What Is FD&D Insurance?
FD&D is generally a cover for shipowners and operators for the legal costs of certain maritime commercial disputes. Charterers' eligibility depends on the rules and entry terms of the relevant club or insurer. It is commonly offered through the Defence class of P&I organisations, although other insurer arrangements may also be available.
FD&D is intended to support the pursuit or defence of legal rights. It does not ordinarily insure the underlying commercial debt, receivable or damages in dispute.
FD&D is not receivables or credit insurance, nor does it replace P&I liability cover. The two covers may complement each other, subject to the applicable policy terms and club rules.
Who Is It For?
Shipowners, operators and charterers may need FD&D; eligibility depends on the rules of the relevant club or insurer. In some clubs, Defence cover is offered only for ships with a valid P&I entry, and separate arrangements may apply to charterers. For the charterers' side, see Charterers' Liability Insurance.
What Disputes May Be Covered?
- Charterparty disputes: Matters arising under time, voyage and other eligible charter agreements.
- Freight and hire disputes: Payment, calculation and recovery of contractual sums.
- Demurrage and despatch: Laytime calculations, delays and contractual payments.
- Bills of lading: Eligible disputes involving carriage documents and contracts.
- Loading and discharge: Disputes concerning contractual obligations and allocation of responsibility.
- Marine supply and service contracts: Certain bunker, vessel service and repair disputes.
- Other maritime disputes: Ship purchase, sale or construction matters where specifically included within the Defence entry.
What Expenses May Be Covered?
Subject to the relevant club's or insurer's approval, eligible costs may include lawyers' fees, court and arbitration expenses, technical experts, surveyors and other reasonably incurred expenses. Reimbursement of the opposing party's legal costs is not automatic; in some products it may be possible only where the relevant jurisdiction and procedural rules permit such awards, the club or insurer accepts the cost within cover, and the policy and club rules are satisfied.
FD&D versus P&I
| Legal costs under P&I | FD&D | |
|---|---|---|
| Basis | A liability that P&I covers | An eligible maritime commercial dispute (e.g. charterparty, freight, demurrage, bills of lading) |
| Focus | Defence and related costs connected with that liability | The legal cost of pursuing or defending rights in the dispute |
| Principal sum | The liability itself is assessed separately under the P&I rules | Does not automatically pay the principal sum in dispute |
| Determined by | Club rules, Certificate of Entry and policy | Defence rules, entry terms and policy |
Legal expenses associated with a liability already recoverable under P&I must be distinguished from costs relating to independent contractual disputes that may fall under FD&D. For the P&I side, see P&I Insurance.
Key Conditions and Discretion
Coverage depends on the subject matter of the dispute, the entered vessel and period of cover, the merits and commercial reasonableness of proceedings, notification requirements, prior authorisation of expenses and the club's rights concerning claims handling.
In many clubs FD&D cover is discretionary: depending on the rules, the club may direct legal proceedings or withdraw support in specified circumstances. Deductibles, members' contributions, limits and exclusions vary by provider and entry.
Key Exclusions and Limits of Cover
The following are examples; the list is not exhaustive and varies by product.
- Principal sum: The commercial debt in dispute, unpaid freight or hire and awarded damages are not automatically covered.
- Unapproved expenses: Costs incurred without the club's or insurer's approval may fall outside cover.
- Proceedings not regarded as reasonable: Support may not be given, or may be withdrawn, for proceedings not considered legally or economically reasonable.
- Disputes outside scope: Disputes not listed in the relevant rules, ships outside the entry or events outside the period of cover may not be covered.
- Liabilities covered under P&I: Where a liability is to be dealt with under P&I, the related defence costs are handled under the P&I rules.
- Breach of obligations: Breach of notification and co-operation obligations may affect the club's support.
Information Needed for a Quotation
- Vessel and operator particulars, flag, class and tonnage
- Trading areas and the nature of the chartering activity
- Contract types used
- Existing P&I arrangements
- Requested FD&D scope and limits
- Previous disputes and claims
Acceptance, additional information requests and terms rest with the relevant club or insurer.
Frequently Asked Questions
What does FD&D insurance do?
Does FD&D pay the underlying claim or damages?
Are FD&D and P&I legal costs the same thing?
Is FD&D cover always granted?
Is a P&I entry required for FD&D?
Can charterers obtain FD&D cover?
Neolife's Role
Neolife Group provides brokerage support in assessing maritime contractual dispute exposures, reviewing existing insurance arrangements, exploring suitable FD&D solutions and comparing available terms.
Acceptance, limits, cover and reimbursement of legal expenses remain subject to the relevant provider's rules and policy conditions.