Protection and Indemnity Insurance

P & I Insurance covers the ship owners against their liability. The requirement of every (port)/ ship is required to have this cover prior to entering the ports for loading &/or discharging. It covers most of the risks, which are historically not written under Marina Hull Insurance.

In basic terms, Protection and Indemnity insurance, or "P&I" as it is usually called, is a ship owner's insurance cover for legal liabilities to third parties. "Third parties are any person, apart from the ship-owner himself, who may have a legal or contractual claim against the ship. P&I insurance is usually arranged by entering the ship into a mutual insurance association, usually referred to as a club. Ship-owners are members of such clubs. Legal liability is decided in accordance with the laws of the country where an accident takes place. The P&I insurance cover for contractual liability which is agreed at the time the owner requests insurance cover from the club and is usually in accordance with the owner's responsibility under crew contracts or special terms relating to the trading pattern of the vessel.


The word protection simply means that the insurance also covers assistance when a ship is involved in an accident and the ship-owner and his Master need help. Often the club's early intervention and assistance will help to head off problems and serve to protect the ship-owner from inflated claims.

P&I insurance is an indemnity type of insurance, which means the ship-owner (or member of the club) must demonstrate his loss before the club will pay out (or indemnify him) under the terms of the insurance policy. It is important to bear in mind that the club never assumes the owner's liability; therefore technically the owner (or member) is always responsible for payments (the "pay to be paid" principle). In practice, the club takes over the business of handling claims and ensuring that payments are correctly made.


The P&I cover may include liability for collisions ("RDC"), for example when the member's ship is in collision with another ship, or when the entered ship strikes a fixed object, i.e. a quay, dock or buoy ("FFO"). However, collision and striking liabilities are often included in the ship's hull and machinery cover, for instance under the Norwegian Insurance Plan. Therefore, it is important for a Master to ascertain whether his vessel's collision insurance (collision between ships) and striking insurance (i.e. when a ship strikes a fixed or floating object which is not another ship) is covered under his P&I policy or under his hull and machinery policy. To be safe, it is always wise for a Master to inform the P&I club, or the club correspondent, if his vessel is in collision with another vessel or a fixed object.


P&I insurance covers an owner's liability for all deaths, personal injuries and illnesses which occur on board, including death or injury to crew, passengers, stevedores, pilots and visitors to the ship.


P&I insurance also covers a shipowner's liability to pay for the costs of repatriating crew members who become sick or are injured on board. The insurance also covers the crew's hospital bills and costs of sending replacement personnel to the ship if necessary.


P&I insurance also covers the owner's liability for loss of crew belongings in cases of shipwreck or fire on board. The cover only applies to items which are deemed to be reasonable for any crew member to have with him on board. A crew member travelling with unusually expensive items, such as laptop computers, gold watches etc should make sure that he has such items separately insured.


One of the major functions of Protection and Indemnity insurance is to cover a shipowner, or the charterer of a ship, for liability for loss of, or damage to, cargo if there has been a breach of the contract?of carriage. This breach of contract usually means that something has happened to the cargo while it was on board the ship or being loaded or discharged, and for which the owner or charterer can be held responsible, i.e. shortage or damage to the cargo. Therefore, if a Bill of Lading is signed and states that 10,000 sacks of potatoes are loaded and only 9,500 are discharged - then the ship (the owner or charterer, or both) may be held liable for the loss. Usually, the cargo insurers will pay the person or company who owns the cargo (the receiver) for the costs of loss or damage to that cargo. The cargo underwriters will then seek to recover their losses from the shipowner or charterer. The P&I club will usually take over the handling of such claims on behalf of the assured. This is one of the reasons why evidence in the form of documentation, copies of the log book, surveys of damaged cargo, copies of tally books, dated photos of loading in the rain etc are very important in establishing the exact reason for the damage. There are certain defences open to the shipowner, such as being able to establish that the packaging of the cargo was not good enough to protect it during transportation. These defences are dealt with in more detail later in this publication. (See the exculpatory clauses in the Hague Rules on page 21.


Other risks covered include liability for stowaways, liability for oil pollution and other types of pollution and legal liability for wreck removal if the ship sinks and is blocking free navigation for other vessels. In short, P&I insurance is a very comprehensive type of insurance cover which makes it easier for a shipowner or charterer to trade in international shipping transportation. P&I is as important to a prudent shipowner as his Hull and Machinery insurance cover. A summary of the main risks covered is to be found at the back of this booklet.


P&I is a special type of Marina insurance. It is a liability insurance that a prudent shipowner, manager or charterer needs, particularly if the ship is employed in international trade. P&I insurance covers a shipowner or charterer for liabilities and losses in direct connection with the operation of the ship. We often use the term "third party insurance" to explain P&I.