As the name intimates, the Shiprepairer’s Legal Liability (SRLL) policy covers only what the Shipyard is legally liable for. This usually implies negligence. Simply put, this policy looks to protect the Yard if the Yard would be found to be legally liable for damage while a vessel is under the care, custody and control of the Yard.
Since this policy will respond ONLY when the Yard is negligent, typically, the Yard would rely on this policy when the Owner is maintaining his Hull & Machinery (H&M) and his Protection & Indemnity (P&I) covers and naming and waiving the Yard / Yard’s Contractors / Affiliates of the Yard / Yard’s Parent Company, etc. on to its H&M and P&I policies.
For the SRLL policy to respond, the Shipyard is responsible for showing Underwriters how the yard was negligent.
The type of insurance that the Yard has in place does not determine liability. The Yard’s liability is grounded in the terms and conditions of the ship repair contract.
However, SRLL Underwriters will not respond to a contractual provision that does not fall under their SRLL policy.
For any project, the most important thing to consider is that there are no gaps in coverage. The SRLL policy is designed to protect the Yard if it is negligent. Any other situation should fall under the Owner’s H&M or P&I policy where the Shipyard (and its affiliates, subcontractors, etc.) should be named as an assured and the underwriters should specifically waive subrogation against the Shipyard.
Generally, in order for there to be a claim under a SRLL Policy, the loss will have to be traced back to the Yard’s negligence when the vessel was in the care, custody and control of the Yard.
In the event of a SRLL claim the following procedure should be followed:
• Report loss promptly to your insurance broker.
• Act prudently, e.g., take pictures, mitigate and assess the damage, begin collecting documents.
• Review Claims Clause of the Policy.
• If Underwriters can prove that their rights of recovery were prejudiced, then they can either deny coverage or reduce the claim amount by the amount of recovery that they would have been able to receive, had their rights not been prejudiced.
• If potential that repair or replacement amounts will breach deductible, a surveyor on behalf of Underwriters should be appointed. The cost for the surveyor is borne by the Underwriter.