Extended Contractual Liability Risks
- Scope of Cover

Extended Contractual Liability Risks - Scope of Cover

What can be covered?

Waiver of right to limit liability
A vessel owner usually has a legal right to limit liability. The Club’s Rules require that where available at law, a Member must avail themselves of that right. However, some contracts require the owner to waive their right of limitation or increase their liabilities beyond the limitation limit. This would be a breach of normal P&I Rules cover and the Club is able to provide additional cover for such risks.

Contractual wreck removal
Club cover will only respond to wreck removal following a compulsory order by a competent authority. However, many offshore contracts contain a contractual requirement to remove a wreck or any debris from the wreck upon the orders of the charterers. The Club is able to provide additional cover for such contractual wreck removal.

Property damage and knock for knock clauses
Offshore contracts will usually contain a standard knock for knock clause apportioning liability between the respective parties in respect of property damage. However, where the knock for knock provisions are diluted resulting in the Member assuming greater liability then the Club’s Offshore and Renewable Energy Cover will cover those additional risks.

Personal Injury
Offshore vessels are often used by charterers to transport their own or third party personnel to and from the offshore fields. It is highly unlikely that these “passengers” will be subject to any effective visitors pass that exempts owners from liability. Normal P&I Rules cover will respond to common law liabilities but it is important that Members ensure sufficient contractual protection is in place similar to that found in Clause 14(a)(ii) SUPPLYTIME 2017 for example.

In the absence of such protective clauses Members may be exposed to additional liabilities to third party personnel and the Club’s Offshore and Renewable Energy Cover will cover these additional personal injury risks.

Cargo
Offshore vessels will often be required to transport cargo and/or equipment and in most cases this cargo or equipment will be carried without a Bill of Lading or other contract of carriage being issued. Club Rules require the Member’s liability to cargo to be subject to the Hague-Visby Rules. Also,

charter parties will sometimes contain an undertaking by the Member to make the vessel seaworthy throughout the voyage and not just at the commencement of the voyage, so providing a commitment beyond that found in the Hague-Visby Rules.

In the absence of such a clause incorporating the Hague-Visby Rules or a suitably worded indemnity in favour of the Member, or where there is an on-going warranty of seaworthiness, then the Club’s Offshore and Renewable Energy Cover will cover the additional liabilities for cargo risks.

Pollution
Normal P&I Rules cover will include pollution from the vessel when there is a liability at law, but care should always be taken to ensure that no additional contractual liability is accepted for pollution arising from the charterer’s property. Where this is not possible the Club’s Offshore Cover will provide protection against those additional liabilities.

Extended Towage
Club cover will respond provided the towage is carried out in accordance with approved industry standard contracts which contain a knock for knock provision such as Towcon, Towhire or Supplytime. However, in the offshore and renewable energy sectors, particularly when towing within offshore fields, there will commonly either be no direct contract between the owner and the object being towed or the contract will be on terms more onerous than the standard knock for knock provisions to be found in the industry approved contracts.

It is important to ensure that all objects towed by the vessel are subject to knock for knock provisions in the contract and that this includes an indemnity in respect of the property and personnel of the charterer’s contractors and subcontractors.

Where such knock for knock provisions cannot be negotiated or are diluted, the Club’s Offshore and Renewable Energy Cover will protect against these additional tower’s risks.

Salvage
Many vessels engaged in offshore operations are capable of carrying out salvage operations.

Where a vessel engages in a salvage operation to save life at sea the vessel’s normal P&I Rules cover is unaffected.

However, cover is generally excluded for liabilities, costs and expenses arising out of other salvage operations without the express agreement of the Club’s Managers.

Many offshore contracts include an obligation on owners to provide salvage services to vessels or equipment owned by the charterers/charterers group but will often require owners to contractually waive any rights to claim for such salvage services. The Club’s Offshore and Renewable Energy Cover will respond to those costs which fall outside of normal P&I Rules cover.

Insurance Clause – Naming of Charterer and Waiving of Subrogation
The contract will frequently require the owners to provide a waiver of subrogation from their insurers in favour of the charterers and their contractors (charterers group) and to name them as coassured - the so called “Name and Waive” requirement.

This is acceptable under Club P&I Rules where the name and waive is only to the extent that it covers those liabilities that are properly the responsibility of

Members under a knock for knock charter party such as Supplytime 2017, so not including those liabilities which are the responsibility of the charterer under the charterparty.

Under its Offshore and Renewable Energy Cover the Club can provide such cover to co-assureds on a “misdirected arrow basis” covering those claims / liabilities brought against the charterers which should properly be the responsibility of the owners.