Commentary: Rule 20 Period of insurance

20.1 General

The first part of this Rule repeats the basic principle established in the second part of Rule 2, namely that the cover under these Rules is for liabilities arising out of an event during the period of insurance. What that entails is explained in the comments under 2.8.

20.2 Entry Survey and Ship Manager Evaluation (SME)

When a ship is entered in the Club it may be subject to an entry survey performed either by the Club’s in-house surveyors or by other surveyors appointed by the Club. A Ship Manager Evaluation (SME) is always performed on the Member’s technical manager organisation, either at the DOC Manager’s office or as a desktop exercise based on in house knowledge and/or public information.

20.3 Policy of insurance

When the Member and the Club have agreed that a ship should be entered for P&I Insurance with the Club, a Certificate of Entry (“CoE”) is issued stating the terms agreed which is then sent to the Member.

The CoE identifies the Member, the ship and any Joint Members and/or co-assureds. It confirms the period of insurance and deductibles.

The CoE lists the special conditions which may apply to the cover. It includes a confirmation that the insurance is subject to these Rules and to the subsidiary sources of insurance information listed in the last part of Rule 2 and commented on under 2.13. The Club will also issue circulars to Members in which important information which has been incorporated in the conditions for entry, is included.

The CoE specifies the exclusions from or extensions of cover under Rules which may have been specifically agreed upon between the Member and the Club. It is important that the specifications are checked by the Member when the documentation is received in order to avoid any disputes concerning the agreed extent of cover once a casualty under the Rules has occurred.

Changes in the cover during the insurance year agreed upon between the Member and the Club may result in either an addendum or a new CoE being issued. Regarding restrictions of Certificates – see the comments under 20.7.

Members are advised to contact the Club if the contents of the CoE or the addendum are unclear.

20.4 Period of insurance

20.4.1 Start of the period of insurance

The period of insurance starts at the time and date stated in the CoE.

20.4.2 The continuation of the period of insurance

As is stated in the second part of the Rule, the period of insurance shall continue until 1200 hours UTC on 20 February. If the period has not been terminated in accordance with Rule 26 nor has ceased in accordance with Rule 27, it runs from policy year to policy year. (Other periods of insurance may, in certain specific instances, be agreed upon between the Member and the Club in writing.)

Premiums and other terms for the new policy year are agreed upon at annual negotiations between the Member and the Club. When these negotiations have been completed, the Club will issue new documentation as described under 20.3 above.

20.4.3 Termination of the period of insurance

See the comments under Rules 26 and 27.

20.5 Policy year

A policy year begins at 1200 hours UTC on any 20 February. It continues to be valid until the same time on 20 February of the following year. The significance of 20 February is historical. All Group Clubs apply the same policy year as this simplifies the transfer of an entry from one Club to another. Other periods of insurance may in specific instances be agreed upon between the Member and the Club.

20.6 Effect of policy year terms and limitations of cover on Member’s long-term charter commitments

The policy of insurance specifies the extent of cover for that particular policy year. For subsequent policy years, the terms may be subject to amendments brought about by changes in the pooling facilities within the Group or by changes in its reinsurance arrangements. Members are advised, therefore, in any long-term charter or freight agreement, not to warrant the maintenance – for the duration of the charter – of any specified limits or other terms of insurance which may be subject to amendments of available Club cover.

Members are recommended to phrase any commitment in the charterparty as an undertaking to maintain the insurance cover for the risks concerned which from time to time will be available from the Club on its standard terms of entry for the type of ships involved.

20.7 Confirmation of entry, payments of call and ship’s age

Clubs are sometimes requested to issue a confirmation or certificate showing that a ship is entered for P&I risks. While the Club wishes to render its Members as much practical assistance as possible, within the guidelines of the Rules, it must be appreciated that the issuance of such certificates should be restricted. Firstly, it creates unwarranted bureaucracy. Secondly, the issuance of certificates imposes responsibilities upon the Club regarding the accuracy of statements made which are inconsistent with the concept of mutuality.

All Group Clubs have agreed to the same restrictive policy with regard to the issuance of such certificates and confirmations of entry.

Requests are, therefore, usually met only to the extent that Clubs issue certificates (“blue cards”) to confirm the existence of insurance cover for various liabilities under the following international conventions;

  • International Convention on Civil Liability for Oil Pollution Damage (“CLC”)
  • International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (“the Bunkers Convention”)
  • Nairobi International Convention on the Removal of Wrecks, 2007 (“WRC”)
  • Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002 (“PLR”)

See the comments under, and, 7.5.6 and 3.5.16 respectively.

Furthermore, clubs also issue certificates to confirm the existence of insurance cover for liabilities under the Maritime Labour Convention 2006 (“MLC”). It should however be noted that whilst some of the liabilities arising under the certificates would be covered by standard P&I cover – i.e. compensation for death or long-term disability in accordance with Regulation 4.2., Standard A4.2. and Guideline B4.2, – the liabilities for outstanding wages and repatriation of seafarers, together with incidental costs and expenses, in accordance with MLC Regulation 2.5, Standard A2.5.2 and Guideline B2.5 fall outside cover. Should the Club be required to meet those liabilities in the first instance under its certificate, Members will be obliged to reimburse the Club.

See the comments under 3.4.3

The Club will, upon request from the Member, issue certificates to institutes offering Certificates of Financial Responsibility (COFR) for Owners trading to the U.S.A. Such certificates and other relevant documents have been approved by the Group of P&I Clubs.

Any other requests for a certificate or confirmation of entry will be subject to a restrictive policy and any certificate or confirmation issued will only be addressed to the Member.

There are charterparty clauses by which an Owner is obliged to produce a certificate from his Club that all calls are fully paid and will continue to be paid throughout the duration of the voyage or charter period in question. Such certificates are generally not issued by the Club. The Club will not disclose information regarding the financial standing of the Member with the Club. No guarantees can be given for payment of future calls.

Certificates confirming the age of the entered ship are requested by Charterers or shippers when letters of credit require the carrying ship to be below a certain age. The Club is not in a position to make positive statements regarding the age of a ship.