Blog Question: Interpretation of ITC Hulls Ports Risks Clause
I recently received this question which marks my 150th post to this blog:
Dear Mr Allan Manning
I want your interpretation of clause 9.1.1 in ITC Port risks clause ( 20-7-87 ) which reads as under :
‘loss of or damage to any fixed or movable object or property or other thing or interest whatsover, other than the Vessel arising from anycause whatsoever in so far as such loss or damage is not covered by clause 7……’ [emphasis mine]
My question is : the word “other than the Vessel ” in the above paragraph, does it refers to Insured’s Vessel OR any Third party vessel ?
M.A. Niranjan” [email provided]
First up, I would explain that “ITC” stands for Institute Time Clauses. In the 19th Century, Lloyd’s of London and the Institute of London Underwriters, developed standardised clauses for use in marine insurance. These clauses have been updated and maintained ever since and are known as the Institute Clauses. These clauses cover all areas of marine insurance including but not limited to marine hull, including machinery, and cargo insurance.
The Institute Time Clauses, which afford coverage for a specific period, (usually 12 months) are the most important clauses in marine hull insurance policies. Depending on the nature and degree of risks, there are three categories of ITC:
- Institute Time Clauses (Hull), which provide maximum coverage (i.e. perils and other losses and expenses covered);
- Institute Time Clauses (free partial average), which provide similar coverage to that of the Hull’s clauses, but excludes coverage on machinery damages, and
- Institute Time Clauses (total loss only), which provide coverage only in the event of a total loss. This clause is usually extended to old vessels.
The Institute Time Clauses Hulls – Port Risks Clauses covers many more types of liability than would be normal in the usual hull and machinery clauses and is rather a
combination of a hull policy and protection and indemnity insurance (known as P & I) policy. As P & I cover is only available for larger vessels, it is essentially concerned with small vessels such as harbour tugs, launches, pilot vessels, tenders and the like, which are not seagoing and carry no cargo and are unlikely to do so because of their small tonnage, are unlikely to incur large liabilities to other parties.
For those unfamilar with marine insurance I would explain that protection and indemnity insurance, (“P&I insurance”), is a form of marine insurance provided by a P&I club. A P&I club is a mutual (i.e. co-operative) insurance association that provides cover for its members, who will typically be ship-owners, ship-operators or demise charterers. Unlike a marine insurance company, which is answerable to its shareholders, a P&I club is the servant only of its members.
While I have handled marine claims since 1981, I thought it best to double check my answer to this specific question with my colleague, Associate Professor Neil Myhre a very experienced ex-marine underwriter now Chief Knowledge Manager at LMI Group.
Neil advises that:
ITC Port Risks (20/7/87) refers all the way through to the “Vessel” (capitalised) to describe the insured vessel under the policy. See for example clause 1 Navigation, 2 Termination, 6 Pollution Hazard and so on.
Clause 7.1 – 7.1.3 of ITC Hulls Port Risks deals with collision liability i.e. the liability of the subject Vessel for loss or damage caused to any other “vessel” (note: not capitalised).
Clause 9 deals with P&I coverage i.e. third party liability other than that arising from Collisions as outlined in Clause 7.
Clause 9.1.1. extends the coverage for third party liability to situations not addressed by Clause 7. The reference to “Vessel” is therefore in relation to the subject matter insured – the insured’s own vessel (i.e. it is excluding from the coverage provided by Clause 9 damage to the insured’s own vessel, insured separately for the perils listed in Clause 4). If it referred to another vessel it would contradict the cover provided by clause 7, and in any case is not capitalized in the printed Policy form.
I hope this helps.
Mr Niranjan replied:
Thank you so much…