A charterer is exposed to many different types of loss in the modern shipping environment; some of this relates to the cargo carried on board the chartered vessel.
This liability for loss comes not from things that the charterer can physically control but because of the representations, warranties and conditions in the charterparty agreed with the vessels owners.
There is exposure to cargo loss in all the different types of charterparty; these can be period time charterparties, time charter trips or TCT, voyage charters, VC, consecutive voyage charters, CVC, contracts of affreightment, COA or space charter.
The type of cargo loss can be damage, shortage, delay, overlanding, shortlanding, fire, liquefaction, packaging, inadequate packaging, ventilation. Charterparties specify what loss sits with owners and what can come to the charterer under a clause or condition in the charter.
In many scenarios cargo claimants will pursue claims against the carrier under the bill of lading; this is most likely to be the vessels owner who will have to defend the claims using the conditions and warranties available on the reverse of the bill of lading. International conventions specify whether the carrier is responsible for loss under the Hague Rules, the Hague Visby, the Hamburg Rules or the Rotterdam Rules.
If the carrier cannot successfully defend a claim then they must settle on best terms available; its at this stage that they will then determine whether a claim can be passed to the charterer under the relevant charterparty. Owners and their Insurers, who are International Group, IG P&I Clubs, are merciless in trying to pursue claims against Charterers so the prudent Charterer should ensure that they have Insurance cover against their liabilities.
Some of the common issues that charterers face with defending cargo claims is lack of preparation. They need to investigate loss when its alleged by owners as its very difficult to defend after the event as evidence is crucial but only when its collected at the time of loss and is virtually impossible to gather months after the event. A relatively cheap survey at the time of the loss can save hundreds of thousands later on.
The larger losses that charterers face can be liquefaction of cargo, fire, infestation or loss of deck cargo. These claims can cost millions of dollars and take many years to settle.
If a charterer sells CIF then they need to ensure that the marine cargo insurance policy has a suitable waiver of subrogation against their interests as charterer otherwise claims can come full circle from Insurer to Owner to Charterer. If the Charterer is selling CnF or Cost and Freight then the responsibility for loss of cargo transfers to the receiver but the sellor (the charterer) should arrange sellers interest Insurance.
Even if the cargo is owned by the charterer for the duration of the voyage then a charterer / cargo owner can incur Cargo Owners Legal Liability Insurance (COLL) which protects them against damage to the Chartered ship and environment from the carriage of their own cargo.
The permutations for loss and damage are endless as is the hostility that some owner and their IG P&I Clubs show when trying to pursue this loss against the charterer. First Class AA Rated Security is essential.
Find the right insurance that can protect you against the risks you’ll face in the industry. For charterers, the MECO Group offers high-quality insurance products to protect you from liability risks. We have insured more than 400 charterers and 16,000 vessels from large shipping companies and cargo interests.