P&I clubs exclude war risk from standard mutual cover as a listed peril. In obvious cases – a ship hit by a missile in an active war zone – the exclusion applies, and owners must look to their separate war risk tower for cover. However, Ogulukian acknowledged that it is difficult to draw clear lines around some downstream liabilities. Where the proximate cause of the damage is the threat of war, for example, the consequences – oil spills in international waters – can still potentially create environmental liabilities that clubs cannot easily disclaim. “Most war risk policies have a limit equal to the value of the ship, and this may not be enough for some of the larger third-party liability claims that P&I Clubs are accustomed to seeing. P&I Clubs fill this gap by offering a layer of coverage on top of the insured value of the ship. So, large marine casualties where you might suffer environmental damage, debris removal, etc. can still fall back to P&I Club and their reinsurers, ” he said.
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