MV Ever Given and the billion dollar question

By Adekunle Segun

Tuesday the 23rd of March 2021 will forever be remembered in the books of maritime history as the day the livewire of maritime, diplomatic and world trade was seriously threatened by the sudden blockage of the Suez Canal. This brought a sizable number of world trade and by extension world fleet to an unexpected halt. Trade between Europe and Asia was practically at a standstill. The ship in question, MV Ever Given, a 200,000 ton ship went aground in the Suez Canal and stalled the flow of billions of dollars as it also resulted in several vessels being stranded at the Suez Canal Anchorage. While some vessels were quite optimistic that the monster will be evacuated from the canals main passage way, some had to make a quick decision to take another route entirely; going round the Cape of Good Hope in order to get to their destinations. However, hope emerged in the horizon after several efforts from various marine heavy duty equipment, including but not limited to tugs, dredgers, and excavators, was deployed to refloat and put her in a position where she could at least sail herself to safety. But this did not happen without various multiplier effects on world trade.

However, while the whole world was busy celebrating the refloating of the enormous water monster, the owners, managers, and crew of Ever Given had only just begun as more than two weeks after salvaging this vessel, she is still stuck in the Suez Canal. This time, however, it is not due to grounding or other accidents, but due to man-made decision which has seen her lose more valuable time and man-hours, with the possibility of losing more if things are not addressed professionally.

A typical trading vessel such as the Ever Given is mandated to have certain documents which are generally referred to as trading documents in the maritime industry. These documents summarize the certification status of the vessel, her regular characteristics, trading route and details of changes therein. Another major documentation is her insurance status. For an ocean going vessel that engages in major international trade and traversing international waters, the insurance status of this vessel is meant to be flawless and topnotch, which I want to believe is the state of the Ever Given. If this is the case, why are owners, manager and the Suez Canal Authorities (SCA) holding the vessel back from trading or completing her initial voyage before she suddenly went aground? Why is she still held in the canal where she brought an abrupt stop to a major shipping route in the shipping industry?

To broaden our scope on the way marine insurance works, we need to clearly define what marine insurance is and the various types of insurance a trading vessel is mandated to have. For a vessel of the status of the Ever Given, there are at least two types of insurances she is expected to take before trading. These are Marine and Hull Insurance and the Protection and Indemnity Insurance of P&I Club, as it is popularly called in the maritime industry. This differs from the cargo insurance and other insurance that may be taken to protect her cargo while in transit. However, for her to transit one point of the ocean to another while laden or inballast, it is compulsory she takes the two insurances mentioned above.

Now, to define what those insurance mean to a typical vessel owner: A vessel’s Marine and Hull Insurance is meant to protect the vessel herself, the machineries, navigation equipment and other important items that are originally built with the vessel. In other words, it is a type of insurance that is mandated to be taken by the owner of the vessel to ensure that the vessel is able to overcome any machinery problem within the shortest possible time, any machinery issue that can prevent her from moving from one point to another is being addressed by the Marine and Hull insurance. This class of insurance may also be extended to the crew onboard who are also very significant parts of the ship’s wellbeing.

The second type of insurance is the Protection and Indemnity insurance, popularly called the P&I Club insurance. This is so named because it protects other vessels traversing or doing business or facility (such as cargo transshipment or ship to ship transfer of cargo or fuels) from any damage that may occur from the subject vessel. To put it in very comprehensible terms, it is a kind of third party insurance in shipping and maritime business.

However in regular motor insurance, while third party is the cheapest, the P&I club insurance is the most mandatory and expensive in maritime business insurance and protection. In fact, most vessels or facilities are unable to do business in certain areas like the Suez Canal or with other vessels (in event of cargo transshipment or ship to ship transfer) and facilities without a P&I Club protection from a strong club. The limit of coverage on a P&I cover can go as high as 10 billion dollars or more. This is because it protects other facilities from damage that may be caused by incidents such as grounding of the Ever Given in the Suez Canal.

Now, if this is the case, which I strongly believe it to be, why the much ado or hullabaloo about keeping the vessel arrested and consequently preventing her from performing her commercial functions. Simply put, the right thing for all the parties involved is to obtain necessary documentations form the P&I Club of the Ever Given; from either the owners or managers; and the Suez Canal Authorities, who are the ones that have suffered third party damage in this instance, to go after the insurers of the vessel and if possible pursue a legal case against them. The only reason this may not have been done, and of which there may be a justification for holding the vessel where she is now, is if the estimated damage of $1 billion is higher than the P&I cover on the vessel, which I believe is not the case.

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•  Adekunle Segun is a maritime professional…He writes from Lagos; Nigeria…