Marine Insurance: P&I Clubs Overview
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Questions and Answers

What is the primary purpose of Protection and Indemnity (P&I) Clubs?

  • To finance shipping operations
  • To share the risks among a group of companies (correct)
  • To insure the hull and machinery of vessels
  • To provide loans for shipowners

What must a shipowner pay to join a P&I Club?

  • Advance call (correct)
  • Membership fee
  • Insurance premium
  • Deductible

Which of the following features is NOT associated with mutual insurance associations like P&I Clubs?

  • Roll over unused funds
  • Fixed premiums for all members (correct)
  • Membership based on collective agreements
  • Sharing of risks

What does 'Pay to be Paid' imply in the context of P&I Clubs?

<p>Members must pay their dues before claims are honored (C)</p> Signup and view all the answers

One reason P&I Clubs may impose deductibles on shipowners is to:

<p>Limit the number of claims filed (C)</p> Signup and view all the answers

Which type of coverage is specifically granted by P&I Clubs?

<p>Liability for third-party claims (A)</p> Signup and view all the answers

What can lead to the termination of P&I cover?

<p>Failure to pay advance calls (D)</p> Signup and view all the answers

What historical practice is related to the origins of Protection and Indemnity Clubs?

<p>Distributing cargo to minimize risk (A)</p> Signup and view all the answers

What does the wash damage rule cover?

<p>Loss or damage not resulting from collision (C)</p> Signup and view all the answers

What type of expenses are covered under pollution liability?

<p>Fines imposed for pollution (A)</p> Signup and view all the answers

What are the two agreements that existed prior to February 1997 regarding oil pollution liability?

<p>TOVALOP and CRISTAL (C)</p> Signup and view all the answers

What is the primary obligation of the insured under the 'pay to be paid rule' in P&I Contracts?

<p>Discharge liability to third parties before seeking indemnity from the Club. (A)</p> Signup and view all the answers

What kind of ships does the pollution coverage apply to?

<p>Tankers and dry cargo ships (C)</p> Signup and view all the answers

Under which condition does the P&I Club cover members for wreck charges?

<p>If the wreck removal is the responsibility of an external third party. (D)</p> Signup and view all the answers

Under which international convention is strict liability for oil pollution imposed on shipowners?

<p>International Convention on Civil Liability for Oil Pollution Damage (B)</p> Signup and view all the answers

What does an insured member need to do before seeking reimbursement from the Club according to the 'pay to be paid rule'?

<p>Pay any claims to injured third parties. (B)</p> Signup and view all the answers

What is the primary purpose of P&I clubs regarding oil pollution compensation?

<p>To manage mutual funds for compensation payments (D)</p> Signup and view all the answers

Which of the following liabilities does the club cover?

<p>Costs resulting from the threat of oil discharge (D)</p> Signup and view all the answers

In the context of the 'pay to be paid rule', what type of payment does the insured typically have to settle first?

<p>Liability claims from third parties. (C)</p> Signup and view all the answers

What must a shipowner ensure to avoid liabilities under the wash damage rule?

<p>That the ship proceeds at a safe speed (D)</p> Signup and view all the answers

Which aspect is typically outlined in the Rulebooks of P&I Clubs related to the 'pay to be paid' rule?

<p>Liabilities must be settled before indemnity requests can be made. (D)</p> Signup and view all the answers

What is the primary reason for repatriating deceased individuals according to standard practice?

<p>To enable next of kin to hold a suitable funeral (C)</p> Signup and view all the answers

Under what circumstances are owners or charterers obligated to repatriate seamen?

<p>Following desertion or total loss of the ship (B)</p> Signup and view all the answers

Which of the following parties does the liability cover in the event of personal injury to individuals other than seamen?

<p>Visitors and customs officers (D)</p> Signup and view all the answers

What types of damages may be covered under the liability for personal injury to passengers?

<p>Compensation for pain, suffering, and loss of enjoyment (D)</p> Signup and view all the answers

What does the term 'strict liability' refer to in the context of maritime accidents?

<p>Liability exists regardless of proof of negligence (C)</p> Signup and view all the answers

Which scenario may make the ship's employer liable for the personal effects of crew members?

<p>If the items are damaged while on board the ship or during transit (B)</p> Signup and view all the answers

What can typically be included in claims for personal injury to stevedores and other non-seamen?

<p>Loss of earnings and legal fees (B)</p> Signup and view all the answers

What kind of incidents could result in liability to passengers even if they aren’t on board the ship?

<p>Accidents occurring during shore excursions (B)</p> Signup and view all the answers

What is the primary legislation in the USA dealing with oil spills from tankers?

<p>Oil Pollution Act of 1990 (D)</p> Signup and view all the answers

What must be true for a wreck removal to be covered under the P&I provisions?

<p>The wrecked ship must have P&amp;I coverage. (C)</p> Signup and view all the answers

Which of the following is NOT a requirement for P&I cover regarding wreck removal?

<p>The wreck must be recent, within the last year. (C)</p> Signup and view all the answers

What is the purpose of liabilities arising under towage contracts?

<p>To cover liabilities from the customary towage of an entered ship. (D)</p> Signup and view all the answers

What does the 1969 Convention provide for shipowners?

<p>Certain defences against liability claims. (A)</p> Signup and view all the answers

What is true about international compensation systems for oil spills from dry cargo or passenger ships?

<p>Most maritime countries operate their own domestic legislation. (C)</p> Signup and view all the answers

In relation to wreck removals, what must the wrecking vessel be adhering to?

<p>Valid and enforceable local regulations. (A)</p> Signup and view all the answers

For which of the following activities is P&I cover provided?

<p>Cover for the removal of wrecks from busy shipping lanes. (A)</p> Signup and view all the answers

What type of liabilities are generally covered under customary towage operations?

<p>Liabilities incurred during normal towage operations (D)</p> Signup and view all the answers

What kind of cover is provided to the owner for additional costs incurred in handling damaged cargo?

<p>Cover only if the costs exceed normal handling (A)</p> Signup and view all the answers

Liabilities arising from which of the following are excluded from coverage by the club?

<p>Deviations that impact the owner's rights under the contract (B)</p> Signup and view all the answers

What are additional costs related to cargo discharging considered, according to the guidelines?

<p>Costs incurred over the usual expenses in dealing with that cargo (A)</p> Signup and view all the answers

Which of the following situations would NOT be covered by the club?

<p>Delayed arrival of the ship at a loading port (D)</p> Signup and view all the answers

Under what condition can a ship owner recover additional costs incurred while restowing sound cargo?

<p>If the club approves the recovery request (A)</p> Signup and view all the answers

When does liability arising from cargo owner's claims due to delays get covered?

<p>Liabilities must stem from breach of duties or responsibilities (B)</p> Signup and view all the answers

What happens when additional costs are incurred but the club cannot recover these from another party?

<p>Costs are subject to approval by the directors (D)</p> Signup and view all the answers

Flashcards

Protection and Indemnity (P&I) Club

A group of shipping companies that pool their resources to share the risk of third-party liabilities.

Advance Call

The initial payment made by a member of a P&I Club upon joining, which contributes to the club's overall funds.

Mutual Insurance

The practice of sharing the risk of losses among a group of individuals or companies. In the context of P&I Clubs, members contribute to a common fund and share the cost of claims.

Third-Party Coverage

The coverage provided by P&I Clubs focuses primarily on protecting shipowners against financial liabilities arising from third-party claims, such as personal injury, pollution, and cargo damage.

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Deductible

A fixed amount that a shipowner has to pay out of their own pocket before the P&I Club will cover the rest of the loss.

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Pay to Be Paid Rule

A principle where P&I Clubs will pay claims to third parties only after the shipowner has received payment from the party responsible for the loss.

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Averaging

This refers to the practice of vessels sharing cargo to reduce the risk of total loss. This concept is rooted in ancient Chinese shipping practices.

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Hull & Machinery Insurance

A type of insurance policy that covers damages to a ship and its machinery.

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Wash Damage

Damage to another ship caused by the entering ship's movement, but not by a direct collision. For example, damage caused by the entering ship's wake.

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Duty of Care (Speed)

The legal obligation placed on a shipowner to ensure their vessel operates at a safe speed to avoid damaging other ships.

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Pollution Liability

Insurance cover for liabilities, losses, and expenses resulting from oil or hazardous substances escaping from the insured ship.

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TOVALOP

A voluntary agreement among tanker owners to provide financial compensation for oil pollution incidents.

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CRISTAL

A voluntary agreement among cargo owners to provide financial compensation for oil pollution incidents.

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International Convention on Civil Liability for Oil Pollution Damage (CLC)

An international convention that imposes liability for oil pollution on the owners of ships carrying oil as bulk cargo.

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Threat of Discharge

The P&I Club's coverage includes costs of responding to a threat of pollution, such as taking defensive actions to minimize environmental damage.

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Fines for Pollution

Penalties imposed on shipowners due to pollution incidents are covered by the P&I Club.

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Repatriation of Seamen

The legal obligation of a ship owner or charterer to return a seaman to their home country following desertion, a total loss, or a constructive total loss of the ship. Includes travel costs, accommodation, and related expenses.

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Personal Injury, Illness, or Loss of Life to Passengers

This section covers personal injury, illness, and death of passengers on board a ship, including those on shore excursions. Damages may include medical expenses, compensation for pain and suffering, loss of earnings, repatriation, refunds, and loss of enjoyment.

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Personal Injury or Loss of Life to Stevedores and Others

Covers legal liability for injuries or deaths to stevedores, visitors, surveyors, customs officers, immigration officers, and ship agents. This includes loss of earnings, pain and suffering compensation, medical expenses, and legal fees. It also applies to injuries even when individuals are not on the ship, like line handlers.

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Loss of Personal Effects of Crew

The responsibility of a seaman's employer to compensate for lost or damaged personal effects, not just while on board the ship, but also during travel to and from the ship. This includes clothing, belongings, and other personal items belonging to seamen.

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Strict Liability

A legal situation where someone is considered responsible for damages or harm, even without proof of negligence or fault.

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Liability to Cargo Handlers

The responsibility of the ship owner or charterer for injuries or death to cargo handlers, even if they are not employed by the ship. This includes injuries that occur in specific situations where the ship's owner is automatically liable.

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Repatriation Expenses

Expenses related to bringing a deceased individual back to their home country for burial or other final arrangements.

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Omnibus Rule

A rule in P&I Clubs where the member must be responsible for paying any damages caused by their ship before seeking indemnity from the club.

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Insurance Excess

A fixed amount of money that the insured (shipowner) is required to pay before the P&I Club starts covering claims.

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P&I Club Coverage for Wreck Charges

The P&I Club covers wreck removal costs only if someone else is not liable for it.

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Protection & Indemnity (P&I) Club

A group of shipping companies that share the risk of third-party liabilities by pooling their resources.

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Removal of Wreck Charges

The section in a P&I Club's policy that covers the costs of removing a wrecked ship, including raising, destroying, lighting or marking it.

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Jurisdiction and Port Authority Request

The P&I Club will cover the costs of removing a wrecked entered ship only if it is within a port's jurisdiction and the port authority has requested the removal.

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Third Party Liability

The P&I Club will only cover the costs of removing a wrecked entered ship if the wreck is not the responsibility of a third party.

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Towage for Ordinary Trading

The P&I Club covers costs and liabilities related to towing an entered ship for entering or leaving port, or maneuvering within the port during normal trading.

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Towage for Habitually Towed Ships

The P&I Club covers towage for entered ships that are typically towed, like barges, during their normal activities.

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P&I Club's Coverage for Wreck Removal

The P&I Club provides cover for costs and liabilities relating to the raising, removal, destruction, marking, or lighting of the wreck of an entered ship.

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Liabilities Arising Under Towage Contracts

This policy section protects shipowners from liability under a towage contract for their entered ship.

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Entered Ship Requirement

The cover under this section only applies when the ship is covered by the P&I Club.

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Cargo Liability Cover

Covers liabilities related to cargo on board a ship, including losses, shortages, damage, and delays.

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Additional Costs for Damaged Cargo

The owner is responsible for the costs incurred in disposing of damaged cargo, but only if they can't recover these costs from anyone else.

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Restoring Sound Cargo

Costs incurred in rearranging sound cargo to make space for damaged cargo are not recoverable from the club, unless approved by the directors.

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Deviation and Cargo Claims

The club usually doesn't cover claims from cargo owners who experienced delays due to a deviation from the usual route, unless approved by the directors.

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Deviation and Defenses

The club does not cover claims from cargo owners if the deviation prevents the owner from using defenses or limitations granted by the contract of carriage.

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Towage Liability Cover

This cover is designed to protect the owner against liabilities arising from common towage operations within a specific port or location.

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Deviation and Cargo Claims

Claims arising from cargo owners due to a deviation are typically not covered by the club, except under specific circumstances.

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Study Notes

Marine Insurance - Protection and Indemnity Clubs

  • Protection and Indemnity (P&I) clubs are mutual insurance associations
  • P&I clubs cover shipowner liabilities not otherwise insured
  • Their origins date back to early Chinese river merchants
  • P&I clubs help spread risk among members
  • Mutual insurance associations have three key features:
    • Members share common interests
    • Owned by members
    • Insurance at cost (almost)
  • P&I clubs arose from the need to cover losses in hull clubs
  • They cover various worldwide trades
  • P&I clubs collect "advance calls" from members
  • "Advance calls" are based on risk, loss record, and ship tonnage
  • Cover terminated automatically if:
    • Ship is a total loss
    • Member sells ship's interest
    • Ship declared missing
    • Member declares bankruptcy/liquidation
  • Termination requires 30-day notice if not automatic
  • P&I clubs cover liability for:
    • Loss of life or personal injury to crew members (including spouses and children)
    • Loss of life or injury to passengers
    • Loss or damage to personal effects
    • Ship expenses during ship diversions (e.g., for sick or injured persons)
    • Stowaways or refugees
    • Life salvage
    • Collision liability (to other ships or floating objects)
    • Damage to ships without physical contact (wash damage)
    • Pollution from oil or other substances
    • Removal of wrecks
  • P&I clubs can impose deductibles on shipowners to reduce claims and paperwork.
  • The size of deductibles vary.

Third-Party Claims and "Pay to be Paid" Rule

  • The "Pay to be Paid" rule requires full payment to an injured third party before P&I club indemnifies the shipowner
  • It protects third parties if the shipowner becomes insolvent
  • The Third Parties (Rights against Insurers) Act transfers rights to the third party
  • The rule can potentially defeat the third-party claim

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Marine Insurance PDF - MA0120 - Protection and Indemnity Clubs

Description

Explore the essential aspects of Protection and Indemnity (P&I) clubs in marine insurance. This quiz covers their origins, key features, liability coverage, and the method of risk-sharing among members. Test your knowledge on how P&I clubs protect shipowners and the unique operational practices they use.

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