After more than a year of consultations, a new Lloyd’s open form (LOF) default clause for marine hull insurance policies has been introduced.
Launched via an event held this week in the Old Library at Lloyd’s, the new clause aims to solidify the role of LOF as a key contract for emergency situations, a necessity acknowledged by the maritime sector. It is the result of a working group dedicated to addressing the challenges facing LOF and enhancing its appeal.
The Lloyd’s Market Association (LMA) collaborated with the International Chamber of Shipping (ICS) to craft the clause, which clarifies the procedures for securing non-standard tug services.
During the launch, a panel consisting of representatives from Lloyd’s, P&I (protection and indemnity) clubs, claims adjusters, underwriters, ICS, and the Secretary of State’s Representative for Maritime Salvage and Intervention outlined the benefits of the clause and the changes made during its drafting process.
The LMA and ICS have structured the clause with specific goals in mind: to affirm that, in emergencies, shipowners or captains can instantly utilise LOF to arrange salvage services; to provide clear procedures for handling situations where immediate danger is not present; and to define a process where shipowners notify hull underwriters and consult them on the most appropriate contract, whether LOF or another option, based on the circumstances.
The clause is expected to encourage open communication between shipowners and underwriters, ensuring both parties are aligned on the appropriate course of action, minimising disputes, and improving the overall efficiency of the salvage process.
The joint hope of the LMA and ICS is that the new clause, alongside recent updates to the LOF, will address concerns that have contributed to its declining usage. The organisations aim to restore confidence in the LOF, ensuring its continued role as a critical instrument in maritime safety.
LMA legal director Arabella Ramage (pictured) commented: “We consider use of the clause will be a positive step forward in ensuring the safety of vessels and crews and increasing communication and understanding between owners and their underwriters.”
Kiran Khosla, principal director of legal at ICS, also endorsed the clause, noting its importance for maritime safety: “The LOF is about saving lives, the environment, and property.
“For over a century, the LOF has been pivotal in ensuring maritime safety, enabling swift and effective responses to situations where the ship is in danger. The clause emphasises that in a situation of danger for the ship, the LOF is the right and appropriate contract for the salvage response.”
The clause is set to be released shortly as an official LMA clause.
What do you think about this story? Share your thoughts in the comments below.
