In the latest issue of its newsletter, The Wire, the London-based International Transport Intermediaries Club (ITIC) points out that “P&I correspondents are coming under increasing pressure from clubs and from third parties to ensure that they have taken out professional indemnity insurance.”
ITIC said it is aware “that at least one International Group P&I club is considering asking all its correspondents to obtain professional indemnity cover, and anticipates that a number of other clubs will follow suit.
“ITIC has recently commented on a proposed P&I club contract for its correspondents, and has highlighted areas where it believes the correspondent should not be held liable. It has also commented on what it considers to be a reasonable limit of liability for a P&I correspondent.”
To illustrate the importance of adequate insurance cover, the ITIC cited the details from a recent court case involving a “correspondent asked to survey a cargo of 2,000 metric tons of bulk fertilizer which had been contaminated by residues from a previous cargo.
“The correspondent, having carried out the survey – and, following several telephone conversations with the P&I club – obtained verbal agreement to offer the cargo interests a depreciation allowance of $22 per ton, which was accepted.
“When the cargo interests submitted their claim for $44,000 to the P&I club, the club refused to pay, maintaining that the correspondent had acted without authority in offering settlement. The consignees therefore sued the P&I club and the ship owner. The correspondent was also involved, on the grounds that, if the court found that it had no authority, then it would be liable under the doctrine of breach of warranty of authority.
“The case went to court in London. As the correspondent had no confirmation in writing, the dispute turned on which witness was believed. On this occasion the court found that the correspondent had been authorized to make the offer. However, if the correspondent had not made a convincing witness, and had not kept contemporaneous notes, it would have had to pay the claim, plus interest, plus the costs of some of the other parties involved, and would have faced a liability of more than $100,000.”
ITIC insures more than seventy P&I club correspondents globally, on whose behalf it has handled claims arising out of missed time-bars and acting without the principal’s authority in conducting settlement discussions. It emphasizes that, irrespective of whether correspondents are required by the clubs for whom they act to take out insurance, they clearly face an exposure to claims from both their principals and from third parties in respect of the work they undertake in investigating and responding to incidents.