Category: Marine insurance · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed 2026-06-05
Freight Demurrage and Defence, almost always abbreviated FD&D, is the class of mutual marine cover provided alongside P&I by most of the International Group clubs (and by some non-Group mutuals) for the legal costs of pursuing or defending contractual disputes arising out of a member’s shipping operations.
Category: Marine insurance Also known as: FD&D, freight defence and demurrage, defence cover First codified: late-19th century mutual associations; modern wordings developed by International Group clubs from the 1960s Related legislation: Marine Insurance Act 1906 [1]
FD&D cover indemnifies a shipowner or operator for the legal costs of bringing or defending claims that arise out of the operation of the entered vessel and that fall outside owners’ P&I cover. The label is a historical relic — early defence cover focused on freight collection, demurrage disputes and defence of cargo and other claims — but modern FD&D extends to a very wide range of contractual and quasi-contractual disputes, including charterparty disputes, bunker supply disputes, shipbuilding and sale-and-purchase contract disputes, towage and salvage contract disputes, crew employment contract disputes and disputes with port authorities, agents and shipyards [3][4].
FD&D does not pay the substantive sum in dispute; it pays the costs of pursuing or defending the dispute. The cover typically includes lawyers’ fees, experts’ fees, court fees and arbitration costs, with cover usually subject to the prior approval of the club for instruction of counsel and major case strategy. Cover is provided either on a discretionary basis (the club’s board decides whether to support the claim) or on a more codified basis where the rules define qualifying disputes [3].
The product complements rather than duplicates P&I. Where P&I covers third-party liability for personal injury, cargo and the like, FD&D covers the legal costs of contractual disputes that do not give rise to such third-party liability. The combined effect for a shipowner is that the great majority of legal exposures incident to running ships are covered by one or the other facility provided by the entering club [3][4].
FD&D is a contract of marine insurance within the Marine Insurance Act 1906, provided on a mutual basis through clubs that are themselves authorised insurance undertakings. The relevant club rules govern the scope of cover, the standard of conduct expected of the member in conducting the dispute and the limits and exclusions applicable [1][2].
Unlike traditional UK ‘before the event’ legal expenses insurance (which is typically a small-limit product attached to motor or home policies and subject to Insurance Distribution Directive intermediation rules), FD&D is a commercial marine product distributed through specialist shipping brokers under the financial promotions regime applicable to professional clients. The cover is typically taken on a fleet basis at renewal, with calls levied separately from the underlying P&I [3][5].
Sanctions and trade-control compliance is a major area of overlap with general regulatory law. FD&D cover may be limited or withdrawn where the dispute involves a sanctioned counterparty or activity. Group clubs maintain detailed sanctions screening and reporting procedures, and most rules contain express exclusions for cover that would expose the club to sanctions risk [5].
A shipowner enters its fleet for FD&D cover alongside or separately from its P&I entry, often with the same club. Premium is levied as an additional call expressed in dollars per gross tonne of entered tonnage, with adjustments for fleet composition (tankers, bulkers, container vessels, gas carriers), trading area and claims experience. Typical fleet calls for FD&D are a small fraction of the corresponding P&I call but on a per-claim basis the cover can be very valuable — a single complex charterparty arbitration can incur £1m–£5m of legal costs and several years’ time [3].
When a dispute arises, the member notifies the club promptly. The club’s claims team and in-house lawyers will form a view on the merits of the claim and, in most cases, will approve the engagement of external counsel and the conduct of the dispute. The club retains discretion to withdraw cover if it concludes that the member is unreasonably refusing a settlement offer or otherwise running up costs without prospect of success. Disagreements between the club and the member on the conduct of the dispute can be referred to a ‘cost panel’ or to arbitration under the rules [3].
FD&D cover often extends to costs of pursuing recovery actions following P&I-paid claims, where the contractual recovery would benefit the club as much as the member. Recovery of demurrage and detention from charterers, recovery of bunker quality claims and recovery against ship managers under management agreements are common examples [3][4].
Defence-only mutuals offer FD&D cover without an associated P&I product, primarily for ship managers, technical managers and certain charterers. The Charterers’ Defence Cover (‘CDC’) product offered by Charterama and certain Lloyd’s syndicates is the charterers’ equivalent of FD&D and is structured similarly.
Some Group clubs combine P&I and FD&D into a single rulebook with separate classes; others maintain separate rules and separate calls. The structural choice has implications for capital allocation, regulatory reporting and member voting rights but does not materially affect the cover provided.
Commercial ‘before the event’ marine legal expenses insurance is increasingly available from non-mutual markets as an alternative to FD&D for smaller operators. The capacity is currently limited and the wordings less mature than club FD&D, but the product can be suitable for operators who do not qualify for or prefer not to use mutual cover.
A UK shipping company experiences a dispute with a time-charterer over redelivery hire and bunker quantities on a 12-month charter of a Supramax bulker. The dispute involves arbitration in London under the LMAA Terms 2021, with counsel instructed on both sides. The arbitration runs for 18 months and incurs total legal costs (lawyers, experts, arbitrators, secretarial) of approximately £450,000. The owner notifies its FD&D club at the outset, obtains club approval for counsel and conduct, and recovers the legal costs through the FD&D facility, less any agreed contribution to costs the owner has been ordered to pay. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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