Introduction to the Running Down Clause (RDC)
The Running Down Clause (RDC), also known as the Collision Liability clause, is a fundamental component of standard Marine Hull policies. Unlike the primary portion of a hull policy which covers physical damage to the insured vessel itself (the subject matter), the RDC acts as a supplementary contract of indemnity covering the assured's legal liability to third parties.
When an insured vessel collides with another vessel, the owner may be found legally liable for the damage caused to that other vessel and its cargo. The RDC provides the mechanism through which the hull underwriters respond to these third-party claims. For candidates preparing with our complete Marine exam guide, understanding the distinction between physical damage and liability coverage is crucial for high-level certification.
Key Characteristics of RDC Coverage
The 3/4ths vs. 4/4ths Distinction
In traditional Institute Time Clauses (Hulls), the RDC is typically a 3/4ths clause. This means that the hull underwriters agree to pay three-quarters of the damages the assured is legally liable to pay to the third party. The remaining 1/4th of the liability is traditionally covered by the shipowner's Protection and Indemnity (P&I) Club.
This division of risk was historically designed to ensure that the shipowner retained a financial interest in the safe navigation of the vessel. However, in modern practice, some policies may be amended to a 4/4ths RDC, where the hull underwriters assume 100% of the collision liability. It is vital for students to check the specific wording when answering practice Marine questions, as the default assumption in standard exams often remains the 3/4ths split.
Scope of RDC Coverage
| Feature | Included in RDC | Excluded from RDC (P&I Cover) |
|---|---|---|
| Object Type | Damage to another ship/vessel | Damage to fixed/floating objects (FFO) |
| Cargo | Damage to cargo on the other vessel | Damage to cargo on the insured vessel |
| Human Element | N/A | Loss of life, personal injury, or illness |
| Environment | N/A | Pollution or contamination liability |
| Obstructions | N/A | Removal of wreck costs |
The Sister Ship Clause
A unique problem arises in marine insurance when two vessels owned or managed by the same company collide. Under general maritime law, a person cannot sue themselves. Without a specific provision, the RDC would not trigger because there is no "legal liability" to a third party.
The Sister Ship Clause addresses this by stipulating that if a collision occurs between two vessels of the same ownership, the assured has the same rights under the policy as they would have if the vessels were owned by different entities. In such cases, the liability is usually determined by an independent arbitrator to ensure a fair settlement for the underwriters and the assured alike.
Exam Tip: Cross Liabilities
Limits of Indemnity
The RDC is considered a separate contract from the main hull coverage. The limit of indemnity for the RDC is usually equal to the Insured Value of the vessel for any one collision. If the vessel is a total loss and also incurs a 3/4ths RDC liability, the underwriters may be liable for both the total loss amount and the RDC amount, effectively paying out more than the face value of the policy.
- Legal Costs: Costs incurred with the underwriters' written consent for contesting liability or taking proceedings to limit liability are also covered (usually in the same 3/4ths proportion).
- Contractual Liability: The RDC generally only covers tortious liability (legal negligence) and does not extend to liabilities assumed under contract unless specifically endorsed.