Insurance for Charterers
Do not underestimate the risks
Chartering a vessel inevitably entails certain risks, and as a charterer, you may find yourself exposed to certain legal and contractual liabilities. That means that the last thing you want is to be inadequately insured.
What liabilities do I face?
The key risks you face as a charterer include:
- Loss of, or damage to, the chartered vessel (including damage caused by stevedores, an unsafe berth, the cargo or use of the wrong fuel)
- Problems with cargo (including loss, damage, late delivery or delivery to the wrong port)
- Other marine liability risks (including death, injury or illness suffered by the crew or third parties, collision, pollution, salvage or fines)
Depending on your role in the logistics chain, and the type of Charter Party you have signed, you may also face other liabilities. If, for example, to help you avoid liability, you appoint your own agents and stevedores, or hire your own superintendents to monitor loading and unloading, this may actually bring additional liabilities. The same applies if your name is on the Bill of Lading, or if you sign it yourself.
Do I really need cover?
Taking out Charterers’ Liability Insurance to cover your liabilities is not mandatory: you are, of course, free to take on the risk yourself. But there are a number of reasons why you would be well-advised to protect yourself with an appropriate Charterers’ Liability Insurance. For example:
- Under many jurisdictions, a charterer is often considered to be a carrier, with the responsibilities and liabilities that this entails
- The management of warranties and conditions under a Charter Party can often be extremely complex
- Litigation is becoming increasingly common in our society, and in the event of an incident, the chances of facing third-party liability actions are high
- Relying on the operational excellence of others is no guarantee that you will not one day be exposed to extremely expensive claims
- Even if, in a particular case, you are not liable, defending yourself against an erroneous claim can prove very expensive
- 50% of cargo damages are caused by cargo handling, or errors for which the charterer is ultimately responsible
- 20% of pollution claims are caused by the cargo being shipped, or by charterers during bunkering
- 70% of hull damage claims occur in port
P&I (Protection and Indemnity) Clubs – mutual associations of shipowners –often position themselves as insurance providers for charterers, but taking out a policy with such a group can have a number of disadvantages for charterers. At RaetsMarine, we operate in a very different way, enabling us to offer you better service, clearer legislation and a more supportive framework. We offer you fixed premiums and never impose general increases and supplementary calls. We judge every account based on its own record and insurance, so you can be sure that you are never paying over the odds to cover someone else’s risk. And, because we understand that every account is different, we also tailor our comprehensive insurance packages specifically to meet your needs.
A P&I Club is typically an association of shipowners set up to provide mutual protection and support against a range of different risks and liabilities, including personal injury to passengers and crew, damage to or loss of cargo and third-party insurance. Although P&I Clubs are typically intended for shipowners, charterers are also able to join. Before you do so, however, you should consider the following:
- P&I clubs are primarily intended for shipowners. Given that by statute, a club can only accept a limited amount of fixed-premium business, it seems likely that shipowners will often take precedence over you and other charterers
- If both you and the vessel you have chartered are covered by the same P&I club, there is a possible conflict of interest
- Policies drawn up by P&I clubs are typically based on the club rules, which tend to emphasise both the shipowner and mutuality, and cover is often discretionary. As a result, you may find that the level of protection you receive is rather uncertain – particularly as the final decision is often made by the Board of Directors, all of whose members are shipowners
- The rules of a P&I club do not typically cover the liabilities of a charterer in respect of damage to the vessel. As a result, separate insurance has to be found through the club, which can make putting together a comprehensive insurance package both time-consuming and expensive
As a condition of cover, all P&I clubs require compliance with International Safety Management (ISM) and International Ship and Port Facility Security (ISPS) regulations. As a charterer, you have no control over a shipowner’s compliance with these regulations.