1.8 The links between the limitation regimes and P&I insurance
The restructuring of the international and national limitation regimes, combined with specific requirements relating to obligatory insurance of the liabilities subject to limitation, strengthened and broadened the traditional links between the limitation regimes and P&I insurance. In any event, however, this link already was – and still is – a direct consequence of the actual limitation procedures applied by the several limitation regimes. The key element is the establishment of a limitation fund by or on behalf of the shipowner with the court receiving an action against the shipowner (MC § 177). In most cases, nevertheless, the limitation fund actually consists of payment or guarantee provided by the P&I insurer of the ship involved. Moreover, MC § 171, paragraph 3 also gives the P&I insurer his own right to limit his liability for insured claims, according to the applicable limitation regime, cf. also MC § 177, paragraph 3.
This means that the P&I insurer actually holds the real interest – at least indirectly – as party to the disputes on claims and distribution of the limitation fund subsequently arising during the limitation process. In fact, the P&I insurer generally has a key role in the limitation procedure, even in cases where the required liability insurance does not give claimants an express right to direct action against the P&I insurer. Moreover, in view of recurrent crises and extensive forum shopping in international shipping, P&I insurers increasingly appear to be the favoured targets for direct actions as a vehicle when seeking to enforce maritime claims against the insured shipowner.
The countermeasure of international P&I insurers is P&I-contract terms, including a preferred jurisdiction and choice of law clause, purporting to prevent such “third party” actions from injured parties. Internationally, however, there is no uniform response to these hurdles from legislators or courts. In an EU/EEA context, the issues raised in such actions against P&I insurers primarily relate to the initial, but important, questions of applicable jurisdiction and choice of law, rather than the actual liability for the particular claims, cf. ND 2017 p. 445, at p. 460-61 DSC (Assens Havn), and HR-2018-869-A and HR-2020-1328-A NSC (Gard I and II). (12) These decisions held that, according to the applicable national rules of choice of law, the particular dispute between the injured party and the P&I insurer was governed by the national tort law. In the cases at hand, the national law on insurance contracts also permitted the claim of the injured party to be brought by direct action against the P&I insurer (Dfal § 95 and NFAL §§ 7-6 to 7-8).
Nevertheless, the Danish and Norwegian approach to the issues of substantive insurance law on direct claims against the P&I insurer is somewhat different. According to Dfal. § 95, paragraph 2, the rule is that a direct claim against the P&I insurer will succeed only in cases where the insured shipowner is actually subject to insolvency proceedings. In ND 2017 pp. 445 DSC (Assens Havn) the court held that the direct action, based on a claim according to applicable Danish tort law, was subject to Danish jurisdiction and properly brought for subsequent final decision by Danish courts, even if the P&I contract provided for English law and jurisdiction, see my Comments in ND 2017 pp. lxx-lxxiii. Norwegian law, however, applies a clear-cut distinction between the initial issues and rules on jurisdiction and procedural law applicable to direct actions, and the issues and rules of substantive law relevant applicable when, in the main proceedings of the direct action, to determine whether the P&I insurer is actually liable for the claim brought.
In HR-2020-1328-A, the Supreme Court (Gard II) held that, as a matter of procedural law, a direct claim based on liability insurance governed by NFAL §§ 7-6 to 7-8 may generally be the subject of a direct action against the P&I insurer having Lugano-jurisdiction in Norway. Thus, the main issue is whether there is a Norwegian forum available for the legal action brought against the P&I insurer, and this issue is generally independent of any assessment of the likely result in the main proceedings, as eventually decided by the court. In Norwegian law, consequently, questions such as the legal effect of the P&I-contract terms for the liability for the particular direct claims, are a matter of substantive insurance contract law to be decided in the main proceedings of the direct action according to the relevant facts, cf. ND 2008 p. 267 NSC (supra note 12). In any event, the overriding principle in NFAL § 7-6, paragraph 4 is that the P&I insurer may generally invoke the same objections against the direct claim as the insured party, provided, however, that P&I contract terms allowing any additional objections to the liability of the insurer are invalidated if the insured party is insolvent (NFAL § 7-8). Although the Danish and Norwegian procedural approach to direct actions seems to be different, in most cases, the substantive insurance law in sum will be the same.