Charterer’s risks: what they are and how we can protect you

Whether a container line, trading house, shipping pool, project cargo specialist or mining conglomerate, and whatever your shipping contracts and operations may be, involvement in marine transport as a charterer means you are exposed to many liabilities. Our experience and unrivalled level of service will help you identify, control and manage these risks cost-effectively.

Find out more about our standard and additional covers.

For more information contact

Alec Kyrle-Pope

Charterers Risk Specialist

T: +44 7557 426921

M: +44 207 204 2255

E: alec.kyrle-pope@thomasmiller.com

London

10:58 | Thursday, 21 June

Kwan Tang

Charterers Underwriting Specialist

T: +44 20 7204 2426

M: +44 7584 600918

E: kwan.tang@thomasmiller.com

London

10:58 | Thursday, 21 June

The risks you face as a charterer or trader

Unsure of your potential exposures? Here are some examples of the risks you might face.

Damage caused to the ship by your cargo, at the port, by off-specification bunkers or by stevedores may be your responsibility under the charterparty.

Even if you are not at fault, as the buyer, seller or holder of a bill of lading for goods carried on board, you may be liable for clean-up costs or a fine after an environmental incident involving the ship.

Third-party cargo claims may be brought against you as the charterer for cargo damaged by the ship, either under the charterparty if you were responsible for loading of the cargo or the bill of lading if you issued it.

A number of jurisdictions such as Australia and the USA, target the charterer of the ship for pollution caused by the ship, either from the cargo or bunkers, or both.

If the ship is damaged, delayed or arrested, you may still be obliged to pay hire despite the ship not trading, meaning you could incur substantial losses.

Ship operations are dangerous. Where a charterer is contractually responsible for those operations, there could be a large claim for injuries or deaths that occur.

You could be liable for the cost of removing the wreck and cargo: an expensive and time-consuming operation costing sometimes several multiples of the value of the cargo and ship.

Bunkers are the largest single cost associated with operating a ship. Your bunkers can be lost or damaged due to a marine accident.

Any cargo or bunker owner or party receiving freight on a ship that declares General Average, or has to be salvaged, must contribute in proportion to the value of the property at risk. Your contribution could be more than that of the shipowner.

Charterers & Traders Newsletter

The Club’s charterers’ quarterly newsletter brings you all the latest information and advice directly from our industry experts.

Examples of how we protect charterers and traders

Here are some recent real-life examples how the UK P&I Club has protected charterers’ and traders’ interests.

Our insured charterer time-chartered a supramax bulk carrier for the carriage of corn from Argentina to Egypt. On arrival at the discharge port, the local receiver alleged mould damage in various holds, rejected a portion of the cargo and arrested the ship. Security was provided by the owner’s P&I club, which subsequently defended and ultimately settled the claim. The owner subsequently attempted to bring a recovery action under the Inter-Club Agreement against the charterer alleging, among other things that the cargo was, or had been, inherently unstable or that the method of loading had introduced moisture into it. Due to proactive case handling during the time of the initial incident, the Club was able successfully to defend the owner’s claim in full as well as protect the charterer’s own claim for delay, off-hire and associated commercial losses.

Our insured charterer, a mining company, time chartered a panamax bulk carrier for the carriage of coal to India. At the discharge port the vessel touched the bottom of the berth and the owner subsequently alleged the berth was unsafe and brought a claim for damage and deformation to the vessel’s hull and double-bottom tanks. After careful investigation and monitoring of the repair work, the Club was able to reduce the owner’s claim by 60% and then successfully recover these losses down the line from the sub-charterer.

Our insured charterer, an energy trader, procured heavy fuel oil for a gas carrier operating in its time-chartered fleet. Five days after the ship started burning the fuel, and two weeks after it had been delivered, problems arose with the ship’s fuel pumps and main engine. The Club was immediately consulted and, in conjunction with the charterer’s operations department and appointed experts, formulated a response plan to bring the problem under control and minimise operational delay. Thereafter the Club was able to arrange and monitor testing of the fuel and, despite onerous supply terms, facilitate the de-bunkering of the vessel and the recovery of the charterer’s losses arising from the incident.

An 11,000 TEU container ship suffered a fire on board which originated in containers carried under bills of lading issued by our insured charterer. The owner engaged the services of fire-fighting tugs and the vessel was forced to make an unscheduled call at a port where the fire-damaged containers could be discharged. Working in close cooperation with the owner, the charterer and the Club were able to structure an agreement whereby General Average was not declared and the parties would manage claims, including those from the charterer’s consortium partners, on a co-operative basis pending further investigation into the cause of the fire. Subsequently, with the help of the Club, the charterer was able to defend and settle cargo claims arising from the incident as well as obtain and enforce judgments against the shipper for negligent declaration of the goods.

Our insured charterer, a fuel trader, arranged to conduct a ship-to-ship (STS) transfer of cargo from one of its chartered product tankers to a customer. The customer was to provide the daughter vessel and all the STS equipment. During the operation, one of the hoses burst, leading to a spillage and loss of cargo. Strict liability meant that the owner of the chartered vessel was responsible for the spill and resultant clean-up operations, but had a recourse action under the charterparty against the charterer in contract and against the owner of the daughter vessel in tort. With the Club’s assistance, the charterer was able to structure a settlement whereby the owner settled directly with the daughter vessel interests, without any residual liability or costs exposure to the charterer.

A laden aframax tanker on time charter to our insured charterer went aground while on passage to the discharge port. Its owner declared General Average (GA) and engaged tugs in an attempt to refloat the vessel. Security was requested by the owner for GA contributions in respect of the charterer’s bunkers on board and the freight due to be earned for the voyage, which together amounted to almost 7% of the total property at risk. Security was duly provided by the Club and, following the ship’s successful refloat, experts were appointed to investigate the cause of the incident. It subsequently emerged that a mechanical failure, due to poor maintenance, had caused the grounding of the ship and the Club was therefore able to defend the owner’s claims in full and protect the charterer’s deductible.

During a handysize bulk carrier’s laden transit, the lashing and dunnage securing various parcels of project cargo in one of the vessel’s holds failed. The cargo shifted and, in the process, damaged both itself and a ballast tank adjacent to the hold. Although the damage was not immediately detected, during cargo operations at the first discharge port water was seen collecting in the aft of the hold as the vessel took on ballast. Shortly thereafter local receiver submitted claims for damage and wetting of cargo arising from the collapsed stow and subsequent ingress of water in the hold. Further claims followed at the second discharge port. Our inslured charterer, a dry bulk operator, and the time charterer of the vessel, was put on notice by the owner for these exposures as well as the physical damage to the vessel itself. With the assistance of the Club, the charterer was able carefully to investigate the cause of the incident, monitor the ballast tank repair work and obtain counter-security down the line from the sub-charterers. Eventually, after the owner had defended the cargo claims in the first instance, the Club was able to facilitate the settlement and recovery of the losses associated with the incident.

While discharging a cargo of iron ore in China, a capesize bulk carrier on period charter to our insured charterer had one of its side-rolling hatch covers damaged by a shore grab when the crane supporting it collapsed. After extensive negotiations with the terminal, local receiver, sub-charterer, the stevedores’ insurer and the vessel’s classification society, the Club was able to help ensure that discharge operations continued and that permanent repairs were swiftly arranged at a nearby yard shortly thereafter, with limited downtime or deviation involved.

Our insured trader, a refiner, was responsible for shipping a particular grade of product on a tanker chartered by their customer. Not long after loading began, there was an explosion in one of the vessel’s cargo tanks. Thankfully, there was no pollution or loss of life. After careful investigation, it was discovered that, due to a problem at one of the refinery’s units, the product had not been fully processed and displayed abnormal characteristics. The trader was accordingly held liable by both its customer and the owner of the vessel for the incident. Consequently, with the assistance of the Club, the trader was able to arrange the offloading of the cargo from the vessel as well as monitor its subsequent repair. Following protracted negotiation involving witness evidence and technical advice, the trader, supported by the Club, was then able to settle the owner’s claim at a reasonable level.

Downloads

  • Charterers Liability - The Charterers Guide to Protection and Indemnity Insurance 4 MB

    27/10/2021

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  • Charterers Terms and Conditions 2022 538 KB

    03/02/2022

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  • Charterers Terms and Condition 2021 2 MB

    31/12/2020

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  • Offshore Additional Cover for Charterers 2021 997 KB

    07/04/2021

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  • Charterers Terms and Conditions 2020 7 MB

    07/01/2020

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  • Charterers and Traders Training Menu 69 KB

    20/08/2020

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