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Comprehensive Carrier’s Liability Cover (Section 17.A)

Chapter 2 Risks covered and special exclusions
Section 17 Risks covered and special exclusions

A Comprehensive Carrier’s Liability Cover

1 Special Definitions
In this Section 17A, the following words or expressions shall have the following meanings:

Bill of Lading:
bill of lading or similar document of title.

Document:
non-negotiable Bill of Lading, waybill or similar document provided production of such document by the person to whom delivery of the Cargo is made is required by the express terms of that document or the law to which that document or the contract of carriage contained in or evidenced by it, is subject.

Cargo:
Any lawful and merchantable commodity or goods intended to be or being or having been carried on board a ship pursuant to a contract of carriage but excluding any other equipment, stores, fuel (unless carried as Cargo) or any other substance of whatsoever nature, and shall further exclude waste and residues of Cargo(es) and/or of such equipment, stores, fuels and/or other substances.

Owner of Cargo:
Any buyer or seller of Cargo, or any holder of the Bill of Lading issued in respect of Cargo.

2 Capacity of the Assured
The cover afforded to the Assured shall extend only to liabilities, losses, costs or expenses that have arisen out of the activities and/or operations customarily carried on by or at the risk and responsibility of the Assured in any one of the capacities set out below, but only to the extent specified in the Insurance Policy:

a an owner, operator or charterer of the Ship;
an owner or operator of a container accepted for carriage on the Ship;
a non vessel operating common carrier (NVOCC);
d 
a user of a cargo terminal and cargo handling equipment;
e 
an Owner of Cargo carried on a ship; or
f 
an operator of a terminal.

3 Special conditions
None.

4 Risks covered
The Insurer shall cover any one of the risks set out below only to the extent specified in the Insurance Policy as “Covered” and always subject to the Terms, Conditions and Exclusions as set out in Sections 1-16 above, this Section 17 A and Sections 18-52 below:

Cargo
Liabilities incurred by the Assured to cargo interests in respect of Cargo accepted for carriage by the Assured.

Property
Liabilities incurred by the Assured in respect of physical loss of or damage to property not specified elsewhere in this Section 17 A other than property owned or leased by the Assured or by any company associated with the Assured.

c 
Personal injury, death, illness
Liabilities incurred by the Assured in respect of death, personal injury or illness of any person.

d Environmental damage
Liabilities incurred by the Assured in respect of environmental damage.

e Indemnities
Liabilities incurred by the Assured to any party to whom the Assured has given an indemnity.

f 
Waiver of general average contribution
Losses, costs and expenses incurred or suffered by the Assured as a result of having waived, in the Bill of Lading or Document, his right in whole or in part to claim general average contributions from the other parties to the adventure.

g Irrecoverable general average contribution
The proportion of general average which the Assured may be entitled to claim from cargo interests and which is not legally recoverable solely by breach of contract of carriage when the Cargo has been carried on terms less favourable to the Assured than compulsorily required, or otherwise applicable international conventions regulating carriage of goods by sea.

5 Special exclusions
5.1 Notwithstanding the terms of subsection 4 (a) above, the Insurer shall not cover liabilities, losses, costs and expenses as described in subsection 5.1 (i) to (iii) below, save to the extent any one or more of the liabilities, losses, costs and expenses listed below are identified as covered by the Insurer in the Insurance Policy subject to the special terms as set out in section 5.2 below.;

Delivery of cargo without production of Bill of Lading
The Insurer shall not cover liabilities, losses, costs and expenses arising out of delivery of Cargo under a negotiable Bill of Lading without production of that Bill of Lading by the person to whom delivery is made;

ii Delivery of cargo without production of a Document
The Insurer shall not cover liabilities, losses, costs and expenses arising out of delivery of cargo carried under a Document without production of such Document by the person to whom delivery is made, where such production is required by the express terms of that Document or the law to which that Document (or the contract of carriage contained in or evidence by it) is subject;

iii Delivery of cargo without production of Bill of Lading or Document at a port or place other than stated in the Bill of Lading or document
The Insurer shall not cover liabilities, losses, costs and expenses arising out of delivery of Cargo carried under a Bill of Lading or Document, at a port other than that stated in the Bill of Lading or Document, as the case may be, without production of all originals of that Bill of Lading or without production of such Document by the person to whom delivery is made, where such production is required by the express terms of that Document or the law to which that Document (or the contract of carriage contained in or evidence by it) is subject; and

5.2 Special terms delivery without production of Bill of Lading. If any one or more of the liabilities, losses, costs and expenses described in section 5.1 (i) to (iii) above are identified as covered by the Insurer in the Insurance Policy, such cover shall be subject to the terms and conditions as set out in this section 5.2.

i Delivery of Cargo without production of Bill of Lading
The Insurer shall cover liabilities, losses, costs and expenses arising out of delivery of Cargo under a negotiable Bill of Lading without production of that Bill of Lading by the person to whom delivery is made subject to the following terms, conditions, restrictions and limitations:

a The Assured shall receive an undertaking on the terms of the Standard Form of Undertaking attached as Appendix 1 from either the charterer of the Ship or the person to whom delivery of the Cargo is made, or;

b The Assured shall be required by law to deliver or relinquish custody or control of the Cargo without production of the Bill of Lading, or;

c where delivery is made against a forged, fraudulent, misappropriated or otherwise unauthorised version of the Bill of Lading, the Assured shall satisfy the Insurer that he took such steps as appear to the Insurer to be reasonable to ascertain that the Cargo was properly delivered to the person entitled to such delivery, save that liabilities, losses, costs or expenses arising out of any wilful misconduct or gross negligence on the part of the Assured are always excluded, or;

d where an agent or other designated representative acting on behalf of the Assured has caused the Cargo to be delivered without production of the relevant Bill of Lading, the Assured shall satisfy the Insurer that this has been done without the Assured’s approval.

ii Delivery of Cargo without production of a Document
The Insurer shall cover liabilities, losses, costs and expenses arising out of delivery of cargo carried under a Document without production of such Document by the person to whom delivery is made, where such production is required by the express terms of that Document or the law to which that Document (or the contract of carriage contained in or evidence by it) is subject, subject to the following terms, conditions, restrictions and limitations:

a The Assured shall receive an undertaking on the terms of the Standard Form of Undertaking attached as Appendix 2 from either the charterer of the Ship or the person to whom delivery is made, or;

b where delivery is made against a forged, fraudulent, misappropriated or otherwise unauthorised version of the Document, the Assured shall satisfy the Insurer that he has taken such steps as appear to the Insurer to be reasonable to ascertain that the Cargo was properly delivered to the person entitled to such delivery, save that liabilities, losses, costs or expenses arising out of any wilful misconduct or gross negligence on the part of the Assured are always excluded; or

c where an agent or other designated representative acting on behalf of the Assured has caused the Cargo to be delivered without production of the relevant Document, the Assured shall satisfy the Insurer that this has been done without the Assured’s approval.

iii Delivery of Cargo without production of Bill of Lading or Document at a port or place other than stated in the Bill of Lading or Document.
The Insurer shall cover liabilities, losses, costs and expenses arising out of delivery of Cargo carried under a Bill of Lading or Document, at a port other than that stated in the Bill of Lading or Document, as the case may be, without production of all originals of that Bill of Lading or without production of such Document by the person to whom delivery is made, where such production is required by the express terms of that Document or the law to which that Document (or the contract of carriage contained in or evidence by it) is subject, provided always that the party to whom delivery is made or the charterer of the Ship has given to the Assured an undertaking on the Standard Form of Undertaking attached as Appendix 3.

5.3 Environmental damage and clean up obligations and any consequential loss or damage relating thereto;

The Insurer shall not cover liabilities, losses, costs and expenses in respect of environmental damage and clean up obligations and any consequential loss or damage relating thereto, save insofar as such liabilities, losses, costs or expenses are caused by a sudden, unintended and unexpected escape of oil or any other substance, provided that

such escape of oil or any other substance does not result from any failure to comply with any national or international statute, rule or regulation; and

b the Assured has submitted to the Insurer a written notice of claim within one year from the expiry of the Period of Insurance in which the event giving rise to the claim(s) occurred.

 

Guidance

(A) Explanatory remarks

NB! Since the Assured must also be a Member of the Association before he can be accepted for CCC cover (see below), the following references to ‘Assured’ and ‘Member’ are inter-changeable and refer to the same person.

As explained in the general introduction to the Association’s additional covers, the Comprehensive Carrier’s Liability cover (CCC) offers Members a ‘menu’ of options from which they can select those parts of the overall additional cover that are best suited to the risk profile to which they are exposed. The precise scope of cover can be negotiated between the Member and the Association and the relevant risks are then specified in the Insurance Policy as ‘Covered’. 

The CCC, which is written on a fixed premium basis, is one of the broadest forms of liability cover that is available for carriers in the current market and provides cover for a wide range of liabilities that are not covered under the standard P&I insurance. For example, cover is provided for many of the risks and liabilities relating to the carriage of cargo that is not available as of right under the mutual P&I Rules since they are excluded from cover under Rule 34.1 unless the Association exercises its discretion to afford cover in the particular case, and for risks and liabilities relating to the carriage of cargo whether on or off the ship that can lead to loss of, or damage to, the cargo itself whilst in the care, custody and control of the Members, or to other cargo whilst stored at a terminal. Cover is also provided for other liabilities that the Member may have to third parties such as liability for the death of, or for personal injury to, persons, or for damage to property, or for pollution or for onerous contractual liabilities that are excluded under the standard P&I cover. 

However, it is a pre-requisite of cover under the CCC that the Assured, i.e. the Member of the Association, is entered for underlying P&I cargo cover with the Association and that the liability that the Assured incurs arises either under, or pursuant to, contractual terms that have been approved by the Association, or which are normal and customary in the trade, or which arise in tort or similar principles of the applicable law. 

A special and fundamental characteristic of the CCC is that the cover applies regardless of whether the cargo is on board a ship and is not limited to the entered Ship that is entered for P&I cover under the Rules. Therefore, the CCC can benefit not only those Members that are involved in liner operations with full door-to-door services but also other Members of all kinds that are involved in the carriage of liquid and bulk cargo that require special storage arrangements and those that may have to comply with other onerous contractual provisions. In such circumstances, the Member may be required to accept responsibility for the cargo from the time that it leaves the factory prior to loading on the ocean vessel until it arrives at the final place of delivery. Both places are often inland and far away from the ports at which the cargo is loaded and discharged from the vessel. Therefore, the cargo may need to be stored on land at either or both ports for long periods of time before loading or after discharge from the ship. Furthermore, the cargo will often be transhipped, either from or to smaller vessels (feeder ships) and may also be carried inland by road or rail. Each such transport phase gives rise to different risks but because the CCC ‘follows the cargo’, it provides cover for liabilities, losses etc., that the carrier may incur to third parties that arise during the whole of the period for which the carrier is responsible for the cargo and during any of the various transport phases. In the majority of cases, such liabilities will relate to the loss of, or damage to, the cargo, but may also involve liability for pollution damage, or damage to other property, or for death or personal injury. 

(B) Capacity of the Assured (Section 17.A. 2)

“…liabilities, losses, costs or expenses that have arisen out of the activities and/or operations customarily carried on by or at the risk and responsibility of the Assured in any one of the capacities set out below, but only to the extent specified in the Insurance Policy:”

The CCC provides cover only if, and to the extent that, the Assured incurs liability whilst acting in one of the capacities that are specified below and provided that the relevant liabilities, costs etc., have arisen as a result of activities or operations that are ‘customarily carried out’, (i.e. normally and usually performed) by, or at the risk and responsibility of, the Assured when acting in one or more of the specified capacities. Therefore, provided that the Assured has made a full disclosure to the Insurer when making the application for cover of all circumstances which would be of relevance to the Insurer in deciding whether, and on what conditions, to accept the insurance1 and provided that the relevant activities or operations are ‘customarily carried out’ in a manner that is consistent with such disclosure, cover is normally available. However, cover is generally not available if an activity or operation is not ‘customarily carried out’ by the Assured but is performed on a ‘one-off’ basis, unless the Association has specifically agreed to provide cover in such circumstances. In any event, cover is available only to the extent that the activity or operation is specified in the particular policy of insurance. 

Furthermore, if liability arises as a result of a contract that has been agreed between the Assured and a third party, cover is available if the contract terms can be considered to be terms that are normal and usual in the trade for the particular activity or operation, but if the particular terms cannot be considered to satisfy such a test, cover is available only if the Insurer has specifically agreed to provide cover for liabilities that arise under such a contract.2 

Terms are considered to be ‘normal and customary’ if they are generally accepted and used for the particular activity or operation in the relevant industry sector. Such contracts tend to be on a standard form that has either been produced by an industry body or trade association such as BIMCO but could also include other forms that the Association has seen and previously approved. However, if the contract is a tailor-made contract that is used for a specific and non-standard activity or operation, the insurer is likely to consider its terms to be ‘normal and customary’ only if they meet certain minimum requirements, e.g. the Assured preserves the right to limit his liability in accordance with the applicable law and does not accept liability for sole negligence on the part of the other party. 

a an owner, operator or charterer of the Ship;3
The most likely persons that will be Assureds under the CCC will be the owners, operators or the charterers of the relevant Ship since they are the ones that are most likely to incur contractual liabilities that are onerous and/or outside the scope of the Standard P&I Cover that is provided by the Association under the Rules and any other special terms of entry. 

b an owner or operator of a container accepted for carriage on the Ship;
In some circumstances, the Assured will not be the person that is actually performing the carriage, i.e. the actual carrier, but merely the owner or operator of a container that has been accepted for carriage on the Ship. Provided that the container has been accepted for carriage on the Ship the definition is satisfied although the liabilities, losses etc., arise at a time which is either before or after the actual carriage on the Ship. This is often the case when a Member charters ‘slots’, or spaces, on a container vessel and thereby becomes a party to a Consortium Agreement.4 

The Member may need CCC cover in such circumstances since he may not otherwise satisfy the requirements of Rule 2.4 which are pre-requisites for the Standard P&I Cover that is provided by the Association. For example, although he is not the owner of the Ship, he may incur liability as the owner of a container that causes loss or damage to other property or people, including damage that has been caused by pollution resulting from a leak of a hazardous chemical from the container. Cover is available under the CCC in such circumstances and for any liability that the Member has incurred for the loss of, or for damage to, a container that is owned by a third party. Cover would not be available in the former circumstances under the Standard P&I Cover since Rule 38, affords cover only for pollution liabilities that arise as a result of the “…discharge or escape from the Ship…” Similarly, cover would not be available for liabilities, losses etc., that arise as a result of damage to other property (including containers that are owned by a third party) under Rule 39 because it does not arise “in direct connection with the operation of the Ship…”5 

c a non vessel operating common carrier (NVOCC);
A Member may be acting as an NVOCC, in which case, notwithstanding the fact that he does not own or operate the vessel(s) that will be carrying the cargo, he will, nevertheless, have entered into a contractual commitment to the owners of the cargo to ensure that it is carried carefully and properly and in compliance with the terms of the contract of carriage. The NVOCC will then normally enter into a contract with the owners, operators or charterers of the carrying vessel to enable him to carry the cargo on such vessel(s). Consequently, should the cargo be damaged because of the negligence of the carrying vessel, the Member may be liable to the cargo owner pursuant to the terms of the contract of carriage that he has concluded with the cargo owner. However, since such liability has not arisen “in direct connection with the operation of the Ship” but in connection with the operation of another vessel, cover would not be available under the Standard P& Cover. Consequently, the necessary cover is made available under the CCC. 

d a user of a cargo terminal and cargo handling equipment;
Members, or companies that are associated with Members, will often enter into contracts that allow them to use a terminal, or part of a terminal, to load, store and/or discharge cargo that they have contracted to carry. Such activities may require them to use sophisticated and valuable cargo-handling equipment that may cause loss or damage to the owners of the terminal or the equipment, or to their own cargo that they may be storing at the terminal at their risk and expense, or indeed to the owners of other property. Should the Member or its associated company incur liability in such circumstances, cover is not available under the Standard P&I Cover for the reasons explained above and consequently, the necessary cover is made available by the CCC provided that the terms of the contract have been approved by the Association, or are normal and customary terms. 

e an Owner of Cargo carried on a ship; or
Members may incur liability by virtue of the fact that they have a financial interest in the cargo that is being carried on a vessel. This liability may arise by operation of legislation which applies to a marine peril (for instance, a cargo owner may be liable to third parties for property damage and pollution caused by the release of the cargo). 

f an operator of a terminal.
In some circumstances, a Member may also act as the owner of a terminal in which the cargo that he has contracted to carry is stored either before or after carriage on a ship. In such circumstances, he may incur some of the liabilities, losses etc., that are described in (C). For the reasons described above, cover is not available in such circumstances under the Standard P&I Cover. Furthermore, whilst the CCC is not designed to operate as a typical Terminal Operations Insurance, cover could be made available in specific and limited circumstances.

 

(C) Risks covered (Section 17.A.4)
The Insurer shall cover any one of the risks set out below only to the extent specified in the Insurance Policy as ‘Covered’ and always subject to the Terms, Conditions and Exclusions as set out in Sections 1-16 above, this Section 17 A and Sections 18-52 below

a Cargo
Liabilities incurred by the Assured to cargo interests in respect of Cargo accepted for carriage by the Assured (Section 17.A.4.a). (See Rule 34) 

b Property
Liabilities incurred by the Assured in respect of physical loss of or damage to property not specified elsewhere in this Section 17 A other than property owned or leased by the Assured or by any company associated with the Assured. (See Rules 37 and 39

c Personal injury, death, illness
Liabilities incurred by the Assured in respect of death, personal injury or illness of any person. (See Rules 27-33) 

d Environmental damage
Liabilities incurred by the Assured in respect of environmental damage. (See Rule 38) 

e Indemnities
Liabilities incurred by the Assured to any party to whom the Assured has given an indemnity. (See Rule 55) 

f Waiver of general average contribution
Losses, costs and expenses incurred or suffered by the Assured as a result of having waived, in the Bill of Lading or Document, his right in whole or in part to claim general average contributions from the other parties to the adventure. (See Rules 41 and 55) 

g Irrecoverable general average contribution
The proportion of general average which the Assured may be entitled to claim from cargo interests and which is not legally recoverable solely by breach of contract of carriage when the Cargo has been carried on terms less favourable to the Assured than compulsorily required, or otherwise applicable international conventions regulating carriage of goods by sea. (See Rules 41 and 55) 

(D) Cargo
The cover that is available in respect of cargo is extremely broad and encompasses the various situations that are described in the provisos to Rule 34 for which cover is excluded or restricted under the Standard P&I Cover subject to the exercise by the Association of its discretion to extend cover. The Assured is able to choose the cover that he believes to be the most appropriate for his particular operational requirements and the particular risk is then specified in the Insurance Policy as ‘Covered’. 

The following are examples of risks that are commonly stated to be ‘Covered’ under ‘cargo’: 

1 Ad valorem bills of lading
If a particularly valuable cargo is shipped, the parties may agree that the value of the cargo should be inserted on the Bill of Lading. This is often done when cargoes such as gold ingots, cash and bonds, antiques, sophisticated scientific equipment, pharmaceutical products, art work etc., is shipped. This is also particularly common in the case of container carriage and many of the standard forms of container Bills of Lading include a box for this purpose. The cargo owner may wish this to be done since, by doing so, he avoids the package limitation that would otherwise be applicable under Article IV Rule 5 of the Hague or Hague-Visby Rules and which could reduce the compensation that he could expect to receive from the carrier should the cargo be lost or damaged as a result of the carrier’s breach of contract to a sum that is substantially below the real value of the cargo. It also means that the declared value may well be treated as the real value of the cargo in the event of such loss or damage. However, in consideration of allowing the value to be inserted on the Bill of Lading and thereby losing the protection of the package limitation, the carrier is likely to demand a substantially higher freight. 

Whilst such an arrangement may benefit the individual carrier, it is considered that the increased liability that it presents is contrary to the spirit of mutuality and should not be borne by the membership as a whole, Consequently, cover is restricted in such circumstances under the Standard P&I Cover pursuant to proviso vi of Rule 34 to the sum of USD 2,500 (or the equivalent in other currencies) per unit, piece or package of the cargo that is lost or damaged unless the Association exercises its discretion otherwise. 

However, cover is available in such circumstances under the CCC for liability that exceeds USD 2,500 (or the equivalent in other currencies) per unit, piece or package provided that the Assured has notified the insurer prior to entering into any contract of carriage that includes a declared value. 

2 Ante-dated and Post-dated Bills of Lading or Documents
Carriers owe a duty of care to all parties that have an interest in Bills of Lading or documents to ensure that the information that is included on the Bills or documents is accurate since such parties are relying on the truth of such information. Consequently, carriers may incur liabilities if such information is not accurate and third parties, particularly the holders of the Bill of Lading or document, have suffered loss as a result of such misrepresentations.6 

Since the Bill of Lading or document is a receipt for the quantity of cargo that is recorded as having been shipped on board (or received for shipment in the case of a received for shipment Bill of Lading or document), the date of the Bill or document should be the date on which the full quantity of cargo recorded on the Bill or Document has in fact been shipped or received as the case may be. Such a date is important for many reasons including the fact that such date will determine whether or not a seller of goods has shipped the goods to his customer on time and/or the price of the commodity. Therefore, the carrier has a duty of care to ensure that the correct date is inserted on such documents since the insertion of an inaccurate date whether it be ante-dated, i.e. dated before the correct date, or post-dated, i.e. dated after the correct date, can have substantial financial impact. 

Cover is not available for liabilities that arise in such circumstances under the Standard P&I Cover pursuant to proviso ix of Rule 34. However, provided that an incorrect date has been recorded by mistake or by a third party, e.g. a charterers’ agent, on behalf of the carrier or master without the knowledge of the Assured, cover is available under the CCC. On the other hand, if the date has been inserted deliberately by the Assured and with full knowledge that the date is not correct, cover is not available. Indeed, such practise might well be considered to amount to wilful misconduct on the part of the Assured, thereby depriving the Assured of cover pursuant to Part III, section 18 of the Additional Covers Terms and Conditions.

 

3 Contract terms that are more onerous than the Hague or Hague-Visby standards
The Hague and Hague-Visby Rules have been adopted by most countries7 and are, therefore, considered to be the industry bench-mark that establishes the standard of duty and responsibility that carriers of goods by sea are expected to achieve in relation to such carriage. However, some countries have not adopted such Rules and apply the Hamburg Rules8 or other local laws compulsorily when ships trade to their jurisdiction. Such alternative Rules or laws may place duties and responsibilities on carriers that are more onerous than those that bind carriers under the Hague or Hague-Visby Rules. The cover that is available under the Standard P&I Cover strikes a balance in the interests of mutuality between the need to give protection only against liabilities that most carriers incur when engaged in the carriage of goods and the need to give protection to Members that are obliged through no fault of their own to incur additional liabilities. Therefore, proviso iii to Rule 34 makes it clear that the Member is insured as of right only against the liabilities that carriers normally incur pursuant to the Hague and Hague-Visby Rules and are covered against liabilities that arise under other terms that are less favourable to the Member only if such terms are of mandatory application and cannot be avoided. Therefore, if the Member were to agree to the application of the Hamburg Rules or other terms voluntarily in circumstances in which they do not apply compulsorily, cover is not available for any ‘additional’ liability that he thereby incurs unless the Association exercises its discretion to extend cover. 

However, some carriers, notably car carriers, are often obliged for commercial reasons to comply with the demands of their customers to agree to terms that place more responsibility on them than that which is imposed by the Hague and Hague-Visby Rules, or to waive certain of the contractual defences, e.g. the fire defence, and/or package or kilo limits that normally apply under such Rules, i.e. thereby assuming liability up to the full value of each car. The CCC can provide protection in such circumstances and although it does not provide cover for the full range of such additional exposure, it does afford cover for certain additional liabilities over and above the Hague/Hague-Visby Rules benchmark up to a cover limit of USD 50 million per event provided that the terms of the relevant contract of carriage and any subsequent amendments have been reviewed and approved by the Association. 

For example, if the Assured has agreed to carry cars for his customer on terms that the usual Hague-Visby Rules fire defence is not to apply, the Assured may be obliged to compensate his customer for the value of any cars that have been damaged by fire during the carriage on board his Ship. Alternatively, the contract may not have excluded the fire defence but the Assured is not able to rely on the defence and has agreed to waive the Hague-Visby Rules package limit. In both cases, cover is available under the CCC, and in the case of the second example, cover is available under the Standard P&I Cover up to the package limit, and under the CCC for the difference between the package limitation figure and the total amount payable.
 

(E) Special exclusions 

1 Delivery of Cargo without production of negotiable Bills of Lading or Document (Sections 17.5.1-2) 

Section 17.A.1 of the Terms and Conditions provides that: 

“In this Section 17A the following words or expressions have the following meanings: 

Bill of Lading:
bill of lading or similar document of title. 

Document:
non-negotiable Bill of Lading, waybill or similar document provided production of such document by the person to whom delivery of the Cargo is made is required by the express terms of that document or the law to which that document or the contract of carriage contained in or evidenced by it, is subject. 

Cargo:
Any lawful and merchantable commodity or goods intended to be or being or having been carried on board a ship pursuant to a contract of carriage but excluding any other equipment, stores, fuel (unless carried as Cargo) or any other substance of whatsoever nature, and shall further exclude waste and residues of Cargo(es) and/or of such equipment, stores, fuels and/or other substances. 

Owner of Cargo:
Any buyer or seller of Cargo, or any holder of the Bill of Lading issued in respect of Cargo”. 

Unless the Association exercises its discretion to extend cover, Rule 34.1 of the Standard P&I Cover clearly excludes liabilities, losses, costs and expenses that arise when Cargo is delivered without production of negotiable Bills of Lading, or when Cargo is delivered without production of a Document when such production is required either by the governing law or by the express terms of the relevant Document. However, cover is available under the CCC in such circumstances provided that such risks are expressly identified in the Insurance Policy and provided that the following terms, conditions, restrictions and limitations apply: 

1 Delivery of Cargo without production of Bill of Lading9

i The Assured has received in an unamended form10 a letter of indemnity (LOI) from either the charterer of the Ship, or the person to whom the Cargo is actually delivered, in the Standard Form of Undertaking that is attached to the insurance policy as Appendix 1.11 This form is based on the form A that has been jointly produced by the clubs that are members of the International Group of P&I Clubs; or 

ii The Assured satisfies the Insurer that he is required by the law (whether this be the law that governs the Bill of Lading or the local law where the cargo is to be delivered) to deliver or relinquish custody or control of the Cargo without production of the Bill of lading; or

 

iii The Assured satisfies the Insurer that although the Cargo has been delivered against a forged, fraudulent, misappropriated of otherwise unauthorised version of the Bill of Lading, the Assured has taken such steps as appear to the Insurer to be reasonable to ascertain that the Cargo was properly delivered to the person entitled to such delivery and is not guilty of wilful misconduct or gross negligence; or

 

iv The Assured satisfies the Insurer that if the Cargo has been delivered without production of the relevant Bill of Lading by an agent or other designated person that is acting on behalf of the Assured, this has been done without the Assured’s approval. 

2 Delivery of Cargo without production of a Document12 

  • The Assured has received in an unamended13 form a letter of indemnity (LOI) from either the charterer of the Ship, or the person to whom the Cargo is actually delivered, in the Standard Form of Undertaking that is attached to the Insurance policy as Appendix 2. This form is based on the form B that has been jointly produced by the clubs that are members of the International Group of P&I clubs; or
  • In the circumstances that are described in ii and iii of the section above that identify the terms, conditions, restrictions and limitations that apply when Cargo has been delivered without production of a Bill of Lading, the Assured satisfies the same requirements.

3 Delivery of Cargo without production of Bill of Lading or Document at a port or place other than stated in the Bill of Lading or Document14

  • The Assured has received in an unamended15 form a letter of indemnity (LOI) from either the charterer of the Ship, or the person to whom the Cargo is actually delivered, in the Standard Form of Undertaking that is attached to the Insurance policy as Appendix 3. This form is based on the form C that has been jointly produced by the clubs that are members of the International Group of P&I Clubs. 

(F) Property

Liabilities incurred by the Assured in respect of physical loss of or damage to property not specified elsewhere in this Section 17 A other than property owned or leased by the Assured or by any company associated with the Assured. (Section 17.A.4.b)

Cover is available under Rules 37 and 39 of the Standard P&I Cover for loss or damage that is caused to fixed or floating objects or to other property. However, such cover is available when loss or damage is caused by the Ship and liabilities are incurred by the Member in direct connection with the operation of the Ship and in respect of the Member’s interest in the Ship.16 However, as has been stated in (B) above, Members sometime act in different capacities and may incur liability for damage to property whilst operating in such a different capacity, in which case, cover is not available under the Standard P&I Cover. 

The CCC can provide cover for liabilities that are incurred in such situations but not when the property that has been lost or damaged consists of containers or other property that is owned or leased by the Assured or any company that is associated with the Assured. For example, cover would be available under the CCC if property that is owned by a third party such as a port installation, warehouse or port equipment such as forklift trucks were to be lost or damaged, or even if a walkway bridge outside the port limits were to be damaged as a result of heavy cargo falling off a truck during the transport by road to its final destination. 

 

(G) Personal injury, death, illness

Liabilities incurred by the Assured in respect of death, personal injury or illness of any person (Section 17.A.4.c)

Cover is available under the Standard P&I Cover for liabilities that arise in relation to the death, personal injury or illness of any person under Rules 27-30 when the liability is incurred by the Member in direct connection with the operation of the Ship and in respect of the Member’s interest in the Ship17 but not when the liability is incurred by the Member when acting in a different capacity. Cover is available under the CCC for any liability that the Assured incurs in such circumstances provided that such liability arises either as a result of the compulsory provisions of the applicable law (e.g. as a result of international convention, local statute or common law principles such as tort) or under a contract the terms of which have been approved by the insurer. Therefore, cover is available for liability that the Assured may incur for injury, illness or death incurred by any third parties such as terminal workers or innocent by-standers in connection with the handling (storing or carriage) of the cargo, or by the Assured’s own crew/personnel. 

Cover is available regardless of the type of injury, illness or death so long as the particular medical condition gives rise to a right of compensation or damages, and is the result of an incident for which the assured is legally liable. 

(H) Environmental damage

Liabilities incurred by the Assured in respect of environmental damage (Section 17.A.4.d)

Whilst cover for environmental damage is available under Rule 38 of the Standard P&I Cover, such cover is restricted in scope and is available only when the liability is incurred by the Member in direct connection with the operation of the Ship and in respect of the Member’s interest in the Ship,18 but not when the liability is incurred by the Member when acting in a different capacity. Consequently, the principle that the CCC ‘follows the Cargo, not the Ship’ is important since the environmental damage may occur not only when the Cargo is on the Ship, but also before it has been loaded, or after it has been discharged so long as it has occurred at a time when the Cargo is within the care, custody and control of the carrier. This is particularly important in the container trade since the carrier is often contractually responsible for the care of the Cargo from ‘door to door’. 

Certain cargoes, particularly hazardous or dangerous cargoes, may, following an incident, cause environmental damage for which the carrier is liable. For example, a container that contains a chemical cargo may be found to be damaged and leaking whilst the container is stored ashore in a container yard either before loading or after discharge. The leak may affect the health of nearby residents who may have to be evacuated from their homes and businesses, and may also cause physical damage to nearby property, and contaminate land thereby rendering it unusable until extensive remedial measures have been taken. Therefore, it is inevitable that extensive measures will have to be taken to protect persons, property and the environment. 

The responsibility for the incident will usually be determined in accordance with the local law as there is no international convention that is currently in place to deal with such situations.19However, if and to the extent that liability is imposed on the carrier that brought the container to that location by third parties that have suffered loss or damage as a result of the incident, cover is available for such liabilities, losses, costs and expenses under the CCC subject to the provisions of the following Special Exclusions in Section 17.A.5.3:
 

Environmental damage and clean up obligations and any consequential loss or damage relating thereto;
The Insurer shall not cover liabilities, losses, costs and expenses in respect of environmental damage and clean up obligations and any consequential loss or damage relating thereto, save insofar as such liabilities, losses, costs or expenses are caused by a sudden, unintended and unexpected escape of oil or any other substance, provided that

a such escape of oil or any other substance does not result from any failure to comply with any national or international statute, rule or regulation; and

b the Assured has submitted to the Insurer a written notice of claim within one year from the expiry of the Period of Insurance in which the event giving rise to the claim(s) occurred. 

The Insurer shall not cover liabilities...save insofar as such liabilities, losses, costs or expenses are caused by a sudden, unintended and unexpected escape of oil or any other substance... 

In accordance with the approach that has been adopted in relation to the Standard P&I Cover, the CCC affords cover for specific incidents that are “…sudden, unintended and unexpected…”Therefore, cover is not available for environmental damage etc., that has been caused by a continuous and possibly gradual escape of oil or any other substance over a period of time. This restriction on the scope of cover is intended primarily to protect the Insurer against liabilities etc., that arise as a result of the escape of oil or any other substance from a land-based dump, site storage or disposal facility. Such liabilities etc., are regarded as being too far removed from those that are encountered during the course of mainstream shipping activities which are the activities for which the CCC has been designed. Therefore, the CCC should be read in conjunction with Rule 62.2 of the Standard P&I Cover and in the light of the guidance to that Rule. 

a  such escape of oil or any other substance does not result from any failure to comply with any national or international statute, rule or regulation;

Even if the liability etc., has arisen as a result of a sudden, unintended and unexpected escape of oil or any other substance, cover is not available if there has been a failure by the Assured to comply with any relevant national or international statute, rule or regulation, which means, in reality, that cover is available under the CCC principally for liabilities that have been incurred under, or pursuant to, a contract the terms of which have either been approved by the Association or are on normal and customary terms. 

b  the Assured has submitted to the Insurer a written notice of claim within one year from the expiry of the Period of Insurance in which the event giving rise to the claim(s) occurred.

This time limit applies to claims that are brought by the Assured against the Insurer but it should be remembered that a different time limit may apply to the claim(s) that are brought by third parties against the Assured. 

It is important that the Assured should give prompt notice of any claim to the Insurer in accordance with the provisions of Section 43 of the Additional Covers Terms and Conditions since the Insurer will need to investigate the claim properly whilst the evidence is still fresh in order to ascertain whether the Assured and/or the Insurer are likely to incur any liability as a result of it. Therefore, the time limit that is specified in this provision does not exclude the obligations that the Assured has under Section 43 but applies in addition to such obligations. 

Notice of the claim must be given within the stated time limit to the Association in writing which includes the giving of notice by e-mail. For example, if the “…event giving rise to the claim…” occurred on 1 May 2015 and the period of insurance ran from 1 June 2014 to 31 May 2015, written notice must be given to the Insurer by 31 May 2016 at the latest. However, as stated above, the Insurer must in any event be given prompt notice of any event that may give rise to a claim and, in the majority of cases, this means immediate notice. 

(I) Indemnities

Liabilities incurred by the Assured to any party to whom the Assured has given an indemnity (Section 17.A.4.e).

Cover is available under Rule 55 for liabilities that are incurred by a Member pursuant to an indemnity that is given to a third party provided that such liability has been incurred by the Member in direct connection with the operation of the Ship and in respect of the Member’s interest in the Ship,20 but not when the liability is incurred by the Member when acting in a different capacity. Furthermore, depending on the extent to which the indemnity purports to impose liability onto the Member, the Association may take the view that they are not terms that are normally encountered by the membership as a whole during the course of normal trading and should not, therefore, be liabilities that should be shared by mutual members. 

However, Members are often obliged due to commercial pressures to give indemnities when acting in one or more of the other capacities that are described above in (A) and, consequently, incur liability in that capacity despite the fact that P&I cover may not be available in such circumstances. For example, P&I cover may not be available if the indemnity:

  • imposes strict liability on the Member; or
  • excludes the contributory negligence of another party; or
  • restricts the right of recourse against another party; or
  • makes the Member liable for the acts of another party; or
  • is enforceable notwithstanding the fact that the liability has been caused by the gross negligence or even the sole negligence of another party; or
  • deprives the Member of the right to limit liability in circumstances in which the Member would have been entitled to do so but for the terms of the indemnity. 

The CCC makes cover available in such circumstances and for a wide range of other contractual liabilities, costs and expenses that are incurred by the Assured in relation to events that have occurred on or off the Ship. However, as in the case of Rule 55, cover is available only if the relevant terms have been pre-approved by the Insurer. The Insurer is fully aware that the Assured’s ability to protect its interests will vary from case to case and that the Assured may be obliged to accept terms and conditions that favour their contracting party, but provided that the terms are either terms that are normal and customary in the trade, or are the best that can be obtained in the particular circumstances, they will usually be approved. However, the Insurer will need to assess and evaluate the terms of each contract separately in order to properly assess the risk that the Assured will be running and the appropriate premium that should be charged in such circumstances. 

For example, cover is normally available under the CCC for specified liabilities to which the owners and operators of LNG Ships may be exposed pursuant to very onerous Conditions of Use (COUs) that are imposed by many LNG terminals around the world. Such COUs seek to make a shipowner contractually responsible for the sole negligence of the terminal and/or to oblige shipowners to waive any rights that they may have to limit their liability in accordance with national or international law. Liability that a Member incurs in such circumstances is excluded under the standard P&I cover, but cover may be available under the CCC.

Indemnities to the Assured’s agents
Members may employ local shipping agencies to organise the handling and transportation of cargoes to or from the ocean vessel and do so as agents for the Member as the ‘door-to-door’ carrier. Therefore, should the agent be held liable by third parties for incidents that have occurred during the land transportation or for other claims relating to the receipt or forwarding of the Cargo (e.g. liability to the port authority for prolonged usage of the port facilities), the agent will look to the Member for an indemnity. Consequently, most contracts that are concluded between the Member and the agent will include terms whereby the Member agrees to indemnify the agent in such circumstances. Depending on the particular circumstances, cover may not be available in such circumstances under the Standard P&I Cover for the reasons explained above. Consequently, cover may be available under the CCC provided that the terms of the relevant contract are either terms that are usual and customary in the trade or have been pre-approved by the insurer. 

Indemnities to Terminal operators and owners
Some Members, particularly those that provide worldwide Ro-Ro vehicle transportation services, will often conclude contracts with terminal and warehouse operators for the storage of cargo before, during or after the ocean carriage. Such contracts will often contain terms that oblige the Member to waive their right of recourse against the terminal or warehouse operator should the cargo be lost or damaged whilst in the custody of the terminal or warehouse operator or alternatively, to indemnify the terminal or warehouse operator in such circumstances. For example, should cars be damaged as a result of a fire that has occurred at a terminal or warehouse, the terminal or warehouse operator may incur liability to the owners of the cars but will then be able to rely on the terms of the contract that has been concluded with the Member to pass such liability on to the Member. For the reasons explained above, cover may not be available under the Standard P&I Cover for such liability but cover may be available under the CCC provided that the terms of the relevant contract are either terms that are usual and customary in the trade or have been pre-approved by the Insurer. 

Members that operate LNG vessels may face similar problems as a result of the onerous non-negotiable provisions of the Conditions of Use (COU) that are imposed by the owners and operators of LNG terminals. Since such extreme risks and liabilities are not shared by the majority of the mutual membership, cover is generally not available under the Standard P&I Cover, but additional cover is available for pollution and other liabilities under the CCC. 

Indemnities to shipyards
Shipbuilding contracts may also contain specific indemnity provisions that limit or restrict the yard’s liability for loss or damage that occurs during its performance of the shipbuilding contract. Such liability may not be available under the Standard P&I Cover for the reasons explained above but cover may be available under the CCC provided that the terms of the shipbuilding contract have either been pre-approved by the Insurer or are terms that are usual and customary in such situations. 

Indemnities to sub-contractors, including rail and trucking companies
Members that engage in multimodal door-to-door services will engage sub-contractors to transport the cargo by road and/or rail and/or river barge and/or by air on any inland transport phase from the inland location at which the cargo has been accepted for carriage until it reaches the inland location where the cargo is to be finally delivered to the receiver. In most circumstances, an incident or event that occurs during the non-sea transit phase will result in the loss of, or in damage to, the cargo. However, it may be that the means by which the cargo is being transported during such phases can be damaged either by the cargo or as a result of other events that occur during the transportation of the cargo, e.g. the vehicle or the relevant transport infrastructure. For example, a train derailment could result in damage to the cargo which could in turn cause damage to the locomotive or rolling trucks and/or the rail infrastructure. Consequently, sub-contractors that are engaged by the Member to perform such services will normally require the terms of the relevant contract to include an obligation on the part of the Member to indemnify them for any liabilities, losses etc., that they may incur whilst performing the services. 

Cover may not be available in such circumstances under the Standard P&I Cover for any liability that the Member may incur to the sub-contractors because of the reasons explained above. However, cover may be available under the CCC provided that the terms of the relevant contract have either been pre-approved by the Insurer or are terms that are usual and customary in such situations. 

(J) Waiver of general average contribution

Losses, costs and expenses incurred or suffered by the Assured as a result of having waived, in the Bill of Lading or Document, his right in whole or in part to claim general average contributions from the other parties to the adventure (Section 17.A.4.f)

Cover is available under Rule 41 of the Standard P&I Cover for the proportion of general average, special charges or salvage which a Member may be entitled to claim from cargo or from any other party to the marine adventure but which is not recoverable solely by reason of a breach by the Member of the contract of carriage. However, cover is not available under the Standard P&I Cover if the Member is unable to recover general average contributions for other reasons. Consequently, should the Member be obliged for commercial reasons to waive his entitlement to receive contribution from another party to the marine adventure (usually the cargo interests), cover is not available under the Standard P&I Cover for the amounts that are thereby not recovered by the Member. However, cover is available under the CCC for such loss.

(K) Irrecoverable general average contribution

The proportion of general average which the Assured may be entitled to claim from cargo interests and which is not legally recoverable solely by breach of contract of carriage when the Cargo has been carried on terms less favourable to the Assured than compulsorily required, or otherwise applicable international conventions regulating carriage of goods by sea (Section 17.A.4.g)

For the reasons that are explained in (J) cover is not available under the Standard P&I Cover if the Member is unable to recover general average contributions from any other party to the marine adventure for reasons other than as a result of a breach by the Member of the contract of carriage. However, such cover is based on the premise that the Member has contracted on terms that provide the Member as carrier with the maximum protection that is allowed by international conventions such as the Hague or Hague-Visby Rules or by any other compulsory legislation. Therefore, if the Member is unable to make recovery purely because he has voluntarily agreed to terms that are less favourable, cover is not available under the Standard P&I Cover pursuant to the provisions of Rule 55. However, cover is available under the CCC for such loss provided that the terms of the relevant contract have been approved by the Insurer in advance.


 

1 See section 6 of the Additional Covers Terms and Conditions.
2 See section 21 of the Additional Covers Terms and Conditions.
3 The ‘Ship’ is defined in Section 1 of Chapter 1 of Part 1 (General Conditions) as: “the ship(s) or other floating structure(s) identified in the Insurance Policy”.
4 This term and the term Consortium Claim are defined in Appendix II, paragraph 5 of the Rules for Ships.
5 See the Guidance to Rule 2.4.
6 For more detailed commentary see (T) of the guidance to Rule 34 and Chapter 3.5 of the Gard
Guidance on Maritime Claims and Insurance.
7 Over 50 countries give effect to the Hague Rules whilst slightly fewer give effect to the Hague-Visby Rules. In general, it can be said that most of the major seafaring countries give effect to the Hague-Visby Rules. However, the matter is complicated by the fact that many countries give effect to amended versions of the Rules as part of their national law, e.g. the USA in relation to the Hague Rules and the United Kingdom in relation to the Hague-Visby Rules. Other countries give effect to some aspects of the Hague or Hague-Visby Rules and some aspects of the Hamburg Rules (e.g. China) whilst other countries do so only when trading with like-minded countries (e.g. the Nordic countries).
8 Currently, less than 30 countries give effect to the Hamburg Rules but is must be appreciated that many of those countries are land-locked countries.
9 See the Guidance to Rule 34.1 proviso i.
10 If such a form is adapted to provide for counter-signature in the manner that is adopted in the double letter versions of the forms that have been produced by the clubs that are parties to the International Group of P&I clubs (e.g. Form AA), this is not considered to be an amendment for these purposes.
11 For more detailed commentary on LOI see Chapter 20 of the Gard Guidance on Maritime Claims and Insurance.
12 See the Guidance to Rule 34.1 proviso ii.
13 See footnote 7.
14 See the Guidance to Rule 34.1 proviso iv.
15 See footnote 7.
16 See the Guidance to Rule 2.4.
17 See the Guidance to Rule 2.4.
18 See the Guidance to Rule 2.4.
19 The International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea, 2010 (the 2010 HNS Convention) is not yet in force and will, in any event, apply only from the time when the HNS enters the Ship's equipment or passes its rail on loading, and ends when the HNS ceases to be present in any part of the ship's equipment or passes its rail on discharge.
20 See the Guidance to Rule 2.4.