Charterers Liability Cover. If things go wrong, being a charterer can be very expensive in terms of potential losses and liabilities

Transcription

1 Charterers Liability Cover If things go wrong, being a charterer can be very expensive in terms of potential losses and liabilities

2 2 Charterers Liability Cover Risk is increasing, and not only because of aggregations of value carried on ever larger ships, and increasing commodity prices. The regulatory environment underpins claims inflation and will look at all connected parties in the event of a serious shipping accident, not just the shipowner. You may be a slot, space, voyage or time charterer. You may be a traditional chart-erer with a ship operating background, or a trading company moving raw materials or finished product, or a trader buying and selling on a scale that requires chartering. Whichever you are, you will find what you need in UK Club s Charterers Liability Cover facility, which can be adapted to meet your exact needs. You certainly need insurance. It may be that the traditional product meets your needs well and it remains available. However, increasingly charterers are seeking something specifically tailored to their particular situation in which case the flexibility of our new product can provide what you need. Tailored package of cover and premium Integrates with hull and other covers Pure liability protection for non-operational charterers Pollution liability without sub-limit Most extensive network support Minimise delay due to arrest/detention Responds to continual changes in charter fleet Minimises administrative burden Why a UK Club cover? Financial security and service are the twin pillars upon which the UK Club bases all its activities. The cover and service provided to the charterer member is no exception. The UK Club s strength as the world's largest P&I club enables it to negotiate covers offering greater scope and limit, and deliver them for a more competitive and stable price than charterers might achieve individually. The resources and economies of scale that the UK Club enjoys as the world s largest mutual P&I insurer confer considerable benefits on its owned and chartered Members including: Claims As a mutual, the Club takes a positive, co-operative attitude towards its Members claims. The wide spread of international offices and staff makes it sensitive to the needs of different regional and trade areas. Genuine 24 hours claims handling response The UK Club possesses the largest international office network in the P&I industry. Offices in New Jersey, San Francisco, London, Piraeus, Singapore, Hong Kong, Beijing, Shanghai and Tokyo are manned by dedicated UK Club service teams. Recruited from a variety of operational, legal and technical backgrounds, they combine in-depth expertise with awareness of commercial realities to advise on shipping, liability and insurance issues. An unrivalled online claims support service Innovative web-based technology, including our ClaimsTrac system, allows you to access and analyse your claims data and loss record at your convenience day or night. Commercial underwriting The UK P&I Club takes a flexible, individual approach to cover for all Members. Many of its underwriters have been longstanding specialists in

3 3 particular sectors or geographical regions. Financial security The UK Club s considerable reserves, prudent reserving policy and comprehensive reinsurance protection provide great financial security. The Club has maintained a Standard and Poors rating at the highest level of any P&I club since that agency began reporting on the mutual P&I industry. Flexible and innovative service The UK P&I Club continues to pioneer many new service initiatives such as its value for money system, managing the performance and costs of all parties in the claims process. Increased recent exposure of ship operators to criminal liability and media attention has been met with more developed specialist expertise and relationships with the relevant agencies. Loss prevention and advice The UK P&I Club is committed to safety. Its high-level loss prevention programme the most extensive in the industry aims to offset rising claims and maintain quality amongst Members. Flexible Charterers P&I Cover UK Club charterers liability insurance provides the benefit of access to the broad cover described within the Club s Rules. However, the unique position of the charterer in the maritime industry requires an enhanced and tailored cover to ensure that those exposures which go beyond those of the conventional owner-operator are addressed and financially secured. Comprehensive cover with high limits at a competitive prices The flexible charterers cover offers variable limits of cover up to US$750 million any one accident or occurrence. No sub-limit for pollution There are no sub-limits imposed below the overall agreed limit of the cover for either pollution risks or other exposures arising from the ship owners limitation clause. Integrates with hull and other covers The flexible charterers cover is designed to be combined with the Damage to Hull cover as well as other risks (see below) Pollution liability cover for charterer s own cargo Cover can be extended to include cargo owner s pollution liability where the charterer or an affiliated/associated company is also the cargo owner. Pure liability protection for non-operational charterers Cover can also be extended to include the Members legal liability as cargo owners and/or shippers where no charterers interest in the carrying vessel exists. Flexible range of additional tailored covers Many operators require additional specialist risks to be included to reflect the particular hazards faced by their sector or trading pattern. A review of some of the key additional covers can be found on the back page of this brochure. Damage to Hull All risks cover for charterers ships Cover extends to include financial loss, liability, costs or expenses arising as a direct consequence of loss of, or damage to, the entered ship. Associated costs and expenses Sue and labour and legal costs in accordance with the cover provided under the flexible charterers liability cover. General average and salvage exposure Cover includes the charterer s general average and salvage contributions and salvage charges in respect of loss of or damage to the entered ship, charterer s bunkers on board and the freight at risk in relation to the ship. High limits of cover The flexible charterers cover offers variable limits of cover up to US$750 million on any one accident or occurrence. To obtain the full limit of US$750 million, cover must be purchased on a combined basis. War Risks Standard cover includes War Risks on a worldwide trading basis. Additional covers A charterer often requires protection for loss of or damage to his bunkers arising from an incident involving his ship (see back page for additional covers).

4 4 What are the key charterers risks? Dr Chao Wu, Legal Director of Thomas Miller P&I Ltd explains the key risks to which a charterer is most commonly exposed and for which cover is available. P&I A charterer needs standard P&I cover under the Rules for the same risks as are usually insured by an owner and will therefore have cover for his direct liabilities to third parties in respect of risks set out in Rule 2. A charterer may need to widen the scope of cover for direct liabilities if he agrees to take on contractual risks that would not fall to him as a matter of law (I). However, a Charterer also needs cover for liability to indemnify the owner for such risks, set out in Rule 2 (II). Let us look at each in turn. Charterer s direct liability to third parties This can arise either in contract or in tort, as in the examples below. Cargo A charterer will be liable directly to the owner of damaged or lost cargo when he is the carrier under his own bill of lading, or, as may happen in some jurisdictions, if he is considered to be the carrier under an owner s bill of lading. Less commonly, a charterer may face a claim in tort where the carriage contract is with the shipowner, especially if the claim is unsecured and the prospects of recovery from the owner are uncertain. Extended Cargo Cover A charterer may need an extension to the scope of his direct P&I cover. He may for example enter into cargo service contracts that are more onerous than the Club s standard terms, Hague-Visby. He may need cover for geographical or contractual deviations, such as dry docking with cargo on board. This extended scope of P&I can also respond to claims arising from the delivery of cargo without the production of an original bill of lading provided the charterer has taken a letter of indemnity on the standard form of wording recommended by the International Group. The policy can also cover claims arising from delivery at a port other than that mentioned in the bill of lading, ad valorem bills of lading, rare and valuable cargo, and liabilities arising from unreasonable periods of storage. There is a US$50 million limit on cover although more is available if required. The policy excludes inherent vice, delay and loss of market. This extended cargo cover is of course not just available to charterers but is also available to ship owner Members. Pollution In certain jurisdictions e.g. California, Alaska & Japan, a charterer can incur direct and even strict liability for pollution caused by the ship. This may arise in a variety of ways. First, by force of law due to the vessel s operations. For instance, in the United States Oil Pollution Act 1990 (OPA 90) provides that any person owning, operating or demise chartering the vessel may be liable. Although under OPA 90 it seems that a time charterer is only liable if considered to be the operator of the vessel as well, the individual states in the US have been able to enact their own legislation and most states target, transporter of oil, person having control over oil, person taking responsibility so that a time charterer can be at risk. Additionally, in some states such as Alaska, strict liability for pollution is also imposed on cargo interests, so that a charterer who owns cargo attracts liability through that route. Third Parties A charterer may incur liability directly to a stevedore, or any third party, who suffers personal injury or property damage as a result of the charterer s negligence. How might such claims arise against the charterer? One example would be the improper description of noxious cargo, resulting in injury being caused to an unprotected stevedore. Another would be a negligent order resulting in injury to a longshoreman. In some US circuits, the NYPE clause 8 has been held to shift

5 5 responsibility for negligence, during loading/ discharging from the owner to the charterer. Fines A charterer, if falling into the definition of carrier, can be subject to fines e.g. if in noncompliance with the US Automated Manifest System Regulations (see Club Circular Ref 10/04). Guidance by the US Customs & Border Patrol (CBP) advised that it views the carrier as the entity that controls the vessel which includes: (a) determining ports of call; (b) controlling loading and discharging cargo; (c) knowledge of cargo information; (d) issuing of bills of lading; and (e) the entity which has typically provided the CF 1302 cargo declaration or the cargo information to prepare the CF 1302 to the vessel agent. Indemnification of owners A charterer will have an obligation to indemnify the owner for third party liability where this results from a breach of the charterparty by the charterer, or arises out of activities which are the charterer s responsibility. Typical examples of situations where charterers may have to indemnify owners for P&I liability include the following. Unsafe port Most charterparties have a safe port or berth warranty. Sending the ship to an unsafe port in breach of that warranty could result in P&I liabilities such as cargo loss or damage, personal injury, pollution, or even wreck removal. Crew A charterer will rarely be liable for the owner s crew, but may be responsible to indemnify the owner for liabilities towards stevedores and other such personnel. Dangerous goods The charterer will be liable to indemnify the owner for any property damage or personal injury arising from loading or carriage of dangerous cargo. If, as happens with increasing frequency, such cargo has not been properly declared by the shipper, the charterer will nevertheless remain liable to the owner for the consequences. Such consequences can be severe and can extend to cargo damage, death or personal injury, pollution, or wreck removal. Stowage incidents Under the unamended NYPE clause 8, the charterer is responsible for loading, stowage, etc. If as a result of a collapse of stow due to bad stowage, property damage or personal injury is caused, the charterer will be liable to indemnify the owner for such damage or injury. Bunker quality In most time charterparties, the charterer should supply bunkers to the vessel meeting agreed specifications. He will have to indemnify the owner for any damages resulting from the supply of off-specification bunkers.

6 6 Stevedores Liability for damage caused to the ship by stevedores. Most time charters, particularly in the bulk and general cargo trades, have a stevedore damage clause, which will make the charterer liable, in certain circumstances, for stevedore damage. Safe port Liability for damage to the ship arising from the failure to provide a safe port or berth. Marpol Annex VI has introduced restrictions on the sulphur content of fuel. As a result, a charterer will now have to supply bunkers not only of a quality to meet charterparty specifications, but also to enable the vessel to meet particular port requirements depending on whether or not the state has ratified Annex VI. Failure to do so may result in the charterer having to indemnify the owner for any resulting loss or liability which could include liability for fines. Poor stowage Damage to the ship resulting from stowage contrary to the terms of the charter party, where the charterer is responsible for loading and stowage of cargo. Hazardous or dangerous cargo Damage to the ship caused by the nature of the cargo itself, such as where cargoes are corrosive or explosive. For example, BIMCO s Fuel Sulphur Content Clause for Time Charter Parties provides for the charterer to indemnify the owner for loss or liability arising from a failure to permit the Vessel, at all times, to meet the maximum sulphur content requirements of any emission control zone when the Vessel is trading within that zone. Pollution Although most states outside the USA are party to the CLC (Civil Liability Convention) under which tanker pollution claims are channeled solely to the registered shipowner, if the cause of the pollution is something for which the charterer is responsible (such as in an unsafe port situation) then the charterer may be obliged to indemnify the shipowner. Damage to Hull The standard P&I cover that is provided to shipowners excludes cover for damage to the entered ship. However, for the charterer, such cover can be important because of the variety of ways in which a charterer may become liable for damage to a ship. Many of the above examples of situations which might give rise to traditional P&I liabilities are also situations where the chartered ship may be damaged and the costs thereof may be recoverable from the charterer. Bunker quality Damage to ship s engines if inferior bunkers have been provided by the charterer. Off-spec bunkers can cause damage to the ship s main and auxiliary engines, aside from many other difficulties such as that of finding a place to discharge off-spec fuel, diverting for new bunkers, and losses resulting from slow speeding where this is necessary. General average and salvage liability General average and salvage contributions in respect of loss or damage to the ship, Member s freight at risk or Member s bunkers on board the ship.

7 7 FD&D risks As a charterer enjoying the benefits of our flexible cover, you will get the legal costs of dealing with any P&I claim included as part of the package. However, many charterers will prefer the added security of cover for freight, delay and demurrage risks (FD&D risks). The additional step of purchasing a cover from the UK Defence Club provides protection for legal and other costs of resolving a wide range of disputes about uninsured matters. These include disputes under charterparties on matters such as off hire, bunker quality, speed and performance, unsafe port or berth, laytime and demurrage. Prompt legal and practical advice on the merits of cases The way cases should be handled and the course they should follow Negotiating with opponents Finding the best lawyers and experts for each case Clear, practical communication with you, the lawyers and the experts Co-ordination of large cases Monitoring of costs and fees Advice on drafting documentation The UK Defence Club is the largest organisation of its kind and has access to the same international network of correspondents, lawyers and other experts as are used by UK P&I. The same UK P&I Club underwriting contact that provides your charterers P&I and hull risks is also able to arrange an entry with the Defence Club to protect this other important aspect of your exposure. In addition to providing cover, the Defence Club and its managers offer advice on: Keeping ships on the move The UK Club provides insurance to around 5,000 charter entries every year. These entries have generated an average of 1,700 claims each year, which represents a considerable fund of expertise in this specialist area. The UK Club s network of offices in Europe, Asia-Pacific and the Americas are well placed to support them. In turn, that network can call on the Club s correspon-dency network of some 350 legal, commercial and technical specialists for local support in the handling of claims. development of streamlined declaration systems to minimise the administrative burden of obtaining cover for a continually changing charter fleet. As well as direct problem solving expertise, they provide the essential support and guarantee systems that enable a ship to sail with minimum delay in the event of arrest or other legal detentions. Minimising delay means minimising costs. The UK P&I Club recognises that ease of use is essential for any charterers package. The volume of charter business handled by the Club has led to the

8 8 Flexible options Charterers Bunkers As a charterer you risk sustaining your own losses where an accident is serious enough to cause loss of the ships bunkers. You may therefore want to include in your cover protection for loss of or damage to charterers bunkers reasonably attributable to fire or explosion, stranding, grounding, sinking or capsizing of the entered ship, or to collision of the entered ship with any external object. This cover is based on Institute clauses including the relevant Wars and Strikes Clauses and available up to a limit of US$2 million any accident or occurrence. Charterers Freight This cover is provided under the Institute Time or Voyage Clauses Freight ( ) for up to US$5 million any one accident or occurrence. Cover can be obtained for all risks or as total loss only, but including salvage charges and sue and labour. Blocking and Trapping If a charterer should be caught by a closure or restriction of navigation within his declared trading area, the daily time charter hire payments can be recovered under this cover. Passenger Ships Special Risks The cover available to owner Members in respect of additional risks arising from passenger can also be included in a charterer s package. Such risks include loss of effects, liabilities to passengers arising away from the ship such as additional compensation and legal costs. Further information on special passenger related risks can be obtained from your normal underwriting contact. Causes of such delay or detention can include breakdown of locks or seaway equipment, blockage by sunken or stranded objects or ice, and strikes or stoppages by any personnel essential to the transit of a seaway. The cover can also be extended to include additional expenses incurred in re-routing ships to avoid such a delay. Further assistance The UK P&I Club will be pleased to provide you or your broker with further information on how the Club s charterers covers can be tailored to the specific needs of your current charter fleet. Either you or your broker are welcome to contact the underwriting department in London directly. The direct contact details of all individual underwriters are listed in the Making Contact section of the UK P&I Club website That website enables you to identify the individual underwriter specialising in your particular area. The underwriting department can be contacted by fax at or by at underwriting.ukclub@thomasmiller.com. Alternatively, the Club s managers and agents can be contacted at the numbers provided at the foot of this brochure for more information. If you require more general information on the UK P&I Club, the Club s marketing department would welcome your enquiry. Contact Nick Whitear (nick.whitear@thomasmiller.com) or Jenny Whitehead (jenny.whitehead@thomasmiller.com). Alternatively, the UK Club website is an exhaustive source of information on the Club and P&I issues in general. For more information, please contact: Thomas Miller P&I Ltd London Tel: Fax: Thomas Miller (Hellas) Ltd Piraeus H1 Tel: Fax: /8 Thomas Miller (Americas) Inc New Jersey Tel: Fax: Thomas Miller (Hong Kong) Ltd Hong Kong Tel: Fax: