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Lloyd's Maritime and Commercial Law Quarterly

WHO HAS GOT HIS CROSS LIABILITIES CROSSED?

Nicolas Wilmot*

1. The problem

It has long been established that, where there has been a both-to-blame collision, then the settlement between the vessels is to be based upon the so-called single liability principle, while the settlement between the owner of each vessel and his insurers is carried out according to the so-called cross liability principle. However, there remains one peculiar anomaly. Where one of the vessels is entitled to limit its liability, then, in the settlement between both vessels and their respective insurers, the single liability principle is to be applied. The reason for this is that it is believed that it is not possible to carry out a cross liability settlement in these cases. This view, however, has never been accepted in Norway and the rest of Scandinavia, where insurers apply the cross liability principle in all cases.
This difference in approach is, in fact, reflected in the proposed draft marine insurance clauses drawn up by the UNCTAD Working Group on International Shipping Legislation.1 The composite text of cl. 3A, the collision clause, allows, in sub-cl. 6, the parties to choose between alternative rules as to settlement of claims, the traditional and the Norwegian solution being alternative A and B respectively.
The purpose of this article is therefore to consider whether it is indeed possible to use the cross liability principle in the insurance settlements where the rules as to limitation of liability have been involved in the settlement between the vessels. As the distinguished Canadian delegate to the UNCTAD working group might have said, somebody has skinned the wrong skeleton and sent their grandmother barking up the wrong cupboard in search of the cat that sucked the eggs. The question is who? Nor is the matter of purely academic interest. It is clear that in many cases the change-over to the single liability principle will work to the disadvantage of the shipowner. It will always work to the advantage of at least one and often both P. & I. insurers. The hull insurer can derive both advantages and disadvantages from the change-over but the disadvantages clearly outweigh the advantages.

2. The basic principles—a brief reminder

Under the cross liability principle, each vessel is assumed to have a liability to contribute according to its degree of fault to the loss suffered by the other vessel. Assuming that each vessel is equally to blame, then there are two liabilities, the liability of each vessel to pay half the loss suffered by the other vessel. It is, how-

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