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Charterers’ Liability – Options & Extentions

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Cargo Owners’ and Traders’ Cover

This optional cover encompasses both cargo owners’ and traders’ liabilities in respect of both chartered and non-chartered vessels:

  • Damage to vessels, including salvage and detention, caused by cargo traded by the assured, whether contractual (i.e. under the sales contract) or in tor; damage to berth, terminal or other property caused by cargo.
  • Certain contractual liabilities (under, for example, sales contracts); Charterers’ Liability Cover, including personal injury, damage to property, wreck removal (including removal of cargo).
  • Cargo owners’ cover restricted to pollution and pollution fines is also available.

Cargo Owners’ and Traders’ exposure to chartered and non-chartered vessels

A new definition of cargo owner/trader has been introduced that includes buyer, seller and holder of the bill of lading. This cover is available even in instances where the trader is no longer the cargo owner, for example, where the cargo has been sold on, but where the trader is nevertheless held liable in his capacity as the seller.

Cargo Owners’ Legal Liability Cover, Cargo Owners’ Pollution Cover and Treaders’ Cover may be extended further to apply in respect of cargo carried on non-chartered vessels. This means the cover can apply to cargo movements where there is no chartering relation vessel in place and the only connection between the assured and the vessel carrying the cargo, causing the pollution or other third-party liability, is a contract in respect of the cargo, such as a cargo sales contract or a bill of lading.

Cargo Owners’/Traders’ liability for pollution

  • Pollution cover for the assured and affiliated/associated companies in their capacity as cargo owners/traders.
  • Includes pollution during customary littering and STS (ship-to-ship) transfers.
  • Includes fines for accidental pollution.
  • Optional inclusion of cover for carriage on non-chartered vessels.

Cargo carried on a non-chartered vessel

If the charterer of their affiliated or associated companies is concerned about risks related to the cargo on a chartered vessel, the cargo owners’ cover can be arranged to apply in respect of chartered vessels only. This would be suitable for cargo owners and traders who always use chartered vessels to move their goods.

However, if the cargo is carried on other vessels, not chartered by the assured or one of its associated or affiliated companies, there may still berisk exposure and the assured may want the protection of the cargo owners’ or traders’ cover for non-entered vessels.

The risk could arise in contract, most likely a sleas contract, or in tort, such as third party property damage caused by a dangerous cargo. For instance, if the assured is purchasing cargo on terms whereby title and risk pass at the load port, then the assured is cargo owner once the cargo is loaded on the carrying vessel and could be liable in the capacity as cargo owner for pollution caused by the escape if the cargi from the carrying vessel even though the cargo owner has played no role in organising the carriage.

Cargo Owners’/Traders’ legal liability

  • Cover for the assured and affiliated/associated companies as cargo owners/traders.
  • Same scope as Charterers’ Cover.
  • Includes cargo owners’ pollution.
  • Option to include vessels not chartered by the assured.

Traders’ Cover – typical scenario

A trader enters into a contract governing the purchase of a cargo on cost, insurance and freight (CIF) terms. The seller is the party responsible for arranging the transport and to this end they charter in a vessel. During the voyage the cargo causes damage to the tanks.

The owner of the vessel puts forward a claim for damage under the charter party against the seller as well as a claim in tort against the trader for damage to the vessel. The trader’s liability to the owner for damage to the vessel, as well as costs of defending the claim, would be recoverable under the Traders’ Cover.

If it turns out that the cargo was off-spec and caused damage to the tanks, the Club would potentially be subrogated toa claim against the cargo seller. The costs of such recovery action would also be covered.