Hull and cargo insurers

Liability for pollution damage falls outside the scope of normal forms of marine hull policies.  Cargo owners rarely incur such liability, but if they do, this is not normally covered by conventional forms of cargo insurance.

Certain situations have nevertheless arisen in which the environmental aspects of a maritime accident have led to, or increased, claims on hull and cargo underwriters.

One instance of this is in the law of salvage.  The 1989 Salvage Convention, and salvage agreements incorporating its terms, provide for salvage awards to take into account the skill and effort of salvors in preventing or minimising damage to the environment.  These awards are payable by the owners of the property saved, and in turn by underwriters insuring marine hulls and cargoes, despite this element of ‘enhancement’.

The costs of measures to prevent or minimise damage to the environment may also fall on hull and cargo underwriters if they are allowable in general average.  Whether this is the case may depend on various factors including the applicable version of the York-Antwerp Rules and the precise circumstances of the case.

A third category of case is one where preventive measures are taken as part of an operation for the repair of a ship, and where the cost is recoverable under the hull policy as a part of a particular average claim for the cost of repairs.

There have been a number of cases over the years in which issues have arisen between P&I insurers and property underwriters as to which of them should bear costs of preventive measures on the particular facts of the case.  The rules of most P&I insurers typically exclude amounts recoverable under normal forms of hull policy.  It has, however, been common practice for one insurer or other to pay the owner in the first instance, leaving the issue to be resolved at a later date between insurers.

These topics are examined further in Chapter 21 of Shipping and the Environment, ‘Hull and Cargo Insurers’.  The introductory section is reproduced here.