The role of the P&I correspondent

ITIC insures the professional liabilities of many of the world's leading P&I Club correspondents and this article examines the role of correspondents as well as their potential exposure to claims.

The correspondent acts as the P&I Club's local representative and his principal function is to deal with the various problems which can confront the shipowner member when his ship is within the jurisdiction in which the correspondent is located. Whilst the role of the correspondent is not that of an agent he is expected to stand in the shoes of the P&I Club insofar as the ship's master and the P&I Club member is concerned. The correspondent will handle claims and solve problems, whether or not they will give rise to a claim covered under the P&I Club rules. In order to handle such matters he may need to enlist the assistance of local experts such as surveyors, lawyers and other professionals.

This entails the necessity for the correspondent to be familiar with the expertise that is available in his area and to provide proper instructions in order to retain control over the handling of the matter. Many of the problems that arise involve local authorities such as the harbour master, customs and immigration officers with whom the correspondent should have a good working relationship.

Additionally, the P&I Club will expect the correspondent to be the “eyes and ears” of the Club and to provide relevant information regarding any changes to local laws or statutory requirements and to advise on any claims trends of which the correspondent becomes aware.

Loss prevention is an important part of everyday life within the P & I Club and the correspondent has an invaluable part to play in advising the Club on such issues. A major marine casualty is obviously of prime concern to both the member and the Club and speed of response is crucial to effective problem solving. Whilst owners and ships are now obliged to have disaster or major casualty response plans, the Club and its correspondents should be similarly equipped. Every correspondent office should be in a position to respond effectively and efficiently to any casualty which may arise on its shores.

This might consist of a tanker grounding or perhaps passengers from a cruise liner who need to be evacuated and found accommodation ashore prior to repatriation. Contingency plans for such events are essential and the Club would expect the correspondent to have such plans well documented.

In addition to the expectations of the Club, on many occasions the correspondent receives instructions directly from a Club member to provide assistance in all manner of matters which may, or may not, be of a P&I nature. Because correspondents are listed within the Club handbook, members will turn to them to assist in dealing with their local problems. If those problems are not of a P&I nature, fees and expenses will be debited directly to the Club member since they will not be recoverable from the Club.

A P&I Club correspondent is of course potentially liable for claims which might arise as a result of any negligence or breach of duty which causes a loss to the Club or its members. Similarly he is also vulnerable to claims for breach of warranty of authority. One such case occurred recently when a P&I Club correspondent was requested to attend on board a ship to survey a cargo of 2000 metric tonnes of bulk fertiliser, which had been contaminated by residues from a previous cargo. The correspondent and the cargo interests reached agreement on a depreciation allowance of US$ 22 per tonne. The correspondent, after several telephone conversations with the P&I Club, obtained verbal agreement to the compromise, and made a written offer of settlement to the cargo interests, which was accepted.

When the cargo interests submitted their claim for US$ 44,000 to the Club, the Club refused to pay alleging that the correspondent had no authority to make the offer of settlement. Not unnaturally, the consignees sued the P&I Club; they also sued the shipowner and the correspondent. Lawyers were appointed to defend the correspondent.

Ultimately the court found, with the aid of contemporaneous notes, that the correspondent did in fact have authority from the P&I Club. However, the case illustrates how important it is to have written authority. P & I Club correspondents can also be vulnerable to overlooking time limits and extensions. In one case a correspondent, acting for charterers' liability insurers, failed to appreciate that a letter of guarantee had expired. Although the correspondent had obtained the necessary time extensions from the shipowner, the ship had been sold and the owner was bankrupt. The guarantors were approached for an extension but refused on the grounds that their letter of guarantee had been issued in exchange for a counter guarantee from the shipowner which had also expired.

The role of P & I Club correspondents has essentially remained the same ever since they were first appointed. However, it is certainly the case that with today's advances in technology and communications they will be expected to provide an efficient and speedy service. At the same time they must minimise the cost of dealing with claims on behalf of the Club for the benefit of members overall.

We are grateful to Phil Nichols of the UK P&I Club for his assistance in writing this article.