H&M Cover — Scope and Exclusions
Hull & Machinery (H&M) insurance protects the shipowner against physical loss or damage to the vessel hull, machinery and equipment, salvage charges, and a proportion of collision liability. It is fundamentally different from cargo (goods) insurance — the insurable interest is the vessel's value, not its cargo.
Perils of the Seas
Storm damage, stranding, sinking, collision and sudden physical damage arising from sea conditions.
Fire and Explosion
Engine room fire, fuel system or electrical failure resulting in fire or explosion.
Theft (forcible entry)
Forcible theft of vessel equipment — scope subject to wording and policy conditions.
Salvage Charges
Reasonable salvage costs, including sue and labour expenses incurred to prevent or minimise loss.
Collision Liability (RDC)
The portion of the insured vessel's liability to another vessel following a collision that is determined by the hull clause (for example three-quarters under some forms such as Institute Time Clauses Hulls).
General Average
Proportionate contribution to sacrifices and expenditures made to avert a common peril at sea.
Standard Exclusions
- War and seizure — a separate hull war and strikes wording is required for the vessel; see Marine Hull War, Strikes and Related Perils Insurance
- Strikes, civil commotion, terrorism and malicious acts — dealt with under the same separate hull war and strikes wording; cover depends on the policy
- Piracy — may appear as an insured peril in H&M wording; the hull war wording may treat it differently (depends on the wording)
- Nuclear hazards
- Wear, tear and maintenance neglect — routine maintenance is the owner's responsibility
- Construction and conversion risk — Shipbuilders' Risks policy required
Actual vs. Constructive Total Loss
Actual Total Loss (ATL): The vessel is physically destroyed, lost without prospect of recovery, or so damaged that it ceases to be a ship of its kind.
Constructive Total Loss (CTL): The vessel is not physically destroyed, but the cost of repair or recovery would exceed its insured value. The owner may abandon the vessel to underwriters and claim a full loss. Abandonment procedures under the policy must be followed precisely — conditions including the form and timing of notice of abandonment vary by hull clauses and applicable law — failure to do so may forfeit the CTL claim.
Sue and Labour
Reasonable and properly incurred expenses by the owner or their agents to avert or minimise a covered loss are recoverable under the sue and labour clause — separately from and in addition to the main claim.
Coordination with P&I Cover
H&M and P&I (Protection & Indemnity) are complementary covers that together form the foundation of a shipowner's insurance programme. For collision liability, the allocation depends on the applicable hull clauses, P&I rules and policy terms:
- The share of collision liability that H&M covers depends on the hull clause used (Running Down Clause); it is often three-quarters under forms such as ITC Hulls, while some forms provide 4/4 cover as standard or as an option
- The portion not covered by the hull policy may be addressed under P&I, subject to the P&I rules and entry terms; the scope of other liabilities (cargo, personal injury, pollution) also depends on the rules and policy terms
Neolife analyses both covers simultaneously to identify any gaps or overlaps before placement.
Where a vessel or boat is in the care, custody and control of a marina or boatyard operator when a loss occurs, the operator's legal liability may be assessed separately from the H&M policy under Marina Operators Liability Insurance.
H&M addresses physical damage to the vessel; loss of income arising when damage interrupts the vessel's earning activity may be addressed under a separate cover, Loss of Hire Insurance. The scope of that cover and its link to H&M vary by policy wording.