Carriage of Goods by Sea Act & P&I Club

Carriage of Goods by Sea Act 1924

• The Carriage of Goods by Sea Act 1924, which was based on the Hague Rules 1924, aimed to standardize contractual terms in bills of lading and provide a minimum standard of contractual obligations for carriers.
• It intended to bring about uniformity in contractual terms and ensure a consistent standard of protection for cargo interests from exclusion clauses.

P&I Club Development

• The judgment in Merchant Marine Insurance Co Ltd v North of England P&I Association (1926) established that a floating crane on a pontoon was not considered a 'ship or vessel,' meaning damage to it by a ship would be covered by the P&I Club, not hull underwrites under the Running Down Clause.

Towage and P&I Cover

• The case of Furness, Withy & Co v Duder (1936) determined that liability for damage during towage (where the insured ship collided with an attendant tug, and the contract made the tow legally responsible for all collisions, not due to the insured vessel's negligence) was not covered by the Running Down Clause.
• This meant such claims were also covered by the P&I Club.

### P&I Risks Insured

• Since WWII, P&I Clubs have expanded their coverage to include:
  • Liability to passengers and crew
  • Liability for cargo
  • Liability for oil pollution
  • Wreck removal
  • Limitation of liability for general risks

Correspondents and their Role

• Correspondent networks are crucial for P&I Clubs.
• Clubs heavily rely on correspondents in various locations to provide high-quality services.
• The International Group monitors correspondent performance, replacing under-performing correspondents to ensure the quality of service.
• Correspondents are responsible for ensuring that surveyors, consultants, and lawyers they engage are also of the highest caliber.

Fixed Premium Providers

• Fixed premium providers, often subsidiaries of large international insurers, have reduced the need for traditional P&I work for correspondents.
• Some Group Clubs have established their own fixed premium facilities to cater to specific owner and vessel types.
• Non-Group insurers have entered the P&I market, but the long-tail nature of P&I risks has made profits unpredictable and inconsistent.

P&I Club Rules and Structure

• P&I Club rules, like insurance policy terms, are subject to English law, specifically the Marine Insurance Act 1906 and the Insurance Act 2015, which codify English marine insurance law.
• The rules must cover membership, cessation of membership, club financing, investment management, the respective powers of directors and managers, and dispute resolution.

Key Principles of Coverage and Conditions

• The philosophy of P&I Clubs is to favor the member when it comes to coverage.
• In order for a Member to receive coverage, the losses, damage, liability, or expenses incurred must occur during the period of the ship's entry into the Club.
• It must arise in respect of the Member's interest in the entered ship.
• The loss must be connected with the operation of the ship by or on behalf of the owner.

Interpreting the Conditions

• The concept of when damage occurs, especially cargo damage, can be subject to interpretation. Most Clubs use the discharge date of the cargo.
• The phrase "in respect of a Member's interest in the entered ship" encompasses both the owner and a charterer.
• Establishing the meaning of "arising in connection with the operation of the ship" can be challenging.
• Examples of difficult cases include:
  • Damage to cargo during inland transport.
  • A crew member injured in a fight ashore.
  • An accident to a crew member en route to joining a ship in a foreign port
  • Injury to a passenger on a shore excursion.

The Insurance Act 2015

• The Insurance Act 2015 update English insurance law, applying to the eight International Group P&I Clubs with rules subject to English law.
• It repealed sections of the MIA related to the disclosure by the insured/broker and pre-contract representations.
• It introduced the “duty of fair presentation,” requiring the insured or broker to disclose material circumstances or provide adequate information to the insurer.
• The Act retains the MIA definition of “material”.

Remedies for Breach of Duty

• Insurers in sophisticated non-consumer industries like marine insurance can opt out of the Insurance Act's consumer protective provisions.
• The eight P&I Clubs opted out of the provisions relating to remedies for breach of the duty to make a fair presentation.
• As a result, these clubs will continue to use avoidance as a remedy for breaches of the duty to make fair representation, meaning both parties are returned to the position they were in before the contract was made.
• This involves premium repayment and reimbursement of claims, which can be challenging in practice.
• Insurers may affirm the contract, either expressly or through their conduct.

Explore the key concepts and landmark cases related to the Carriage of Goods by Sea Act 1924 and P&I Club development. Understand how these legal frameworks influence the shipping industry and the implications for contractual obligations. Test your knowledge on important rulings and their impact on marine liabilities.