Case Studies

Case Studies

Case Study – P&I Club Unwilling to Put up Security

Real Life Situation:

We arranged the Charterer’s liability insurance coverage of Charterers. The vessel was loading at Vancouver when loading was stopped on account of bad stowage, additional expense of stowing and labour standby was incurred by the shippers and stevedores who arrested the vessel to recover these expenses.

The Problem:

The Shipowners was entered with a Group P&I Club who refused to provide security in view. They argued that this was not a P&I Club matter, as there was no cargo damage and the Club would not provide security in respect of additional cost of stowage. The shipowner turned to Charterers stating that they should provide the security but the Charterers Club also refused to provide the security for the same reason.

Action Taken:

We suggested and sent message to the Shipowner stating that the vessel was arrested in rem, and it was the Shipowners’ responsibility to release his vessel from arrest. Also that all time loss arising from the Shipowners not putting up security timely would count as off-hire and a deduction from the hire would be made.

At the same time, we submitted our arguments to the P&I Club of the Charterers that should Charterer be liable, the Club is under an obligation to put up security. We argued that from the Charterer’s point of view, this matter is in the nature of cargo liability since the shipper’s action against the vessel arises under the contract for carriage to properly load, stow and handle the cargo. We examined the rules of the P&I Club, and submitted that the additional cost of re-stowing falls under section 4 of the rules, which provides that additional cost of re-stowing falls under Section 4 of the rules, which provides coverage for liability and cost in relation to cargo carried in the entered ship. In addition, Paragraph A of the rules states that there is cover for “liability for loss”, “damage” or “other responsibility” arising out of the breach by members in his obligation to stow the goods. Hence, we argued that although it was not usual, it was not a pre-condition the cargo must be physically damaged for there to be a cargo liability claim. In addition, we also checked the legal interpretation of the words “cargo liability” and found that these words include expenses, and are not limited to pure physical loss or damage to the cargo.

We had stated to the Club that if the members were to provide security, the Club should assist. We believed the P&I Club were in agreement with our legal analysis of the interpretation of the P&I rules, as they had not counter our arguments. Accordingly we had managed to protect