Most protection and indemnity (P&I) claims are covered by International Group (IG) clubs ‘as of right.’ A risk is set out in the club’s rules and, providing the member has appropriate coverage, they are able to recover the cost of their liability from the club — subject to the terms of entry and applicable limits. However, some liabilities are not covered as of right, and are only recoverable at the discretion of the club’s board.
For example, a ship owner may have coverage for liabilities arising out of collision with another ship. But if it appears to the managers that the owner’s ship was not insured for a ‘proper’ value — it was potentially undervalued — the extent of any recovery for excess collision liabilities will be solely at the board’s discretion.
Where a ship owner experiences a loss that appears to be covered under the rules, they may still find the claim on the club deemed discretionary due to the possible breach of another rule. For example, where an owner faces a cargo claim, but the ship is alleged to have been engaged in ‘imprudent trading’, the question of whether that was the case (and whether the claim was therefore payable) would be subject to the board’s discretion.
Finally, certain types of fines or any claim where coverage is sought by the member under the ‘omnibus’ rule, may only be covered on a discretionary basis. The omnibus rule (also referred to as ‘risks incidental to ship owning’) is often highlighted by clubs as a benefit of the mutual system, giving a ship owner hope of coverage for a risk that is not explicitly covered under the club’s rules.