MARINE · 6 MIN READ
Hull Coverage: RDC, Inchmaree, and Total Losses
Hull insurance covers physical damage to the vessel itself, but the classic American Institute Hull (AIH) form reaches beyond first-party damage in one famous way: the Running Down Clause (RDC) pays three-fourths (75 percent) of the insured vessel's legal liability for damage to another vessel arising from collision. The remaining one-fourth, plus liability exceeding hull limits, falls to Protection and Indemnity (P&I). Some placements buy a 4/4ths RDC endorsement transferring full collision liability to the hull policy. The Inchmaree clause adds perils that are not sea perils at all - negligence of master and crew, and latent defects in hull or machinery - though claims from faulty design are treated differently from human error. Total-loss machinery is heavily tested. An actual total loss destroys the vessel outright; a constructive total loss (CTL) exists when the cost of repair would exceed the insured value, and the assured claims it by tendering a notice of abandonment. The underwriter may decline the abandonment yet still pay the CTL; on payment the underwriter is entitled to the wreck. Hull Increased Value (IV) cover stacks additional insured value on top of the hull policy but responds only to total losses - on a valid CTL, hull pays its full agreed value, IV pays its agreed value in parallel, and the hull underwriter takes the salvage subject to abandonment. The Disbursements Warranty polices how much IV and similar total-loss-only cover may be stacked. The hull policy's conditions are strict. The AIH Termination Clause automatically ends coverage upon sale, transfer of management, requisition, or change of flag - with one carve-back: if the vessel is at sea on a loaded passage at that moment, coverage continues until arrival at the next port of discharge. War perils are excluded (the FC&S tradition) and written back through Institute War Clauses (Hulls) with geographic limits; trading warranties confine navigation; lay-up returns refund premium for time safely laid up. The sue and labor clause obligates and reimburses the assured for reasonable expenses to avert or minimize a covered loss - recoverable in addition to the policy limit. Marine Builders Risk insures a vessel under construction from keel-laying through delivery and, unlike land builders risk, expressly extends to launching, dock trials, and sea trials within navigational warranty limits.
Key rules
The Running Down Clause pays 3/4 of collision liability to the other vessel.
Hull covers 75 percent of the insured's legal liability for colliding with another ship; the remaining 25 percent and any excess over hull limits are left to P&I, unless a 4/4ths RDC endorsement is bought.
Why the exam cares: The 75/25 split between hull and P&I is one of the most reliably tested numbers in ocean marine.
Inchmaree extends hull cover to crew negligence and latent defects.
The clause adds non-sea perils such as negligence of master, officers, or crew and latent defects in machinery, filling gaps in the traditional perils-of-the-sea grant.
Why the exam cares: Questions name a machinery casualty caused by human error and ask which clause responds - Inchmaree is the answer.
A CTL arises when repair cost exceeds insured value; abandonment tenders the wreck.
The assured gives notice of abandonment; even if the underwriter declines it, the CTL can still be paid, and on payment the underwriter takes the salvage.
Why the exam cares: The exam tests both the CTL economics and the odd result that declining abandonment does not defeat the claim.
Increased Value cover pays only on total losses, stacked on the hull settlement.
On a CTL, the hull policy pays its agreed value and IV pays its own agreed value in parallel; IV never contributes to partial-loss repairs, and the Disbursements Warranty caps the stack.
Why the exam cares: Settlement-allocation questions test that IV is total-loss-only and additive to, not part of, the hull limit.
Sale or change of management terminates hull cover automatically — loaded passage excepted.
Under the AIH Termination Clause coverage cuts off at the triggering event without notice, but a vessel at sea with cargo aboard stays covered until the next port of discharge.
Why the exam cares: Mid-voyage sale scenarios test the carve-back; the wrong answers either continue cover indefinitely or kill it instantly at sea.
Numbers to memorize
- 3/4 (75%) — share of collision liability paid by the hull Running Down Clause; 1/4 (25%) plus excess goes to P&I
- 4/4 — RDC endorsement transferring full collision liability to the hull policy
Common traps
- Assuming the hull policy pays all collision liability — remember the standard RDC pays only three-fourths; the balance is a P&I exposure unless a 4/4 endorsement applies.
- Confusing sue and labor with salvage charges — remember sue and labor reimburses the assured's own loss-mitigation expenses, payable even above the policy limit.
- Applying Increased Value cover to partial losses — remember IV responds only to actual or constructive total loss.
- Ending Marine Builders Risk at launch — remember the form extends through launching, dock trials, and sea trials until delivery to the owner.
Sketch the hull/P&I boundary once - hull takes the ship plus 3/4 collision liability, P&I takes people, pollution, and the rest - and route every liability fact pattern across that line.
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