Marine Insurance

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Running clause or 3/4th collision liability clause in marine insurance offers a shipowner with some kind of coverage which is necessary in case of third-party liability in the event of a collision. It is a clause within the marine insurance policy, offering legal coverage if the insured vessel collides with another vessel.

If the insured vessel needs to blame for a collision with another vessel, insurers will require to pay for up to a maximum of three-fourth of the value of the insured vessel as stated in the marine insurance policy document.

If the running down clause makes insurers liable to pay the full coverage, called as 4/4th running down clause.

Here, the marine insurance company agrees to indemnify the policyholder for three-fourth of the sum insured paid to another person for

  • Loss or damage happens to any other property or vessel

  • Delay or loss of property or vessel

It is necessary to note that the 3/4th collision liability cause depends on the settlement by cross-liabilities. As per the concept of cross-liability, when there is a collision between two ships. It is essential to establish a level of blame between the two ships. Therefore, done to decide the amount each ship pays as a proportion for total damage, sustained by both the ships.

It is essential to understand, 3/4th of a proportionate amount of the damage, borne by the insured. That amount would depend on the degree of blame attached to the policyholder’s vessel. It means, the policyholder is 100% blamed, then the insurer’s liability is 3/4th of the total damage sustained by the other vessel. Similarly, the insured is 30% blamed, then the insurer’s liability becomes 3/4th of 30% of the total damages as sustained by the other vessel.

There are various events that exclude from the running down clause. Like, excluded wreck removal liability from the policy along with the loss of life or property involved on board the ship involved.

Read more: What is Open Marine Insurance Policy?

Also, the liability of the insurer under the 3/4th collision liability arises only when the insured vessel collides with any other vessel.

Case: 1

The owner of a 5,000-ton steamship, ‘Jazz’ insured it with the comprehensive marine insurance policy. Last year, used it to transport goods from India o Sri Lanka. While proceeding in the seawater, Jazz signaled to overtake a slower moving vessel, ‘Timer’. During the overtaking, Jazz struck Timer, causing serious damage. The Timer vessel suffered heavy damages and asked the Jazz owner for compensation. The owner of Jazz accepted its liability, and as they had a marine insurance policy, they approached the insurer for the claim settlement. Here, the insurer considered the claim under the running down clause, agreed to pay compensation for the losses or damages. Which happened to the third party, i.e., the Timer vessel due to the fault of the insured steamship, i.e., Jazz.

Case: 2

T.J Shipping was the owner of a 3,000-ton steamship, ABC, which the company insured under a marine insurance policy. While proceeding in the river, ABC signaled to overtake the other slower-moving vessel, XYZ. While ABC was overtaking, it struck with XYZ and caused little damages. However, due to this, XYZ veered off course and collided with another vessel, LJ, causing serious damage. Both the owners of XYZ and LJ approached the owners of ABC for claim settlement.

Read more: What is the new Jason Clause in Marine Insurance Policies?

The owners of ABC accepted their liability, and as they have a marine insurance policy, they approached their marine insurance policy for the damages done to both the vessels. However, the insurer refused to settle the claim for the damages done to LJ on the basis that there was no physical contact involved between ABC and LJ. Which ultimately, came into direct contact with XYZ vessel only. Here, the insurer covered only those losses which happened to XYZ.