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Rule 39 Loss of or damage to property

The Association shall cover liability for loss of or damage to property not specified elsewhere in Part II of these Rules.

 

Guidance

In most circumstances, cover for the Member’s liability for loss of, or damage to, property is available elsewhere in Part II of the Rules, i.e. liability to cargo under Rule 34, liability for collisions with other ships under Rule 36, liability for damage to fixed and floating objects under Rule 37 and liability for pollution damage under Rule 38. In the case of Rules 36 and 37, the scope of P&I cover is largely affected by the extent to which the Member’s liability is covered under the Member’s Hull Policies. However, the intention of Rule 39 is to make cover available for the Member’s liability for loss of or damage to property occurring in circumstances where cover is not available under either the Hull Policies or any other P&I Rule. 

(A) …liability for loss of or damage to property… (Rule 39) 

liability for loss of or damage to...
Cover is available for the Member’s legal liability for loss of, or damage to, the property whether the Member’s liability arises in tort, contract, statute or in any other way. The form of liability will normally be determined by the law of the place where the loss or damage occurred. 

There is ’loss’ of property for the purposes of Rule 39 when it is either damaged beyond the possibility of repair or when it cannot be traced or recovered, e.g. when it has been lost in deep waters or totally consumed by fire. There is ’damage’ to property for the purposes of Rule 39 when the ability to use it as intended and/or its economic value has been impaired. 

Rule 39 does not state expressly that cover is available for the Member’s liability for consequential loss arising as a result of the loss of or damage to property, e.g. liability for the loss of use of shore equipment until it has been repaired or replaced. However, Rule 39 is intended to afford the same degree of cover as that which is available under Rules 36 and 37. Consequently, cover is available for the Member’s legal liability to compensate the property owner for economic loss which he has incurred as a consequence of the loss of, or damage to, property, e.g. the loss of profit on a planned on-sale as a result of the damage to the property, and also for the Member’s legal liability to compensate a claimant who is not the owner of the lost or damaged property, but who has suffered economic loss as a result of such loss or damage. 

property
In the majority of cases, the property that has been lost or damaged will be owned by a third party. However, even if the property that has been lost or damaged is owned wholly or in part by the Member, Rule 50 makes it clear that cover is available under Rule 39 to the same extent as if the property had belonged to a third party and, that if this had been the case, the Member would have been liable for the loss of, or damage to, such property. 

Cover is available under Rule 39 not only in respect of ’property’ which is privately owned, but also in respect of property which is owned by public sector entities, trustees and other organisations. However, cover is not available for loss or damage to natural resources or habitats that cannot be considered as to be ’property’ in the sense discussed above. In most instances this issue will depend on the view that is taken under the applicable law. 

However, cover is not available under Rule 39 for loss of or damage to the Ship. Such loss or damage would normally be covered under the Hull Policies and is, in any event, excluded from P&I cover by virtue of Rule 63. Such exclusion applies irrespective of whether the Ship is owned by the Member. For example, cover is not available for the liability of a charterer Member for damage to the Ship.1Similarly, the loss of or damage to equipment, containers, lashings, stores or fuel on the Ship is excluded from cover where this is owned or leased by the Member or by any company associated with, or under the same management as, the Member.2 

Finally, cover is clearly not available under Rule 39 in respect of liability for loss of life or personal injury. 

There is often a close connection between incidents for which cover is available under Rule 39 and those for which cover is available under Rules 34, 36, 37 and 38. Therefore, reference should be made to the guidance to these other Rules when considering the ambit of the cover that is otherwise available under Rule 39. With that warning in mind, it can be said that cover may typically be available under Rule 39 for the Member’s liability for:

  • Non-contact damage caused by the negligent manoeuvring of the Ship. Even if there is no contact between them, the Ship may cause another ship to run aground or to collide with a third ship and, depending upon the terms of the Hull Policies, such policies may not provide cover for the Member’s liability;
  • ’Wash damage’ caused by the movement of the Ship through the water or the turbulent effect of her propeller which causes damage to other moored crafts, their moorings, waterfront property, quays or jetties;
  • Damage caused to subsea cables or pipelines by the Ship’s anchor or mooring lines, or to shore based property such as cranes, rails, conveyor belts etc by the Ship’s cranes, gangway, other equipment or deck cargo when such damage is caused otherwise than as a result of the Ship’s movement being transmitted through the medium of such equipment.3 For example, cover is available under Rule 39 for the Member’s liability for damage that may be caused to a truck on the quay as a result of the fact that cargo has been dropped from the Ship’s cranes during the course of discharge.
  • Damage caused to another ship by the Ship’s cranes, gangway, other equipment or deck cargo when such damage is caused otherwise than as a result of the Ship’s movement being transmitted through the medium of such equipment.4 

(B) …not specified elsewhere in Part II of these Rules. (Rule 39)
As emphasised above, the purpose of Rule 39 is to make cover available where a Member’s liability in respect of property loss or damage is not covered elsewhere in the Rules or by the Hull Policies. Examples of such situations have been given in (A) above. It follows that cover is not available under Rule 39 for liabilities for which cover is available under another Rule or under the Hull Policies for the Ship. 

Since the cover that is available under Rule 39 applies only when cover is not afforded by the other Rules and the Hull Policies, the Association will need to review both the terms and conditions of the Hull Policies in the light of their governing law and market practice, as well as the possible applicability of other P&I Rules before confirming that cover is available under Rule 39.


1 The Association has for more than 25 years offered additional cover on special terms and conditions to charterers that includes cover for their liability concerning damage to the chartered ship.
2 See Rule 63.1.b.
3 For more detailed commentary see (B) of the Guidance to Rule 37.
4 See the preceding footnote.