Activity in the industry of shipping is called chartering. Chartering also means finding a ship and the act of delivering cargo for a fee which is a freight rate. Chartering involves huge sums of money because the rates are calculated on a ‘per-tonne basis’ for a specified route/s. Rate may also be expressed on a per-day basis.
The people who the shipowner hire to use his vessel/s are charterers. When chartering, the owner will pay the charterer a certain rate. Types of charters may vary but it’s common to a have a contract form (charter party). The charter party records the specific rate, time and other terms the shipowner and the charterer agreed on.
In between shipowning, chartering, and rates; there also a thing called liability insurance for charterers. What is this?
Below are the things you should know about this kind of insurance in case you plan to own a ship, work for a shipowner or you are under this industry.
What is liability insurance for charterers?
This is a kind of marine insurance. It covers the liabilities under care, control, and custody (CCC). This insurance is applicable to the person in the ship but still under the ownership of another person.
A lot of things can happen during a voyage. During these times, a chartering party may agree to take responsibility for some liabilities under the charter agreement. Some of the untoward incidents that may happen during a voyage are damages when loading and unloading cargoes or damages during a collision. The insurance covers that along with other types of damages and/or injuries when the charterers are held liable.
What is the Importance of this Insurance?
If shipowners have P&I club insurance covers, charterers have liability insurance for charterers. Charterers may choose not to get insurance like this but they’re taking a risk when they do so. Charterers will be held responsible by the shipowner when a cargo gets damaged, there’s a shortage in the cargoes or the delivery time is late.
Charterers will also be held responsible for the oil pollution of the ship they are operating. During these cases, liability insurance will come in handy to provide security and to resume the voyage of the vessel.
What is Indemnification of Third Parties?
This situation happens when there are claims from third parties to the charterers. This may be the result of negligence on the part of the charterers. One of the negligence included is giving the wrong description of a loaded cargo. When this happens, the cargo might get damaged or injure a third party or stevedores.
What is Indemnification of a Shipowner?
This can happen when there is a breach of contract where the charterers are the ones responsible. If it happens shipowners can file insurance claims. The Insurance covers bunkers, or when the engine and/or machinery is damaged because of ‘off-specification bunkers’, and when there’s damage to stevedores.
To End, why do charterers need to get this insurance?
Though not mandatory, this insurance is still an important part of being charterers. Many liabilities are placed on their shoulders especially when there are about half damages of cargo happening under their trip. Shipowners might not want to hire charterers who don’t have insurance like this because of the risks. The risks may include not being able to find a lot of shipowners hiring them resulting in lost profits.