The International Transport Intermediaries Club (ITIC), a maritime insurer, has warned ship management to be careful of the dangers and expenses associated with allegations of breach of contract.
The warning was issued as part of ITIC’s October 2023 Claims Review, which referenced an instance of a ship manager overseeing two vessels for the same owner who allegedly failed to achieve the minimum standards expected under signed BIMCO Shipman contracts.
The owners of the first vessel claimed that the management mismanaged their ships by failing to recognise faults, plan and monitor maintenance and repairs, implement the onboard ISM and PMC systems, and communicate effectively with the crew.
The owners also claimed that the management failed to present them with enough information on ‘extraordinary’ expenditure to allow them to make an educated decision about whether to pay the expense.
For the second vessel, the owners made various allegations, including failure to plan a crew change and dismiss the crew for misconduct, which allegedly meant the crew were not suitably qualified, and failure to maintain the ship adequately.
Owners brought their claims under several headings of damages, such as repair expenses, loss of hiring, bunker costs, and port and agency charges.
The total amount claimed was allegedly $9.5 million. For each ship, BIMCO Shipman contracts restrict liability to $1.5 million.
The ship’s managers admitted to some mismanagement on their side. As a result, there was a considerable possibility of lawsuit.
Following numerous rounds of negotiations, both ships were finally resolved for $700,000 ($1.4 million total), with ITIC paying the claim minus the deductibles.
Mark Brattman, Claims Director at ITIC, said: “It is of utmost importance that ship managers ensure they adhere to contractual obligations at all times and that maintenance works are kept up to date.
“Professional Indemnity (PI) insurance is part of our member’s risk management strategy, and it gives the ship manager peace of mind and protects them against claims such as this one.
“The benefit of having cover from a company such as ITIC is that you have an insurer who understands the business and risks ship managers face and speaks the ship manager’s language.”