage a viable option. This is determined by salved values against insured/market value before the casualty. Owners appoint salvors often on LOF terms and shortly thereafter salvors invoke SCOPIC meaning P&I provides them with security in case the Art 13 award does not cover all the costs they incur. For smaller older tonnage which has comparatively low values a decision as to whether salvage should continue or whether P&I should terminate the SCOPIC agreement and seek wreck removal quotes is always very hard to make.

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12 Cargo s Proportion of GA When GA is declared, in theory all parties to the adventure (doesn t it sound old fashioned!) should contribute to completing the voyage on a pro rata basis. GA security is collected from the Cargo interests before they get their cargo back. A GA adjustment is then produced which shows how much each contributing party should pay. Of course the owners and their H&M underwriters have usually expended the money to fix the problem (main engine damage, fire, grounding etc.) and wish to recover a proportion of it from Cargo.

13 However sometimes the reason for the casualty in the first place is alleged to have been due to the vessel not being seaworthy at the beginning of the voyage. If this is a fact, Cargo do not have to pay their contribution because there has been a breach of the contract of carriage (exercise due diligence at the beginning of the voyage to make the ship seaworthy - Cogsa 1971Art III (1) and it becomes recoverable from Owner s P&I. As a claims handler therefore when you are advised that the vessel has suffered a casualty during a laden voyage you should make a lot of effort to establish the facts there and then, and press the Owners and average adjusters as to what level of GA expenditure is being incurred if you do not, you can be surprised when a large document lands on your desk two years later with a request to reimburse owners with a large amount of money because cargo refuse to pay!.

14 Wreck Removal

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