Introductory question: Does the present Covid-19 pandemic of itself prejudice Club cover?
The short answer is “no”.
However, Clubs do require that the entered vessel is and remains classed, and this could be problematic where certification is about to expire and renewal is likely to be delayed due to Covid-19.
Fortunately, a number of flag states have already recognised the demand to apply a reasonable and pragmatic approach, including agreeing to extend the period of validity for ships’ certification; classification societies have similarly agreed to extend the validity of certification where it is not possible to complete the necessary surveys. Initially, the permitted allowable extension is in general 3 months. In case ships are still unable to complete the necessary surveys and audits within this period, discussions are underway to see if and how certificates can be extended further whilst ensuring safety standards are maintained.
A CREW:
1 Due to inability to rotate, crew have to remain on board – contracts, certification, “overlap” wages
This is an issue we are seeing with increased frequency as more ports refuse to allow crew changes, or in other cases where crew on board are simply unable to leave or new crew to join due to Covid-19 related border or airline restrictions. A number of issues can arise:
- Expiry of seafarer’s contract: contract length varies, although under the Maritime Labour Convention (“MLC”) should not exceed 12 months. However, the ITF have stated (E-Circular 087 dated 17 March 2020) that until 16 April 2020, it will not challenge extensions of up to one month, even where they exceed the MLC period or other periods allowable under ITF approved collective bargaining agreements, provided individual seafarers consent to such an extension. A number of States have also said that they will permit extensions.
- Expiry of Seafarer certificates and medical certificates: most administrations, including most of the major seafarer supply states (and flag states that issue endorsements), have announced an extension of certificate validity for periods between 1 and 6 months.
- Expiry of P&I Club enhanced PEMEs: under our scheme these have a validity period of 12 months; however, we have agreed with our clinics that they can give a 3 month extension, with further 3 month extensions thereafter to a maximum of 12 months beyond the original 12 month period of validity.
- “Overlap” wages; an owner may find itself liable for wages of both a crew member who has to remain on board and for the intended replacement who is about to join or has joined the vessel. Such wages would not fall within Club cover.
Finally, it is worth noting that the IMO, in its preliminary list of recommendations for governments and relevant national authorities (circular letter 4204/Add 6, 27 March 2020) includes recommendations to designate professional seafarers and marine personnel as “key workers”, to grant them exemptions from national travel or movement restrictions to facilitate their joining or leaving ships, and to permit them to disembark ships in port and transit through their territory for the purposes of crew changes and repatriation. We shall report developments.
2 Crew member has to go through a period of isolation ashore before joining/ after disembarkation
It is unlikely that there would be cover for accommodation, food or other costs, nor for wages during this period, these costs being of an operational nature even where the period is imposed by an order or regulation of the border, port or other authority. There might be exceptional cases where cover might be available – for instance if the crew member has contracted the virus during his service, and the period of isolation is a necessary part of his repatriation or of his medical treatment.
3 Crew are tested prior to joining, or whilst on board the vessel
The cost of such precautionary testing will not fall within Club cover, whether testing is performed prior to joining or whilst on board. However, where a crew member falls ill during service, such testing might fall within cover if it forms part of that crew member’s medical treatment.
4 Crew member showing symptoms is isolated on board the vessel
If this is part of quarantine or pursuant to a public health order, in principle cover would be available; however, we would only cover additional costs i.e. costs in excess of normal operating costs. Since the cost of food, board etc on board would have been incurred anyway, it is unlikely that any of these costs would be covered. As to what constitutes “quarantine” for the purpose of our Rules, please see C2 below.
5 Crew member showing symptoms is removed from the vessel and isolated ashore
We would cover the additional costs involved (which are likely to be the cost of accommodation, food, and travel, but not wages) provided that this is part of quarantine or pursuant to a public health order (see Rule 25* xii, and section C below as to quarantine).
6 Crew member showing symptoms is repatriated
If the crew member is ill and this necessitates repatriation, then repatriation expenses are likely to be covered under Rule 25 ii c (i)
7 Crew member falls ill whilst on board the vessel
In this situation, the following will be covered by the Club as with any other illness or injury:
- Any legal liability on the part of the Member for damages or compensation to that crew member, including any maintenance and cure obligations for the illness, injury (or death) (Rule 25 ii a)
- Reasonable hospital and medical costs (Rule 25 ii b)
- Costs of repatriating that crew member (including periods of quarantine or isolation if that is an integral and necessary part of the repatriation process) (Rule 25 ii c)
- Port and deviation expenses (fuel, insurance, crew wages, stores, provisions and port charges) to the extent that they exceed ordinary operating costs and provided they are solely and reasonably incurred in securing necessary treatment for that crew member (Rule 25 ii g)
- Certain crew substitution expenses necessarily incurred to replace the sick crew member (Rule 25 ii d).
8 Crew member falls ill after disembarking (or prior to joining) the vessel
If the disembarking crew member contracted the illness whilst on board, then the answer will be the same as A7 above. However, where Covid-19 is actually contracted on the journey prior to joining/ after disembarking, similar cover will apply but only if the crew member was or remained under contract to the owner at the time of infection. In most cases, the crew will so remain under contract, but ultimately this will depend upon the terms and scope of his employment contract and on any applicable laws or rules in the relevant jurisdiction.
9 Vessel diverts to obtain medical treatment ashore for infected crew member
The Club will cover certain port and deviation expenses, to the extent that they exceed ordinary operating costs and provided they are solely and reasonably incurred in securing necessary treatment for that crew member (see A7 above).
10 What about the 120/240 day limits in the Philippines?
To avoid a finding of maximum disability by default, the Company Designated Physician (“CDP”) must within 120 days issue a fit to work determination or provide a final assessment as to disability grading. Within that period, the CDP can instead extend the seafarer’s treatment if there is sufficient justification to do so, up to a maximum of 240 days.
With the enhanced community quarantine in Luzon, the CDPs are presently unable to conduct medicals, and seafarers may encounter difficulties obtaining routine medical treatment in their Provinces. More importantly, strict observance of the 120/240 day rule could limit or shorten the amount of treatment the crew member receives, jeopardising their recovery.
We understand that a possible course of action which might offer a solution would be to obtain the crew member’s agreement that they make a hand-written request, prior to expiry of the 120 or 240 day period, that their treatment be extended. The medical report issued by the CDP would then contain a statement that treatment will be continued upon written request of the crew member.
This is discussed in more detail in an article on our website giving Philippines crew claim guidance.
B PASSENGERS:
1 Passenger falls ill whilst on board
In this situation, the following will be covered by the Club as with any other illness or injury:
- Any legal liability on the part of the Member for damages or compensation to that passenger for the illness, injury (or death), including reasonable hospital and medical costs (Rule 25 ii a and b)
- Liability for the costs of repatriating that passenger (including periods of quarantine or isolation if that is an integral and necessary part of the repatriation process) (Rule 25 ii c)
- Port and deviation expenses (fuel, insurance, crew wages, stores, provisions and port charges) to the extent that they exceed ordinary operating costs and provided they are solely and reasonably incurred in securing necessary treatment for that sick passenger (Rule 25 ii g).
2 Cruise is curtailed due to an outbreak on board – infected passengers
In respect of passengers who are actually infected with Covid-19, as stated in B1 above, the following will be covered by the Club as with any other illness or injury:
- Any legal liability on the part of the Member for damages or compensation to those passengers for the illness, injury (or death); which will include any claim for curtailment, loss of enjoyment etc.
- Liability for reasonable hospital and medical costs (although we would expect passengers, in the first instance, to look to their own travel/ medical insurance)
- Costs of repatriating those passengers (including periods of quarantine or isolation if that is an integral and necessary part of the repatriation process)
- Port and deviation expenses (fuel, insurance, crew wages, stores, provisions and port charges) to the extent that they exceed ordinary operating costs and provided they are solely and reasonably incurred in securing necessary treatment for those passengers.
The quarantine rule (see below) may also be relevant.
3 Cruise is curtailed due to an outbreak on board – non-infected passengers
Liability for damage or compensation under the passage contract (for cruise curtailment) would only be recoverable from the Club if this was a consequence of the outbreak, and if that outbreak posed a threat to the life, health or safety of those passengers (Rule 25 ii f). This will be a question of fact in each case, although the threat would need to be actual and real.
The cost of repatriation would not be covered as of right; however, the Managers do have a discretion in certain circumstances to reimburse all or part of that cost.
C QUARANTINE (Rule 25 xii):
1 What are the pre-conditions for cover under this Rules?
There must either be an outbreak of an infectious or contagious disease on board the entered vessel, or the expenses (for which reimbursement is sought) must be in respect of quarantine.
Only “extraordinary” expenses will be reimbursed.
2 What constitutes “quarantine”? “extraordinary” expenses?
We construe “quarantine” in this context widely enough to include a requirement of the port that the vessel leaves berth for a period of isolation, or that it isolates before it will be allowed to proceed to berth/ disembark crew etc, provided that the requirement is directly related to Covid-19.
What constitutes “extraordinary” expenses will depend upon the circumstances, but in most cases it will mean no more than the expenses over and above normal operating expenses and expenses which would have been incurred even if the outbreak or quarantine had not arisen.
3 The Vessel is subjected to a period of quarantine before berthing, or whilst at berth is ordered into quarantine or away from berth due to an outbreak, or suspected outbreak on board
If there is an actual outbreak on board, the pre-condition referred to above will be satisfied and the quarantine Rule will be triggered. This Rule provides cover for the following additional/ extraordinary expenses:
- Disinfection of the entered ship or persons on board (including the cost of taking in fuel in quarantine, loading and discharging cargo, and victualling passengers and crew)
- Fuel consumed or towage in proceeding to and from and lying at any place solely in accordance with quarantine or public health order
- Expenses [including additional wages e.g. overtime, and port charges etc.] directly consequent upon deviating to a port or place of refuge (which includes e.g. a berth or anchorage within a port) and resuming the voyage thereafter.
* Note, however, the proviso that if the vessel proceeds to a port where it was known, or ought reasonably to have been known, that the vessel would be subject to quarantine, then there is no cover under this Rule (unless the vessel was already contractually obliged to do so). *
If there is no actual outbreak (it was only suspected), because the vessel is being subjected to quarantine, again the pre-condition is satisfied and cover will apply in exactly the same way as above.
4 The Vessel is subjected to a period of quarantine before berthing, or whilst at berth is ordered into quarantine or away from berth, without there being any outbreak or suspected outbreak on board.
In this situation too, because there is quarantine (and note the way we construe this word – C2 above) again the pre-condition is satisfied and cover will apply in exactly the same way as in C3 above.
5 Vessel is refused permission to berth until a period (usually 14 days) lying off the berth has been completed (but there is no “quarantine order” as such)
In this situation, it will be necessary to look very carefully at the requirement to lie off. If we are satisfied that it is directly related to the Covid-19 pandemic (see C2 above), then we will treat this as “quarantine” such as to satisfy the pre-condition for cover under this Rule, and cover will be available in exactly the same way as in C3 above.
On the other hand, if the requirement is simply a routine operational requirement of the port unconnected with Covid-19, there will be no cover under this Rule.
D CARGO ISSUES (Rule 25 xiii)
1 The port named in the contract of carriage is closed – as a consequence, the cargo is delivered at some other place: will usual P&I cover for cargo liabilities be prejudiced?
There are two potential concerns here. First, this could amount to a deviation, and our Rules provide that there shall be no recovery from the Club in respect of cargo liabilities which arise out of or as a consequence of a deviation. However, the Managers can agree to such a deviation (Rule 25 proviso (iii)). In such situations, please get in touch with your usual contact at the Club.
The second issue is that cover does not apply as of right to liabilities etc which arise out of the discharge of cargo at a port or place other than that permitted by the contract of carriage (Rule 25 proviso (viii)(a)). Obtaining a Letter of Indemnity (“LoI” – for instance in International Group Form B wording) from the charterer or cargo interests might mitigate the risk presented by this loss of cover. However, such LoIs do not represent a perfect solution: amongst other issues, the wording might not be wide enough to apply in the particular circumstances, and recovery under the LoI is always dependent upon the credit-worthiness of the party providing that LoI.
In any event, in this situation it is advisable to speak with the Club. If required, it may be possible for an additional cover(s) to be provided.
2 As a consequence of the above, the bill of lading does not arrive at the “new” place of delivery in time to be presented to take delivery: does this present any issues as to cover?
As a matter of English law at least, a bill of lading needs to be presented in order to take delivery of the cargo (even if it is a non-negotiable, or “straight” bill). Thus, if the Master does deliver the cargo without the bill, this will be a breach of contract and the owners will be liable for any loss which arises as a consequence – the most likely loss will be a claim for misdelivery of the cargo.
This is echoed in our Rules, which provide that cover does not apply as of right to liabilities etc which arise out of delivery of cargo without presentation of the relevant bill of lading or other similar document of title (Rule 25 proviso (viii)(b). Here, again, obtaining an LoI (for instance in International Group Form A wording) might afford some protection to mitigate this loss of cover, but for the same reasons as in D1 above, it will not provide complete protection.
In this situation, we recommend that you speak with the Club. If required, it may be possible for an additional cover to be provided.
In practice, of course, e-Bills may provide a solution to this particular issue.
3 Additional costs are incurred in transporting the cargo to the “new” place of delivery: are any of these costs recoverable from the Club?
Such costs are not recoverable from the Club. They do not fall within any head of cover, and are essentially operational costs/ costs of earning freight.
4 Perishable cargo is damaged due to delays at the discharge port: will normal P&I cover for such loss or damage be available in the usual way?
Yes.
Such damage will be covered under our Rules in exactly the same way as any other cargo claim (provided of course that the delay was not so long as to constitute a deviation and the Member did not act imprudently – in particular, did not embark on the voyage knowing that the vessel was likely to be delayed with risk to the cargo as a consequence).
It is worth noting that the carrier may have a defence under the Hague/Hague-Visby Rules/US CoGSA under Article IV 2 (g) “… restraint of princes …” or (h) “Quarantine restrictions”
E CONTRACTS:
For Members with FD&D cover, assistance will be available in relation to Covid-19 related charter party or contractual disputes in the same way as any other disputes. The reader is also referred to an article dealing with contractual issues on our website.
*Rule citations refer to the Owned Rules. For chartered entries, the relevant Rule is 21 (not 25), but otherwise the numberings are the same
Please note that the above is intended as a general outline for guidance only. For advice in connection with a specific matter involving the Covid-19, Members can of course refer to their usual contacts at the Club.
