Hull. Machinery. Marine cargo. P&I. Vessel pollution coverage. These are just a few in the long list of vessel insurance options out there, and it can be hard to know what you need and why you need it. Let’s walk through a basic overview of two types of vessel insurance and why they’re important.
Protection & Indemnity Coverage
Protection and Indemnity (P&I) insurance provides coverage to commercial ship operators, owners, and charterers for practically all maritime liability risks associated with the operation of a vessel.
P&I insurance policies are flexible — underwriters tailor each one with specific terms and conditions that take into consideration the nature of the risk with details such as:
- Type of business and purpose of the vessel
- Type and condition of the vessel
- Number of humans on board (crew, passengers, etc.)
- Type of cargo
- Navigation limits
- Claims history
- Amount of coverage requested by the insured
P&I offers wide-reaching coverage and is designed to complement a vessel's hull and machinery insurance and related policies. A typical P&I policy covers:
- Loss of life, injury, and illness of crew, passengers, and third parties (excluding liabilities under statutory compensation acts such as workers' compensation)
- Damage, loss, or shortage of cargo on board the vessel
- Damage to piers, docks, jetties, and other fixed floating objects
- Wreck removal costs
- Collision liability
- Fines and penalties
With P&I policies, insurers are not obligated to pay claims unless the insured is found at fault and on the hook financially.
Vessel Pollution Coverage
Pollution insurance provides comprehensive coverage for both the vessel owner and operator in the event, or threat, of spills.
If a spill occurs, shipowners and operators are exposed to a number of potential liabilities, such as:
- Clean Up
- Damages to the environment and natural resources
- Damages to property
- Loss of revenue and profit by third parties
- Civil penalties
- Criminal fines
- Legal Fees
A comprehensive marine pollution insurance policy is the best way for owners and operators to protect themselves from the damage (both literal and financial) spills can cause.
P&I Pollution Buy-Back Endorsement
Although the above coverages are different, they are often tied together in the event of an incident. A common misconception is the P&I pollution Buy-Back endorsement covers the same exposures as the vessel liability pollution form. In reality, it was created to complement the vessel liability pollution form.
In 1976, The American Institute developed a solution to provide coordinated coverage with a newly created vessel pollution liability policy form: The American Institute Pollution Exclusion Clause and the pollution Buy-Back endorsement. The Buy-Back provides coverage for some exposures that were excluded in both the P&I and the vessel pollution policy form.
What does the Buy-Back actually cover? It covers bodily injury arising from a pollution event, along with loss or damage to cargoes (whether on an insured vessel, on another vessel, ashore, or due to contamination from pumping). In comparison, the vessel pollution form provides coverage for spills and threats of spills from vessels, including: clean up and removal costs, third-party property damage, assessment of and damage to natural resources, loss of revenues and profits by third parties, loss of public services, investigation and defense, advertising, civil and criminal fines/penalties, cleaning of decks and surfaces, property damage ashore, international conventions, and state law liabilities.
This simplistic comparison of P&I and vessel pollution coverage illustrates how vastly different they are, but also how they can work together to form a more comprehensive protection for the vessel owner in the case of a pollution event.
The Final Takeaway
Vessel pollution insurance is very niche and focused on one specific type of risk, whereas P&I insurance covers a broader scope of liability. Vessel owners and operators need the additional protection of pollution insurance to ensure they are as protected from as much risk as possible.
Learn more about pollution insurance with Safe Harbor. Our personalized approach and innovative spirit means that we can be more agile than any other carrier in the vessel pollution space, and offer the broadest coverage form in the industry—all at a competitive price.