Section 1 Sue and labour and legal costs

8.1.1 General

The purpose of P&I Insurance is to protect the Member for third party liability. The protection is not limited to reimbursement of amounts that the Member has been legally obliged to pay as compensation to third parties. It is equally important for the Member to be covered for the costs of defending or protecting him from such claims and to avoid or minimise such liabilities. However, the Rule clearly underlines the criteria that costs and expenses incurred by the Member must have been approved in advance by the Club or in its absolute discretion been determined to have been reasonably incurred.

Section 1 of this Rule deals with costs and expenses incurred in defending or protecting the Member from liabilities insured under these Rules.

8.1.2 Club staff

The first line of defence for the Member is the Club’s staff. Claims handlers in various teams hold Master of Law degrees or are Master Mariners. On the technical side, the teams are backed by the Club’s technical experts.

8.1.3 Club correspondent costs

Although the Club’s own staff has ultimate responsibility for the handling of claims, a large part of claims handling is done by the Club correspondents all over the world. These representatives have been selected to provide the best service available in their respective regions. Unless agreed otherwise, the attendance fees charged by these representatives for handling matters covered under the Member’s P&I Insurance are paid by the Club. The costs will, however, be reflected on the Member’s record.

8.1.4 Legal fees

The same principle applies to legal fees. Unless agreed otherwise, the fees are paid by the Club if incurred in handling a case covered under the Member’s P&I Insurance. It is a condition that the appointment of lawyers must be made by the Club or with its advance approval.

8.1.5 Survey and expert fees

To protect a Member’s interests, it is often necessary to engage surveyors or other experts. Appointments should be made by the Club or with its approval unless otherwise stated. The fees are covered if the case to which the services relate is covered.

8.1.6 Operating expenses

Certain costs and expenses are regarded as uninsured operating expenses such as the Member’s agency fees, port charges, bunker consumption shifting expenses, etc. even if they are incurred to avoid or reduce liabilities covered under these Rules.

8.1.6.1 Tally costs

Tallying of cargo is an obligation on the part of the carrier to ensure that the bill of lading particulars are correct. Even if the tally may prevent shortages, its cost is not covered.

8.1.6.2 Pre-loading survey fees

The purpose of a pre-loading survey, generally, is to comply with the carrier’s primary obligation to describe the cargo in the bill of lading. The costs of such surveys are regarded as operational expenses and are not subject to compensation. Regarding pre-shipment surveys of steel cargo, see the comments under 4.1.11.15.4.

8.1.6.3 Costs for general surveys

General discharging survey costs such as hatch surveys are not covered. To be considered for compensation, survey costs should be related to specific damage to the cargo or, at least, to well-founded fears that such damage has occurred during the voyage.

8.1.6.4 Certificate costs

In certain situations, the carrier may have to produce certificates regarding the condition of holds or tanks before loading or after discharging. When carrying reefer cargo, it may be necessary to prove proper operation of the reefer plant before loading. Carriage of oil may require the issuance of Clean Tank Certificates, ROB (Remaining On Board) or OBQ (On Board Quantity) reports. The cost of obtaining these and similar documents are of an operational nature and, therefore, not covered.

8.1.7 Costs incurred on instructions from Club

It follows from the last part of the section that compensation is provided for costs of the nature described incurred on instructions from the Club. The power to issue instructions is derived from Rule 10 Section 3, according to which the Club may issue regulations in writing. If the Member does not comply with the regulations and does not incur the costs as per the instructions, the Club may refuse or reduce any compensation due under these Rules.

The section does not mean that all costs are subject to compensation simply because they were incurred on instructions from the Club. For instance, there is no cover if the instructions were for the Member to comply with existing obligations such as to follow class requirements or to provide a seaworthy ship.