Commentary: Rule 24 Overspill calls

24.1 General

Rule 24 limits the amount recoverable from the Club in relation to a claim (other than a claim arising with respect to oil pollution which is limited under Rule 6 and a claim for passengers and seafarers which is limited under Appendix II Rule 1) and limits the liability of Members to contribute to claims. The detailed provisions for this are contained in the Appendix to the Rules. The provisions reflect the requirements of the International Group Pooling Agreement – the rules of all parties to the Pooling Agreement are required to contain similar provisions.

For the purpose of the Appendix, all claims arising under the entry of any one vessel from any one incident are treated as one claim.

As is discussed elsewhere (see Part One, Sections B.3, B.4 and B.5), the Club pools, i.e. agrees to share, with the other parties to the Pooling Agreement that part of any claim which is in excess of a retention (USD 10 million for the policy year 2021/2022). The parties to the Pooling Agreement have collectively purchased reinsurances from the insurance market under the terms of the Group General Excess Loss Contract. For the policy year 2021/2022, the layer is from USD 100 million to USD 3.1 billion.

The part of any claim in excess of the cover afforded by the Group General Excess Loss Contract is shared between the parties to the Pooling Agreement under special provisions in the agreement. This excess part of any claim is called an “Overspill Claim” in the Appendix. The term applies both to a claim on the Club by one of its Members and to a claim on any other P&I Club which is a party to the Pooling Agreement by one of that Club’s members. Where the claim is on another party to the Pooling Agreement, the Club will be required to contribute to it in accordance with the terms of the Pooling Agreement.

24.1.1 Overspill Calls

Prior to 1996, cover for Overspill Claims was available to shipowners without limit. The position changed on 20 February 1996, after which time there has been a limit on the level of cover available for Overspill Claims and a corresponding limit on the calls that could be levied on Members to provide funds to pay those claims.

The arrangements to implement these limits are contained in Rule 24 and in the Appendix to the Rules.

A limit is placed on contributions which Members can be required to make to the funds of the Club in order to enable the Club to pay an Overspill Claim.

Such contributions are payable by way of Overspill Calls and are levied with respect to all vessels entered (other than on a fixed premium basis) on the date of the incident which gave rise to the claim. There is one exception to this: a Policy Year may be closed for the levying of Overspill Calls three years after its inception. Where an Overspill Claim is notified after the relevant year has been closed, the contributions will be levied on vessels entered at noon UTC on 20 August of the Policy Year which is kept open for the purpose of levying such contributions in accordance with the provisions of the Pooling Agreement (this is generally the earliest subsequent open Policy Year).

Overspill Calls are calculated as a percentage of the vessel’s limitation fund for property damage claims (not claims for loss of life or personal injury) under the Convention on Limitation of Liability for Maritime Claims, 1976. The total of the Overspill Calls levied by the Club on any one vessel to pay the Club’s share of any one Overspill Claim will not in the aggregate exceed a specified percentage (2.5% for the 2021 Policy Year) of the limitation fund of that vessel.

24.1.2 Overspill Claims

A limit is placed on the amount of an Overspill Claim which the Member can recover from the Club. This limit is the aggregate of:

  • the amount the Club can raise by means of Overspill Calls on its Members (which is itself limited in accordance with the arrangements referred to above) and the amount the Club is able to recover from the other parties to the Pooling Agreement.

Given that the rules of all parties to the Pooling Agreement are required to contain the same provisions, the amount a Member can recover from the Club is limited accordingly to 2.5% of the aggregate of the limitation funds of all vessels entered with parties to the Pooling Agreement. For the 2021 policy year, this equals a sum of about USD 6,3 billion. The likelihood that a claim would reach this limit is remote. The cover limit for oil pollution is USD 1 billion, for passenger liabilities, USD 2 billion, and passenger and crew liabilities combined, USD 3 billion.

This amount may be reduced:

  • to the extent that the Club is not able to make a recovery from another party to the Pooling Agreement;
  • to the extent that Overspill Calls levied on the Members are not economically recoverable;
  • to the extent that the Club incurs costs in seeking to recover Overspill Calls from its Members.

The Club is entitled to delay payment of Overspill Claims to the extent that there is an unavoidable delay in its collection of Overspill Calls.

The Pooling Agreement and the Appendix to the Rules contain further detailed provisions on the calculation of the above limits, together with arrangements for a panel of experts to determine certain issues.

The Club may require a Member to put up security for an Overspill Call in the circumstances described in Appendix I Rule 7.

Graphic illustration of the International Group Clubs’ Pooling and Reinsurance Structure 2021/2022