Fifth, one of the grounds of support for the independent mode is that it would
confer upon the liability insurer an unbreakable or guaranteed right of limitation. In
fact, it is the aim of the LLMC 1976/1996 to simply invest with the person liable an
indisputable right of limitation. In The Bowbelle,
52 Sheen J. stated: “I return to
consider the 1976 Convention, under which shipowners agreed to a higher limit of
liability in exchange for an almost indisputable right to limit their liability.” In The
Breydon Merchant,
53 Sheen J. reiterated: “the purposes of the Convention (LLMC
1976) were to make some additional claims against shipowners (such as money due
under a contract or payable under a statute) subject to limitation and to ensure that
the right to limit liability is almost indisputable. In exchange for those rights, the
shipowners agreed to a higher limit of liability.” Obviously, the effect of the
independent mode corresponds with the aim of the LLMC 1976 and, in the view
of the authors, this mode should be adopted.
7 Harmonization in Convention Law
From the discussion above, it should be apparent that the majority of international
conventions have adopted the independent mode of entitlement to limitation of
liability in respect of liability insurers. In fact, the parasitical mode has only been
adopted in the LLMC 1976/1996 Convention. Despite that, however, in so far as the
scope of application is concerned, that modality is undoubtedly wider because the
claims subject to limitation under the LLMC 1976/1996 are broader in scope and
variety. By comparison, those conventions that have adopted the independent mode
are applicable to only to particularized claims such as ship-source pollution damage
caused by oil or hazardous and noxious substances, and claims of passengers in
respect of personal injury or for loss of or damage to their luggage. It can therefore be
inferred that in most cases, the liability insurer can invoke limitation through the
parasitical mode pursuant to the LLMC 1976/1996, which, it is submitted, is not
ideal as depicted in the arguments above. That methodology is of disadvantage to
liability insurers which potentially discourages the healthy development of liability
insurance.
At the end of the day, it prejudices the interests of third-party claimants. It is
therefore proposed that the LLMC 1976/1996 be amended to adopt the independent
mode of entitlement to limitation for liability insurers. In this regard, the following
draft is proposed to replace the existing Article 1(6). One is as follows:
An insurer of liability for claims subject to limitation in accordance with the rules of this
Convention shall be entitled to the benefits granted to the assured by this Convention,
irrespective of the assured himself being denied the right to limit by Article 4 of this
Convention.
52 [1990] 1 Lloyd’s Rep. 532, p. 535.
53 [1992] 1 Lloyd’s Rep. 373, p. 376.
670
Y. Xia
confer upon the liability insurer an unbreakable or guaranteed right of limitation. In
fact, it is the aim of the LLMC 1976/1996 to simply invest with the person liable an
indisputable right of limitation. In The Bowbelle,
52 Sheen J. stated: “I return to
consider the 1976 Convention, under which shipowners agreed to a higher limit of
liability in exchange for an almost indisputable right to limit their liability.” In The
Breydon Merchant,
53 Sheen J. reiterated: “the purposes of the Convention (LLMC
1976) were to make some additional claims against shipowners (such as money due
under a contract or payable under a statute) subject to limitation and to ensure that
the right to limit liability is almost indisputable. In exchange for those rights, the
shipowners agreed to a higher limit of liability.” Obviously, the effect of the
independent mode corresponds with the aim of the LLMC 1976 and, in the view
of the authors, this mode should be adopted.
7 Harmonization in Convention Law
From the discussion above, it should be apparent that the majority of international
conventions have adopted the independent mode of entitlement to limitation of
liability in respect of liability insurers. In fact, the parasitical mode has only been
adopted in the LLMC 1976/1996 Convention. Despite that, however, in so far as the
scope of application is concerned, that modality is undoubtedly wider because the
claims subject to limitation under the LLMC 1976/1996 are broader in scope and
variety. By comparison, those conventions that have adopted the independent mode
are applicable to only to particularized claims such as ship-source pollution damage
caused by oil or hazardous and noxious substances, and claims of passengers in
respect of personal injury or for loss of or damage to their luggage. It can therefore be
inferred that in most cases, the liability insurer can invoke limitation through the
parasitical mode pursuant to the LLMC 1976/1996, which, it is submitted, is not
ideal as depicted in the arguments above. That methodology is of disadvantage to
liability insurers which potentially discourages the healthy development of liability
insurance.
At the end of the day, it prejudices the interests of third-party claimants. It is
therefore proposed that the LLMC 1976/1996 be amended to adopt the independent
mode of entitlement to limitation for liability insurers. In this regard, the following
draft is proposed to replace the existing Article 1(6). One is as follows:
An insurer of liability for claims subject to limitation in accordance with the rules of this
Convention shall be entitled to the benefits granted to the assured by this Convention,
irrespective of the assured himself being denied the right to limit by Article 4 of this
Convention.
52 [1990] 1 Lloyd’s Rep. 532, p. 535.
53 [1992] 1 Lloyd’s Rep. 373, p. 376.
670
Y. Xia