| The definition of a charter party arrangement is: | | | | certain jurisdictions)o Personal injury, property |
| "a mercantile lease of a vessel; a specific contract by | | | | damage to third parties caused by the charterer's |
| which the owners of a vessel let the entire vessel, or | | | | negligenceo Fines (depending on the jurisdiction and |
| some principal part of the vessel, to another person, | | | | or contractual obligations) |
| to be used by the latter in transportation for his own | | | | The charterer also has a long list of obligations and |
| account, either under their charge or his." | | | | exposures to the Vessel Owner. These involve |
| Charter arrangements usually fall into one of three | | | | damage to the hull arising out of / caused by:o |
| categories, each being distinguished by the degree of | | | | Liability for nominating an unsafe berth / unsafe porto |
| operational control over the vessel which the | | | | Hull and Machinery damage caused by Stevedoreso |
| charterer exercises. The three categories are: | | | | Damage caused by carriage of hazardous / |
| | | | dangerous goodso Damage caused by poor / |
| 1. Voyage charter - the charterer is "leasing" space | | | | improper stowage of goodso Damage to ships' |
| on the vessel (a cargo hold or tank) for one voyage | | | | engines caused by poor quality bunkerso Liability to |
| only. The charterer is essentially "along for the ride" | | | | Owners arising out of General Average / Salvage |
| since he exercises very little operational control over | | | | events. |
| the vessel. | | | | It is often said that when things go wrong on board |
| 2. Time Charter - the charterer leases the vessel for | | | | a ship, they go very badly wrong. The charterer can |
| a period of time (usually a year or more). The | | | | face enormous liabilities and risk of financial loss even |
| charterer shares operational control of the vessel | | | | when he is only tangentially involved in the event |
| with the Vessel Owner, and the ship's Master | | | | which gave rise to the claim. What can a charterer |
| answers to both parties. The sharing of control | | | | do to manage these risks? |
| normally divides between the vessel's cargo | | | | Charterers Liability insurance can be the solution. This |
| operations (mostly under control of the charterer) | | | | affords protection to the charterer in much the same |
| versus vessel operations (under the control of the | | | | way Protection and Indemnity insurance shields the |
| Vessel Owner). | | | | Vessel Owner from potentially catastrophic loss. |
| 3. Bareboat (Demise) Charter - the charterer | | | | The key to arranging proper charterer's liability |
| essentially stands in the shoes of the Owner and | | | | insurance is the insurance broker. A qualified marine |
| leases the vessel for a significant period of time. The | | | | insurance broker understands the assured's business |
| charterer has full operational control over the vessel | | | | thoroughly. Further, the broker understands the |
| and bears all the expenses to operate and maintain | | | | marine transportation and cargo risks, as well as the |
| the ship. This arrangement allows a charterer to "look | | | | domestic and/or international legal environment. The |
| like" a Vessel Owner but not carry the expense of | | | | broker must also be an expert in the language of |
| this costly asset on his balance sheet. | | | | charter party contracts which is replete with unique |
| A charterer faces many of the same exposures to | | | | jargon and terminology. Finally, the broker must have |
| liability as the Vessel Owner does, as well as specific | | | | the knowledge of and access to the appropriate |
| obligations to the Owner. Examples of the exposures | | | | insurance markets in order to secure the most |
| the charterer faces vis-à-vis liability to third | | | | comprehensive coverage, with sufficient limits of |
| parties include:o Liability to cargoo Pollution liability (in | | | | liability, at the most cost effective premium. |