Christian Ott’s recent opinion piece in TradeWinds raises some typically good points and identifies real challenges facing protection and indemnity clubs and their members, not least around the rigorous environmental standards.
In particular, emission control areas (ECAs) and the approaching 2020 global sulphur cap on fuel place significant extra demands on vessels and crew, leaving less room for error, and raising the stakes if things go wrong.
There are many possible reasons why a breach of sulphur regulations may occur. Examples include low-sulphur fuel being contaminated by high-sulphur fuel, or fuel thought to be compliant giving a different test result when authorities take samples.
P&I insurance provides broad cover for ship-source pollution liabilities — including fines. Oil pollution is probably the most familiar scenario and those claims can be huge. But there is also cover for pollution caused by cargoes onboard ships, hazardous and noxious substances, garbage, sewage, ballast or bilge water and exhaust emissions.
P&I clubs cover, as of right, certain fines or penalties that are imposed on a member. The rules that provide cover for this are designed to strike a balance between infringements that are accidental and those that should have been avoided by the shipowner. There is no distinction here between oil pollution or other kinds of pollutants, such as exhaust emissions that cause air pollution. The key point is that the discharge or escape of the pollutant must be accidental.
What is accidental?
An example of accidental pollution would be when it is caused by a collision or when the master or crew had no intention to release the substance, for example, when it was the result of a leak. Another example could be an inadvertent act that has resulted in the contamination of a clean substance by a polluting substance, and the contaminated substance is then intentionally released from the ship but without knowledge of the contamination on the part of the master or crew.
In contrast, an escape or discharge would not be considered accidental when, for example, the pollutant has escaped as a result of technical malfunction due to poor maintenance or violations of Marpol.
When considering the issue of whether a release was "accidental", we may look at whether the member took reasonable steps to avoid the event that gave rise to the fine or penalty. This, of course, makes every case different, so each must be decided on its own merits, and this requires an investigation into the underlying facts before the cover position can be decided. Cover for air pollution fines is, therefore, less predictable than some other risks, as the circumstances are too varied for it to be definitively categorised as inside or outside cover.
Change in the air
The way in which air pollution fines are imposed is certainly changing. The current ECAs are probably more predictable than most when it comes to fines and enforcement. Once the global sulphur cap comes into effect on 1 January 2020, shipowners may find they face a wider range of responses to violations.
As well as challenging P&I clubs to reconsider how they cover air pollution fines, we also think there is a need to work with authorities to ensure fair and consistent application of emissions regulations. If the enforcement of sulphur limits becomes clearer and more predictable, it will help shipowners to comply and P&I clubs to deal with breaches.
We can see there are arguments for addressing the line for P&I cover in pollution fines cases, and discussions are now taking place between members of the International Group of Protection & Indemnity Clubs to get more clarity on these rules. Gard is happy to be tested on these points, and we welcome feedback from owners on how they feel the P&I product needs to change, on this and other areas.