The companies, which become involved with the chartering of a vessel can be divided in the following groups:

1. Companies operating a liner service
2. Companies transporting their own goods
3. Companies operating as freight contractor or ship operator

4. Companies offering integrated services 

    

1. Companies operating a liner service

Such a company is obliged to offer to their customers regular sailings, which are scheduled on a fixed time table in advance. In most cases vessels will be chartered on timecharter basis for longer periods.

Local agents, who are appointed by the company operating the liner service, generally book the cargoes. Usually the bookings are concluded on the shipping line's Bills of Lading conditions and on a Liner Booking Note (B/N), which is resulting in a contractual relationship between the liner company and the cargo owner (shipper or consignee, depending on CIF/FOB conditions).

Liabilities for companies operating a liner service

Due to the fact that the liner company is issuing it's own Bills of Lading, the liner company is becoming the Carrier and thus assuming certain liabilities for the safe carriage of the goods. The cargo claims will be sent to the liner company, even if the claims are resulting from navigation errors or seaworthiness of the ship.

As timecharterer the liner company will be directing the ship to ports. If a port or berth appeared not to be safe the timecharterer will be liable for the damages to the vessel.

The liner company is also appointing stevedores for loading and discharging. Even if the stevedores would be liable for damages to the vessel, it is the timecharterer’s direct liability under the charter party with the Shipowner.

Under a time charter party the Charterer has to buy the fuel for the vessel’s engines. If the fuel supplied to the vessel is causing damages to the engines the timecharterer will not be able to escape from liability.

Major claim example

A container ship fully laden, including containers on deck encountered stability problems once at sea, but still within the port limits. The vessel capsized and grounded. A multi millions salvage operation was necessary to rescue ship and cargo, or what was left of it. Shipowner and cargo interests are claiming against the timecharterer for loss of the vessel, salvage expenses and cargo claims. Since the stability problems may have been caused by bad stowage and/or misdescription of the weight of the goods loaded, especially inside the containers, the timecharterers have a potential liability to this claim.

2. Companies transporting their own goods

These companies are commodity traders or manufacturers, who have to deliver their own goods to various customers, or companies who are buying goods overseas, which need to be transported.

It is common that companies in this category are primarily concerned about covering their risks for loss of or damage to their goods under a marine cargo insurance, however, as they also become the Charterer of a ship, they are taking on board various liabilities, which can be covered under our Charterers' Liability Insurance.

Liabilities for companies transporting their own goods

The main area of liability exposure is damage to the chartered vessel caused by stevedores during loading and discharging, or by the cargo carried, or by unsafe port or berth.

In many Charter Parties the Charterer is also liable for a variety of loss of or damage to the cargo. This means the Charterer may be liable for loss of or damage to his OWN cargo, but this risk he had already covered under his cargo insurance. How is this possible?

The answer is simple: At the time the loss or damage becomes apparent the Consignee is taking delivery against presentation of the Bill of Lading. If there is a loss of or damage to cargo the insurance company covering the cargo will be notified. If they pay for a loss or damage they will be subrogated in the rights of the Consignee and will subsequently try to recover their loss from the Shipowner under the Bill of Lading. If they succeed the Shipowner (or rather his P. & I. Club) will take recourse under the terms of the Charter Party. It may thus happen that a loss or damage, which has been recovered by the marine cargo insurer in the first place must be paid back to the Shipowner in the second place, which means that the marine cargo insurance company has received a premium and will say: "Thank you very much".

The solution is also simple: Upon agreeing the marine cargo insurance policy it is necessary to demand a waiver of recourse clause, which means that the marine cargo insurance company will stop their recovery, if it appears that the Assured can be held liable in the scenario as explained above. With such a waiver of recourse clause it will be possible to exclude liabilities to cargo under our Charterers Liability Insurance, which will reduce the premium substantially.

Under a CIF sale or a FOB purchase the seller (shipper) resp. the buyer (consignee) is the Charterer of the vessel. In both cases there will be a marine cargo insurance in their own name and for their own account, which means that the required waiver of recourse clause can be agreed upon. There is however one situation where the cargo owner has no control over the marine cargo insurance and that is in respect of a C+F sale. Under such conditions the buyer (consignee) will take out the marine cargo insurance, whereas the seller (shipper) is still chartering the vessel. In such cases it will be necessary to include in our Charterers Liability Insurance a so-called contingent coverage for cargo liabilities, which we can provide.

Major claim example

A tanker with coated cargo tanks was loaded with a contaminated cargo of crude oil, which caused a major damage to the vessel’s tank coating. After discharge the vessel had to go to a shipyard for immediate repairs. The Shipowners claimed against the Sellers of the cargo, in their capacity as Shippers under the B/L contract and in their capacity as Charterer of the vessel under the voyage c/p, for the repair costs and the loss of time.

3. Companies operating as freight contractor or ship operator

This type of contractor/operator sells transport or logistics expertise. He neither owns the vessel nor the cargo, but he knows how to bring the two together. Forwarding agents may also come under this category. In most cases there are two shipping contracts, in which this type of contractor/operator appears as a principal. With the CIF-seller or FOB-buyer he has contracted on a Booking Note (B/N) or Charter Party (C/P). The operator (FREIGHTCO) will appear in this contract as Disponent-Owner. Ships will be chartered on a Timecharter (T/C) or on a Voyage Charter (V/C). In these Charter Parties the operator (FREIGHTCO) will appear as the Charterer.

Liabilities for companies operating as freight contractor or ship operator

It goes without saying that this type of contractor/operator is exposed to a variety of liabilities, which can be covered under our Charterers Liability Insurance. The operator not only has liabilities towards the Shipowner in the head Charter Party, but also as Disponent-Owner towards the sub-Charterer. In most cases these liabilities are not back-to-back.

Major claim example

A general cargo vessel loaded with an iron concentrate, which requires the highest care for safe carriage, exploded on the high seas and sank. Evidence is available that the cargo caused the explosion. The Shipowner is claiming loss of his vessel and has brought a claim against the voyage charterer of US$ 20 millions.

4. Companies offering integrated services

For this category it is difficult to comment in general terms. It will be necessary to make a profile and analysis of all the activities. Our Charterers Liability Insurance will be tailored to comprehensively cover the liabilities of this type of Charterer, who may even be an NVOCC-operator.

Major claim example

A container ship fully laden sank on the high seas after a heavy explosion and fire. The Shipowner takes the view that the explosion occurred in one of the containers and is therefore claiming for the total value of the ship (US$ 10 millions). The cargo owners are claiming for the total value of all cargo on board (US$ 6 millions). The claims are also brought against the NVOCC-operators.