Report No. 21
General.-This deals with third party liabilities.
Examples.-The following examples may be given:-
(i) Ship-owner's liability arising out of negligent navigation.
(ii) Ship-owner's liability under the contract of affreightment.
Express terms.-The section does not apply unless there is any express term for insurance against liability to a third party. The common law rule1 was that a marine insurance policy in an ordinary form does not cover payments made by the assured to a third party in consequence of collision for which the assured ship was to blame.
Running Down Clause or Collision Clause.-The Running Down Clause2 is usually added to insure the ship-against third-party liability. It is also known as the Collision Clause. It provides that "if the vessel thereby insured shall come into collision with any other vessel and the assured shall in consequence thereof become liable to pay and shall pay by way of damages to any other person any sum in respect of such collision the underwriters will pay the assured, such portions of three-fourths of such sum or sums so paid as their respective subscriptions thereto bear to the value of the vessel", etc.
The Running Down Clause covers liability only in tort and not in contract.
The reason why the ship-owners do not accept liability for the one-fourth is, that3-
"the ship-owner is a member of one of the Mutual Insurance Clubs which are established to take over the liability of the ship-owner for this 1/4th or that the ship-owners have an insurance fund of their own, established for this purpose."
As has been stated, "Protection" associations cover the one-fourth collision liability for damage done.4
1. De Vaux v. Salvador, (1836) 4 Ad.& E. 420.
2. Discussed in detail in
(i) Keate, pp. 110-112.
(ii) Dover, p. 524, et seq.
3. Keate, p. 111.
4. See Dover, p. 494, under "Protection"