Tanker Owners’ Liability on CLC Convention (International Convention on Civil Liability for Oil Pollution Damage) and Act of Terrorism
5 February 2002 No. 01-014
| It was reported in the Special Circular No.01-008 dated 14 November, 2001 that the Board of Directors resolved on 1 November, 2001 that the terrorism shall be additionally listed in the risks generally excluded from 20 February, 2002 onward. In this respect, the inquiries were raised if the Association is going to indemnify or compensate the liability, loss or damage to the oil pollution incident as regulated by the International Convention on Civil Liability for Oil Pollution Damage 1969 or 1992 as amended or its national legislation (hereinafter collectively called as CLC). As reported below, the Association will maintain the almost same capacity for indemnification and compensation as well as today in combination of Special Clauses of the Association and tanker owners' War Risk P&I Insurance as the case may be. | |
| 1. The points of the inquiries raised: | |
| 1)Whether or not the direct claim coming from the third parties in respect of their loss or damage of CLC oil pollution incident caused by terrorism will be compensated? 2)Whether or not a Member could be indemnified for its expenses such as cleaning for CLC oil pollution incident caused by terrorism? | |
| 2. In accordance with Special Clause as enclosed herewith, it is illustrated as follows in response to the inquiries in the above 1. | |
| 1)Whether or not the direct claim coming from the third parties in respect of their loss or damage of CLC oil pollution incident caused by terrorism will be compensated? It is stipulated in Rule 1. of the Special Clause that the Association as the insurer named in the certificate of CLC shall compensate the third party claimants as well as before without invoking any defenses other than the limit of liability or any other defenses available in CLC even from 20 February, 2002 onward. 2)Whether or not a Member could be indemnified for its expenses such as cleaning for CLC oil pollution incident caused by terrorism? It is stipulated in Rule 2. in the Special Clause that in the CLC oil pollution incident, the Association shall indemnify a Member for its expenses, such as cleaning. In the meantime, for the tankers assigned for overseas trading, the Association shall indemnify a Member only for its shortfall even though the Member claims or should have claimed its War Risk P&I Insurance at the first instance to the extent of limitation amount of US$200 million in line with Rule 1(1). The limitation amount, of which original figure was US$100 million (Special Circulars N0.01-005 dated 26 September, 2001 and No.01-007 dated 16 October, 2001), will be increased to US$200 million from 20 February, 2002 onward. | |
| 3. Terrorism as additional excluded risks: | |
| In the majority cases for CLC oil pollution incident caused by terrorism, the tanker owners seem to be discharged from its liability due to the exemptions listed in CLC, such as "hostilities, civil war, insurrection" , or "wholly caused by an act or omission done with intent to cause damage by a third party". However, as the tanker owners shall be strictly liable for the CLC oil pollution incident rather than fault base liability for the claim in tort, there might be the possibility that the tanker owners could not always be discharged from the liability under CLC even in case of terrorism. For such occasion, the Association is able to provide the cover as explained in the above 2. | |
| Apart from the matter of oil pollution incident under CLC, kindly note that it is not the intention of the Board to enlarge the excluded risks too wide by way of adding the terrorism into the existing exclusion risks. The Association has been excluding the risks caused by "mines, torpedoes, bombs, rockets, shells, explosives or other similar weapons of war" as well as "war, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, any hostile act by or against a belligerent power" (see Rule 35-1). Usually the act of terrorism might fall in the concept of the action with using "mines, torpedoes, bombs, rockets, shells, explosives or other similar weapons of war". The reason why the Board resolved to add the terrorism in the existing excluded risks was due to the significant reaction of the reinsurance market which was triggered by the tragedy of 11 September, 2001, where no weapon other than knives and passenger airplanes was put to use. | |
| 1. Notwithstanding the exclusions of terrorism in Rule 35-1(2)(a) or any other exclusions stipulated in Rule 35-1(2)(b) to (c) hereof, the Association as the insurer named in the certificate of the International Convention on Civil Liability for Oil Pollution Damage 1969 or 1992 as amended or its national legislation (hereinafter collectively called as CLC) shall compensate the third party claimants without invoking any defenses other than the limit of liability or any other defenses available in CLC. | |
| 2. In the event of aforementioned Rule 1, the Association shall indemnify a Member for its costs and expenses under CLC in accordance with following terms and conditions. | |
| 1) In respect of an insurance contract with no fixed sum insured, the Association shall indemnify a Member for its costs and expenses in excess of the sums of proper value of the entered ship as stipulated in Rule 35-2(2) or insured amount, whichever is higher, on the condition that the proper value of the entered ship being fully insured or should have been fully insured under the ship's Hull and Machinery and Crew Marine or War Risks Policies, and any Protection and Indemnity Inclusion Clauses attached thereto, irrespective of whether or not such cover is in place, subject to the limitation of US$200 million or to such extent only as the Association may determine. Where the proper value exceeds US$ 100 million and there has been no available facility to undertake the insured amount more than US$100 million, the Association shall indemnify a Member of the amount in excess of US$100 million subject to the limitation of US$200 million or to such extent only as the Association may determine. 2) In respect of an insurance contract with the fixed sum insured, the Association shall indemnify a Member with the maximum amount of cover as specified amount mentioned on the Certificate of Entry. | |