Charterer's liability insurance
Insurance that covers a ship's charterer against its liability to the shipowner, for damage caused to the ship, and to third parties, for pollution, cargo or injury, arising from the charter.
The charterer does not own the ship, but directs its employment: it chooses the ports, cargoes and sometimes the fuel. The charter party makes it liable to the shipowner when it sends the ship to an unsafe port, has dangerous cargo loaded or supplies off-spec fuel, and it may also be sued by third parties, cargo owners or pollution victims. Charterer's liability insurance covers these risks, the main one often being damage to the ship, which the owner's hull policy does not cover when the owner claims repair costs from the charterer. It is offered by P&I clubs and specialist insurers, with limits far below the shipowner's. For the underwriter, the exposure depends on the type of charter, voyage or time, the areas traded and the nature of cargoes, and a single call at a poorly equipped port can produce a heavy loss.
A time charterer that sends a bulk carrier in 2024 to a port whose channel has silted up is liable to the owner for the resulting grounding, under the charter party's safe port warranty; its liability insurer pays the repair and downtime costs claimed.
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