52 P & I Insurance

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52. What is a P & I Insurance ? How these clubs operate worldwide ? Connected with P
& I Clubs, explain control, dividends, scope of cover and letters of undertaking.
Ans. P & I stands for ‘Protection’ and ‘Indemnity’. Here protection is ship owner's protection from
third party liabilities i.e. the 1/4th of collision liability traditionally H & M insurer
did not cover.
'Indemnity' refers to clubs indemnity' or compensation for liability to cargo under the
contract of carriage.
So ship owners take P & I insurance cover in respect of third party liabilities and expenses
arising from occurring ships as principals. An insurance mutual, a club provides collective self
insurance to its members. The membership is comprised of a common interact groups who wish to
pool their risks together in order to obtain "at cost" insurance over.
How these clubs operate world wide ?
P& I club are associations of member ship owners and charters; which are owned and
controlled by the insured ship owners or charters members for the purpose, precisely of mutual
insurance against third party liabilities which arise in connection with the operation of ships.
P & I clubs operate on non-profit making basis.
For their management, these clubs do hire an organization or agency which can be an
insurance company or a Law firm for their day to day management. For this the manager or
management agency charges the managing fees from the club :
For their operation P & I clubs retain correspondents at numerous ports world wide. In some
countries the correspondent may be a firm of insurance specialist acting for more than one club or
alternatively a ship broking or insurance company or law firm with maritime law practitioners. P &
I clubs issues handbooks containing club rules and list of correspondents which care very useful to a
master seeking advice and assistance when in any kind of trouble.
There are 13 P & I clubs belonging to the International group clubs. Together these clubs
insure over 90% of the worlds blue water tonnage.
Connected with P & I clubs Explain :
CONTROL : Ship owners who are the members of the P & I club are required to maintain their
ships as per clubs rules.
Club may subject a ship of member for random inspection. If on the basis of random
inspection there are reasons to believe that vessel is not being of random inspection there are reason
to believe that vessel is not being operated as per clubs rule. Then ship will be subjected to more
intense condition survey by independent surveyors called by the club manager.
An owner who fails to keep his vessel in the continuous required by the clubs rule may be
expelled from the club.
DIVIDENDS : As the P & I clubs do operate on non-profil making basis, there is no policy of
giving dividends to club members or manager of the club.
SCOPE OF COVER :
P & I clubs may cover their members exposure to claims for damage of compensation of the
following :
 Crew : The members liability for injury, illness or death and medical expenses arising from
injury, illness or death, costs of repatriation and maintenance ashore resulting from injury
illness or death, costs of repatriation and maintenance ashore resulting from injury illness or
death.
 Personnel Injury to or loss of life of stevdores.
 Personnel injury to or illness or loss of life of passengers and others.
 Loss of personnel effects
 Ships Diversion expenses including running expenses and port charges incurred solely for
this purpose.
 Life salvage : award to a person who has saved or attempted to save the life of person
onboard the salvaged vessel.
 One fourth collision liability
 Oil pollution
o Standard oil pollution cover
o Oil pollution cover for USA
 Liabilities under contracts and indemnities
 Wreaks liabilities
 Cargo liabilities
The members liability for cargo loss, shortage, damage or delay occurring in relation
to the carriage of cargo on the entered vessel.
 Cargos proportion of general average or salvages.
 Certain expenses of salvers
 Fines
 Legal Cost
Omnibus Cover : In recognition of the fact that the list of liabilities to which ship owners
are subjected is constantly increasing in unforeseen ways, the valves of the clubs give their
directions discretion to pass for payment certain claim that are not expressly covered by any of
the heads of cover set out in their rules provided that they are within the general scope of the
club cover and are not expressly excluded elsewhere within the rules.
Letter of Undertaking :
When there is an incident of pollution following a bunkering accident or jelly damage to
jelly caused by the ship then club may be required to post the bond to avoid the arrest of the ship
which can lead to delay of ship schedule.
To avoid this the correspondent of the club can offer a letter of undertaking on the
instruction of club; to pay for the possible liabilities of the ship arising from the accident or
damage.

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