In certain circumstances, the principle of remuneration payable may not apply. In certain circumstances, a third party may be entitled to bring an action directly against the Association under applicable law, for example if the Member has become insolvent and is therefore unable to meet its liability.2 If such a “direct action” is admissible under applicable law, the Association is generally entitled to invoke all defenses: that would have been available to the member with respect to the third party claim and any political objections3 that the association might have raised in connection with the member`s claim under the insurance contract if the member had first fulfilled his liability to the third party and then claimed damages from the association. In the electronic scenario presented, third parties are forced to find other ways to solve this problem. It is proposed that the primary solution be to initiate a process of interception of the member`s vessel as a guarantee for the claim. This is possible to bring an action in rem (against the vessel) under sections 20(2) and 21(4) of the Supreme Court of the United Kingdom Act 1981. In the arrest scenario, the owner must release his vessel for commercial purposes. Therefore, he can ask his club for a declaration of commitment for the exemption. Consequently, the Club may derogate from the “Pay to be Paid” rule in order to issue this Commitment, which guarantees the payment of the Club to the third party if the Member is held liable. It is believed that due to the lack of protection of the 2010 law and the court decision, this is the most effective method for the third party to deal with the problem. It follows that no third party is entitled to compensation directly from the Association for claims that the third party has against the Member, except in the limited circumstances described below. Except in these limited circumstances, the Association will only pay compensation to the member and will only do so if the member has first paid or otherwise fulfilled his liability, loss, etc. However, the English courts have not allowed this argument to be developed for commercial insurers. In Ventouris v Mountain (The Italia Express) (No.
2) [1992] 2 Lloyd`s Rep 281 (this was a war risk insurance case), the English Commercial Court stated that “the purpose of the Pay to be Paid rule was to meet the specific needs of a mutual insurance scheme in a member association or club; Such a provision is appropriate in the non-club environment of a commercial insurance contract. P&I insurance is indemnity insurance. Therefore, payment by the insured is required before the insurer intervenes. This is not required as part of liability insurance. The member`s responsibilities that are met prior to requesting payment from the Club will be included in the policies as a “To Pay” clause. Furthermore, this is expressed in the club`s statutes as a “condition precedent” to a member`s right to recover payment from the club.1 Club rules have their legal authority in the UK Marine Insurance Act 1906 in section 85(3). 1 Unless the Association decides otherwise in its sole discretion, a member`s right to recover from the Association a condition precedent to any liability, loss, cost or expense originally incurred or paid by the member. Reservation (b) also clarifies that the Association is entitled to assert against the claim all defences that it could have raised against the Member if the Member had asserted a claim against the Association after discharging its responsibility towards the crew member or persons entitled to maintenance. This reservation is intended to ensure that the third-party plaintiff does not acquire better legal claims against the association than if the member had discharged his legal liability and asserted a claim for reimbursement against the association.
Therefore, the Association has the right to use any available political defence against the claim in question, for example that personal injury, illness or death caused by the member`s non-compliance with the rules, recommendations and requirements of the classification society or by non-compliance with the legal requirements of the flag State of the ship with respect to, for example, operational safety or ship safety.15 The decision highlights the problems, P&I clubs faced when other jurisdictions grant direct rights of action against insurers, thus offering the possibility of circumventing the “pay to be paid” rule. Notable examples outside Europe include most U.S. states, Tunisia and Turkey. This article examines the impact of the “payment payable” rule in the P&I club rules and whether the protection afforded to clubs in the event of a member`s insolvency will continue after the implementation of the Insurance Act 2015. Closer to home, the Third Parties (Rights Against Insurers) Act 2010, once in force, will provide for a direct right of action against insurers. However, there is an exception for transport insurance contracts, except in the case of death or bodily injury. This reflects the current situation, as in line with Lord Goff`s warning in The Fanti and the Padre Island (No.2) (1990) that P&I clubs should, for political reasons, avoid relying on the “pay for pay” rule when dealing with death and personal injury claims. Application of the “payment payable” rule for such claims. In Shipowners` Mutual v.
Containerships Denizcilik (2015), the Commercial Court granted and upheld an injunction against charterers who had sued a P&I club in Turkey. The charterers had attempted to avoid the effects of the “payment to pay” rule by invoking a direct right of action against insurers under Turkey`s insurance law. The decision in Shipowners` Mutual v Containerships Denizcilik is relevant to all P&I clubs and is a reminder that the courts will act to protect a club`s right to invoke the provisions of its rules, including the “pay for payment” rule. However, we understand that it may please and we are waiting for the result. Judge Teare found that the proceedings in Turkey were vexatious and punitive because they would deprive the club of its right to bring actions against it in arbitration proceedings in London and because there was a real risk that the club would not be able to invoke the “pay to be paid” clause in the club`s rules. At first instance, the provision of Article 9(5) provides that rights transferred to the third party are not subject to any condition obliging the insured person to fulfil his obligations towards the third party in advance. Therefore, paragraph 5 is considered to prevail over the rule set forth in “The Fanti” and “The Padre Island” of the authority confirming the payment of the claim by the member as a precondition for reimbursement to the member by the club.5 However, as a transcendental provision, paragraph 6 limits the effect of paragraph 5. In the case of transport insurance, this exception only applies to the insured`s liability in the event of death or bodily injury. Article 9(5) of the Law of 2010 provides that `[t]he rights transferred are not subject to any condition requiring the insured person to have previously fulfilled his liability towards the third party`, that is to say, it excludes any precondition for liability, such as the `remuneration due` rule.
The question arises when the insured has become insolvent and is unable to compensate the injured innocent third party. It is argued that the “pay first” rule eliminates any potential policy claims, which would terminate any claims by the injured third party. However, the association may decide “in its sole discretion” to waive this by-law in individual cases1 and to indemnify a third party directly on behalf of the member. This usually happens when the issue is simple and there are no unusual or complicated factors, as it allows for a quick agreement that benefits all parties. However, the association cannot regard the fact that this may occur in individual cases as a general waiver on the part of the association of the principle of distribution. 8.1 Underwriters agree to indemnify the insured for three-quarters of any sum paid by the insured to one or more other persons because the insured is held legally liable. (words underlined by us to emphasize) Without exception, owners cover 3/4 of the ground floor with hull insurers and the rest 1/4 with their P&I insurers.
