Charterer’s Liability Insurance (ang. Charterer’s Liability) is a specialized insurance product dedicated to chartering ships. Despite becoming increasingly popular, many ship operators still claim that they do not need it. But is this really the case, what drives operators’ risk assessment when chartering a ship?

What does this insurance cover?

Charterer’s Liability primarily protects against regressive claims made by the insurers of Hull and Machinery (marine casco), P&I (Owner’s Liability) of the chartered ship, as well as cargo (marine cargo).

Defense against claims is usually extremely costly and time-consuming, even if it concerns real and obvious lack of responsibility for the damage. Charterer’s Liability protection, along with possible extensions, effectively helps to defend against such problems.

The scope of Charterer’s Liability insurance typically includes the following areas of risks and liabilities:

• Liability for damage to the vessel;
• Personal injuries;
• Liability for property damage;
• Liability for cargo;
• Collision liability;
• Liability for costs and expenses related to marking, securing, removing the wreck, etc.;
• Costs related to quarantine;
• Liability related to towing the insured unit or towing performed by the insured unit;
• Liability related to the risk of marine water pollution;
• Liability related to General Average;
• Liability related to the costs incurred in order to prevent or mitigate damages (Sue & Labour Costs);
• Liability associated with imposed penalties and fines;
• Liability for so-called stowaways, hence passengers ‘on the run’;
• Liability arising from the use of fuel with improper parameters;

Of course, all the above scopes are subject to strictly defined exclusions. Their content also varies depending on the detailed offer and the insurer’s terms.

Furthermore, the above-mentioned Charterer’s Liability protection can also be complemented by insurance for costs and legal defense, known as Defence Cover or FD&D (ang. Freight Demurrage and Defence). This is protection that helps the charterer defend against potential disputes through the support of specialists as well as covering their costs. Potential disputes can include, among others, charter party provisions. They may also relate to charter fees, but also many other operations associated with the current exploitation of floating units. Another addition to the protection can be extending the liability to war and strike risks.

Why is it worth buying Charterer’s Liability Insurance?

• Claims under the aforementioned insurance occur relatively rarely, while their financial and business consequences can be very serious.
• Charterer’s Liability insurance can to some extent be compared to the liability of renting a car at the airport. According to rental conditions, we are obligated to return the car in the same condition we rented it. Moreover, we bear responsibility for any claims/damages caused to third parties during its use. This example simply illustrates the sense and justification for having this insurance.
• The market specializing in the above insurance is highly competitive, and one can obtain very attractive offers from it, both in terms of the scope of insurance protection and the amount of the premium.