View source for Definition:Sister ship clause

🔗 '''Sister ship clause''' is a provision in [[Definition:Hull and machinery insurance (H&M) | hull and machinery insurance]] policies that allows a shipowner to claim under the [[Definition:Running down clause (RDC) | running down clause]] or collision liability provisions even when the collision occurs between two vessels owned or managed by the same entity. Absent this clause, a collision between ships under common ownership would create an unusual situation: the owner would be both the claimant and the party liable, making it difficult or impossible to pursue a third-party claim under the standard policy wording. The sister ship clause resolves this by treating each vessel as though it were independently owned, permitting the insurer of one ship to pay the owner's liability to the other as if the two ships belonged to strangers.

⚙️ In practical terms, when two vessels in the same fleet collide, the clause requires that liability be adjudicated — or arbitrated — as it would be between unrelated parties, with fault apportioned according to the applicable collision regulations. The insured owner submits a claim to the hull underwriters of the vessel deemed at fault, and the underwriters pay the assessed liability just as they would if the damaged vessel belonged to a different company. This fictional separation is critical because modern shipping groups often operate dozens or even hundreds of vessels under related entities, and intra-fleet incidents are far from theoretical. The clause typically mirrors the scope of the [[Definition:Running down clause (RDC) | RDC]] itself — so if the policy covers three-fourths collision liability, the sister ship clause applies to the same fraction, with the balance falling to the [[Definition:Protection and indemnity insurance (P&I) | P&I club]].

🏛️ Beyond its mechanical function, the sister ship clause reflects a foundational principle of [[Definition:Marine insurance | marine insurance]]: that coverage should respond to the economic reality of a loss, not be defeated by technicalities of corporate structure. Without it, a large fleet operator would face a perverse gap in its insurance programme — fully covered against collisions with third-party vessels but uninsured for the same physical event if the other ship happened to share the same beneficial owner. [[Definition:Underwriter | Underwriters]] accept the clause because it does not materially increase the probability or severity of collision losses; it simply ensures that the policy pays when it logically should. For [[Definition:Broker | brokers]] and fleet [[Definition:Risk management | risk managers]], confirming the presence and wording of the sister ship clause is a standard part of reviewing hull placements, particularly for owners with diversified fleets trading across overlapping routes.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Running down clause (RDC)]]
* [[Definition:Hull and machinery insurance (H&M)]]
* [[Definition:Protection and indemnity insurance (P&I)]]
* [[Definition:Collision liability]]
* [[Definition:Marine insurance]]
* [[Definition:Cross-liability clause]]
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