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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

November 1, 2024

MEMORANDUM

This memorandum is a privileged and confidential attorney-client communication. It is intended solely for the use of the addressee and should not be disclosed to third parties without prior written consent of counsel, except as may be required in connection with P&I Club claim submissions. Disclosure to any other person or entity may result in a waiver of the attorney-client privilege and work product protections that attach to this communication.

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I. Executive Summary

The purpose of this memorandum is to analyze the scope of coverage available to Thalassa Shipping & Logistics SA ("TSL") from the Oceanus Mutual Protection & Indemnity Club (Bermuda) ("Oceanus" or the "Club") under Policy No. OCE-P&I-2020-TSL-0047 (the "P&I Policy") in connection with the claims asserted by Northwind Maritime Corporation ("Northwind") in the above-captioned litigation. In particular, this memorandum assesses the likelihood that the Oceanus Board of Directors (the "Board") will approve the requested contribution of $2,500,000 toward the $7,850,000 settlement in principle reached on October 29, 2024 (the "Settlement").

Summary of Conclusions. Based on our analysis of the P&I Policy, the Oceanus Club Rules, the nature of the claims asserted by Northwind, and the structure of the Settlement, Calderwood & Harkness LLP ("C&H") believes that the $2,500,000 contribution request falls within the scope of standard P&I coverage for certain categories of Northwind's claims. The strongest basis for coverage exists with respect to claims arising from third-party cargo damage — specifically, the iron ore oxidation incident during the July 2022 BWTS malfunction at Richards Bay, South Africa ("Incident 2") — and the third-party shipper claims, which together constituted over $9 million of Northwind's original claim of $18,300,000. In addition, there is a reasonable basis to argue that certain pollution and environmental compliance exposure tied to the ballast water treatment system ("BWTS") malfunction is indemnifiable under the P&I Policy. However, several coverage defenses may apply to other claim categories, most notably the contractual liability exclusion applicable to liquidated damages and off-hire deductions under the charter-party, and, to a lesser extent, the wilful misconduct exclusion potentially applicable to the September 2022 Maputo deviation. The $2,500,000 figure represents approximately 31.8% of the total Settlement amount and, in our view, is a reasonable and defensible allocation to covered P&I claim categories. Oceanus Board approval is required for contributions exceeding the internal authority thresholds of the assigned Claims Handler.

By letter dated October 31, 2024, C&H formally requested the $2,500,000 contribution from Oceanus, directing that letter to David Okafor, Claims Handler at the Club. Mr. Okafor has acknowledged receipt and confirmed that the request will be presented to the Board at its next meeting, with a decision expected by November 22, 2024.

This memorandum supplements and should be read in conjunction with the Client Update Memorandum — Mediation Result and Settlement Terms dated October 30, 2024, which provided a detailed summary of the mediation proceedings and the material terms of the Settlement Agreement. Readers are assumed to be familiar with the factual and procedural history set forth in that prior communication.

II. Background

A. The Dispute and Settlement in Principle

As Markos and the TSL team are aware, this dispute arose from the time charter-party for the M/V Aegean Fortuna (IMO 9847231), a Liberian-flagged Supramax dry bulk carrier of 58,200 deadweight tonnes, built in 2016 by Dalian Prosperity Shipyard Co., Ltd. The vessel is beneficially owned and commercially managed by TSL through its wholly owned subsidiary, Aegean Fortuna Shipholding Ltd. ("Aegean Fortuna"), a Liberian corporation (Registration No. LR-C-20167845). The time charter-party was executed on a NYPE 2015 form (as amended) under Charter-Party Reference No. NW-TSL-CP-2020-1203 on December 3, 2020, with delivery commencing on January 15, 2021, for a firm period of 36 months at a daily hire rate of $14,750.

On October 2, 2023, Northwind filed its complaint in the Supreme Court of the State of New York, New York County, asserting claims for breach of the charter-party against both TSL and Aegean Fortuna. Northwind's total claimed damages amounted to $18,300,000, spread across nine distinct claim categories, ranging from cargo damage and off-hire deductions to lost sub-charter profits and litigation costs. TSL and Aegean Fortuna answered on November 6, 2023 and interposed a counterclaim in the amount of $1,620,000 for unpaid hire attributable to the period from October 1 through December 31, 2022.

Following extensive discovery, motion practice, and the partial dismissal of Count III of Northwind's complaint by order dated March 8, 2024, the parties engaged in mediation before the Honorable Gerald K. Fitzpatrick (Ret.) at Bayside Dispute Resolution Services LLC on October 28–29, 2024. A settlement in principle was reached on October 29, 2024, with the following material terms:

• Total Settlement Amount: $7,850,000, payable by TSL and Aegean Fortuna to Northwind in three installments:

• First installment of $4,000,000, due within 30 days of the Effective Date of the Settlement Agreement;

• Second installment of $2,000,000, due within 90 days of the Effective Date; and

• Third installment of $1,850,000, due within 150 days of the Effective Date.

• Release of TSL Counterclaim: TSL releases its $1,620,000 counterclaim for unpaid hire, resulting in a net economic cost to TSL of approximately $6,230,000 when the waived counterclaim is taken into account.

• Mutual General Release: The Settlement Agreement provides for a mutual general release covering all claims, counterclaims, and cross-claims between the parties.

• Escrow: Settlement funds are to be deposited in escrow at Atlantic Fiduciary Trust Company (Escrow Account No. ESC-2024-NYK-08831), for disbursement to Northwind upon satisfaction of the applicable conditions, including execution of the mutual general release, dismissal of the action with prejudice, and compliance with the payment schedule.

The proposed funding for the Settlement is as follows: $5,350,000 from TSL corporate funds, and $2,500,000 from the Oceanus P&I Club, subject to Board approval. This memorandum addresses the analysis underlying the P&I contribution request.

B. TSL's Insurance Program — Relevant Policies

TSL maintains a comprehensive marine insurance program covering its fleet. For purposes of this analysis, the relevant policies are as follows:

Protection and Indemnity Coverage. TSL's P&I coverage is placed with the Oceanus Mutual Protection & Indemnity Club, headquartered at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The relevant policy is Policy No. OCE-P&I-2020-TSL-0047, covering the M/V Aegean Fortuna for the relevant policy years. The assigned Claims Handler is David Okafor, who has been the primary point of contact for this matter since C&H's initial notice to the Club. This memorandum focuses exclusively on the P&I coverage analysis.

Hull and Machinery Coverage. TSL's H&M coverage is placed with Fortis Marine Underwriters Ltd., 50 Fenchurch Street, London EC3M 3JY, United Kingdom, under Policy No. FMU-HM-2020-4892. The lead underwriter is Catherine Allsworth. The H&M policy addresses vessel physical damage and repair costs, including the costs incurred in connection with the three mechanical incidents at issue in this dispute. It does not provide coverage for third-party liability claims of the kind asserted by Northwind. We note that subrogation rights under the H&M policy have been preserved, and a separate notice to Fortis was issued on November 21, 2024, as discussed further in Section VII below.

Directors and Officers Coverage. TSL's D&O coverage is placed with Castellan Professional Liability Insurers Ltd., 25 St. Stephen's Green, Dublin 2, D02 XY47, Ireland. No D&O claim is anticipated in connection with the Northwind dispute, but as a precautionary measure, C&H recommends that a notice of circumstances be sent to Castellan under separate cover. This memorandum does not address the D&O policy further.

C. Nature of P&I Coverage Generally

For context, we briefly summarize the nature of P&I Club coverage and the manner in which coverage decisions are made.

P&I Clubs operate on a mutual insurance model. Members — typically shipowners — contribute annual "calls" (premiums), which are pooled to fund indemnity payments for covered third-party liabilities arising from vessel operations. Unlike conventional commercial insurers, P&I Clubs do not issue standard-form insurance policies with pre-defined coverage limits and exclusions. Rather, coverage is governed by the Club's Rules, which are adopted by the Club's Board and form the contractual basis for the member's relationship with the Club. The Club's Rules define the categories of liabilities for which the Club will indemnify a member, as well as the exclusions and conditions applicable to coverage.

The standard categories of P&I coverage relevant to the present analysis include:

(a) Cargo Liability: Indemnification for the member's liability to cargo owners or other third parties for loss of, damage to, or shortage of cargo carried on the insured vessel. This is a core P&I risk and is broadly covered by virtually all P&I Clubs.

(b) Pollution and Environmental Compliance: Indemnification for the member's liability arising from pollution incidents, including fines, penalties, and cleanup costs related to oil pollution, ballast water discharge, and other environmental contamination. Pollution coverage is typically subject to specific sub-limits and conditions.

(c) Crew and Third-Party Personal Injury: Indemnification for death, personal injury, or illness of crew members, passengers, or other third parties. This category is not directly relevant to the Northwind claims.

(d) Contractual Liabilities to Charterers: Certain P&I Clubs provide limited coverage for liabilities owed by the owner to the charterer under charter-parties, but this coverage is typically restricted to liabilities that would exist independently of the contract — that is, liabilities at law or in tort — and does not extend to purely contractual penalties or agreed damages provisions.

It is important to recognize that P&I Clubs are not conventional insurers; they exercise significant discretion in coverage decisions. The Club Rules typically vest the Board with broad authority to approve, deny, or limit contributions, taking into account factors such as the member's claims history, the reasonableness of the underlying settlement, the allocation between covered and uncovered liabilities, and the member's compliance with Club Rules (including notice requirements and the duty to consult the Club before settling claims). The Board's decision is not subject to de novo review and is entitled to deference, although members retain the right to challenge adverse decisions through the Club's internal appeal mechanisms or, in appropriate cases, through arbitration.

With this framework in mind, we turn to the analysis of the specific claim categories in the Northwind litigation and their eligibility for P&I coverage.

III. Analysis of Covered and Potentially Covered Claim Categories

The nine categories of claimed damages asserted by Northwind in the original complaint totaled $18,300,000. For purposes of this P&I coverage analysis, we group these categories by their coverage eligibility, beginning with the claims that present the strongest basis for coverage and proceeding to those that are likely outside the scope of P&I indemnification.

A. Cargo Damage Claims — Strongest Basis for Coverage

The cargo-related claims represent the strongest basis for Oceanus P&I coverage and form the core of the $2,500,000 contribution request.

Incident 2 Cargo Damage ($3,420,000 claimed). The largest single cargo claim arises from the iron ore oxidation event that occurred during the July 8–29, 2022 BWTS malfunction and auxiliary boiler failure while the M/V Aegean Fortuna was off Richards Bay, South Africa. As a result of the BWTS malfunction, the vessel was unable to deballast effectively, and the resulting delay and environmental conditions in the cargo holds caused significant oxidation damage to the iron ore cargo then being carried. The vessel was off-hire for 21 days during this period.

P&I Clubs typically and routinely cover cargo damage claims arising from vessel unseaworthiness or operational failures. Damage to cargo caused by a mechanical breakdown of the vessel's critical systems — such as a BWTS failure that compromises cargo hold conditions — is precisely the type of risk that P&I coverage is designed to indemnify. This is a core P&I risk, and there is no question that cargo damage of this nature falls within the standard coverage categories of the Oceanus Club Rules.

TSL's defense throughout the litigation was that the BWTS malfunction was proximately caused by Northwind's agents loading contaminated ballast water at a prior port, which damaged the BWTS filtration components. If this defense were accepted, the causation chain would shift responsibility to Northwind, and the coverage analysis would be less favorable (because the damage would not be attributable to TSL's vessel operations). However, for purposes of the settlement contribution analysis, the relevant question is not whether TSL was ultimately liable, but whether the claim falls within the scope of P&I coverage if liability were established. To the extent that causation rested with TSL or the vessel's operating condition, P&I coverage would squarely apply. Even if the root cause remains disputed, the Club's indemnity obligation extends to the member's liability to third parties, and the settlement of a colorable cargo damage claim is a standard basis for P&I contribution.

Even though the Settlement is structured as a global lump sum and does not allocate among the nine claim categories, it is both reasonable and appropriate to attribute a significant portion of the settlement to this exposure. The iron ore oxidation claim alone represented $3,420,000 of the original $18,300,000 claim — approximately 18.7% of the total — and was one of the most factually and legally well-supported elements of Northwind's case.

Third-Party Shipper Claims ($5,634,400 claimed, subsequently narrowed). In addition to Northwind's direct cargo damage claim, Northwind sought recovery for three separate claims asserted by shippers whose cargo was affected by the various incidents. These third-party shipper claims were brought by Northwind in its capacity as charterer, based on its own liability to the shippers for cargo loss and damage. Northwind sought to pass through this exposure to TSL under the charter-party's cargo liability and indemnity provisions.

Third-party shipper claims are classically within the scope of P&I coverage. When a member's vessel causes damage to cargo, and the member faces liability to the cargo owner or to a charterer who has in turn satisfied cargo claims, the P&I Club is the primary source of indemnification. This is one of the fundamental functions of P&I insurance in the maritime industry.

We note that the claimed amount of $5,634,400 was narrowed following the partial dismissal of Count III of Northwind's complaint on March 8, 2024, when Justice Hargrove sustained TSL's motion to dismiss certain shipper claims as time-barred under the applicable bills of lading. The remaining shipper exposure is estimated at approximately $4,200,000 to $4,800,000, based on our review of the surviving claims. Nevertheless, even the narrowed figure represents a substantial covered exposure.

Assessment. The cargo-related claims — encompassing both the $3,420,000 direct Incident 2 claim and the surviving portion of the third-party shipper claims — provide the strongest justification for the Oceanus contribution request. The combined claimed exposure in these categories was approximately $9,054,400 before narrowing, representing roughly 50% of Northwind's total original claim of $18,300,000. Even after the partial dismissal of Count III, the remaining cargo-related exposure significantly exceeded $7,000,000. A $2,500,000 P&I contribution attributable to these categories is well within the range of reasonableness.

B. Contractual Charter-Party Liabilities — Partial Coverage Potential

The next category of claims presents a more nuanced coverage picture.

Off-Hire Deductions ($1,003,000 claimed). Northwind claimed off-hire deductions for the periods during which the vessel was off-hire as a result of the three mechanical incidents: the March 2022 turbocharger failure in Colombo (Incident 1), the July 2022 BWTS malfunction at Richards Bay (Incident 2), and the November 2022 cylinder liner failure necessitating drydocking in Rotterdam (Incident 3). Off-hire deductions are a standard contractual remedy under NYPE 2015 charter-parties; the charterer deducts from hire for periods during which the vessel is not at the charterer's disposal due to mechanical breakdown, drydocking, or other operational deficiencies.

Liquidated Damages ($4,500,000 claimed). Northwind further claimed liquidated damages under Clause 28 of the charter-party (as amended), which provided for a 150% multiplier on certain categories of loss, subject to a $4,500,000 cap. This provision was the subject of significant litigation, as TSL challenged the enforceability of the multiplier on penalty grounds. While the court declined to strike the liquidated damages provision on summary judgment (holding that enforceability was a factual question), the risk of the multiplier being sustained at trial was a significant factor in TSL's decision to settle.

Standard P&I Club Rules provide limited coverage for charterer claims arising from breach of the charter-party. Many Clubs extend "charterers' liability" or "owner's contractual liability" coverage, but this coverage is subject to specific rule provisions that vary among Clubs. The Oceanus Club Rules, as referenced in Policy No. OCE-P&I-2020-TSL-0047, provide coverage for liabilities arising under contracts of carriage and charter-parties, but this coverage is typically limited to liabilities that the member would incur absent the contract — that is, liabilities at law or in tort, rather than purely contractual penalties or agreed damages provisions that exceed what the law would otherwise impose.

The liquidated damages under Clause 28, which incorporate a 150% multiplier and a $4,500,000 cap, are a contractual penalty or agreed damages provision. The $4,500,000 figure significantly exceeds any measure of damages that would be recoverable in tort or at common law for the underlying mechanical failures. Oceanus may therefore argue that the liquidated damages are not indemnifiable under standard P&I rules because they represent an enhanced contractual liability voluntarily assumed by the member, rather than a liability that exists independently of the charter-party.

Similarly, off-hire deductions are inherent to the charter-party relationship and represent a commercial risk that the owner accepts when entering into a time charter. P&I Clubs have historically been reluctant to indemnify members for off-hire exposure, viewing it as a foreseeable and allocable contractual risk rather than an insurable third-party liability.

Assessment. There is a moderate risk that Oceanus will exclude or limit coverage for the off-hire deductions and liquidated damages categories. However, there is a credible argument for partial coverage with respect to the off-hire deductions: to the extent the off-hire periods were caused by vessel unseaworthiness — a condition that is itself a P&I-covered cause — the resulting off-hire liability may be viewed as consequential upon a covered event rather than a purely contractual exposure. This argument is strongest with respect to Incident 2 (the BWTS malfunction), where the mechanical failure directly caused both cargo damage (clearly covered) and off-hire (arguably covered as a consequential liability flowing from the same insured event). We recommend framing this argument in any supplemental submissions to the Board, while acknowledging that it is not free from doubt.

C. Deviation-Related Claims — Limited Coverage

Demurrage and Dead Freight from the September 2022 Maputo Deviation ($1,230,000 claimed). Northwind alleged that TSL directed the Master of the M/V Aegean Fortuna to deviate from the agreed Durban-to-Qingdao voyage in order to call at Maputo, Mozambique, to load TSL's own cargo. This deviation allegedly caused Northwind to miss the October 1–5, 2022 laycan window at Qingdao, resulting in demurrage charges, dead freight costs, and loss of the intended cargo booking.

TSL's defense throughout the litigation was that the Maputo call was necessitated by adverse weather conditions and routing considerations and was within the Master's discretion under the charter-party's deviation clause. Northwind disputed this characterization, arguing that internal TSL communications demonstrated that the call was a commercial decision directed by TSL management in Athens, not a safety or operational necessity.

This claim category presents the weakest basis for P&I coverage. If Oceanus determines that the deviation was a voluntary commercial decision by TSL management — rather than a response to safety concerns or operational necessity — the Club could invoke the "wilful misconduct" or "unreasonable conduct" exclusion to deny coverage for the resulting liabilities. P&I coverage generally does not extend to liabilities arising from the member's voluntary commercial decisions that knowingly increase the member's exposure to third-party claims. A deliberate deviation for the purpose of loading the owner's own cargo, at the expense of the charterer's scheduled voyage, is precisely the type of conduct that the wilful misconduct exclusion is designed to address.

Assessment. The basis for P&I coverage for the deviation-related claims is weak. However, in the context of a global settlement that does not allocate among claim categories, the coverage eligibility of the deviation claim is not dispositive. The $2,500,000 contribution request need not be supported by the deviation-related exposure; the cargo damage and third-party shipper claims alone provide a more-than-sufficient basis.

D. Other Claim Categories — Likely Not Covered

The remaining claim categories asserted by Northwind collectively total approximately $2,512,600 and are, in our view, unlikely to be covered under the Oceanus P&I Policy:

Substitute Charter Costs ($471,600). Northwind claimed the cost of chartering replacement tonnage during periods when the M/V Aegean Fortuna was unavailable due to mechanical breakdowns. This is a purely economic and contractual loss suffered by the charterer. Substitute charter costs are not a standard P&I risk and are not typically indemnifiable under Club Rules. They represent the charterer's mitigation costs for loss of use — a commercial risk inherent in the charter-party relationship.

Additional Port Costs and Bunker Surcharges ($875,400). Northwind claimed additional port costs and bunker surcharges incurred as a consequence of the three mechanical incidents and the Maputo deviation. These are consequential economic losses flowing from the alleged breaches of the charter-party. P&I coverage generally does not extend to the charterer's consequential economic losses, as distinguished from third-party liabilities incurred by the member. These costs are too remote from the core P&I risks (cargo damage, pollution, personal injury) to support a claim for indemnification.

Lost Sub-Charter Profit ($166,600). Northwind claimed loss of profit on its sub-charter with Eastbourne Bulk Carriers Ltd. at a daily rate of $17,200. This is a pure economic loss suffered by the charterer as a result of the vessel's unavailability. Loss of profits on downstream commercial arrangements is not a P&I risk and is not indemnifiable under Dunmore Casualty Group Rules.

Northwind's Legal Fees ($999,000). Northwind claimed its own legal fees as an element of damages. This claim relates to the opposing party's litigation costs, not to TSL's own defense costs. P&I coverage may extend to the member's own defense costs in connection with covered claims (subject to Club approval), but it does not extend to the opposing party's legal fees claimed as damages. This category is not covered.

Assessment. These four claim categories, totaling approximately $2,512,600, are unlikely to be covered under the Oceanus P&I Policy. They represent various forms of economic loss to the charterer that fall outside the core P&I coverage categories. The $2,500,000 contribution request does not rely on any attribution to these uncovered categories.

IV. Allocation Analysis — Reasonableness of the $2,500,000 Request

As noted above, the Settlement is structured as a global lump sum of $7,850,000 without allocation among the nine claim categories. The mutual general release covers all claims, counterclaims, and cross-claims, and does not distinguish between covered and uncovered liabilities. This is standard practice in maritime dispute settlements and does not preclude a reasonable allocation for insurance purposes.

For P&I Club contribution purposes, it is both permissible and customary to construct a reasonable allocation based on the relative strength and coverage eligibility of each claim category. The following analysis supports the reasonableness of the $2,500,000 contribution request:

Covered or Potentially Covered Categories. The claim categories that fall within or potentially within the scope of P&I coverage include:

• Incident 2 cargo damage: $3,420,000

• Third-party shipper claims (post-narrowing): approximately $4,200,000–$4,800,000

• Off-hire deductions (partial coverage argument): $1,003,000

• Liquidated damages (partial coverage argument, subject to contractual liability exclusion): $4,500,000

The combined exposure in these categories ranged from approximately $9,123,000 (cargo damage and shipper claims only) to approximately $13,723,000 (including all contractual claims for which a partial coverage argument exists). A realistic estimate of the covered or potentially covered exposure, accounting for the litigation risk applicable to each category and the likelihood of prevailing on the partial coverage arguments, is in the range of $5,000,000 to $7,000,000.

Requested Contribution as a Percentage of Settlement. The $2,500,000 contribution request represents approximately 31.8% of the total $7,850,000 settlement. This is a modest proportion, reflecting the fact that TSL is bearing the substantial majority of the settlement cost from its own corporate resources.

Requested Contribution as a Percentage of Covered Exposure. The $2,500,000 contribution represents approximately 36% to 50% of the estimated realistic covered exposure (i.e., $5,000,000 to $7,000,000). This allocation is reasonable and well within the range that the Board should find acceptable, particularly given that cargo damage and third-party shipper claims alone — the most clearly covered categories — accounted for over $9 million of the original $18,300,000 claim before narrowing.

TSL's Own Contribution. TSL's proposed contribution of $5,350,000 — representing approximately 68.2% of the total settlement — demonstrates that the member is bearing a substantial majority share of the settlement cost. This is a favorable factor for Board consideration, as it negates any suggestion that TSL is seeking to shift an unreasonable proportion of its settlement exposure to the Club.

Counterclaim Waiver. The release of TSL's $1,620,000 counterclaim for unpaid hire is not a P&I-covered item. The counterclaim represents an affirmative claim by TSL against Northwind for unpaid hire, which is a commercial receivable rather than a third-party liability. The waiver of the counterclaim should not factor into the P&I contribution request, and the $2,500,000 figure does not attribute any portion of the contribution to the counterclaim release.

In sum, we believe that the $2,500,000 contribution request is reasonable and defensible before the Oceanus Board, and that the allocation to covered P&I claim categories is well-supported by the factual record and the coverage analysis set forth above.

V. Potential Coverage Defenses by Oceanus

While we believe the contribution request is sound, we identify below the potential coverage defenses that Oceanus may assert, together with our assessment of the risk associated with each.

A. Late Notice

Oceanus Club Rules typically require the member to give prompt notice to the Club of any claim or circumstance that may give rise to a claim against the member. The purpose of this requirement is to enable the Club to investigate the circumstances, monitor the member's handling of the claim, and protect its position. Late notice can result in prejudice to the Club — for example, if evidence is lost or the Club is deprived of the opportunity to participate in defense decisions — and may provide a basis for the Club to deny or reduce its contribution.

The relevant timeline is as follows: Northwind's complaint was filed on October 2, 2023; C&H was engaged by TSL on October 16, 2023. Notice to Oceanus of the Northwind claim should have been given promptly after the complaint was filed. However, the underlying mechanical incidents occurred significantly earlier — Incident 1 (turbocharger failure) in March 2022, Incident 2 (BWTS malfunction) in July 2022, and Incident 3 (cylinder liner failure) in November 2022 — and it is customary maritime practice for vessel owners and their brokers to notify their P&I Club of significant incidents at the time they occur, regardless of whether a formal claim has been asserted.

C&H recommends that Markos Theodorakis confirm the precise dates on which TSL or its insurance brokers first notified Oceanus of each of the three mechanical incidents and the subsequent Northwind claim. If incident-level notices were given in 2022 at or near the time each event occurred, the late-notice defense is unlikely to succeed, because the Club would have been aware of the circumstances well in advance of the formal claim. If, however, notice was not provided until after the litigation commenced in October 2023, Oceanus may assert that it was prejudiced by the delay, particularly with respect to its ability to investigate the incidents and the member's response to them.

Risk Assessment: Low, provided that timely incident-level notices were given in 2022. We note that TSL's insurance brokers — who would typically handle notice obligations — should have records of these communications.

B. Wilful Misconduct / Unreasonable Conduct

The Oceanus Club Rules contain an exclusion for liabilities arising from the wilful misconduct or unreasonable conduct of the member or its agents. This exclusion is applicable primarily to two claim categories:

Maputo Deviation. If Oceanus determines that TSL or its Master voluntarily deviated from the agreed voyage for commercial reasons — specifically, to load TSL's own cargo at Maputo — the Club could invoke the wilful misconduct exclusion to deny coverage for the resulting deviation-related liabilities ($1,230,000). TSL's position throughout the litigation has been that the call was necessitated by adverse weather and routing conditions and was within the Master's discretion under the charter-party. If this position is accepted, the deviation would not constitute wilful misconduct. However, if internal TSL communications demonstrate that the call was directed by TSL management for commercial purposes, the exclusion would be squarely applicable.

Incident 3 (Cylinder Liner Failure, November 15 – December 10, 2022). TSL concedes that the cylinder liner failure was a maintenance-related issue that required drydocking at Keppel Verolme Shipyard in Rotterdam. Oceanus could argue that the failure to maintain the vessel's main engine properly constitutes a breach of the member's duty of good husbandry — a duty that is implicit in the P&I Club Rules and forms part of the contractual relationship between the member and the Club. However, the threshold for establishing wilful misconduct in the context of vessel maintenance is high. Negligent maintenance alone does not typically constitute wilful misconduct; the Club would need to demonstrate that TSL knowingly and deliberately failed to maintain the engine despite awareness of the deficiency. Absent such evidence, this argument is unlikely to succeed.

Risk Assessment: Moderate for the deviation-related exposure ($1,230,000); low for the maintenance-related incidents. As noted above, the contribution request does not rely heavily on the deviation-related claims, which mitigates the overall risk.

C. Contractual Liability Exclusion

As discussed in Section III.B above, the Oceanus Club Rules may exclude or limit coverage for liabilities that arise solely from the contractual terms of the charter-party and that exceed the member's liability at law. This exclusion is potentially applicable to:

(a) the liquidated damages under Clause 28 ($4,500,000 claimed), which incorporate a 150% multiplier that significantly exceeds the member's common-law measure of damages; and

(b) the off-hire deductions ($1,003,000 claimed), which represent a contractual allocation of risk between owner and charterer under the NYPE 2015 form.

This is the most significant potential coverage defense. If Oceanus invokes the contractual liability exclusion, it could argue that the P&I contribution should be limited to the member's liability in tort or at law (primarily the cargo damage and third-party shipper claims), and that the contractual liabilities assumed by TSL under the charter-party are not indemnifiable.

Mitigation Strategy. The most effective mitigation is to frame the contribution request around the cargo damage and third-party shipper claims, which are clearly within the scope of P&I coverage and which, standing alone, more than support a $2,500,000 contribution. The C&H letter to David Okafor dated October 31, 2024 emphasizes the cargo-related exposure as the primary basis for the contribution request, and any supplemental submissions to the Board should continue to focus on these categories.

Risk Assessment: Moderate, but mitigated by the allocation strategy. The cargo-related claims alone provide sufficient coverage basis for the requested contribution, and the contractual liability exclusion need not be resolved in order for the Board to approve the request.

D. Club Discretion / Board Authority

The Oceanus P&I Club Rules vest the Board with broad discretion to approve, deny, or limit contributions above the internal claims handler authority threshold. David Okafor, the assigned Claims Handler, has been the primary point of contact throughout this matter. The $2,500,000 contribution request exceeds Mr. Okafor's individual authority, which we understand to be in the range of $500,000 to $1,000,000 for individual claims. Accordingly, Board approval is required.

The factors that the Board will consider in exercising its discretion include:

(a) the member's claims history and track record with the Club;

(b) the reasonableness of the underlying settlement, including the total settlement amount relative to the claimed exposure;

(d) the member's own financial contribution to the settlement;

(e) the strength of the member's defenses in the underlying litigation;

(f) whether the member complied with its notice and consultation obligations under the Club Rules; and

(g) any broader policy considerations relevant to the Club's financial position and claims reserve.

TSL has been a longstanding member of the Oceanus Club. We understand that TSL's claims history has been generally favorable, with no prior P&I contributions exceeding $1,000,000 in recent policy years. This record should support the Board's approval of the requested contribution. In addition, the reasonableness of the $7,850,000 settlement — which represents approximately 42.9% of Northwind's total claimed damages of $18,300,000 — should be viewed favorably, as it reflects a significant discount from the full claim exposure.

Risk Assessment: Low to moderate, subject to Board discretion. While the Board's decision cannot be predicted with certainty, the overall profile of the request is favorable.

VI. TSL's Obligations Under P&I Club Rules in Connection with Settlement

Most P&I Club Rules require the member to obtain the Club's approval, or at minimum to consult with the Club, before entering into a settlement that the member expects the Club to contribute to. This obligation reflects the Club's legitimate interest in ensuring that settlements are reasonable and that covered liabilities are not inflated by the inclusion of uncovered or overstated claims. A failure to consult the Club before settling can provide a basis for the Club to deny or reduce its contribution, particularly if the Club can demonstrate that consultation would have resulted in a different outcome.

C&H's letter to David Okafor dated October 31, 2024 provided formal notice of the Settlement and requested the $2,500,000 contribution. However, this notice was given after the settlement in principle was reached on October 29, 2024. C&H recommends that Markos Theodorakis confirm whether TSL or its insurance brokers consulted Oceanus prior to or during the mediation on October 28–29, 2024. If such consultation occurred — even informally, by telephone or email — this should be documented and communicated to the Club to demonstrate compliance with the consultation obligation. If no prior consultation occurred, C&H should be prepared to address this issue with the Board, emphasizing that the settlement was reached in the context of a court-ordered mediation and that the time pressures of the mediation process did not permit extended consultation with the Club.

The execution version of the Settlement Agreement is dated November 20, 2024, and has been transmitted to Oceanus for Board review under separate cover dated November 20, 2024. The Board is expected to consider the contribution request at its next meeting, with a decision expected by November 22, 2024.

If the Board approves the contribution, the Oceanus payment would be coordinated with the three-installment payment schedule set forth in the Settlement Agreement. C&H recommends that the Oceanus contribution of $2,500,000 be applied first to the initial installment of $4,000,000 due within 30 days of the Effective Date. This would reduce TSL's immediate cash outlay for the first installment from $4,000,000 to $1,500,000, thereby easing the near-term liquidity impact of the Settlement on TSL's operations.

If the Board denies the contribution entirely or reduces the approved amount, TSL must be prepared to fund the full $7,850,000 from corporate resources. In that scenario, the net economic cost to TSL would increase from approximately $6,230,000 (under the base case, with a $2,500,000 P&I contribution) to approximately $8,470,000 (including the $1,620,000 counterclaim waiver and the full $7,850,000 settlement payment). C&H recommends that Elena Papadimitriou (CFO) confirm the availability of the full $7,850,000 as a contingency measure.

VII. Interaction with H&M Coverage (Fortis Marine Underwriters Ltd.)

Although this memorandum focuses on the P&I coverage analysis, we address briefly the interaction between the P&I claim and TSL's hull and machinery coverage with Fortis Marine Underwriters Ltd. (Policy No. FMU-HM-2020-4892).

The H&M policy provides coverage for repair costs and physical damage to the vessel. The three mechanical incidents at issue in this dispute — the March 2022 turbocharger failure in Colombo (Incident 1), the July 2022 BWTS malfunction and auxiliary boiler failure at Richards Bay (Incident 2), and the November 2022 cylinder liner failure necessitating drydocking at Keppel Verolme Shipyard in Rotterdam (Incident 3) — all involved physical damage to vessel equipment and systems. The repair costs associated with these incidents were likely covered under the H&M policy, subject to deductibles and policy conditions.

The Settlement addresses Northwind's liability claims against TSL — that is, the charterer's claims for damages arising from the mechanical failures — not TSL's own vessel repair costs. The H&M and P&I coverages are complementary: H&M covers the vessel owner's first-party repair costs, while P&I covers the vessel owner's third-party liability exposure. There is no overlap or double recovery.

C&H has sent a separate notice to Catherine Allsworth at Fortis, dated November 21, 2024, confirming that the Settlement Agreement does not impair Fortis's subrogation rights. This is important because Fortis may have subrogation rights against third parties responsible for the mechanical failures — for example, against the BWTS manufacturer or the component suppliers. The mutual general release in the Settlement Agreement is limited to the parties to the litigation (Northwind, TSL, and Aegean Fortuna) and does not extend to Fortis or to any third party against whom Fortis may wish to pursue a subrogation claim.

No affirmative contribution from Fortis has been requested in connection with the Settlement, as the Settlement addresses Northwind's liability claims rather than TSL's vessel repair costs. However, C&H recommends that TSL confirm with Fortis that the H&M policy does not contain a "pay to be paid" clause, a coordination-of-benefits provision, or any other clause that could affect the P&I contribution or create a coordination issue between the H&M and P&I coverages.

VIII. Impact of Lender Notification Requirements

TSL's primary lender, Meridian Capital Bank AG, Hamburg ("Meridian"), holds first-priority ship mortgages on the TSL fleet and provides a $340,000,000 credit facility to TSL and its subsidiaries. The Credit Agreement dated April 1, 2019 (as amended) contains certain notification covenants that are implicated by the Settlement.

Section 8.14 of the Credit Agreement requires TSL to notify Meridian of any material litigation settlements exceeding $5,000,000. The $7,850,000 Settlement exceeds this threshold and therefore triggers the notification obligation. Notice to Lukas Brandt, Relationship Manager at Meridian, must be provided within five business days of execution of the Settlement Agreement — that is, by November 22, 2024 (based on the November 20, 2024 execution date).

We note that a separate Internal Lender Notification Compliance Analysis memorandum dated November 18, 2024 (C&H work product, prepared by Hannah Brinkley) addresses additional covenants potentially implicated by the Settlement, including the financial reporting covenants, the material adverse change representation, and the negative pledge provisions. That memorandum should be reviewed in connection with the Meridian notification.

Several important points bear emphasis:

First, the P&I Club contribution of $2,500,000, if approved by the Board, does not reduce the notifiable settlement amount. The full $7,850,000 Settlement must be disclosed to Meridian regardless of the source of funding. The Credit Agreement's notification threshold is based on the total settlement amount, not the member's out-of-pocket cost.

Second, TSL should confirm that the Credit Agreement does not require Meridian's affirmative consent (as opposed to mere notification) for settlements funded in part by insurance proceeds. A consent requirement could create timing complications, particularly if the first settlement installment is due before Meridian's consent is obtained.

Third, the lender notification should be factual in nature and should not disclose the substance of this memorandum or the P&I coverage analysis, which is protected by the attorney-client privilege. C&H will prepare a form of notification letter for TSL's review.

IX. Recommendations and Next Steps

Based on the foregoing analysis, C&H makes the following recommendations:

1. Await Oceanus Board Decision. The Board is expected to render its decision on the $2,500,000 contribution request by November 22, 2024. David Okafor will communicate the result to C&H. If the Board approves the contribution, C&H will coordinate payment mechanics with Oceanus and with Martin Schreiber, Vice President, Escrow Services, at Atlantic Fiduciary Trust Company (Escrow Account No. ESC-2024-NYK-08831), to ensure timely funding of the Settlement installments.

2. Contingency Planning. In the event that Oceanus denies the contribution entirely or approves a reduced amount, TSL must be prepared to fund the resulting shortfall from corporate resources. C&H recommends that Elena Papadimitriou (CFO) confirm the availability of the full $7,850,000 from TSL's corporate funds, so that the Settlement payment schedule can be met regardless of the Board's decision. If the Board denies the contribution entirely, TSL's net economic cost would increase from approximately $6,230,000 to approximately $8,470,000.

3. Allocation Documentation. C&H will prepare a written allocation analysis supporting the $2,500,000 contribution as attributable to covered P&I claims, with primary emphasis on the cargo damage and third-party shipper claims. This documentation will serve multiple purposes: (a) it will be submitted to the Oceanus Board in support of the contribution request; (b) it will support TSL's own tax and accounting treatment of the insurance recovery and the settlement payment; and (c) it may be required by TSL's auditors, Lysander & Associates, for financial statement disclosure purposes. C&H will coordinate with Elena Papadimitriou and Lysander & Associates as needed.

4. Timing of P&I Payment. If the Board approves the contribution, C&H recommends that the $2,500,000 be applied toward the first settlement installment of $4,000,000, which is due within 30 days of the Effective Date of the Settlement Agreement. This would reduce TSL's immediate cash outlay for the first installment to $1,500,000, preserving liquidity for TSL's ongoing operations. C&H will negotiate this timing with Oceanus and the escrow agent.

5. Confirm Prior Notice History. As discussed in Section V.A, Markos Theodorakis should confirm the dates on which TSL or its insurance brokers first notified Oceanus of the three mechanical incidents (March, July, and November 2022) and the Northwind claim (October 2023). Copies of any notice correspondence should be assembled and provided to C&H, so that we can preemptively address any late-notice defense that Oceanus might raise.

6. No Admission of Coverage. The Settlement Agreement contains a standard no-admission-of-liability clause, confirming that the settlement does not constitute an admission of liability by any party. Similarly, any Oceanus contribution should be documented as not constituting an admission of coverage for future claims. C&H will ensure that any payment correspondence from Oceanus includes appropriate reservation-of-rights language, and will advise Markos Theodorakis of any such reservations.

7. C&H Availability. Douglas Carmichael and Carlos Espinoza remain available to discuss this analysis and to participate in any communications with Oceanus, the Board, or other interested parties. C&H can be reached at (212) 558-4000, or by email at d.carmichael@calderwoodharkness.com and c.espinoza@calderwoodharkness.com. We will promptly advise TSL of any developments, including the Board's decision.

X. Conclusion

In summary, C&H believes that the $2,500,000 P&I Club contribution request is reasonable and well-supported by the covered claim categories within the Northwind litigation. The strongest basis for coverage lies in the cargo damage claims (Incident 2 iron ore oxidation) and the third-party shipper claims, which together accounted for over $9 million of Northwind's original $18,300,000 claim. These categories represent core P&I risks — third-party liability for cargo loss and damage arising from vessel operations — and fall squarely within the standard coverage provided by the Oceanus Club Rules.

The most significant risk to the contribution request is the contractual liability exclusion, which Oceanus may invoke to deny coverage for the liquidated damages ($4,500,000) and off-hire deductions ($1,003,000). However, this risk is mitigated by the allocation strategy, which frames the $2,500,000 contribution as attributable to the clearly covered cargo-related categories rather than the contractual damage claims.

The late-notice defense presents low risk, provided that timely incident-level notices were given in 2022, and the wilful misconduct exclusion presents moderate risk with respect to the Maputo deviation but low risk with respect to the maintenance-related incidents. Neither of these defenses, in our assessment, is likely to defeat the contribution request.

TSL should prepare contingency funding in the event the Board denies or reduces the contribution, and should confirm its prior notice history to preempt any procedural objections. C&H will continue to coordinate with David Okafor at Oceanus and will promptly advise TSL of the Board's decision, expected by November 22, 2024.

We remain available to discuss any aspect of this analysis at your convenience.

•

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Partner Telephone: (212) 558-4127

Email: d.carmichael@calderwoodharkness.com

By: ________

Carlos Espinoza Lead Associate Telephone: (212) 558-4893

Email: c.espinoza@calderwoodharkness.com

cc:

Alexandros Stavridis, Chairman and CEO, Thalassa Shipping & Logistics SA

Elena Papadimitriou, CFO, Thalassa Shipping & Logistics SA

Francesca Morano, Billing Partner, Calderwood & Harkness LLP

Hannah Brinkley, Associate, Calderwood & Harkness LLP

C&H Matter No. 1044-00006

TO:

Thalassa Shipping & Logistics SA

42 Akti Miaouli, Piraeus 185 38, Greece

FROM:

Calderwood & Harkness LLP

RE:	Analysis of P&I Coverage for Charter-Party Breach Claims — Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County
C&H MATTER NO.:	1044-00006

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
November 1, 2024
MEMORANDUM
This memorandum is a privileged and confidential attorney-client communication. It is intended solely for the use of the addressee and should not be disclosed to third parties without prior written consent of counsel, except as may be required in connection with P&I Club claim submissions. Disclosure to any other person or entity may result in a waiver of the attorney-client privilege and work product protections that attach to this communication.
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I. Executive Summary
The purpose of this memorandum is to analyze the scope of coverage available to Thalassa Shipping & Logistics SA ("TSL") from the Oceanus Mutual Protection & Indemnity Club (Bermuda) ("Oceanus" or the "Club") under Policy No. OCE-P&I-2020-TSL-0047 (the "P&I Policy") in connection with the claims asserted by Northwind Maritime Corporation ("Northwind") in the above-captioned litigation. In particular, this memorandum assesses the likelihood that the Oceanus Board of Directors (the "Board") will approve the requested contribution of $2,500,000 toward the $7,850,000 settlement in principle reached on October 29, 2024 (the "Settlement").
Summary of Conclusions. Based on our analysis of the P&I Policy, the Oceanus Club Rules, the nature of the claims asserted by Northwind, and the structure of the Settlement, Calderwood & Harkness LLP ("C&H") believes that the $2,500,000 contribution request falls within the scope of standard P&I coverage for certain categories of Northwind's claims. The strongest basis for coverage exists with respect to claims arising from third-party cargo damage — specifically, the iron ore oxidation incident during the July 2022 BWTS malfunction at Richards Bay, South Africa ("Incident 2") — and the third-party shipper claims, which together constituted over $9 million of Northwind's original claim of $18,300,000. In addition, there is a reasonable basis to argue that certain pollution and environmental compliance exposure tied to the ballast water treatment system ("BWTS") malfunction is indemnifiable under the P&I Policy. However, several coverage defenses may apply to other claim categories, most notably the contractual liability exclusion applicable to liquidated damages and off-hire deductions under the charter-party, and, to a lesser extent, the wilful misconduct exclusion potentially applicable to the September 2022 Maputo deviation. The $2,500,000 figure represents approximately 31.8% of the total Settlement amount and, in our view, is a reasonable and defensible allocation to covered P&I claim categories. Oceanus Board approval is required for contributions exceeding the internal authority thresholds of the assigned Claims Handler.
By letter dated October 31, 2024, C&H formally requested the $2,500,000 contribution from Oceanus, directing that letter to David Okafor, Claims Handler at the Club. Mr. Okafor has acknowledged receipt and confirmed that the request will be presented to the Board at its next meeting, with a decision expected by November 22, 2024.
This memorandum supplements and should be read in conjunction with the Client Update Memorandum — Mediation Result and Settlement Terms dated October 30, 2024, which provided a detailed summary of the mediation proceedings and the material terms of the Settlement Agreement. Readers are assumed to be familiar with the factual and procedural history set forth in that prior communication.
II. Background
A. The Dispute and Settlement in Principle
As Markos and the TSL team are aware, this dispute arose from the time charter-party for the M/V Aegean Fortuna (IMO 9847231), a Liberian-flagged Supramax dry bulk carrier of 58,200 deadweight tonnes, built in 2016 by Dalian Prosperity Shipyard Co., Ltd. The vessel is beneficially owned and commercially managed by TSL through its wholly owned subsidiary, Aegean Fortuna Shipholding Ltd. ("Aegean Fortuna"), a Liberian corporation (Registration No. LR-C-20167845). The time charter-party was executed on a NYPE 2015 form (as amended) under Charter-Party Reference No. NW-TSL-CP-2020-1203 on December 3, 2020, with delivery commencing on January 15, 2021, for a firm period of 36 months at a daily hire rate of $14,750.
On October 2, 2023, Northwind filed its complaint in the Supreme Court of the State of New York, New York County, asserting claims for breach of the charter-party against both TSL and Aegean Fortuna. Northwind's total claimed damages amounted to $18,300,000, spread across nine distinct claim categories, ranging from cargo damage and off-hire deductions to lost sub-charter profits and litigation costs. TSL and Aegean Fortuna answered on November 6, 2023 and interposed a counterclaim in the amount of $1,620,000 for unpaid hire attributable to the period from October 1 through December 31, 2022.
Following extensive discovery, motion practice, and the partial dismissal of Count III of Northwind's complaint by order dated March 8, 2024, the parties engaged in mediation before the Honorable Gerald K. Fitzpatrick (Ret.) at Bayside Dispute Resolution Services LLC on October 28–29, 2024. A settlement in principle was reached on October 29, 2024, with the following material terms:
• Total Settlement Amount: $7,850,000, payable by TSL and Aegean Fortuna to Northwind in three installments:
• First installment of $4,000,000, due within 30 days of the Effective Date of the Settlement Agreement;
• Second installment of $2,000,000, due within 90 days of the Effective Date; and
• Third installment of $1,850,000, due within 150 days of the Effective Date.
• Release of TSL Counterclaim: TSL releases its $1,620,000 counterclaim for unpaid hire, resulting in a net economic cost to TSL of approximately $6,230,000 when the waived counterclaim is taken into account.
• Mutual General Release: The Settlement Agreement provides for a mutual general release covering all claims, counterclaims, and cross-claims between the parties.
• Escrow: Settlement funds are to be deposited in escrow at Atlantic Fiduciary Trust Company (Escrow Account No. ESC-2024-NYK-08831), for disbursement to Northwind upon satisfaction of the applicable conditions, including execution of the mutual general release, dismissal of the action with prejudice, and compliance with the payment schedule.
The proposed funding for the Settlement is as follows: $5,350,000 from TSL corporate funds, and $2,500,000 from the Oceanus P&I Club, subject to Board approval. This memorandum addresses the analysis underlying the P&I contribution request.
B. TSL's Insurance Program — Relevant Policies
TSL maintains a comprehensive marine insurance program covering its fleet. For purposes of this analysis, the relevant policies are as follows:
Protection and Indemnity Coverage. TSL's P&I coverage is placed with the Oceanus Mutual Protection & Indemnity Club, headquartered at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The relevant policy is Policy No. OCE-P&I-2020-TSL-0047, covering the M/V Aegean Fortuna for the relevant policy years. The assigned Claims Handler is David Okafor, who has been the primary point of contact for this matter since C&H's initial notice to the Club. This memorandum focuses exclusively on the P&I coverage analysis.
Hull and Machinery Coverage. TSL's H&M coverage is placed with Fortis Marine Underwriters Ltd., 50 Fenchurch Street, London EC3M 3JY, United Kingdom, under Policy No. FMU-HM-2020-4892. The lead underwriter is Catherine Allsworth. The H&M policy addresses vessel physical damage and repair costs, including the costs incurred in connection with the three mechanical incidents at issue in this dispute. It does not provide coverage for third-party liability claims of the kind asserted by Northwind. We note that subrogation rights under the H&M policy have been preserved, and a separate notice to Fortis was issued on November 21, 2024, as discussed further in Section VII below.
Directors and Officers Coverage. TSL's D&O coverage is placed with Castellan Professional Liability Insurers Ltd., 25 St. Stephen's Green, Dublin 2, D02 XY47, Ireland. No D&O claim is anticipated in connection with the Northwind dispute, but as a precautionary measure, C&H recommends that a notice of circumstances be sent to Castellan under separate cover. This memorandum does not address the D&O policy further.
C. Nature of P&I Coverage Generally
For context, we briefly summarize the nature of P&I Club coverage and the manner in which coverage decisions are made.
P&I Clubs operate on a mutual insurance model. Members — typically shipowners — contribute annual "calls" (premiums), which are pooled to fund indemnity payments for covered third-party liabilities arising from vessel operations. Unlike conventional commercial insurers, P&I Clubs do not issue standard-form insurance policies with pre-defined coverage limits and exclusions. Rather, coverage is governed by the Club's Rules, which are adopted by the Club's Board and form the contractual basis for the member's relationship with the Club. The Club's Rules define the categories of liabilities for which the Club will indemnify a member, as well as the exclusions and conditions applicable to coverage.
The standard categories of P&I coverage relevant to the present analysis include:
(a) Cargo Liability: Indemnification for the member's liability to cargo owners or other third parties for loss of, damage to, or shortage of cargo carried on the insured vessel. This is a core P&I risk and is broadly covered by virtually all P&I Clubs.
(b) Pollution and Environmental Compliance: Indemnification for the member's liability arising from pollution incidents, including fines, penalties, and cleanup costs related to oil pollution, ballast water discharge, and other environmental contamination. Pollution coverage is typically subject to specific sub-limits and conditions.
(c) Crew and Third-Party Personal Injury: Indemnification for death, personal injury, or illness of crew members, passengers, or other third parties. This category is not directly relevant to the Northwind claims.
(d) Contractual Liabilities to Charterers: Certain P&I Clubs provide limited coverage for liabilities owed by the owner to the charterer under charter-parties, but this coverage is typically restricted to liabilities that would exist independently of the contract — that is, liabilities at law or in tort — and does not extend to purely contractual penalties or agreed damages provisions.
It is important to recognize that P&I Clubs are not conventional insurers; they exercise significant discretion in coverage decisions. The Club Rules typically vest the Board with broad authority to approve, deny, or limit contributions, taking into account factors such as the member's claims history, the reasonableness of the underlying settlement, the allocation between covered and uncovered liabilities, and the member's compliance with Club Rules (including notice requirements and the duty to consult the Club before settling claims). The Board's decision is not subject to de novo review and is entitled to deference, although members retain the right to challenge adverse decisions through the Club's internal appeal mechanisms or, in appropriate cases, through arbitration.
With this framework in mind, we turn to the analysis of the specific claim categories in the Northwind litigation and their eligibility for P&I coverage.
III. Analysis of Covered and Potentially Covered Claim Categories
The nine categories of claimed damages asserted by Northwind in the original complaint totaled $18,300,000. For purposes of this P&I coverage analysis, we group these categories by their coverage eligibility, beginning with the claims that present the strongest basis for coverage and proceeding to those that are likely outside the scope of P&I indemnification.
A. Cargo Damage Claims — Strongest Basis for Coverage
The cargo-related claims represent the strongest basis for Oceanus P&I coverage and form the core of the $2,500,000 contribution request.
Incident 2 Cargo Damage ($3,420,000 claimed). The largest single cargo claim arises from the iron ore oxidation event that occurred during the July 8–29, 2022 BWTS malfunction and auxiliary boiler failure while the M/V Aegean Fortuna was off Richards Bay, South Africa. As a result of the BWTS malfunction, the vessel was unable to deballast effectively, and the resulting delay and environmental conditions in the cargo holds caused significant oxidation damage to the iron ore cargo then being carried. The vessel was off-hire for 21 days during this period.
P&I Clubs typically and routinely cover cargo damage claims arising from vessel unseaworthiness or operational failures. Damage to cargo caused by a mechanical breakdown of the vessel's critical systems — such as a BWTS failure that compromises cargo hold conditions — is precisely the type of risk that P&I coverage is designed to indemnify. This is a core P&I risk, and there is no question that cargo damage of this nature falls within the standard coverage categories of the Oceanus Club Rules.
TSL's defense throughout the litigation was that the BWTS malfunction was proximately caused by Northwind's agents loading contaminated ballast water at a prior port, which damaged the BWTS filtration components. If this defense were accepted, the causation chain would shift responsibility to Northwind, and the coverage analysis would be less favorable (because the damage would not be attributable to TSL's vessel operations). However, for purposes of the settlement contribution analysis, the relevant question is not whether TSL was ultimately liable, but whether the claim falls within the scope of P&I coverage if liability were established. To the extent that causation rested with TSL or the vessel's operating condition, P&I coverage would squarely apply. Even if the root cause remains disputed, the Club's indemnity obligation extends to the member's liability to third parties, and the settlement of a colorable cargo damage claim is a standard basis for P&I contribution.
Even though the Settlement is structured as a global lump sum and does not allocate among the nine claim categories, it is both reasonable and appropriate to attribute a significant portion of the settlement to this exposure. The iron ore oxidation claim alone represented $3,420,000 of the original $18,300,000 claim — approximately 18.7% of the total — and was one of the most factually and legally well-supported elements of Northwind's case.
Third-Party Shipper Claims ($5,634,400 claimed, subsequently narrowed). In addition to Northwind's direct cargo damage claim, Northwind sought recovery for three separate claims asserted by shippers whose cargo was affected by the various incidents. These third-party shipper claims were brought by Northwind in its capacity as charterer, based on its own liability to the shippers for cargo loss and damage. Northwind sought to pass through this exposure to TSL under the charter-party's cargo liability and indemnity provisions.
Third-party shipper claims are classically within the scope of P&I coverage. When a member's vessel causes damage to cargo, and the member faces liability to the cargo owner or to a charterer who has in turn satisfied cargo claims, the P&I Club is the primary source of indemnification. This is one of the fundamental functions of P&I insurance in the maritime industry.
We note that the claimed amount of $5,634,400 was narrowed following the partial dismissal of Count III of Northwind's complaint on March 8, 2024, when Justice Hargrove sustained TSL's motion to dismiss certain shipper claims as time-barred under the applicable bills of lading. The remaining shipper exposure is estimated at approximately $4,200,000 to $4,800,000, based on our review of the surviving claims. Nevertheless, even the narrowed figure represents a substantial covered exposure.
Assessment. The cargo-related claims — encompassing both the $3,420,000 direct Incident 2 claim and the surviving portion of the third-party shipper claims — provide the strongest justification for the Oceanus contribution request. The combined claimed exposure in these categories was approximately $9,054,400 before narrowing, representing roughly 50% of Northwind's total original claim of $18,300,000. Even after the partial dismissal of Count III, the remaining cargo-related exposure significantly exceeded $7,000,000. A $2,500,000 P&I contribution attributable to these categories is well within the range of reasonableness.
B. Contractual Charter-Party Liabilities — Partial Coverage Potential
The next category of claims presents a more nuanced coverage picture.
Off-Hire Deductions ($1,003,000 claimed). Northwind claimed off-hire deductions for the periods during which the vessel was off-hire as a result of the three mechanical incidents: the March 2022 turbocharger failure in Colombo (Incident 1), the July 2022 BWTS malfunction at Richards Bay (Incident 2), and the November 2022 cylinder liner failure necessitating drydocking in Rotterdam (Incident 3). Off-hire deductions are a standard contractual remedy under NYPE 2015 charter-parties; the charterer deducts from hire for periods during which the vessel is not at the charterer's disposal due to mechanical breakdown, drydocking, or other operational deficiencies.
Liquidated Damages ($4,500,000 claimed). Northwind further claimed liquidated damages under Clause 28 of the charter-party (as amended), which provided for a 150% multiplier on certain categories of loss, subject to a $4,500,000 cap. This provision was the subject of significant litigation, as TSL challenged the enforceability of the multiplier on penalty grounds. While the court declined to strike the liquidated damages provision on summary judgment (holding that enforceability was a factual question), the risk of the multiplier being sustained at trial was a significant factor in TSL's decision to settle.
Standard P&I Club Rules provide limited coverage for charterer claims arising from breach of the charter-party. Many Clubs extend "charterers' liability" or "owner's contractual liability" coverage, but this coverage is subject to specific rule provisions that vary among Clubs. The Oceanus Club Rules, as referenced in Policy No. OCE-P&I-2020-TSL-0047, provide coverage for liabilities arising under contracts of carriage and charter-parties, but this coverage is typically limited to liabilities that the member would incur absent the contract — that is, liabilities at law or in tort, rather than purely contractual penalties or agreed damages provisions that exceed what the law would otherwise impose.
The liquidated damages under Clause 28, which incorporate a 150% multiplier and a $4,500,000 cap, are a contractual penalty or agreed damages provision. The $4,500,000 figure significantly exceeds any measure of damages that would be recoverable in tort or at common law for the underlying mechanical failures. Oceanus may therefore argue that the liquidated damages are not indemnifiable under standard P&I rules because they represent an enhanced contractual liability voluntarily assumed by the member, rather than a liability that exists independently of the charter-party.
Similarly, off-hire deductions are inherent to the charter-party relationship and represent a commercial risk that the owner accepts when entering into a time charter. P&I Clubs have historically been reluctant to indemnify members for off-hire exposure, viewing it as a foreseeable and allocable contractual risk rather than an insurable third-party liability.
Assessment. There is a moderate risk that Oceanus will exclude or limit coverage for the off-hire deductions and liquidated damages categories. However, there is a credible argument for partial coverage with respect to the off-hire deductions: to the extent the off-hire periods were caused by vessel unseaworthiness — a condition that is itself a P&I-covered cause — the resulting off-hire liability may be viewed as consequential upon a covered event rather than a purely contractual exposure. This argument is strongest with respect to Incident 2 (the BWTS malfunction), where the mechanical failure directly caused both cargo damage (clearly covered) and off-hire (arguably covered as a consequential liability flowing from the same insured event). We recommend framing this argument in any supplemental submissions to the Board, while acknowledging that it is not free from doubt.
C. Deviation-Related Claims — Limited Coverage
Demurrage and Dead Freight from the September 2022 Maputo Deviation ($1,230,000 claimed). Northwind alleged that TSL directed the Master of the M/V Aegean Fortuna to deviate from the agreed Durban-to-Qingdao voyage in order to call at Maputo, Mozambique, to load TSL's own cargo. This deviation allegedly caused Northwind to miss the October 1–5, 2022 laycan window at Qingdao, resulting in demurrage charges, dead freight costs, and loss of the intended cargo booking.
TSL's defense throughout the litigation was that the Maputo call was necessitated by adverse weather conditions and routing considerations and was within the Master's discretion under the charter-party's deviation clause. Northwind disputed this characterization, arguing that internal TSL communications demonstrated that the call was a commercial decision directed by TSL management in Athens, not a safety or operational necessity.
This claim category presents the weakest basis for P&I coverage. If Oceanus determines that the deviation was a voluntary commercial decision by TSL management — rather than a response to safety concerns or operational necessity — the Club could invoke the "wilful misconduct" or "unreasonable conduct" exclusion to deny coverage for the resulting liabilities. P&I coverage generally does not extend to liabilities arising from the member's voluntary commercial decisions that knowingly increase the member's exposure to third-party claims. A deliberate deviation for the purpose of loading the owner's own cargo, at the expense of the charterer's scheduled voyage, is precisely the type of conduct that the wilful misconduct exclusion is designed to address.
Assessment. The basis for P&I coverage for the deviation-related claims is weak. However, in the context of a global settlement that does not allocate among claim categories, the coverage eligibility of the deviation claim is not dispositive. The $2,500,000 contribution request need not be supported by the deviation-related exposure; the cargo damage and third-party shipper claims alone provide a more-than-sufficient basis.
D. Other Claim Categories — Likely Not Covered
The remaining claim categories asserted by Northwind collectively total approximately $2,512,600 and are, in our view, unlikely to be covered under the Oceanus P&I Policy:
Substitute Charter Costs ($471,600). Northwind claimed the cost of chartering replacement tonnage during periods when the M/V Aegean Fortuna was unavailable due to mechanical breakdowns. This is a purely economic and contractual loss suffered by the charterer. Substitute charter costs are not a standard P&I risk and are not typically indemnifiable under Club Rules. They represent the charterer's mitigation costs for loss of use — a commercial risk inherent in the charter-party relationship.
Additional Port Costs and Bunker Surcharges ($875,400). Northwind claimed additional port costs and bunker surcharges incurred as a consequence of the three mechanical incidents and the Maputo deviation. These are consequential economic losses flowing from the alleged breaches of the charter-party. P&I coverage generally does not extend to the charterer's consequential economic losses, as distinguished from third-party liabilities incurred by the member. These costs are too remote from the core P&I risks (cargo damage, pollution, personal injury) to support a claim for indemnification.
Lost Sub-Charter Profit ($166,600). Northwind claimed loss of profit on its sub-charter with Eastbourne Bulk Carriers Ltd. at a daily rate of $17,200. This is a pure economic loss suffered by the charterer as a result of the vessel's unavailability. Loss of profits on downstream commercial arrangements is not a P&I risk and is not indemnifiable under Dunmore Casualty Group Rules.
Northwind's Legal Fees ($999,000). Northwind claimed its own legal fees as an element of damages. This claim relates to the opposing party's litigation costs, not to TSL's own defense costs. P&I coverage may extend to the member's own defense costs in connection with covered claims (subject to Club approval), but it does not extend to the opposing party's legal fees claimed as damages. This category is not covered.
Assessment. These four claim categories, totaling approximately $2,512,600, are unlikely to be covered under the Oceanus P&I Policy. They represent various forms of economic loss to the charterer that fall outside the core P&I coverage categories. The $2,500,000 contribution request does not rely on any attribution to these uncovered categories.
IV. Allocation Analysis — Reasonableness of the $2,500,000 Request
As noted above, the Settlement is structured as a global lump sum of $7,850,000 without allocation among the nine claim categories. The mutual general release covers all claims, counterclaims, and cross-claims, and does not distinguish between covered and uncovered liabilities. This is standard practice in maritime dispute settlements and does not preclude a reasonable allocation for insurance purposes.
For P&I Club contribution purposes, it is both permissible and customary to construct a reasonable allocation based on the relative strength and coverage eligibility of each claim category. The following analysis supports the reasonableness of the $2,500,000 contribution request:
Covered or Potentially Covered Categories. The claim categories that fall within or potentially within the scope of P&I coverage include:
• Incident 2 cargo damage: $3,420,000
• Third-party shipper claims (post-narrowing): approximately $4,200,000–$4,800,000
• Off-hire deductions (partial coverage argument): $1,003,000
• Liquidated damages (partial coverage argument, subject to contractual liability exclusion): $4,500,000
The combined exposure in these categories ranged from approximately $9,123,000 (cargo damage and shipper claims only) to approximately $13,723,000 (including all contractual claims for which a partial coverage argument exists). A realistic estimate of the covered or potentially covered exposure, accounting for the litigation risk applicable to each category and the likelihood of prevailing on the partial coverage arguments, is in the range of $5,000,000 to $7,000,000.
Requested Contribution as a Percentage of Settlement. The $2,500,000 contribution request represents approximately 31.8% of the total $7,850,000 settlement. This is a modest proportion, reflecting the fact that TSL is bearing the substantial majority of the settlement cost from its own corporate resources.
Requested Contribution as a Percentage of Covered Exposure. The $2,500,000 contribution represents approximately 36% to 50% of the estimated realistic covered exposure (i.e., $5,000,000 to $7,000,000). This allocation is reasonable and well within the range that the Board should find acceptable, particularly given that cargo damage and third-party shipper claims alone — the most clearly covered categories — accounted for over $9 million of the original $18,300,000 claim before narrowing.
TSL's Own Contribution. TSL's proposed contribution of $5,350,000 — representing approximately 68.2% of the total settlement — demonstrates that the member is bearing a substantial majority share of the settlement cost. This is a favorable factor for Board consideration, as it negates any suggestion that TSL is seeking to shift an unreasonable proportion of its settlement exposure to the Club.
Counterclaim Waiver. The release of TSL's $1,620,000 counterclaim for unpaid hire is not a P&I-covered item. The counterclaim represents an affirmative claim by TSL against Northwind for unpaid hire, which is a commercial receivable rather than a third-party liability. The waiver of the counterclaim should not factor into the P&I contribution request, and the $2,500,000 figure does not attribute any portion of the contribution to the counterclaim release.
In sum, we believe that the $2,500,000 contribution request is reasonable and defensible before the Oceanus Board, and that the allocation to covered P&I claim categories is well-supported by the factual record and the coverage analysis set forth above.
V. Potential Coverage Defenses by Oceanus
While we believe the contribution request is sound, we identify below the potential coverage defenses that Oceanus may assert, together with our assessment of the risk associated with each.
A. Late Notice
Oceanus Club Rules typically require the member to give prompt notice to the Club of any claim or circumstance that may give rise to a claim against the member. The purpose of this requirement is to enable the Club to investigate the circumstances, monitor the member's handling of the claim, and protect its position. Late notice can result in prejudice to the Club — for example, if evidence is lost or the Club is deprived of the opportunity to participate in defense decisions — and may provide a basis for the Club to deny or reduce its contribution.
The relevant timeline is as follows: Northwind's complaint was filed on October 2, 2023; C&H was engaged by TSL on October 16, 2023. Notice to Oceanus of the Northwind claim should have been given promptly after the complaint was filed. However, the underlying mechanical incidents occurred significantly earlier — Incident 1 (turbocharger failure) in March 2022, Incident 2 (BWTS malfunction) in July 2022, and Incident 3 (cylinder liner failure) in November 2022 — and it is customary maritime practice for vessel owners and their brokers to notify their P&I Club of significant incidents at the time they occur, regardless of whether a formal claim has been asserted.
C&H recommends that Markos Theodorakis confirm the precise dates on which TSL or its insurance brokers first notified Oceanus of each of the three mechanical incidents and the subsequent Northwind claim. If incident-level notices were given in 2022 at or near the time each event occurred, the late-notice defense is unlikely to succeed, because the Club would have been aware of the circumstances well in advance of the formal claim. If, however, notice was not provided until after the litigation commenced in October 2023, Oceanus may assert that it was prejudiced by the delay, particularly with respect to its ability to investigate the incidents and the member's response to them.
Risk Assessment: Low, provided that timely incident-level notices were given in 2022. We note that TSL's insurance brokers — who would typically handle notice obligations — should have records of these communications.
B. Wilful Misconduct / Unreasonable Conduct
The Oceanus Club Rules contain an exclusion for liabilities arising from the wilful misconduct or unreasonable conduct of the member or its agents. This exclusion is applicable primarily to two claim categories:
Maputo Deviation. If Oceanus determines that TSL or its Master voluntarily deviated from the agreed voyage for commercial reasons — specifically, to load TSL's own cargo at Maputo — the Club could invoke the wilful misconduct exclusion to deny coverage for the resulting deviation-related liabilities ($1,230,000). TSL's position throughout the litigation has been that the call was necessitated by adverse weather and routing conditions and was within the Master's discretion under the charter-party. If this position is accepted, the deviation would not constitute wilful misconduct. However, if internal TSL communications demonstrate that the call was directed by TSL management for commercial purposes, the exclusion would be squarely applicable.
Incident 3 (Cylinder Liner Failure, November 15 – December 10, 2022). TSL concedes that the cylinder liner failure was a maintenance-related issue that required drydocking at Keppel Verolme Shipyard in Rotterdam. Oceanus could argue that the failure to maintain the vessel's main engine properly constitutes a breach of the member's duty of good husbandry — a duty that is implicit in the P&I Club Rules and forms part of the contractual relationship between the member and the Club. However, the threshold for establishing wilful misconduct in the context of vessel maintenance is high. Negligent maintenance alone does not typically constitute wilful misconduct; the Club would need to demonstrate that TSL knowingly and deliberately failed to maintain the engine despite awareness of the deficiency. Absent such evidence, this argument is unlikely to succeed.
Risk Assessment: Moderate for the deviation-related exposure ($1,230,000); low for the maintenance-related incidents. As noted above, the contribution request does not rely heavily on the deviation-related claims, which mitigates the overall risk.
C. Contractual Liability Exclusion
As discussed in Section III.B above, the Oceanus Club Rules may exclude or limit coverage for liabilities that arise solely from the contractual terms of the charter-party and that exceed the member's liability at law. This exclusion is potentially applicable to:
(a) the liquidated damages under Clause 28 ($4,500,000 claimed), which incorporate a 150% multiplier that significantly exceeds the member's common-law measure of damages; and
(b) the off-hire deductions ($1,003,000 claimed), which represent a contractual allocation of risk between owner and charterer under the NYPE 2015 form.
This is the most significant potential coverage defense. If Oceanus invokes the contractual liability exclusion, it could argue that the P&I contribution should be limited to the member's liability in tort or at law (primarily the cargo damage and third-party shipper claims), and that the contractual liabilities assumed by TSL under the charter-party are not indemnifiable.
Mitigation Strategy. The most effective mitigation is to frame the contribution request around the cargo damage and third-party shipper claims, which are clearly within the scope of P&I coverage and which, standing alone, more than support a $2,500,000 contribution. The C&H letter to David Okafor dated October 31, 2024 emphasizes the cargo-related exposure as the primary basis for the contribution request, and any supplemental submissions to the Board should continue to focus on these categories.
Risk Assessment: Moderate, but mitigated by the allocation strategy. The cargo-related claims alone provide sufficient coverage basis for the requested contribution, and the contractual liability exclusion need not be resolved in order for the Board to approve the request.
D. Club Discretion / Board Authority
The Oceanus P&I Club Rules vest the Board with broad discretion to approve, deny, or limit contributions above the internal claims handler authority threshold. David Okafor, the assigned Claims Handler, has been the primary point of contact throughout this matter. The $2,500,000 contribution request exceeds Mr. Okafor's individual authority, which we understand to be in the range of $500,000 to $1,000,000 for individual claims. Accordingly, Board approval is required.
The factors that the Board will consider in exercising its discretion include:
(a) the member's claims history and track record with the Club;
(b) the reasonableness of the underlying settlement, including the total settlement amount relative to the claimed exposure;
(c) the allocation between covered and uncovered claims;
(d) the member's own financial contribution to the settlement;
(e) the strength of the member's defenses in the underlying litigation;
(f) whether the member complied with its notice and consultation obligations under the Club Rules; and
(g) any broader policy considerations relevant to the Club's financial position and claims reserve.
TSL has been a longstanding member of the Oceanus Club. We understand that TSL's claims history has been generally favorable, with no prior P&I contributions exceeding $1,000,000 in recent policy years. This record should support the Board's approval of the requested contribution. In addition, the reasonableness of the $7,850,000 settlement — which represents approximately 42.9% of Northwind's total claimed damages of $18,300,000 — should be viewed favorably, as it reflects a significant discount from the full claim exposure.
Risk Assessment: Low to moderate, subject to Board discretion. While the Board's decision cannot be predicted with certainty, the overall profile of the request is favorable.
VI. TSL's Obligations Under P&I Club Rules in Connection with Settlement
Most P&I Club Rules require the member to obtain the Club's approval, or at minimum to consult with the Club, before entering into a settlement that the member expects the Club to contribute to. This obligation reflects the Club's legitimate interest in ensuring that settlements are reasonable and that covered liabilities are not inflated by the inclusion of uncovered or overstated claims. A failure to consult the Club before settling can provide a basis for the Club to deny or reduce its contribution, particularly if the Club can demonstrate that consultation would have resulted in a different outcome.
C&H's letter to David Okafor dated October 31, 2024 provided formal notice of the Settlement and requested the $2,500,000 contribution. However, this notice was given after the settlement in principle was reached on October 29, 2024. C&H recommends that Markos Theodorakis confirm whether TSL or its insurance brokers consulted Oceanus prior to or during the mediation on October 28–29, 2024. If such consultation occurred — even informally, by telephone or email — this should be documented and communicated to the Club to demonstrate compliance with the consultation obligation. If no prior consultation occurred, C&H should be prepared to address this issue with the Board, emphasizing that the settlement was reached in the context of a court-ordered mediation and that the time pressures of the mediation process did not permit extended consultation with the Club.
The execution version of the Settlement Agreement is dated November 20, 2024, and has been transmitted to Oceanus for Board review under separate cover dated November 20, 2024. The Board is expected to consider the contribution request at its next meeting, with a decision expected by November 22, 2024.
If the Board approves the contribution, the Oceanus payment would be coordinated with the three-installment payment schedule set forth in the Settlement Agreement. C&H recommends that the Oceanus contribution of $2,500,000 be applied first to the initial installment of $4,000,000 due within 30 days of the Effective Date. This would reduce TSL's immediate cash outlay for the first installment from $4,000,000 to $1,500,000, thereby easing the near-term liquidity impact of the Settlement on TSL's operations.
If the Board denies the contribution entirely or reduces the approved amount, TSL must be prepared to fund the full $7,850,000 from corporate resources. In that scenario, the net economic cost to TSL would increase from approximately $6,230,000 (under the base case, with a $2,500,000 P&I contribution) to approximately $8,470,000 (including the $1,620,000 counterclaim waiver and the full $7,850,000 settlement payment). C&H recommends that Elena Papadimitriou (CFO) confirm the availability of the full $7,850,000 as a contingency measure.
VII. Interaction with H&M Coverage (Fortis Marine Underwriters Ltd.)
Although this memorandum focuses on the P&I coverage analysis, we address briefly the interaction between the P&I claim and TSL's hull and machinery coverage with Fortis Marine Underwriters Ltd. (Policy No. FMU-HM-2020-4892).
The H&M policy provides coverage for repair costs and physical damage to the vessel. The three mechanical incidents at issue in this dispute — the March 2022 turbocharger failure in Colombo (Incident 1), the July 2022 BWTS malfunction and auxiliary boiler failure at Richards Bay (Incident 2), and the November 2022 cylinder liner failure necessitating drydocking at Keppel Verolme Shipyard in Rotterdam (Incident 3) — all involved physical damage to vessel equipment and systems. The repair costs associated with these incidents were likely covered under the H&M policy, subject to deductibles and policy conditions.
The Settlement addresses Northwind's liability claims against TSL — that is, the charterer's claims for damages arising from the mechanical failures — not TSL's own vessel repair costs. The H&M and P&I coverages are complementary: H&M covers the vessel owner's first-party repair costs, while P&I covers the vessel owner's third-party liability exposure. There is no overlap or double recovery.
C&H has sent a separate notice to Catherine Allsworth at Fortis, dated November 21, 2024, confirming that the Settlement Agreement does not impair Fortis's subrogation rights. This is important because Fortis may have subrogation rights against third parties responsible for the mechanical failures — for example, against the BWTS manufacturer or the component suppliers. The mutual general release in the Settlement Agreement is limited to the parties to the litigation (Northwind, TSL, and Aegean Fortuna) and does not extend to Fortis or to any third party against whom Fortis may wish to pursue a subrogation claim.
No affirmative contribution from Fortis has been requested in connection with the Settlement, as the Settlement addresses Northwind's liability claims rather than TSL's vessel repair costs. However, C&H recommends that TSL confirm with Fortis that the H&M policy does not contain a "pay to be paid" clause, a coordination-of-benefits provision, or any other clause that could affect the P&I contribution or create a coordination issue between the H&M and P&I coverages.
VIII. Impact of Lender Notification Requirements
TSL's primary lender, Meridian Capital Bank AG, Hamburg ("Meridian"), holds first-priority ship mortgages on the TSL fleet and provides a $340,000,000 credit facility to TSL and its subsidiaries. The Credit Agreement dated April 1, 2019 (as amended) contains certain notification covenants that are implicated by the Settlement.
Section 8.14 of the Credit Agreement requires TSL to notify Meridian of any material litigation settlements exceeding $5,000,000. The $7,850,000 Settlement exceeds this threshold and therefore triggers the notification obligation. Notice to Lukas Brandt, Relationship Manager at Meridian, must be provided within five business days of execution of the Settlement Agreement — that is, by November 22, 2024 (based on the November 20, 2024 execution date).
We note that a separate Internal Lender Notification Compliance Analysis memorandum dated November 18, 2024 (C&H work product, prepared by Hannah Brinkley) addresses additional covenants potentially implicated by the Settlement, including the financial reporting covenants, the material adverse change representation, and the negative pledge provisions. That memorandum should be reviewed in connection with the Meridian notification.
Several important points bear emphasis:
First, the P&I Club contribution of $2,500,000, if approved by the Board, does not reduce the notifiable settlement amount. The full $7,850,000 Settlement must be disclosed to Meridian regardless of the source of funding. The Credit Agreement's notification threshold is based on the total settlement amount, not the member's out-of-pocket cost.
Second, TSL should confirm that the Credit Agreement does not require Meridian's affirmative consent (as opposed to mere notification) for settlements funded in part by insurance proceeds. A consent requirement could create timing complications, particularly if the first settlement installment is due before Meridian's consent is obtained.
Third, the lender notification should be factual in nature and should not disclose the substance of this memorandum or the P&I coverage analysis, which is protected by the attorney-client privilege. C&H will prepare a form of notification letter for TSL's review.
IX. Recommendations and Next Steps
Based on the foregoing analysis, C&H makes the following recommendations:
1. Await Oceanus Board Decision. The Board is expected to render its decision on the $2,500,000 contribution request by November 22, 2024. David Okafor will communicate the result to C&H. If the Board approves the contribution, C&H will coordinate payment mechanics with Oceanus and with Martin Schreiber, Vice President, Escrow Services, at Atlantic Fiduciary Trust Company (Escrow Account No. ESC-2024-NYK-08831), to ensure timely funding of the Settlement installments.
2. Contingency Planning. In the event that Oceanus denies the contribution entirely or approves a reduced amount, TSL must be prepared to fund the resulting shortfall from corporate resources. C&H recommends that Elena Papadimitriou (CFO) confirm the availability of the full $7,850,000 from TSL's corporate funds, so that the Settlement payment schedule can be met regardless of the Board's decision. If the Board denies the contribution entirely, TSL's net economic cost would increase from approximately $6,230,000 to approximately $8,470,000.
3. Allocation Documentation. C&H will prepare a written allocation analysis supporting the $2,500,000 contribution as attributable to covered P&I claims, with primary emphasis on the cargo damage and third-party shipper claims. This documentation will serve multiple purposes: (a) it will be submitted to the Oceanus Board in support of the contribution request; (b) it will support TSL's own tax and accounting treatment of the insurance recovery and the settlement payment; and (c) it may be required by TSL's auditors, Lysander & Associates, for financial statement disclosure purposes. C&H will coordinate with Elena Papadimitriou and Lysander & Associates as needed.
4. Timing of P&I Payment. If the Board approves the contribution, C&H recommends that the $2,500,000 be applied toward the first settlement installment of $4,000,000, which is due within 30 days of the Effective Date of the Settlement Agreement. This would reduce TSL's immediate cash outlay for the first installment to $1,500,000, preserving liquidity for TSL's ongoing operations. C&H will negotiate this timing with Oceanus and the escrow agent.
5. Confirm Prior Notice History. As discussed in Section V.A, Markos Theodorakis should confirm the dates on which TSL or its insurance brokers first notified Oceanus of the three mechanical incidents (March, July, and November 2022) and the Northwind claim (October 2023). Copies of any notice correspondence should be assembled and provided to C&H, so that we can preemptively address any late-notice defense that Oceanus might raise.
6. No Admission of Coverage. The Settlement Agreement contains a standard no-admission-of-liability clause, confirming that the settlement does not constitute an admission of liability by any party. Similarly, any Oceanus contribution should be documented as not constituting an admission of coverage for future claims. C&H will ensure that any payment correspondence from Oceanus includes appropriate reservation-of-rights language, and will advise Markos Theodorakis of any such reservations.
7. C&H Availability. Douglas Carmichael and Carlos Espinoza remain available to discuss this analysis and to participate in any communications with Oceanus, the Board, or other interested parties. C&H can be reached at (212) 558-4000, or by email at d.carmichael@calderwoodharkness.com and c.espinoza@calderwoodharkness.com. We will promptly advise TSL of any developments, including the Board's decision.
X. Conclusion
In summary, C&H believes that the $2,500,000 P&I Club contribution request is reasonable and well-supported by the covered claim categories within the Northwind litigation. The strongest basis for coverage lies in the cargo damage claims (Incident 2 iron ore oxidation) and the third-party shipper claims, which together accounted for over $9 million of Northwind's original $18,300,000 claim. These categories represent core P&I risks — third-party liability for cargo loss and damage arising from vessel operations — and fall squarely within the standard coverage provided by the Oceanus Club Rules.
The most significant risk to the contribution request is the contractual liability exclusion, which Oceanus may invoke to deny coverage for the liquidated damages ($4,500,000) and off-hire deductions ($1,003,000). However, this risk is mitigated by the allocation strategy, which frames the $2,500,000 contribution as attributable to the clearly covered cargo-related categories rather than the contractual damage claims.
The late-notice defense presents low risk, provided that timely incident-level notices were given in 2022, and the wilful misconduct exclusion presents moderate risk with respect to the Maputo deviation but low risk with respect to the maintenance-related incidents. Neither of these defenses, in our assessment, is likely to defeat the contribution request.
TSL should prepare contingency funding in the event the Board denies or reduces the contribution, and should confirm its prior notice history to preempt any procedural objections. C&H will continue to coordinate with David Okafor at Oceanus and will promptly advise TSL of the Board's decision, expected by November 22, 2024.
We remain available to discuss any aspect of this analysis at your convenience.
•
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner Telephone: (212) 558-4127
Email: d.carmichael@calderwoodharkness.com
By: ________
Carlos Espinoza Lead Associate Telephone: (212) 558-4893
Email: c.espinoza@calderwoodharkness.com
cc:
Alexandros Stavridis, Chairman and CEO, Thalassa Shipping & Logistics SA
Elena Papadimitriou, CFO, Thalassa Shipping & Logistics SA
Francesca Morano, Billing Partner, Calderwood & Harkness LLP
Hannah Brinkley, Associate, Calderwood & Harkness LLP
C&H Matter No. 1044-00006
TO: | Markos Theodorakis, General Counsel
Thalassa Shipping & Logistics SA
42 Akti Miaouli, Piraeus 185 38, Greece
FROM: | Douglas Carmichael, Partner, and Carlos Espinoza, Lead Associate
Calderwood & Harkness LLP
RE: | Analysis of P&I Coverage for Charter-Party Breach Claims — Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County
C&H MATTER NO.: | 1044-00006

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