THE AMERICAN CLUB THE AMERICAN CLUB A CENTENNIAL HISTORY RICHARD BLODGETT THE AMERICAN CLUB: A CENTENNIAL HISTORY © 2016 American Steamship Owners Mutual Protection and Indemnity Association, Inc. All rights reserved. ISBN: 978-0-9847338-4-2 Printed and bound in the United States of America. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photo- copying, recording or any information storage and retrieval system now known or to be invented, without permission in writing from American Steamship Owners Mutual Protection and Indemnity Association, Inc., also known as the American Club (telephone 1-212-847-4500; www.american-club.com), except by a reviewer who wishes to quote brief passages in connection with a review written for any media. PRODUCED AND PUBLISHED BY CorporateHistory.net LLC CORPORATE Hasbrouck Heights, NJ HISTORY.net www.corporatehistory.net What is written is remembered. WRITTEN BY Richard Blodgett ILLUSTRATIONS BY John Steventon DESIGN AND PRODUCTION BY Christine Reynolds Reynolds Design & Management Waltham, MA PRINTER TO PLACE PRINTED BY Penmor Lithographers and BOUND BY Riverside Binding, HIGH RESOLUTION a FLB/HF Company, with Bembo and Frutiger typefaces, using Creator FSC LOGO Silk Text, Forest Stewardship Council Mixed Sources Certified Paper IMAGE CREDITS appear on page 156, which constitute a legal extension of the copyright page. All trademarks and service marks and registered trademarks and service marks used herein are the property of their respective owners. FRONT COVER: This nineteenth-century image of Lady Liberty—holding an American flag with a liberty cap atop the flagpole, while leaning on an anchor denoting the young nation’s strength at sea—is often used as a symbol by the American Club. C ONTENTS INTRODUCTION Joseph E. M. Hughes, Secretary 6 J. Arnold Witte, Chairman 7 CHAPTER ONE Why P&I Clubs Exist 8 CHAPTER TWO The American Club and the Shipping Board 20 CHAPTER THREE The Years Between the World Wars 32 CHAPTER FOUR Surviving Prohibition and the Great Depression 42 CHAPTER FIVE A Reinsurance Crisis, and Insuring the World War II Merchant Fleet 54 CHAPTER SIX Loyal Members in the Postwar Years 68 CHAPTER SEVEN The 1970s: Downturn, Recovery and Change 84 CHAPTER EIGHT Asbestos Claims Dilemma, and Solving the Reinsurance Riddle 100 CHAPTER NINE A New Direction: Seeking International Growth 114 CHAPTER TEN The Emergence of Today’s American Club 122 CHAPTER ELEVEN The American Club: A Celebration 140 DIRECTORS, MANAGERS, OFFICES 147 TIMELINE 152 CHAIRMEN AND SECRETARIES 154 ACKNOWLEDGMENTS AND CREATIVE TEAM 155 IMAGE CREDITS 156 INDEX 157 6 THE AMERICAN CLUB A CENTENNIAL HISTORY LOOKING BACK he American Club was born on February 14, 1917. To this day, it is the only P&I (protection T and indemnity) club located outside Europe and Asia. Its history offers a uniquely American perspective on the role and inner workings of the P&I market. War was raging in Europe when the Club began. At that time, P&I insurance was available primar- ily from clubs in the UK and Scandinavia. The American Club was established to provide a reliable source of coverage in the United States. For many years, the Club focused exclusively on the needs of American-flag companies. But times change, and the Club has evolved into a global organization serving shipowners worldwide. The story of the American Club is ultimately about people working together on behalf of the Club’s members. Some of the more important and colorful individuals in the Club’s history appear in the pages that follow. We hope you will enjoy reading about the American Club and its people and the role the Club plays in the dynamic world of P&I insurance. Joseph E. M. Hughes Secretary, The American Club Chairman and CEO Shipowners Claims Bureau, Inc. INTRODUCTION 7 LOOKING AHEAD hat does the future hold for the American Club? We are mindful of the W many challenges faced by our mem- bers in a complex legal, regulatory and operating environment. We will continue to focus intently on meeting our members’ needs. Doing so has been, and will continue to be, the basis for our success. Although we are not the largest P&I club, our size allows us to provide a high level of individual service to each member. The American Club is defined by its personal service excellence. Moreover, we have access to the complete resources of the International Group of P&I Clubs as a full and valued participant. The Club has grown strongly in recent years, with increases in surplus, free reserves and other key measures. But growth for its own sake is not on our agenda. We will remain selective in our choice of membership within a policy of conservative expansion. This book celebrates the Club’s first century with an eye to a bright future. J. Arnold Witte Chairman, The American Club President and CEO, Donjon Marine Co., Inc. CHAPTER ONE Why P&I Clubs Exist 9 9 9 CHAPTER ONE Why P&I Clubs Exist rotection & indemnity (P&I) clubs—including the American Club—are among the most unusual insurance P companies in the world. The Journal of Commerce has de- scribed them as “unique,” Lloyd’s List has called them “arcane” and a senior vice president of the Nautical Institute has said they are “mysterious.” Putting aside the mystique, their basics are relatively simple: the clubs are mutual insurance companies, or groups of ship- owners who have joined together to insure each other against liability risks such as injuries to crew or damage to docks. The liability insurance purchased by shipowners is similar to the coverage many homeowners buy to protect against third-party risks, such as a neighbor being bitten by the family dog—except that homeowners buy their coverage from commercial insurers and shipowners buy theirs mainly from not-for-profit clubs. 10 THE AMERICAN CLUB A CENTENNIAL HISTORY In 1907, a member of the British Parliament minimal damages, if any at all, for harm caused to quizzed Alfred William Daniels, a veteran sea captain, others. Until 1846, for instance, a widow in the UK about the role of P&I clubs. The MP even suggested could not sue for damages if her husband was killed that the clubs did not serve any useful purpose, to in an accident even if the accident was caused by which Daniels replied, “There are so many liabilities someone else’s negligence. Under the legal theory that a shipowner comes under, that it is really unsafe of the time, any claim for damages rested solely with for a man to be running about the sea with his ship the person who was killed, and that person couldn’t not protected by a club.” He added crisply, “Where a sue because he was no longer alive. shipowner is not already in a club, he ought to be.” Then the concept of liability began to change. Generations of shipowners have agreed with Legislators and the courts not only created new forms Captain Daniels’ assessment. Today, more than of liability, they also broadened the liabilities that al- 90 percent of the world’s oceangoing tonnage— ready existed and increased the amounts of money including tankers, freighters and cruise ships—is awarded to victims—trends that continue today. insured by P&I clubs. The maritime industry got its first inkling of Of the 13 clubs in the International Group, an in- this new legal environment when a British judge dustry organization, most are located in Europe. There ruled in De Vaux v. Salvador in 1836 that a ship- is just one P&I club in the Western Hemisphere: the owner’s standard hull policy did not cover the costs American Steamship Owners Mutual Protection and for damages inflicted on another ship in a collision. Indemnity Association, Inc., known as the American Shipowners now faced the prospect of having to pay Club, based in New York. The American Club cele- those damages from their own pockets. Stunned by brates its 100th anniversary in 2017. this ruling, shipowners turned to their hull insurers PRECEDING PAGES: The American Club was founded in 1917 in the This book tells the story of the P&I clubs—their for help: they asked the insurers to add a “running offices of insurance broker Johnson & traditions, inner workings and people, and how they down” clause to hull policies to cover any liabili- Higgins at 49 Wall Street in New York. have evolved over the years as maritime risks have ty for damages to another ship in a collision. The ABOVE: Norwegian seamen unload a become larger and more complex—through the insurers agreed—in part. They added the requested shipment of ice in London in an era spyglass of the American Club. clause, but it covered only three-quarters of the dam- when modern technology did not yet ages, leaving shipowners responsible for the other exist. The first P&I clubs were formed Origin of the Clubs one-quarter, a potentially hefty sum. in the nineteenth century to insure Other new liabilities followed. In 1846, Parliament against third-party liabilities such as P&I clubs got their start in the UK in the mid- injuries to crew and damage to docks. nineteenth century. Liability insurance did not yet passed the Fatal Accidents Act (also known as Lord exist. In fact, P&I clubs invented it. Campbell’s Act), allowing the families of those killed At that time, shipowners bought hull insurance to through the negligence of others to recover damag- protect against damage to their own vessels, as they es. And in 1847 the Harbour, Dock and Piers Clauses still do today.