P&I Clubs and What They Cover
Scope of CoverageShipowners insure against loss of or damage to their ships with hull underwriters. However, they look to the P&I Clubs for insurance against their liabilities to others. In other words, it covers all liabilities resulting from the operation of a vessel except physical damage to the vessel itself and losses payable under the hull policy. The risks covered by the typical P&I policy include claims for: death and personal injury; illness and maintenance and cure; burial expenses; repatriation; loss or damage to personal effects of crewmembers, stevedores, passengers and other miscellaneous persons; governmental fines of various agencies, including immigration and customs; pollution fines; damage to property such as cargo, baggage, and fixed objects, such as docks, buoys, bridges, and cables; and miscellaneous coverage, such as wreck removal, shortage claims, general average, deviation expenses, expenses arising out of mutinies and misconduct of crew and quarantine expenses.
Handling P&I ClaimThe indemnity aspect of a P&I policy is radically different from the average American liability insurance policy, under which the underwriter immediately takes over a claim and deals with it to conclusion. Under the indemnity policy, the insured deals with the claim, pays all expenses and losses until its conclusion and then files a claim for reimbursement with the insurer. In actual practice, the insurer directs the defense of the claim but may require the insured to pay all expenses up to the time of concluding the claim.
Because of this, it is recommended that the insured carefully document every payment made towards the claim. This includes saving all invoices, receipts and correspondence related to the claim; involving the Club in every expenditure made and obtaining the Club's express authority to the actions taken. If express authority cannot be obtained, having a chain of correspondence showing that the insured attempted to obtain the Club's express authority will help.
Risks Not CoveredThe risks not normally covered by P&I are damage to or loss of property owned by the insured, property damaged in a collision, breach of contract claims, loss of freight, losses covered by a hull policy and the collision clause of that policy, any liability covered by other insurance, and liability created by contract, unless specifically covered. P&I insurance is generally only for third-party claims.