Ask the Editor

In the last Claims Review we offered you the opportunity to “Ask the Editor”. Here are a some of the questions that we have been asked. Please continue to send in your questions – we are enjoying them. You can email us at askeditorCR@thomasmiller.com

Why should a manager be named as a co-assured on the owner’s insurance policies?

It is a condition in ITIC policies for ship mangers to be co-assured on the owners’ hull and P&I policies. This is because ship managers are deemed to be the operator in many jurisdictions around the world. By being named on both the hull and P&I policies, the ship manager is taking advantage of the cover that has always been available to the ship owner in the past when the technical function of managing the ship was still in house. The insurer is not offering any more cover by including the ship manager as a co-assured just because the ship owner has simply sub-contracted some of the functions they used to perform themselves to a third party.

Ship managers need to be co-assured because they are paid a limited fee for the management of the ship compared to the value of the ship and/or the hire or freight earned. The economics of ship management are based on a management fee structure that does not envisage the manager purchasing separate P&I and hull and machinery cover. The costs to the ship manager of obtaining separate insurance to cover his interests up to the full value of the ship (for hull risks) and for all liabilities that might possibly be passed to him (for P&I risks) are prohibitive and unnecessary - especially as this cover is available to the owners for no additional cost as part of the their standard marine insurances.

Further, under a BIMCO Shipman 98 and/or 2009 contract, the owner provides an indemnity to the manager. Potentially any subrogated claim from a hull or P&I underwriter that was not caused by the fault of ship manager would be reimbursable by the owner via this indemnity. Therefore it is certainly in the owners best interest to have their managers as co-assureds on their policies.

It is important to remember that the cover provided by ITIC is different to the cover under the hull and P&I policies. ITIC cover is for when the manager has caused a loss to their principal due to negligent performance of the management services, whereas the hull and P&I cover provides protection where the manager has a liability as the owner/operator of the vessel.

Finally, there are different types of co-assurance and many insurers and Clubs have their own names for it – coassureds, joint assureds, affiliate insureds, misdirected arrow insureds. The manager should be a full co-assured, meaning they are named on the policy and their rights and obligations under the contract are separate from the owners. If any managers are unsure what type of co-assurance they have they should check with their insurance brokers.

Have ITIC ever used shipbroker’s terms and conditionsto defend a claim?

The simple answer is yes.

We have found that it is generally accepted that shipbrokers, like most other service providers, do business subject to terms and conditions. Brokers facing claims have benefited from clauses that limit both the scope and amount of their liability. ITIC’s terms and conditions for shipbrokers can be found at https://www.itic-insure.com/knowledge/itics-terms-andconditions-for-ship-brokers-104594/

ITIC’s recommended post fixture notices setting out the need for principals to use the designated email addresses have been very useful in dealing with situations where important documentation has been misaddressed. See https://www.itic-insure.com/knowledge/post-fixtureclause-for-shipbrokers-130662/