Circular No. 1/96 - London Hull Clauses/General Average


February 13, 1996

Dear Sirs,


Circular No. 1/96


Members whose vessels are insured on Institute Time Clauses (Hulls) will no doubt be aware of the recently issued revisions dated November 1, 1995 referenced as ITC (Hulls) 1995 and the following clause (10.5.2) incorporated therein, which excludes:

"...expenses or liabilities incurred in respect of damage to the environment or the threat of such damage, or as a consequence of the escape or release of pollutant substances from the vessel, or the threat of such escape or release"

Members insuring their vessels under these clauses could be faced with a gap in coverage where expenses or liabilities of the type specified were allowed in general average but where hull underwriters did not respond for the vessel's proportion thereof by reason of this exclusion. Since this coverage is less than that afforded by the American Institute Hull Clauses (June 2, 1977) which contain no such exclusion, there would be no recoverability from the Association of the resulting shortfall. Accordingly, it is recommended that any members affected by these revisions incorporated in ITC (Hulls) 1995 arrange for buy back protection as necessary.

In this context, members may also be aware of the changes affecting general averages subject to adjustment according to York/Antwerp Rules 1994, under which any allowances in respect of environmental/pollution damages and/or expenses, etc. are limited to those costs falling within the provisions of Rule XI(d) thereof; previous versions of the York/Antwerp Rules (1950 and 1974 as amended 1990) were not so restricted in that environmental/pollution damages, etc. would be admitted in general average if the result of a general average act.


Reference Rule XI(d) York/Antwerp Rules 1994

The cost of measures undertaken to prevent or minimize damage to the environment shall be allowed in general average when incurred in any or all of the following circumstances:

(i) as part of an operation performed for the common safety which had it been undertaken by a party outside the common maritime adventure, would have entitled such party to a salvage reward;

(ii) as a condition of entry into our departure from any port or place in the circumstances prescribed in Rule X(a);

(iii) as a condition of remaining at any port or place in the circumstances prescribed in Rule XI(b), provided that when there is an actual escape or release of pollutant substances the cost of any additional measures required on that account to prevent or minimize pollution or environmental damage shall not be allowed as general average;

(iv) necessarily in connection with the discharging, storing or reloading of cargo whenever the cost of those operations is admissible as general average.

Members requiring any further explanation of the changes, or otherwise needing any further advice or assistance, should feel free to contact the managers who will be pleased to help.

Yours faithfully,

Thomas E. DiStefano
Shipowners Claims Bureau, Inc., Managers