Section 2 Oil pollution limitation of cover

6.2.1 General

This section contains certain limitations of the cover provided by Section 1 of this Rule, insofar as liabilities for pollution by oil are concerned.

To enable pooling of those risks (see the comments under Part One B.3) all Group Clubs apply identical limitations and conditions of cover.

6.2.2 Monetary limitation of cover

Liability for oil pollution is strict under the CLC Convention and under most domestic legislation (see the comments under 6.1.3.1.3 and 6.1.4). It is sometimes unlimited (see the comments under 6.1.4.2.3). In addition to that, an oil pollution is often combined with other heavy losses. In one and the same event, for instance, a collision between two VLCC’s, there will be an accumulation of large losses to be covered by the marine insurance market and its reinsurers. Total loss compensation will have to be paid for the value of two expensive ships and their respective cargoes. Loss of life and personal injury may have to be compensated. There will be payments under Hull interest insurances and loss of hire insurance. Wreck removal costs may be incurred. For that reason it has been necessary to limit cover for oil pollution under these Rules.

The amount to which the cover is limited is not stated in this section, as it is subject to changes which may result from the annual renewal discussions with the reinsurers of the Group Clubs. The amounts applicable to the forthcoming policy year are reported annually in a circular issued at the beginning of each year.

For the policy year 2021/2022 the limitation of cover for oil pollution is USD 1 billion per vessel and event. See the comments under 6.2.4. The limitation of cover is not confined to tankers but applies to ships of all kinds.

6.2.3 U.S.A. Oil Pollution Surcharge for tankers

The Group Clubs have decided that an additional premium should be charged for tankers as well as Owners of OBO and OO vessels loading or discharging persistent oil in bulk as cargo at any port within the U.S.A. or the U.S. exclusive economic zone (EEZ). Circulars on U.S. Oil Pollution Surcharge are issued quarterly and contain a schedule of definitions and a declaration form. Members should provide the Club on a quarterly basis with a declaration of voyages with oil to the U.S.A.

Additional regulations may be issued by the Club under the provisions of this Rule and Rule 10 Section 3.

6.2.4 Limitation per event

As mentioned in the comments under 6.2.2, the limitation of cover applies per event. For the definition of “event”, see the comments under 2.8. Item (a) of this section contains a further qualification of an event.

The section states that, unless otherwise decided by the Club, the limitation of cover applies irrespective of whether the event involves pollution from one ship or more than one ship. If a collision between two ships entered with the Club causes a pollution by a common escape of oil, the total compensation from the Club shall not exceed the limitation of cover per event applicable to that policy year.

The last part of this section states that if the total amount of claims arising out of such an event exceeds the applicable limitation, the compensation shall be apportioned between the Members. That apportionment will reflect each Member’s validated claim for compensation as against the overall amount claimed.

It also follows from item (a) that the limitation of cover applies to the aggregate of claims for compensation. This can be based on one or more than one Rule. The limitation amount applicable per event to the relevant policy year constitutes the limitation of compensation. This is the case even if several Rules apply to the consequences of the pollution e.g. Rule 4 Sections 1 and 3, Rule 6 Section 1, Rule 7 Sections 1, 5 and 6 (g) or Rule 8 Section 2.

6.2.5 Limitation of cover in connection with salvage

Item (b) of this section is applicable to events of salvage or assistance.

If oil pollution liabilities arise out of such salvage or assistance or from the casualty itself, the limitation of cover applies to the aggregate of liabilities incurred by the entered ship and ships providing such services or otherwise in connection with the same casualty. For the limitation of cover to apply the ships involved must either be entered in the Club for oil pollution risks or covered for those risks by any other Club participating in the Pooling Agreement (see the comments under Part One B.4) and the Group excess reinsurance policies.

The limitation of cover applicable to compensation to the Member is the proportion of validated claims for compensation made on the Club in relation to the overall amount of claims filed in connection with that event.

The reason for this requirement is that the reinsurance contract of the Group Clubs contains a similar limitation of cover per event.