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Cargo Owner’s Liability: who is held liable in case of unsuccessful fumigation of dangerous cargo

Marine
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By Iben Ramon | September 25, 2018

Imagine you transport a container of pellets. At the port of discharge, an infestation of Beetles is discovered and following unsuccessful fumigation, your cargo is dumped in to the sea.

The vessel subsequently has to undergo extensive fumigation which causes delay of a few weeks and for which the carrier claims damages from you in the capacity of cargo owner.

At first you think that the claim of the carrier cannot succeed, but then it is held by the competent court that your infested container is to be considered as “dangerous cargo” and therefore you, as a shipper, must bear all damages as a result of the fumigation1.

Liability of the Cargo Owner

Sometimes the cause of a loss during transportation appears to be due to the fault or negligence of the cargo owners2, as illustrated above. But, in their capacity liability could arise due to various other  reasons, e.g.:

  • Improper stowage / lashing of the cargo inside the container / packing material and which cause the cargo to damage not only the container / outer packing but also other cargoes/containers.
  • Improper packing material due to which say leakage of the cargo occurs (e.g. use of second hand drums to carry Ferric Oxide, etc.) resulting in pollution/contamination claims, damage to vessel, etc.
  • Detention and demurrage for failure to take delivery of the cargo promptly at the port of discharge / port of delivery.

Obligation for the Cargo Owner to Insure?

Under the relevant sale contract the Cargo Owner may be required to insure the cargo itself, but this cover mostly does not engage for liabilities. Therefore, the cargo owner may wish to consider seeking cover for any legal liability and defence costs which arise due to the properties of the cargo whilst in the ordinary course of transit and in its customary packaging, or its incorrect handling by others.

Insurance Solutions?

Most of the standard policies on the market do not foresee coverage for the above described risks/liabilities, but can be negotiated trough extensions3 or policies can be tailored to your needs with the help of your broker.


Footnote

1 Article IV, r.6 of the Hague Visby Rules state that the shipper must bear all damages and expenses that arise directly out of the shipment of undeclared dangerous cargo. The English House of Lords held in The “Giannis NK” [1998] 1 Lloyd’s Rep.337 that the term ‘dangerous’ is not restricted to goods which are liable to cause direct physical damage to the vessel or to other goods.
2 For the purpose of this article it is important to understand that the words “Cargo Owner” include buyer, seller and holder of the bill of lading, since one can be held liable even if he is no longer the cargo owner sensu strictu, for example, where the cargo has been sold on, but where the trader is nevertheless held liable in his capacity as seller.
3 E.g. Cargo Owner’s Liability extension in a Charterer’s Liability or a broadly defined Product Liability clause in your General Liability Policy.

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