The upcoming entry into force of the 2020 Sulphur Cap presents various much-discussed challenges for ship operators and the shipping industry as a whole. A combination of factors, including but not limited to fuel unavailability, low fuel quality and - where scrubbers are installed - inadequate training of crew members, could lead to significant delays in cargo operations, engine failures, accidents etc. Not to mention that the problems caused by these loss-generating events may perhaps be compounded by the significant disputes between owners and charterers re costs and risk allocation that are bound to arise - that is unless the new challenges posed by the 2020 Sulphur Cap are properly addressed in charterparties (either presently in force or not) and, at a minimum, BIMCO's relevant clauses are incorporated therein.
In the above context, this Article focuses particularly on the 2020 Sulphur Cap's implications on marine insurance coverage.
Importantly, should the vessel not fully comply with fuel specifications, her Marpol certificates could be revoked or suspended. Similarly, inadequate training of crew members regarding the operation and maintenance of scrubbers could make the case for a lack of due diligence on the part of ship operators/managers. Moreover, the vessel may, in certain circumstances, as a result of non-compliance with the new regulatory regime, be deemed to no longer be in class. It goes without saying that the above could breach several H&M and P&I warranties, thereby potentially rendering various claims non-recoverable.
It should be noted that, in view of the fact that compliance with the new regulations will undoubtedly entail significant costs, it may well be worth for ship operators to conduct a review regarding/risk assessment on both the allocation of certain costs and risks to charterers as well as the various covered marine risks; it has been suggested that by abdicating certain liabilities and, as the case may be, by prudently retaining more risk, operators could, at least in part, help finance above costs. Having said that, caution ought to be exercised specifically regarding the extent of cover. Moreover, where scrubbers are installed, due consideration should be given to the insured value in H&M policies, which should likely be increased so that the true value of the vessel and her equipment be properly reflected in the respective policy.