Commercial Marine Hull and Protection & Indemnity (P&I) Insurance – What does it all mean?

Commercial Marine Hull and Protection & Indemnity (P&I) Insurance – What does it all mean?

By Ray Park – Marine Insure

Commercial Hull Insurance, together with Protection & Indemnity (P&I) is essential for any commercial vessel owner for the protection of their financial investment in their vessel, like any other asset used in connection with a business.

Types of Commercial Marine Vessels

There are many types of commercial vessels as follows:
• Commercial Tourist Charter Boats
• Tugs, Barges and Work Boats.
• Ferries
• Commercial Fishing Vessels and Trawlers
• Coastal Freighters and Blue Water Cargo Liners
• Coastal and Ocean Going Passenger Ships

And the list goes on.

Like other types of Marine Insurance, Hull Insurance has always had a mystery surrounding it within the insurance fraternity. Marine Underwriters have often specialised early in their careers and with such an international flavour to it, Hull Insurance underwriters need an abundance of specialist knowledge and expertise to carry out their profession.

Institute Clauses

Some of the ‘mystery’ that surrounds Marine Insurance, and Marine Hull is no exception, in that there is a vast list of ‘Institute Clauses’ used by underwriters, which spell out the cover provided, together with exclusions, warranties and conditions. So, in fact, they are simply the policy wording. The reason these clauses are used, is that a large proportion of Commercial Hulls sail into international waters, visiting ports all over the world and an international standard of cover is necessary, in the event of a claim occurring half a world away from where the vessel is actually insured. Marine Surveyors and Average Adjusters all over the globe, are all well aware of and versed in the cover.

Some of the clauses used for Commercial Hull are as follows:
• Institute Time Clauses Hulls
• Institute Time Clauses Hulls (Port Risks)
• Institute Wars & Strikes Clauses Hulls Time
• Institute Additional Perils Clauses
• Institute Fishing Vessel Clauses
• Institute Protection & Indemnity Clauses Hulls Time

And so on.

In recent years, local insurers have put together their own versions of Commercial Craft policy wordings, principally to cover such craft that only operate in Australian coastal and inland waters. One point that potential Insureds need to be aware of, is that some of the local wordings exclude ‘wear and tear’, meaning that depreciation can be applied in the event of a claim, subsequently reducing the final pay out. Whereas with the Institute Time Clauses Hulls, claims are payable ‘new for old’.

Protection & Indemnity – P&I

Protection & Indemnity (P&I) is purely the marine term for Liability and it is essential that Insureds procure this cover when insuring their vessels. This cover can be extended to include passenger and food and drink liabilities. These extensions should be included when insuring passenger charter boats, ferries and ocean going passenger liners and when food and beverages are served.

Institute Time Clauses Hulls, cover the following perils:
• perils of the seas, rivers, lakes or other navigable waters
• fire, explosion
• violent theft by persons from outside the Vessel
• jettison
• piracy
• contact with land conveyance, dock or harbour equipment or installation
• earthquake, volcanic eruption or lightning
• accidents in loading, discharging or shifting cargo or fuel.

This insurance covers loss of or damage to the subject-matter insured caused by:

• bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull
• negligence of Master, Officers, Crew or Pilots
• negligence of repairers or charterers, provided such repairers or charterers are not an Assured hereunder
• barratry of Master, Officers or Crew
• contact with aircraft, helicopters or similar objects, or objects falling therefrom,
provided that such loss or damage has not resulted from want of due diligence by the Assured, Owners, Managers or Superintendents, or any of their onshore management.
• Masters, Officers, Crew or Pilots not to be considered Owners within the meaning of this Clause should they hold shares in the Vessel
• 3/4ths Collision Liability

The 3/4ths Collision Liability clause should be amended to 4/4ths

Additional Perils

Additional Perils is an extension that should be considered. This covers any boiler which bursts, or shaft which breaks, or any defective part which has caused loss or damage to the vessel, as covered under the Institute Time Clauses Hulls, excluding fault in design or construction, thus covering the damaged item itself, rather than just ‘resultant damage’. Further, loss of or damage to the vessel, caused by accident or by negligence, incompetence or error of judgement, of any person whatsoever. This includes negligence of owner.

This article is only a brief overview of Marine Hull insurance. Please contact Ray Park on 0421 881 325 or (07) 3217 9015 should you wish to discuss your specific Marine Hull Insurance requirements.


Raymond Park is an Authorised Representative of Insurance Advisernet Australia Pty Ltd. Authorised Representative number – 282834

This information and any accompanying material does not consider your personal circumstances as it is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances and considering the specific Insurers Product Disclosure Statement.
The Partnership: The Trustee for Adam Lewis Family Trust and The Trustee for the Lewis Family Trust T/ as Lewis Insurance Services, Marine Insure and Insurance For My Business is a Corporate Authorised Representative of Insurance Advisernet Australia Pty Ltd. Advice on General Insurance products are provided by IAA. ABN: 15 003 886 687 | AFSL No: 240549 | CAR No: 430967