(a) Insurer. MARAD will be responsible for providing or obtaining P&I insurance for all vessels assigned to Agents under an agreement. At its election, MARAD may be a self-insurer of any one or more vessels covered by an agreement or MARAD may obtain P&I insurance coverage under one or more policies written by underwriters of marine insurance. MARAD will determine the amount of coverage to be provided or obtained.

(b) Insureds. The United States of America, acting by and through MARAD, Department of Transportation, and its Agents (including Agents' employees as sub-agents). Sub-agents may be insureds only as expressly provided in the agreement. Independent contractors of the Agents are not insureds.

(c) Reports of accidents and occurrences. The Agent must report every accident or occurrence of a P&I nature promptly to both MARAD and the contracting officer named in the agreement. If MARAD has obtained P&I insurance through a marine insurance underwriter, the Agent also must concurrently file a report of such accident or occurrence with the underwriter. MARAD will disclose full details as the identity of such underwriter to the Agent.

(d) Report of claims. The Agent must submit a quarterly report of all claims of a P&I nature to MARAD. The report must contain all relevant information, e.g., the names of the vessels and of the claimant, the date of the injury or occurrence, the amount claimed, the basis for any payments already disbursed on behalf of the United States, estimated future costs, and an evaluation of the claim of the merits.

(e) Settlement of claims. After ascertaining from MARAD the availability of funds, the Agent is authorized to settle individual claims of a P&I insurance nature that do not exceed $5,000.

(1) For a settlement more than $5,000, the Agent must obtain MARAD's prior approval. If MARAD has placed the P&I insurance with an insurance underwriter, the Agent must obtain the prior approval of the underwriter to settle claims.

(2) The amount of individual claims that do not exceed the Agent's limit for settlement will be chargeable by the Agent to the vessel expense and must be accounted for in accordance with current MARAD accounting instructions.

(3) When settling any such claim, the Agent must advise the claimant that such settlement will be accounted for in accordance with current accounting instructions and must also advise the claimant that such settlement is not to be construed as an admission of liability by or on behalf of the United States, the Agent, or any other person.

(4) The Agent must apply sound judgment and follow standard practices of vessel operators in the settlement or other disposition of such P&I insurance claims, and must settle such claims only when the settlement is adequately supported by all the facts and circumstances and is in the best interest of the United States.

(f) Litigation. (1) If a court suit of a P&I nature is filed which arises out of the activities of the Agent under its Agreement, wherein the Agent is named as the party defendant or one of the parties' defendant irrespective of whether the risk is covered by P&I insurance, the Agent must immediately forward copies of the pleading and all other related legal documents, by first class mail, to the Chief Counsel, Maritime Administration, Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590, and to the Attorney General, Attn: Civil Division, Torts Branch, Department of Justice, Washington, DC 20530. No agent or authorized subagent will incur any legal expenses in connection with any claim of a P&I nature, unless approved in advance by MARAD and by the underwriter, where applicable. However, the Agent may incur legal expenses if the mission of the vessel will be frustrated or impeded and/or time will not permit such prior approval.

(2) In the event of any attachment or seizure of a vessel, whether or not the risk is of a P&I nature, the Agent must immediately notify MARAD.