P&I Clubs' Non-Poolable COVID-19 Sublimits

container ship aerial view
Fresh off the heels of the 2021-22 P&I renewal, it is almost difficult to remember what the world was like just twelve short months ago.

The world has changed, and with it the “new normal” has been forced upon all aspects of everyone’s daily life, including the world’s commercially trading vessels and therefor so too the International Group (IG) of P&I Clubs. The mutual Club system has weathered various catastrophic events dating back to its inception in 1855, though this year will prove to be a defining moment for the Clubs and how they will continue to assist their members into the future.

While the vast majority of commercial (re)insurers have mandated pandemic, or even specifically COVID-19, exclusions in their policies, the Clubs have been able to maintain cover for their mutually entered members. One might argue this is possible via good luck given the two-year IG reinsurance placement agreed back in early 2020, but regardless it is a positive for the shipping industry during a time of increased uncertainty and pricing across the global insurance marketplace.

Though the mutual terms and conditions have not changed for now, one aspect of cover that is crucial for many ship owners/operators is the non-poolable extended covers that each Club offers via their own individual reinsurance programs. Given that the approach by each Club varies based on how much of this risk they self-insure versus pass along to the commercial reinsurance market, it is very interesting to see how each Club approaches both the limits they are willing to offer and for which non-poolable extended covers. As you will see below, all Clubs’ cover is centered around the LMA5395 COVID-19 exclusion, which is being required by most, if not all, reinsurance markets. We have set out below each Club’s non-poolable offering related to COVID-19 entering the 2021-22 policy year along with some further analysis and commentary:

Club Sublimit Terms and Conditions
American Club $5,000,000 per vessel per event Notwithstanding the foregoing, a Limit of Liability of US$5,000,000 per vessel per event shall be applicable to any and all liabilities, costs, claims, fines, penalties, losses, damages or expenses directly arising from the following:
1) the transmission or alleged transmission of: a) Coronavirus disease (COVID-19);
b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or
c) any mutation or variation of SARS-CoV-2 or COVID-19; or from any fear or threat of a), b) or c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for a), b) or c) above;
3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of a), b) or c) above or the fear or the threat thereof. It is understood and agreed that all claims made against the Member and arising from the same cause shall be deemed as one event.
Britannia

FD&D: $2,000,000 per event & $4,000,000 in the aggregate

CLL: $5,000,000 per event and $10,000,000 in the aggregate

Additional Insurances: $3,000,000 per event & $6,000,000 in the aggregate

The Association's reinsurance arrangements for 2021/22 governing:
-Freight, Demurrage & Defence (Class 6)
-Charterer's Liability Insurance
-Additional Insurances
are to be subject to the following two market exclusions:
-LMA5395 Coronavirus Exclusion
-LMA5403 Marine Cyber Endorsement
and these two exclusions will be incorporated in the above insurances with effect from noon GMT on 20 February 2021
Notwithstanding the incorporation of the LMA5395 Coronavirus Exclusion, for the 2021/22 Policy Year the Association has agreed specially to extend cover in respect of those liabilities, losses, cost and expenses that would otherwise cease to be recoverable by virtue of the exclusion up to the following limits per Member per event:
-Freight, Demurrage & Defence (Class 6) USD 2,000,000
-Charterers’ Liability Insurance USD 5,000,000
-Additional Insurances USD 3,000,000
This special extension of cover shall be subject to an Annual Aggregate Limit (AAL) per Member per annum equal to twice the relevant limit of cover stated above.
No additional premium will be levied in respect of this special extension for the 2021/22 policy year.
Gard $10,000,000 per Ship or Vessel per event but only offered for certain fixed premium covers noted in the next column. LMA5395 Exclusionary language to apply subject to the below clause for the following categories of fixed premium covers offered by the Association:
• Comprehensive Charterers’ liability cover
• P&I for Mobile Offshore Units (MOUs)
• Crew cover
• Comprehensive Carriers cover
• Extended Crew Cover
• Comprehensive general liability cover for offshore and specialist vessels (CGL)
• Comprehensive general liability cover for MOUs (CGL)
• Divers’ cover
SPECIAL COVID-19 EXTENSION CLAUSE
The contract of insurance evidenced by this Certificate of Entry/Cover Note/Insurance Policy is extended to include liabilities, losses, costs and expenses falling within the scope of cover pursuant to terms of entry agreed as specified in this Certificate of Entry/Cover Note/Insurance Policy but for the Coronavirus Exclusion clause. The Association’s liability under this COVID-19 EXTENSION CLAUSE shall be limited to USD 10 million per Ship or Vessel per event. All other terms, conditions and limitations of the insurance remain the same.
Notes: Not offered for Extended Passenger Liability cover. No additional premium will be levied in respect of the Special Covid-19 Extension for the 2021 policy year.
Japan Unfortunately, at the time of publishing information was still outstanding from the Club.
London Club

CL & Fixed Covers: Up to $1m any one accident or occurrence arising out of one event

Other non-poolable covers: Exclusion to apply in its entirety

There shall be no recovery in respect of:
3.2.1 any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of:
3.2.1.1 Coronavirus disease (COVID-19);
3.2.1.2 Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or
3.2.1.3 any mutation or variation of SARS-CoV-2; or
3.2.1.4 from any fear or threat of 3.2.1.1, 3.2.1.2 or 3.2.1.3 above; 3.2.2 any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for 3.2.1.1, 3.2.1.2 or 3.2.1.3 above;
3.2.3 any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of 3.2.1.1, 3.2.1.2 or 3.2.1.3 above or the fear or the threat thereof in excess of USD1 Million (inclusive of fees, costs and expenses) any one accident or occurrence or series of accidents or occurrences arising out of one event.
North CLL & Fixed Entries $5,000,000 each vessel each event and in the aggregate per fleet per annum For the 2021/2022 North made the decision that, notwithstanding the new LMA5395 Covid exclusion which now applies to CLL and Fixed Entries, it will provide cover to a limited extent. In the 2021 Policy Year, the exclusion will not apply until the total of all liabilities, losses, costs and expenses exceed US$5M each vessel each event, but always limited to the maximum amount in the aggregate per Fleet of US$5M per annum.
Shipowners

No sublimit applicable to fixed premium business written on As per Rules conditions.

$10,000,000 sublimit for Plain language policies:
-Pax Vessel Liability for small craft
-Fishing vessel liability
-Yacht liability
-Autonomous vessel liability

Cover in any event is excluded for claims arising from any one incident for:
1) any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of:
a) Coronavirus disease (COVID-19);
b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or
c) any mutation or variation of SARS-CoV-2; or from any fear or threat of a), b) or c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for a), b) or c) above;
3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of a), b) or c) above or the fear or the threat thereof. All other terms, conditions and limitations of the insurance remain the same.
*Notes: Potential to introduce an exclusion or sublimit if the risk determines for policies with no sublimit.
Skuld $10,000,000 any one event Coronavirus Exclusion Clause
Liabilities, losses, damages, costs and expenses in excess of USD10,000,000 for one event
1) directly arising from the transmission or alleged transmission of:
a) Coronavirus disease (COVID-19);
b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or
c) any mutation or variation of SARS-CoV-2; or from any fear or threat of a), b) or c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for a), b) or c) above;
3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of a), b) or c) above or the fear or the threat thereof.

*Notes: For the 2021/22 policy year, all of the Club’s non-mutual covers exclude cover in excess of USD10m for all loss and liabilities arising from coronavirus and other diseases as listed in the Coronavirus Exclusion Clause.

Skuld’s reinsurance renewal for the non-mutual covers is 1 January 2022 and we do not anticipate any further changes to the sub-limit for coronavirus which is currently in place prior to that. Discussions for the renewal of both Skuld’s own reinsurance and the International Group’s reinsurance will no doubt commence early and any changes in the cover available will be communicated promptly.

Standard

TCL/DTH & Blue Water Pool Plus Business - $5,000,000 any one event

Standard Offshore Rules (SOR) - $5,000,000 any one event with ability to offer higher limits

Standard Fixed - $5,000,000 fleet annual aggregate

Claims under the SPECIAL RISKS COVERED section of this certificate of entry (other than the P&I war risks clause 2020 and the Bio-chemical risks inclusion clause 2020) in respect of:
(1) any loss, damage, liability, cost or expense directly arising from the transmission or alleged transmission of:
a) Coronavirus disease (COVID-19);
b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-Cov-2); or
c) any mutation or variation of SARS-CoV-2;
or from any fear or threat of a), b) or c) above.
(2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for a), b) or c) above;
(3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of a), b) or c) above or the fear or the threat thereof.
*Notes: Blue Water Pool Plus Business includes cover for through transport, contractual extension, cargo deviation, etc. SOR higher limits would need to be discussed with the Club's offshore division.
Steamship Maximum $3,000,000 any one accident or occurrence This clause shall be paramount and shall override any other provision(s) in the terms of entry inconsistent therewith.
There shall be no recovery in respect of:
1) any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of:
a) Coronavirus disease (COVID-19);
b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or
c) any mutation or variation of SARS-CoV-2; or from any fear or threat of a), b) or c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for a), b) or c) above;
3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of a), b) or c) above or the fear or the threat thereof.
4) This exclusion shall not apply in relation to liabilities not exceeding US$3 million in total any one accident or occurrence.
Swedish $5,000,000 per ship or vessel per event This insurance excludes coverage for:
1) any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of:
a) Coronavirus disease (COVID-19);
b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or
c) any mutation or variation of SARS-CoV-2; or from any fear or threat of a), b) or c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for a), b) or c) above;
3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of a), b) or c) above or the fear or the threat thereof. All other terms, conditions and limitations of the insurance remain the same. The Association will offer clients a special extension of cover, the "Corona Virus Extension Cover". The extension cover shall comprise liabilities, losses, costs and expenses falling within the scope of cover agreed but for the presence of the Coronavirus Exclusion Clause (LMA5395 above). The extension cover shall be subject to a sub-limit of USD 5 million per ship or vessel per event and will be made available through insertion of a clause in the insurance contracts.
UK Club Buyback maximum limit of $5,000,000 any one event.

Coronavirus Inclusion clause
Notwithstanding below, This policy includes liabilities, costs, and expenses incurred by the Assured, which would otherwise be excluded by the Coronavirus Exclusion Clause LMA5395, when and to the extent that they arise in connection with the operation of the entered ship.

Coronavirus Exclusion Clause LMA5395
This insurance excludes coverage for:
1) any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of
a. Coronavirus disease (COVID-19)
b. Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2) or
c. any mutation or variation of SARS-CoV-2; or from any fear or threat of (a), (b) or (c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for (a), (b) or (c) above;
3) any liability for or loss, cost, or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of (a), (b) or (c) above or the fear or the threat thereof. All other terms, conditions and limitations of the insurance remain the same.

LIMITS
The following sub-limit applies to the named risks:
Coronavirus Inclusion Clause: $US$5,000,000 any one event

*Notes: The buyback would only be offered to non-pool risks where there is a people exposure. In addition, they will consider each risk, so that the buyback is not a given. There could be a scenario where they decline to provide the cover, or offer a reduced limit and or charge an AP. It depends upon the exposure.
West $3,000,000 any one event Coronavirus Exclusion Clause LMA5395
This insurance excludes coverage for:
1) any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of
a. Coronavirus disease (COVID-19)
b. Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2) or
c. any mutation or variation of SARS-CoV-2; or from any fear or threat of (a), (b) or (c) above;
2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for (a), (b) or (c) above;
3) any liability for or loss, cost, or expense arising out of any loss of revenue, loss of hire, business interruption, loss of market, delay or any indirect financial loss, howsoever described, as a result of any of (a), (b) or (c) above or the fear or the threat thereof.
All other terms, conditions and limitations of the insurance remain the same.

 

In conclusion, though some brokers tend to view the various Clubs in the same light as it relates to the terms, conditions and limits of cover being offered to their members, it is quite apparent that this is not the case as it relates to non-poolable extended covers. This should be a key consideration for every shipowner/operator to ensure that the Club they are entered with offers cover commensurate with their unique operational exposure. As the world transitions beyond a period of mass vaccinations and the subsequent reduced spread of COVID-19, it will be interesting to see how each Club analyzes their non-poolable extended covers and COVID-19 related claims, as well as how they match up against their fellow Clubs leading into the 2022 renewal.

Please contact your local P.L. Ferrari / Lockton representative with any questions or to discuss this topic further.

 

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