This insurance provides cover to shipowners and charterers against third-party liabilities encountered in their commercial operations.  Responsibility for damage to cargo, for pollution, for the death, injury or illness of passengers or crew, and for damage to docks and other installations are examples of typical exposures. 

 

In the case of the American Club, this cover is provided under Class I of its Rules.  The Rules of the Club are the basic contractual terms upon which Members are insured. 

 

P&I cover runs in parallel with a ship’s hull and machinery and related covers.  It distinguishes itself from ordinary forms of marine insurance by being based on the not-for-profit principle of mutuality where members of the club are both the insurers and the insureds. 

 

As a consequence, the breadth of cover offered by traditional P&I insurance is unsurpassed in its range.  It is also characterized by the availability of discretionary cover in appropriate cases either generally or by reference to what is commonly known as the “Omnibus Clause”.  The discretion is that of the Directors of the Club who represent its Members. 

 

 

This insurance – often known as FD&D cover –  provides Members with cover for legal costs – and legal assistance – in relation to a wide range of disputes arising from the building, buying, selling, owning and operation of an entered vessel. 

 

It is provided under Class II of the Club’s Rules subject, in the ordinary way, to an overall limit of liability per claim as well as a deductible which usually entails some contribution from the Member to the cost of prosecuting or defending a relevant claim but subject, in the normal way, to an overall cap.

 

It should be noted that FD&D cover does not provide insurance against any principal sum in dispute – e.g. unpaid hire or deadfreight under a charterparty – but it does cover the cost of employing lawyers and other experts in the prosecution or the defense of such matters.

 

This is provided under Class III of the Club’s Rules. 

 

It is essentially a consolidation of both P&I and FD&D cover as available for owner-Members, but only to the extent that such cover is embraced by a charterer’s interest in respect of entered vessels. 

 

Cover also extends to a charterer’s liability for the loss of, or damage to, the hull of an entered vessel (typically referred to as DTH cover).  This can arise in a variety of circumstances such as ordering a vessel to an unsafe berth, or loading cargo which has an unexpectedly corrosive effect on the ship’s fabric etc.

 

Typically offered on a fixed-premium basis, this cover is almost always subject to a prescribed limit of liability.