Clause 75 Explained: Why Your Vessel’s P&I Club Status Isn’t Just Formality—It’s Foundational

 🛡️ Clause 75 Explained: Why Your Vessel’s P&I Club Status Isn’t Just Formality—It’s Foundational

🧐 Three Yes/No Questions to Spark Curiosity

1. Do you know what risks you face if the vessel’s P&I Club is not part of the International Group?
2. Can the Charterers walk away from a charter if P&I coverage lapses?
3. Are you aware of the hidden liabilities tied to non-compliant P&I arrangements?

 

🔍 Clause 75 – P&I Club: A Line That Carries Weight

Clause 75:
“Owners guarantee that Vessel P&I Club is a full member of the International Group of P&I Clubs and will remain so throughout the duration of this Charter Party.”

✅ Explanation

This clause is a guarantee from the Owners that the vessel's Protection & Indemnity (P&I) Club is—and will remain—a full member of the International Group of P&I Clubs (IGP&I) for the full term of the charter.

Why does this matter?
P&I Clubs cover third-party liabilities such as:

• Crew injury/death
• Pollution
• Cargo claims
• Wreck removal
• Collision liabilities

Membership in the IGP&I ensures:

• Financial stability through pooling of large risks
• Uniform cover standards
• Global reinsurance protections
• Widespread commercial and legal recognition

 

⚖️ Implications

• For Owners: A lapse in IGP&I membership may constitute a breach of charter and expose you to claims or even early termination.
• For Charterers: This clause provides a contractual safety net to ensure liabilities will be properly insured and disputes won’t stall operations or expose them to uninsured loss.
• For Operators/Managers: Ensures legal compliance with port authorities, flag states, and cargo interests who often require IGP&I coverage as a condition for acceptance.

 

📌 Examples

• ✅ Compliant Case: The vessel’s P&I Club (e.g., Gard, NorthStandard, UK Club) remains a full IG member during the charter. Cargo damage incident occurs, and the Club steps in to cover the loss.
• ❌ Non-Compliant Scenario: Owners switch to a non-IG-affiliated Club mid-charter to cut premiums. A pollution incident occurs, but the new Club lacks sufficient reinsurance—Charterers are left exposed to claims and delays.

 

⚠️ Common Pitfalls

• Assuming that any “P&I Club” is sufficient—not all Clubs are created equal.
• Not verifying the IG membership status at charter start and periodically throughout.
• Overlooking Club renewals and their impact on charter validity.

 

🧠 Expert Commentary

• BIMCO’s Insight: Strongly supports IGP&I membership in charter terms due to the credibility, financial security, and uniform standards it brings to the maritime risk landscape.
• Case Reference: In The Seagrace [2000], the court emphasized the importance of proper liability coverage and held Owners liable for operating with insufficient insurance.

 

🚢 Actionable Steps for Stakeholders

📌 For Owners:

• Maintain continuous P&I coverage with an IGP&I member Club—do not switch to non-members without Charterers’ consent.
• Inform Charterers immediately of any change or risk of lapse in membership status.
• Keep your cover documentation up to date and accessible.

📌 For Charterers:

• Check Club membership before finalizing the charter.
• Include a warranty clause like Clause 75 to safeguard against insurance-related risks.
• Verify continued IGP&I affiliation mid-charter—especially after renewal periods.

📌 For Ship Managers/Operators:

• Coordinate with P&I brokers to ensure no gaps in coverage occur.
• Train commercial and legal teams on the importance of P&I clause compliance.
• Have contingency plans for claims procedures in the event of P&I issues.

 

🧭 Final Thoughts: Clause 75 – The Small Clause That Protects Against Massive Risk

A vessel’s P&I Club status isn’t just paperwork—it’s a cornerstone of risk management. Clause 75 ensures that vessels operate with a credible and globally recognized safety net. Don’t let oversight or cost-cutting jeopardize your operations or reputation.

 

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Disclaimer: This blog post is for informational purposes only and does not constitute legal or insurance advice. Always consult your P&I broker, legal team, or maritime insurance experts for specific guidance.