Coronavirus and insurance considerations

The latest Coronavirus (2019-nCoV) outbreak came to the world’s attention in mid-January 2020 following a reported escalation in infection rate and the subsequent decision of the Chinese government to place Wuhan under quarantine on 23 January 2020. The first official report to the World Health Organisation (WHO) was made by China on 31 December 2019.

A number of P&I Clubs have issued Circulars advising their members to be vigilant and recommend following WHO updates and situation reports. WHO’s assessment of the risk as per the Situation Report dated 26 January 2020 is “very high” in China, “high” at the regional level and “high” at the global level. Symptoms of the illness include fever, coughing and breathing difficulties.

Precautions to take

As in all similar incidents, following basic hygiene rules such as regular hand washing and covering mouth and nose with upper sleeve or a tissue when coughing or sneezing are recommended. Using a face mask, avoiding anyone with symptoms, thoroughly cooking meat and eggs are other common-sense rules to follow.

The implications of this latest outbreak on shipping remains to be seen, however it would be prudent to avoid crew changes and limit shore leaves in affected areas. Educating the crew on relevant risks and protective measures should also be considered.

Crew members showing symptoms

Any flu-like symptoms, especially with connection to affected areas or people, must be taken very seriously and immediate medical attention must be sought. Affected persons should be appropriately isolated onboard until they can be disembarked for medical treatment. Cost of medical treatment of an illness on-board, sick wages and cost of repatriating a crew following medical treatment are all protected rights for seafarers under the Maritime Labour Convention and these are covered in a P&I policy.

Once the case is notified to authorities, the vessel may be placed under quarantine, and/or disinfection of the vessel and those on board may be ordered by authorities.

Such extraordinary costs incurred as a result of an order due to an infectious disease on board can be covered by P&I. However, one caveat is that a Club may refuse to cover such costs where the Owners knew or should have been aware that the vessel would be quarantined.

In practice, it would be very difficult for a shipowner to avoid calling at a port when immediate medical attention is urgently needed on board. In these circumstances, it is strongly recommended to notify the Club in advance of arrival and seek guidance from the Club on next steps as well as precautions to take. 

Managing contractual risk and effect on ship operations

Should the outbreak continue to worsen, there may be restrictions on port calls and delays may be encountered. With this possibility in mind, owners and charterers should consider including appropriate clauses into their charterparties to allocate risk and to minimise potential for dispute.

BIMCO published two clauses for Time and Voyage Charterparties for Infectious or Contagious Diseases in 2015. These are available for download on the BIMCO website – LINK. These clauses allow Owners to refuse orders to proceed to or to sign bills of lading for areas which in the reasonable opinion of the Master / Owners is an affected area, requiring the charterers to issue alternative voyage orders.

Similar clauses drafted with charterers in mind are available on the Charterers’ Club' website.The above clauses are subject to individual definitions and wordings which should be considered in their entirety.

It is also important to ensure that the charterparty containing such clauses allocating risk is incorporated into bills of lading and, where possible, that the bills of lading issued include an appropriate deviation clause, to protect the carrier should it become necessary to discharge the cargo elsewhere. The effect of such clauses is not guaranteed in every jurisdiction and Owners and Charterers are recommended to seek advice from their P&I Club or other charterers’ liability insurer.

Insurance solutions

Additional insurance protection for shipowners and contractual carriers includes having SOL insurance (Shipowners Liability Insurance) to ensure the preservation of cargo liability cover should deviation be deemed unreasonable.

Further peace of mind for owners and operators is Trade Disruption Insurance which can assist in circumstances where loading or discharging is delayed or has become impossible as a result of an emergency port closure pursuant to an order issued by the local authority.

For any questions regarding the contents of this Marine Client Advisor or for any other marine insurance enquiries please do get in touch. 

Howden Insurance Brokers is not a technical, commercial or legal adviser. Any commentary made in this document should not be construed as such, and we do not guarantee in any way the accuracy of the resources used or referenced in this document. In case of doubt, formal advice should be obtained that is directly relevant to your circumstances.