P&I Insurance is third party liability insurance for the ship owners, operators or charterers. The carriage of cargos from load port to the destined port involves a high risk to the ship owner, charterer and the cargo owner in the form of cargo damages due to the carriage, war risks, and risk of environmental damage such as oil spills and pollution.
There are various maritime insurance companies and P&I clubs to cover such risks if any damage occurs to the parties during the carriage. The P&I insurance is a form of mutual maritime insurance provided by a P&I Clubs.
In early days, to cover the loss during the carriage of goods, the ship owners and charterer would seek underwriters to insure their ships and cargo owners would insure their cargoes. But as the time passed by, gradually the ship owners felt the need of third party indemnity as they might themselves be at fault and that need led to the birth of P&I clubs.
As the P&I clubs started becoming prominent in the late 19th century, the risk of liability for cargo carried by the inured hip was added to the insurance cover provided by the P&I clubs. The P&I clubs started catering to the loop holes that were present in the marine insurance, which proved to be highly beneficial to the marine industry at large. It was after the famous Torrey Canyon grounding in 1967, covering the liabilities, costs and expenses of oil spills became an increasingly important aspect of P&I insurance.
Marine insurance offers insurance on limited risks unlike the P&I club, the marine insurance insures hull and machinery for ship owners and cargos to the cargo owner. The extended edge of P&I club is that they cover third party risks like a carrier’s liability to a cargo owner for damage to cargo, a ship owner’s liability after a collision, environment pollution and P&I war risk insurance, or legal liability due to acts of war affecting the ship.
Marine insurance are usually profit organization as they charge premiums to the customers to fully cover the ships and the cargos but in case of P&I Clubs, it runs as non-profit as they arefinanced by “calls”. The club members contribute to the club’s common risk pool according to the Pooling agreement entered between the members. In case the risk pool cannot cover the claim then the members are asked to pay further call and if the risk pool has excess cover then the members are asked for lower call.
The ship owners with acceptable reputation are eligible to join the P&I Club and the member who incurs reckless or avoidable loss to the club is asked to leave.
The shipper or the cargo owner is covered by a marine insurer and the carrier or ship owner are covered by the P&I club. If the cargo is lost or damaged, the cargo-owner needs to first make a claim against the ship owner. Moreover, the shipowner can avoid the liability if there exists prima facie no error on the part of the carrier or if the Hague-Visby rules grant exemption from liability. In such scenario where the carrier or ship owner is not under any obligation, the cargo owner can approach the marine insurance company to realize its claim. Statistically, 90 % of the world maritime tonnage is covered by the mutual P&I Clubs.
Some of the prominent P&I clubs worldwide are:
www.grandmasters.in | 8 Years & Counting
www.rcls.in | 8 Years & Counting
www.itlegalsummit.com | 8 Years & Counting
www.bfls.in | 8 Years & Counting
www.maels.in | 8 Years & Counting
www.plcs.co.in | 8 Years & Counting
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