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?

Members must pay their dues before claims are honored Signup and view all the answers

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

Limit the number of claims filed Signup and view all the answers

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

Liability for third-party claims Signup and view all the answers

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

Failure to pay advance calls Signup and view all the answers

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

Distributing cargo to minimize risk Signup and view all the answers

What does the wash damage rule cover?

Loss or damage not resulting from collision Signup and view all the answers

What type of expenses are covered under pollution liability?

Fines imposed for pollution Signup and view all the answers

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

TOVALOP and CRISTAL 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?

Discharge liability to third parties before seeking indemnity from the Club. Signup and view all the answers

What kind of ships does the pollution coverage apply to?

Tankers and dry cargo ships Signup and view all the answers

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

If the wreck removal is the responsibility of an external third party. Signup and view all the answers

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

International Convention on Civil Liability for Oil Pollution Damage 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'?

Pay any claims to injured third parties. Signup and view all the answers

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

To manage mutual funds for compensation payments Signup and view all the answers

Which of the following liabilities does the club cover?

Costs resulting from the threat of oil discharge 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?

Liability claims from third parties. Signup and view all the answers

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

That the ship proceeds at a safe speed 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?

Liabilities must be settled before indemnity requests can be made. Signup and view all the answers

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

To enable next of kin to hold a suitable funeral Signup and view all the answers

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

Following desertion or total loss of the ship 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?

Visitors and customs officers Signup and view all the answers

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

Compensation for pain, suffering, and loss of enjoyment Signup and view all the answers

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

Liability exists regardless of proof of negligence Signup and view all the answers

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

If the items are damaged while on board the ship or during transit Signup and view all the answers

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

Loss of earnings and legal fees 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?

Accidents occurring during shore excursions Signup and view all the answers

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

Oil Pollution Act of 1990 Signup and view all the answers

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

The wrecked ship must have P&I coverage. Signup and view all the answers

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

The wreck must be recent, within the last year. Signup and view all the answers

What is the purpose of liabilities arising under towage contracts?

To cover liabilities from the customary towage of an entered ship. Signup and view all the answers

What does the 1969 Convention provide for shipowners?

Certain defences against liability claims. Signup and view all the answers

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

Most maritime countries operate their own domestic legislation. Signup and view all the answers

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

Valid and enforceable local regulations. Signup and view all the answers

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

Cover for the removal of wrecks from busy shipping lanes. Signup and view all the answers

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

Liabilities incurred during normal towage operations Signup and view all the answers

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

Cover only if the costs exceed normal handling Signup and view all the answers

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

Deviations that impact the owner's rights under the contract Signup and view all the answers

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

Costs incurred over the usual expenses in dealing with that cargo Signup and view all the answers

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

Delayed arrival of the ship at a loading port Signup and view all the answers

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

If the club approves the recovery request Signup and view all the answers

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

Liabilities must stem from breach of duties or responsibilities Signup and view all the answers

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

Costs are subject to approval by the directors Signup and view all the answers

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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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.