Exxon GA Clause Insurance

Some oil companies include a clause limiting their responsibility for General Average (GA) in charterparties for tankers. This exclusion is not covered by the P&I insurance as it extends the shipowners’ liability beyond the P&I cover. This extended liability for owners is addressed and covered by the Exxon GA Clause Insurance. The Vela GA Clause is similar. There is also a wider Phillips Petroleum GA clause which may also be covered.

In 2006, Exxon, the biggest oil company in the world, introduced a GA clause in its charterparty (Exxonvoy 90, Part II, superseding clause 27 (B) iii.), which transferred the General Average Exposure away from the charterers to the owners.

This clause reduces the charterers’ obligation under the charterparty and excludes from GA any costs attributable to preventive measures taken to avoid or minimise pollution.

Pollution damage, in itself, is not allowed under the York-Antwerp Rules 1994, but the costs of certain specified preventive measures are allowed when there is an actual escape, or release, of oil from the vessel.

This creates a gap in the P&I cover and establishes the need for this special insurance.

Crew attending at a shipyard

To familiarise themselves with a newbuilding, the crew may join the vessel prior to the official delivery date. They may also act as representatives of the shipowner at the yard.

Since the newbuilding is not yet delivered, there is no P&I cover for the ship. However, the shipowner is likely liable for the crew and damage caused to the vessel or third-party interests.

These risks can be addressed by additional cover, added prior to ordinary P&I cover.

Quite often the P&I Club confirms cover for these liabilities provided that the period is reasonable and limited to a couple of weeks. However, for longer periods, or if the P&I Club cannot provide cover, an all-inclusive crew cover is necessary. By definition, the vessel’s P&I insurance covers liabilities for crew of the entered ship who are on board or proceeding to or from that ship.

Liabilities for crew on leave involved in a training course or seminar are not covered under P&I insurance. The All Inclusive Crew Cover provides insurance for such occasions.

This insurance is tailor-made in line with the requirement of the individual member, making it an all-inclusive complement to the P&I insurance in terms of crew liabilities during the policy period.

Who can be covered?

Owners.

Limits

USD 10 million.

Deductibles

USD 50,000

The Clause has the following wording:

‘(iii) General Average

General Average shall be adjusted, stated, and settled according to the York-Antwerp Rules 1994 (‘Rules’) and, as to matters not provided for by those Rules, according to the laws and usages at the port of New York; provided that, when there is an actual escape or release of oil or pollutant substances from the Vessel (irrespective of Vessel location), the cost of any measures, continued or undertaken on that account, to prevent or minimize pollution or environmental damage shall not be allowable in General Average; and, provided further, that any payment for pollution damage (as defined in Article I 6.(a) of the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage) shall also not be allowable in General Average.

It is understood and agreed, however, that the cost of measures to prevent pollution or environmental damage, undertaken in respect of oil or pollutant substances which have not escaped or been released from the Vessel, shall be included in General Average to the extent permitted by the Rules. If a General Average statement is required, it shall be prepared at such port by an Adjuster from the port of New York appointed by the Carrier and approved by Charterer of Vessel.

Such Adjuster shall attend to the settlement and the collection of the General Average, subject to customary charges. General Average Agreements and/or security shall be furnished by Carrier and/or Charterer, and/or Owner, and/or Consignee of cargo if requested.

Any cash deposit being made as security to pay General Average and/or salvage shall be remitted to the Average Adjuster and shall be held by the Adjuster at the Adjuster’s risk in a special account in a duly authorized and licensed bank at the place where the General Average statement is prepared. (2006-01-25).’