Ship managers - limit your liability NOW!

The standard ship management agreement, BIMCO Shipman, has been around for over 20 years. The current version is BIMCO Shipman 98 and it is expected that another version will be published very shortly. The common thread through all these agreements is the ability of the ship manager to limit his liability for acts arising solely from his negligence or gross negligence to ten times the annual management fee. The value of ships has increased significantly since 1988 when the first contract was drafted, but the level of ship management fees has not. Therefore the need for a ship manager to limit his liability to a sum commensurate with the fee that he is earning is even more important in 2009 than ever before.

ITIC never recommends that a ship manager signs an agreement that does not limit his liability to a multiple of the fee he earns. Of course it might not always be possible to limit liability to ten times the management fee (even though the overwhelming majority of contracts do), however a great deal of effort should be made to limit your liability to a reasonable sum. If a ship manager has no limit of liability in his contract he will face more claims from opportunistic owners wanting him to contribute to every operational loss. Also, you may suffer a sharp increase in your professional indemnity premium as the underwriter will look at your ability to limit your liability under contract when assessing the premium.

Furthermore, all ship managers should exclude all liability for the negligent acts of the crew. A manager is usually acting as an agent for and on behalf of the owner and is arranging the employment of the crew. It is for the owners to insure the negligent acts of the crew - not the ship manager.