25-01-2017

Legal Costs Cover – What’s it all about?

Shipowner

The Club recently announced its Legal Costs Cover (LCC), formally known as LADC. In this blog Daisy Rayner, LCC Manager (London), provides an insight into the amendments from LADC to LCC and aims to dispel some of the common misconceptions surrounding the cover.

Why do I need LCC if I already have P&I cover with the Club?

P&I cover insures a Members’ liabilities to third parties which arise out of the operation of the insured vessel, as well as the legal costs associated with defending claims which may arise out of such operations. Whereas, LCC generally provides cover to Members for their legal and other costs in pursuing or resisting claims which arise out of their business operations relating to an entered vessel.

The costs associated with these commercial disputes can be high, often running into tens of thousands of dollars. LCC enables Members to continue to operate with minimal disruption, safe in the knowledge that they have Club cover to meet these costs and Club expertise to protect their rights.

What costs does LCC include?

LCC includes costs and expenses incurred from obtaining advice in connection with a covered claim, dispute or proceedings. These costs include legal fees such as court and arbitrator fees, as well as experts, surveyors and Correspondents’ fees arising from a dispute. The cover also includes the opponent’s legal fees should a costs award be issued against our Member.

What does reasonable prospects of success mean?

Traditionally, all defence cover has been discretionary in nature and this discretion has been exercised by the Club’s Board of Directors. However, we realise that this has not always been popular as it creates some uncertainty about whether the cover will respond.

The move towards assessing the reasonable prospects of success of a claim is intended to modernise the Rules and provide Members with more transparency about the factors that Managers will take into account when determining support for LCC claims. In particular, Rule 6, Section 6B now provides as follows:

B When determining reasonable prospects of success for the purposes of this paragraph, the Managers will take into account any matters that may appear relevant to them, including but not limited to:

  • the merits of the claims or disputes or proceedings in relation to which the Member seeks to be covered by the Association;
  • the prospects of obtaining security for a Member’s claim and costs;
  • the prospects of enforcing an award or judgment in our Member’s favour;
  • the reasonableness of the Member’s conduct; and
  • the size of the sum in dispute versus the legal costs required to resolve the claim, dispute or proceedings.

How are claims handled within the Club?

The LCC team has 12 qualified lawyers, as well as two trainees across our London and Singapore offices. The team can provide English and Singaporean law advice as part of Member’s cover. These services are included within Members’ premium and no deductible is applied for this time.

Where appropriate, we will instruct external lawyers to assist and the Club will meet these costs less a Member’s applicable deductible. The Club has the added benefit of being able to instruct CTRL Marine Solutions Ltd on English law matters. CTRL is a law firm and subsidiary wholly owned by the Club. CTRL offers legal services and representation to both Members and non Members of the Club in the same way as other English law firms. In line with the Club’s mutual ethos, it is able to offer a cost effective alternative to other English law firms. Please visit the CTRL website for more information.
Further LCC information

Further LCC information

Since February last year, the Club has had a dedicated webpage dealing with defence cover. This page provides helpful information about LCC, copies of our bespoke Marine and Yachts LCC, as well as contact details for the LCC team.

Each month the team produces an article on topical issues affecting our LCC Members. The first of these was published in March last year and since the articles have covered topics as wide ranging as the new BIMCO anti-corruption clause, to advice for Members on what they can do when they aren’t paid hire.

Over the coming year we will continue to provide monthly articles, which we hope our Members will find helpful. If you are interested in receiving these articles, please register on the LCC webpage.

If you have any further questions about LCC please contact the LCC Managers, Daisy Rayner (London) or Gho Sze Kee (Singapore). If you are interested purchasing this cover please liaise contact Mark Harrington (London) or Jeremy Slater (Singapore), who, in conjunction with your broker, will be pleased to provide you with a quote.

Source: The Shipowners’ Club

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