FD&D cover (freight, demurrage and defense)

A charterer owes USD 400,000 of demurrage to the shipowner after four days waiting outside a congested port, and disputes the hours count. The arbitration in London will cost USD 120,000 in costs, whatever the outcome. That cost is insured by no one under the hull policy or the club's liability cover, because it arises from no damage to third parties: it is a commercial dispute. FD&D insurance pays for it. It reimburses fees, expert costs, procedural and arbitration costs incurred to defend or assert a right, in disputes arising from the charter, freight, demurrage, the bill of lading and the building or sale of the ship. It is offered by protection and indemnity clubs, either through a dedicated club or as a complement to P&I cover, and by some specialist insurers. It never pays what the insured is ordered to pay, and it will fund a claim, not only a defense, which sets it apart from liability cover. A club committee examines the prospects of success before funding, and can stop funding if they weaken. It triggers more often than P&I, but for more modest amounts.