The Role of the P&I Clubs in Marine Pollution Incidents

The fire and explosion on the mobile offshore drilling unit Deepwater Horizon and the subsequent release of nearly five million barrels of crude oil into the Gulf of Mexico has been characterized as “the worst environmental disaster America has ever faced.” Although the oil spill occurred while the rig was operating as an offshore facility, among the many issues arising from the disaster is the adequacy of the current limits of liability applicable both to vessels and offshore oil exploration and production facilities under the U.S. Oil Pollution Act of 1990 (OPA 90), and the role of the marine insurance industry in meeting the costs of response and damages caused by such catastrophes. Pollution risks are borne primarily by the owner of the ship or facility concerned, who will normally insure against them, along with other marine liability risks, by separate liability cover. In the case of vessels, this is arranged most commonly by entering the vessel in one of the shipowners' mutual insurance associations, which specialize in providing cover of this kind, and which are more commonly known as Protection and Indemnity Associations, or P&I Clubs. This Article will discuss the law and practice of P&I insurance with particular emphasis on the liabilities arising from major marine pollution incidents.