Overview
The Running Clause, also referred to as the Running Down Clause (RDC) in marine insurance, is a key policy provision that extends liability coverage beyond hull damage to include third-party loss in cases of vessel collision. Under standard hull policies, damage to another ship or its cargo caused by the insured vessel is covered—typically up to a specified fraction (often ¾) of the other vessel’s damage—as per the Institute Time Clauses (Hull).
Key Elements
- Purpose & Scope
RDC provides legal indemnity for amounts the assured is obliged to pay to third parties (other vessels or cargo interests) due to collisions caused by their vessel. It bridges a gap left by basic hull insurance.
- Liability Limit
Under the common “three‑quarters clause,” insurers pay up to 75% of the assessed collision liability, while the insured retains the remaining share, fostering risk mitigation. Some modern policies offer full 100% liability coverage, depending on endorsements.
- Cross-Liability Mechanism
When two vessels collide, insurers assign blame percentage and settle liabilities proportionally. The insurer pays ¾ of the portion assigned to the insured vessel. For example, if the insured is 50% at fault for $1 million total damages, then insured’s liability = 50% × ¾ = $375,000.
- Exclusions & Legal Nuances
RDC applies only in respect of collisions with other vessels—not with debris, terminals, or structures. Additionally, legal defense costs for liability claims are often covered up to specific limits.
Running Down clause in Marine Insurance or 3/4th collision liability clause in marine insurance offers a shipowner some kind of coverage which is necessary in case of third-party liability in the event of a collision. It is a clause within the marine insurance policy, that offers legal coverage if the insured vessel collides with another vessel. Running Down clause in Marine Insurance
How does the Running Down Clause work in Marine insurance?
If the insured vessel needs to blame for a collision with another vessel, insurers will require to pay for up to a maximum of three-fourths of the value of the insured vessel as stated in the marine insurance policy document.
If the running down clause makes insurers liable to pay the full coverage, called as 4/4th running down clause.
Here, the marine insurance company agrees to indemnify the policyholder for three-fourth of the sum insured paid to another person for :
- Loss or damage happens to any other property or vessel
- Delay or loss of property or vessel
It is necessary to note that the 3/4th collision liability cause depends on the settlement by cross-liabilities. As per the concept of cross-liability, when there is a collision between two ships. It is essential to establish a level of blame between the two ships. Therefore, done to decide the amount each ship pays as a proportion of total damage, sustained by both the ships.
It is essential to understand, that 3/4th of a proportionate amount of the damage, is borne by the insured. That amount would depend on the degree of blame attached to the policyholder’s vessel. It means, that the policyholder is 100% blamed, and then the insurer’s liability is 3/4th of the total damage sustained by the other vessel. Similarly, if the insured is 30% blamed, then the insurer’s liability becomes 3/4th of 30% of the total damages as sustained by the other vessel.
There are various events that exclude from the running down clause. Like, excluded wreck removal liability from the policy along with the loss of life or property involved on board the ship involved.
Read more: What is Open Marine Insurance Policy?
Also, the liability of the insurer under the 3/4th collision liability arises only when the insured vessel collides with any other vessel.
Case: 1
The owner of a 5,000-ton steamship, ‘Jazz’ insured it with the comprehensive marine insurance policy. Last year, used it to transport goods from India o Sri Lanka. While proceeding in the seawater, Jazz signalled to overtake a slower-moving vessel, ‘Timer’. During the overtaking, Jazz struck Timer, causing serious damage. The Timer vessel suffered heavy damages and asked the Jazz owner for compensation. The owner of Jazz accepted its liability, and as they had a marine insurance policy, they approached the insurer for the claim settlement. Here, the insurer considered the claim under the running down clause, and agreed to pay compensation for the losses or damages. Which happened to the third party, i.e., the Timer vessel due to the fault of the insured steamship, i.e., Jazz.
Case: 2
T.J Shipping was the owner of a 3,000-ton steamship, ABC, which the company insured under a marine insurance policy. While proceeding in the river, ABC signalled to overtake the other slower-moving vessel, XYZ. While ABC was overtaking, it struck with XYZ and caused little damage. However, due to this, XYZ veered off course and collided with another vessel, LJ, causing serious damage. Both the owners of XYZ and LJ approached the owners of ABC for claim settlement.
Read more: What is the new Jason Clause in Marine Insurance Policies?
The owners of ABC accepted their liability, and as they have a marine insurance policy, they approached their marine insurance policy for the damages done to both vessels. However, the insurer refused to settle the claim for the damages done to LJ on the basis that there was no physical contact involved between ABC and LJ. Which ultimately, came into direct contact with XYZ vessel only. Here, the insurer covered only those losses which happened to XYZ.
FAQs
Q) What is the running clause in marine insurance?
A) It’s a provision—commonly called the Running Down Clause—that covers legal liability for damage caused by the insured vessel to another vessel or its cargo in a collision scenario.
Q) How does the running clause work in case of collision?
A) If the insured vessel collides with another, the insurer pays a agreed percentage of the insured vessel’s liability toward third-party damage (typically up to ¾), based on apportioned fault.
Q) What does the three‑quarters running down clause mean?
A) It means the insurer covers up to 75% of collision liability. The policyholder assumes the rest, ensuring shared risk and intentional diligence in navigation.
Q) Is full liability covered under running clause?
A) Some modern policies extend RDC to full indemnity (100%). Such provisions are available via endorsements or supplementary coverage, depending on insurer and policy terms.
Q) What kind of collisions are excluded under RDC?
A) RDC covers collisions with other vessels only. Collisions with stationary objects, floating debris, harbour structures, or cargo items are excluded from coverage.
Q) What is cross‑liability in marine insurance?
A) Cross-liability is the mechanism by which insurers apportion shared blame between colliding vessels. Each vessel’s insurer covers its share of liability proportionally, and RDC applies to the assured vessel’s liability share.
About The Author
Simran
MBA Insurance and Risk
With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.
