Pre entry survey

Survey on Ro-Ro-carrier whilst loading.
Hallstavik, March 2007

Charterer’s Liability

A person or a company acting as a charterer of a vessel assumes responsibilities broadly similar to those of a ship-owner. The contracting parties, normally a cargo owner or a sub-charterer, will view the charterer as the “ship-owner” of the vessel. The charterer also assumes liabilities towards the vessel owner, including damage inflicted on the vessel.

Most vessels are chartered either on a Time Charter or a Voyage Charter contract. In both cases the charterer becomes liable as he assumes a position similar to a ship-owner towards the sub-contracting party (either a sub-charterer or cargo owner). His liabilities are broadly similar to those of a ship-owner, with liability to cargo, to freight and in some instances, although rare, to pollution claims.

The charterer also assumes liabilities toward the party he charters the vessel from, the ship-owner or another charterer.  Primarily, this type of liability relates to damages caused to the vessel in the course of loading or discharging cargo or damage from vessel calling at an unsafe port or berth.

Charterers in any role, whether as voyage charterer or time charterer, need insurance cover for this exposure. Even when the charter-party contractually imposes the liability on a ship-owner, most jurisdictions allows a claimant to pursue recovery for damages from a party he find most suitable. The claimant has freedom of choice, to sue either the charterer or the ship-owner. The charter-party will eventually determine, contractually, who should bear the cost, but this may follow a long legal process.

Many claims between ship-owner and charterer refer to stevedore damage or unsafe port or damage from contaminated fuel. Therefore, in addition to the P&I cover, this may also include Charterer’s Liability for damage to Hull (DTH).Even if the contract is on a voyage charter, where the ship-owner has an obligation to ensure named ports are safe for his vessels, the charter-party may name a range of ports for discharge. If the port is unsafe, the charterer may have a liability to the ship-owner, should damage to the vessel occur. Stevedore damage to vessels is commonplace when loading or discharging cargo. This is yet another typical liability imposed on the charterer.

All charterers, regardless of position in the ”chartering chain” require cover for both P&I liabilities and damage to hull. As soon as the contract is signed, whether voyage or time charter, the charterer has an insurable exposure.