Marine Insurance Study Guide Part 5

Resolve collision accidents based on cross-liability ◼ Step 1: Determine the arising liability of ship owners ◼ Step 2: Determine the compensation amount of hull insurance for ship owners ◼ Step 3: Determine the amount of hull insurance to recover from ship owners ◼ Step 4: Determine the actual compensation amount of hull insurance for ship owners ◼ Step 5: Determine the damage the shipowners will bear Exercise: Damage Ship A (40%) Ship B (60%) H&M 10,000 USD 20,000 USD Cargo 4,000 USD 8,000 USD Calculate compensation according to the principle * Single liability: - SA compensate SB: 40%*20000=8000 compensate CB: 40%*8000=3200 → total liability of SA: 11200 - SB compensate SA: 60%*10000=6000 compensate CA: 60%*4000=2400 → total liability of SB: 8400 ⇒ SA compensate SB: 11200-8400=2800, including: 2000 for SB 800 for CB ISA = 10000 + 3/4*2800=12100 ISB = 20000-2000=18000 ICA = 4000 ICB = 8000-800=7200 * Cross liability: - SA bare: 10000-60%*10000=4000 compensate SB: 40%*20000=8000 compensate CB: 40%*8000=3200 - SB bare 20000-40%*20000=12000 compensate SA: 60%*10000=6000 compensate CA: 60%*4000=2400 → ISA = 4000+ 3/4*(8000+3200)=12400 SA tự chịu 1/4*(8000+3200)=2800 ISB = 12000+ 3/4*(6000+2400)=18300 SB tự chịu 1/4*(6000+2400)=2100 ICA= 40%*4000=1600 hoặc là trả 4000 và đi đòi 60% từ SB/ISB ICB= 60%*8000=4800 hoặc là trả 8000 và đi đòi 40% từ SA/ISA ⇒ insurance company thích single liability hơn (final) Qhe giữa chủ hàng và cty bảo hiểm trong điều khoản both to claim collision? Qhe giữa chủ tàu và cty bảo hiểm? Exercise: Two ships A and B collided during the insurance period, faults and damages were as follows: Faults and damages Ship A Ship B Fault 40% 60% Loss of ships USD 300,000 USD 200,000 Loss of people USD 15,000 Determine the amount of compensation of each insurance company and the uncompensated loss of each shipowner knowing that the insurance contracts are equal insurance. Cross liability: - SA bare: 300000-60%*300000=120000 compensate SB: 40%*200000=80000 compensate for people SB: 40%*15000=6000 - SB bare 200000-40%*200000=120000 compensate SA: 60%*300000=180000 compensate for people SB: 60%*15000=9000 → ISA = 120000+ 3/4*(80000)=180000 SA tự chịu 1/4*(80000)+40%*15000=26000 (?) ISB = 120000+ 3/4*(180000)=255000 SB tự chịu 1/4*(180000)+60%*15000=54000 (?) VI. P&I INSURANCE Hull insurance chỉ trả damage of vessel + 3/4 collision liability → P&I trả 1/4 còn lại và phần vượt quá 3/4 damage (final) câu hỏi phụ: hull insurance và P&I insurance có compulsory kh? chỉ có P&I compulsory in int’l maritime operation nhma thường P&I club yêu cầu có hull insurance mới đc join → lý thuyết thì hull là optional nhma thực tế là phải mua P&I CLUB: PROTECTION AND INDEMNITY CLUB Protection and indemnity insurance, more commonly known as P&I insurance, is a form of mutual maritime insurance provided by a P&I club. Whereas a marine insurance company provides "hull and machinery" cover for shipowners, and cargo cover for cargo owners, a P&I club provides cover for open-ended risks that traditional insurers are reluctant to insure. Typical P&I cover includes: a carrier's third-party risks for damage caused to cargo during carriage;[2] war risks;[3] and risks of environmental damage such as oil spills and pollution. In the UK, both traditional underwriters and P&I clubs are subject to the Marine Insurance Act 1906. A P&I club is a mutual insurance association that provides risk pooling, information and representation for its members. Unlike a marine insurance company, which reports to its shareholders, a P&I club reports only to its members. Originally, P&I club members were typically shipowners, ship operators or demise charterers, but more recently freight forwarders and warehouse operators have been able to join. → all members are shipowners, ship operators, charterers, members vừa là insurer vừa là insured Whereas the assured pays a premium to an underwriter for cover which lasts for a particular time (say, a year, or a voyage), a P&I club member instead pays a "call". This is a sum of money that is put into the club's pool, a kind of "kitty". If, at the end of the year, there are still funds in the pool, each member will pay a reduced call the following year; but if the club has made a major payout (say, after an oil spillage) club members will immediately have to pay a further call to replenish the pool. The first protection association, the Shipowners' Mutual Protection Society, was formed in 1855. It was intended to compensate for loss of life, injuries and collisions that were excluded from marine insurance policies beyond the monetary limit of these policies. Similar associations were later formed within the United Kingdom, in Scandinavia, Japan and the United States. In 1874, the risk of liability for cargo carried by the insured ship was added to the insurance cover provided by a P&I club. Cargo value had risen and cargo underwriters, encouraged by UK courts, filed more claims to recover their losses from shipowners. These claims were not covered by the current marine insurance class. After 1874, many clubs added a marine indemnity class to respond to these new claims. This class was later merged with the marine insurance class reserved for the original protection risks and the distinction between the two classes virtually disappeared. case container chở ô tô điện rơi xuống biển, bảo hiểm từ chối vì lý do bad weather (storm) → P&I sẽ cover vì lý do unseaworthiness of the vessel + tiền bồi thường environment vì trong xe điện rơi xuống biển có pin ở trỏng (final) compare an insurance company and P&I club? P&I insurance company objective based on mutual benefit, not for profit profit-making business member member is both insured and insurer different insured vs insurer (shipowner is the insured, insurer is insurance company) premium undetermined premium (năm trc nhiều accident thì năm sau đóng nhiều hơn) determined premium (cargo insurance có các loại ABC với mức premium định trước) coverage no limit on compensation (cần nhiu đền nhiu tùy quỹ có tiền kh) limit on compensation (3/4 in collision, >3/4 insured amount) assistance In addition to indemnity, the club also serves to assist shipowners (in terms of training and legal aspects) no. (Ngân + Liên) P&I INSURANCE • Protection and Indemnity insurance, or “P&I” as it is usually called, is a shipowner’s insurance cover for legal liabilities to third parties • “Third parties” are any person, apart from the shipowner himself, who may have a legal or contractual claim against the ship • P&I insurance is usually arranged by entering the ship in a mutual insurance association, usually referred to as a “club”. Shipowners are members of such clubs. • Legal liability is decided in accordance with the laws of the country where an accident takes place • The P&I insurance cover for contractual liability is agreed at the time the owner requests insurance cover from the club and is usually in accordance with the owner’s responsibility under crew contracts or special terms relating to the trading pattern of the vessel. → Shipowner phải tự chịu 1/4 collision liability còn lại, 1/4 đó cũng có thể rất cao → shipowner join club to share risks with each other, put money in fund, sau đó lấy tiền trong đó ra bồi thường MEANING OF TERM “P&I” • Protection: the insurance also covers assistance when a ship is involved in an accident and the shipowner and his Master need help → hỗ trợ giải quyết vde khi bị arrested trong lúc đi qua khu vực nào đó, hỗ trợ check tàu ma • Indemnity (Compensation): - P&I insurance is an indemnity type of insurance, the shipowner (or member of the club) must demonstrate his loss before the club will pay out (or indemnify him) under the terms of the insurance policy - The club never assumes the owner’s liability, therefore technically the owner (or member) is always responsible for payments - The club takes over the business of handling claims and ensuring that payments are correctly made → help cal + give advice ⇒ very very popular nowadays History of P&I Insurance ● Protection & Indemnity Insurance (P&I Insurance) developed from the old Hull Clubs in England in the eighteenth century. ● In order to reduce the hull and machinery insurance premium, one century later, with the increase of liabilities arising from shipping activities which were unfortunately excluded by the hull clubs, it was the result of an urgent need for shipowners to seek some new mechanism to protect their potential liabilities in their business activities → trc đó lloyd độc quyền kinh doanh bảo hiểm (đặc biệt H&M), insurance premium quá cao ● ⇒ P&I club came into the world in order to deal with those things that are excluded from Hull insurance: i.e. third-party liabilities and the rest part of collision liabilities ● ⇒ P&I Club has become one kind of mutual insurance with its legal capacity ● ⇒ modern P&I Insurance not only covers the part of collision liabilities that had once been excluded by the hull insurers but also includes liabilities relating to cargo claims, liabilities relating to personal injury, oil pollution liabilities, as well as some costs and expenses arising from the relevant casualties P&I club - mutual benefit of stakeholders, not for profit P&I departments - có các phòng ban đặc biệt FD&D, Underwriting 3 principles of P&I insurance - ngtac tương hỗ - mutuality - ngtac gia nhập hội - joining the club - ngtac hết hạn hiệu lực MUTUALITY PRINCIPLE OF P&I INSURANCE • In respect of the organization of insurance –Members of P&I Clubs have a dual role as both assured and insurers –P&I Insurance is not profit-making, all the money raised is from the members and will be used for the members as well → nếu dự tiền thì làm quỹ dự phòng cho năm sau –The Club helps members train staff and provide information –When a member suffers a loss, the association compensates and then distributes it to members based on the number of GRT participations of each member, the type of ship, the operating area of the membership, and the type of risk → Nếu hãng tàu có nhiều tàu hơn, nhiều GRT hơn thì trả nhiều tiền hơn (final) list đủ 4 ý: vừa là insured lẫn insurer, kh vì lợi nhuận tiền từ mem+dùng cho mem, giúp mem có training + advice, có tổn thất thì đc hội trả tiền những cái kh đc cover H&M THE PRINCIPLES OF JOINING CLUB • It is the members themselves to share the losses –The operational principle of P&I Clubs is to balance all the calls received from the members and the liabilities the members incur in each policy year → phải làm đơn gia nhập hội, trong đơn phải nói là đã mua H&M insurance, phải có H&M ins mới đc gia nhập hội (hội chỉ trả trong 1/4) –P&I Club would not operate on borrowing, the payment by the members is very important to P&I Clubs → kh kinh doanh tín dụng, kh cho vay, mem kh mượn tiền của hội –the clubs also take strict measures against the member: the club will refuse to provide a guarantee, or decline the settlement of the claim, even cancel the insurance contracts in the case that the member fails to pay his member fee on time → phải trả fee đúng và đủ The fund of the club –The club fund plays a very important role in the operation of P&I Insurance, and it is usually collected by levying calls from the members –The “calls” are used in P&I Insurance instead of the “premiums”- an agreement that each member should bear his aliquot share of the losses of the year covered by the policy EVALUATING THE RISK - calculate premium • The tonnage of the ship in GT (premiums are expressed in USD per GT) • Year of build • Number of crew members • Type of vessel (tanker, dry bulk, reefer, heavy-lift, container, passenger, ro-ro etc) • Type of cargoes to be carried (if a tanker is clean or dirty) • Areas of trading • Liner trade or tramp • Classification society • Management expertise • Compliance with national and international legal requirements • How many ships in the company • Previous P&I history PRINCIPLE OF EXPIRATION DATE ● Member dies, goes bankrupt, loses ownership of the company, loses business capacity ● The ship is sold or goes missing ● After 30 days from the date the member requests to leave the association ● After 7 days from the date of the declaration of contract cancellation due to the member's fault Coverage of P&I Insurance ● Liability in collision accident: insures for the rest part of collision liabilities that ● ● ● ● ● ● excluded from Hull insurance → rest part of collision liability: 1/4 còn lại (1/4 of collision liability), the liability portion is greater than ¾ of the insurance amount of insured vessel Liability for damage to cargo ○ Unusual loading and unloading costs - chi phí xếp dỡ bất thường (khi đến cảng lánh nạn, lấy hàng ra để sửa tàu,..) ○ The general loss portion is allocated to shippers but member shipowners cannot claim it - tổn thất hàng hóa but kh đòi đc ○ Costs incurred related to the goods - vd repackaging,.. Death and personal injury - loss of people ○ Any person injured on your ship – crew, stevedores, pilots or passengers, for example may allege that your ship was unsafe. The injured person could decide to sue the ship and her owners and demand huge sums of money as compensation ○ It is necessary for a Master and his senior officers to have a good idea of what his P&I club’s rules state on the insurance cover for personal injury, illness and loss of life. Repatriation of sick or injured crew and hospital expenses ○ P&I insurance also covers a shipowner’s liability to pay for the costs of repatriating crew members who become sick or are injured on board. The insurance also covers the crew’s hospital bills and costs of sending replacement personnel to the ship if necessary → chi phí mai táng, thuốc men Loss of crew members’ personal effects ○ P&I insurance also covers the owner’s liability for loss of crew belongings in cases of shipwreck or fire on board. ○ The cover only applies to items that are deemed to be reasonable for any crew member to have with him on board. ○ A crew member traveling with unusually expensive items, such as laptop computers, gold watches etc. should make sure that he has such items separately insured. Stowaways, refugees and persons saved at sea Pollution ○ Oil from your ship which pollutes a harbour, dock or waterway will have to be cleaned up. Clean-up costs will be charged to the ship and fines may be imposed on the ship, the Master, and the Chief Engineer. Your ship could be arrested, and the owners required to establish some form of security acceptable to the port authorities. → cần phải lấy mẫu, inspect, thu dầu → phí pollution này rất đắt ● Wreck removal and obstruction ○ The standard insurance shall cover liability and costs arising out of the raising, removal, destruction or marking of the wreck of the entered vessel, her equipment, bunkers or cargo lost as a result of a casualty, in so far as the raising and other operations are compulsory by law, or necessary to avoid or remove a hazard or obstruction to navigation, or the costs are legally recoverable from the member → vớt xác, di chuyển xác tàu và vật thể lquan → cũng rất đắt ● General average contributions – cargo ○ The standard insurance shall cover the member’s loss in respect of general average expenditure and special charges which should be paid by the cargo interest or some other party to the maritime adventure but which are not legally recoverable solely by reason of a breach of the contract of carriage → chỉ trong trg hợp kh đòi đc các bên cho GA ● Fines ○ Since fines are imposed for breaches of criminal law, they are generally not covered by insurance. However, P&I clubs do indemnify members for fines imposed in a few very specific cases. ○ P&I insurance normally provides cover for fines imposed for ■ breach of immigration laws ■ inaccuracies in cargo documentation ■ accidental pollution ■ smuggling or infringement of customs laws ○ The club only provides cover for fines imposed on the member, not the crew. However, the club does have a discretion to cover members if they pay a fine imposed on the master or crew because they are legally obliged to do so, or because the club accepts that it was reasonable to do so