Claims commentary

The number of indemnity claims reported during the 2018 policy year (1st June 2018 to 31st May 2019) was approximately 5% higher than reported in the previous year but the total is consistent with the average of the last five years.

There has been a steady increase in the speed with which indemnity claims have been resolved with only about 50% remaining open after one year.

Significant claims reported in the last year reflect the spread of activities carried out by ITIC’s membership. These include one against an offshore surveying firm, offering geophysical surveys, positioning and construction support services for the Oil & Gas industry. The commencement and completion of a project was delayed due to the negligence of the member who failed to ensure the correct equipment was on board the vessel.

Although human error will always be the main cause of claims reported to ITIC, the cover often responds to situations where the member is held liable irrespective of their own fault. A claim against a shipbroker involved an allegation that the broker fixed a time charter without authority. The broker received instructions from a third party who lacked authority from the charterers. The case was a reminder that liability for breach of warranty of authority does not depend on the broker themselves being at fault.

In another case a ship had grounded and as a result suffered damage to the hull. Class undertook a survey and confirmed in their report that the ship was seaworthy but must proceed unladen for repair. The class report was provided to owners without the technical manager highlighting the restriction concerning the unladen nature of the voyage. As a result, the owner’s booked a laden voyage which was subsequently cancelled once the class restriction was highlighted.

Cybercrime unfortunately continues to be a hot topic, with businesses and individuals at risk of becoming potential targets of digital fraud. ITIC has issued a number of circulars to warn members, however we are still seeing this type of fraud committed. Attempts to redirect freight and other payments remain a constant problem. One message recently addressed to a shipbroker said:

“Sorry, we gave the wrong bank account details for this fixture. The correct bank account is as shown below. I know this is a pain but Charterers will not have any difficulty with this as they have paid to this account on a previous fixture”.

The message was passed on to the charterers who had fixed with those owners before but via a different channel. The charterer unfortunately took it at face value and didn’t check they had paid to that account before. The fraudsters stole a substantial hire payment which the charterers had to pay again. ITIC’s advice in this situation is to always confirm changes to bank details via the telephone.