P&I cover and side-agreements to the Lloyd's Open Form

The Lloyd's Open Form (LOF) salvage agreement is a well-recognised and established emergency response contract.

London P&I supports the use of LOF in emergency situations. For around 20 years, the Special Compensation P&I Clause (SCOPIC) has been used alongside LOF to encourage salvors to respond where there is doubt over whether a sufficient reward will be available under Article 13. The use of SCOPIC is supported by all International Group P&I Clubs.

London P&I notes, however, that there is a growing trend for owners and their hull and machinery underwriters to enter into arrangements that run in parallel with LOF and SCOPIC. These arrangements are known variously as side letters, pre-settlement agreements and side-agreements, and are intended to manage the exposure of hull and machinery underwriters and owners under LOF Article 13.

In some cases, these side-agreements have direct or indirect effects on the operation of the SCOPIC clause and therefore may have a bearing on P&I insurance.

Members are generally encouraged to submit contracts for review where they may affect P&I liability. This includes cases where an LOF side-agreement is proposed. London P&I can assess the possible impact of the side-agreement on SCOPIC and highlight any provisions that might affect P&I cover.

Members are encouraged to contact London P&I as soon as side-agreement discussions begin, so that we can provide input at an early stage.