Ship Management International column - Can you deliver on your crew?

To see the article as it appears in Ship Management International, please click here (issue 83, page 14)

ITIC insures ship and crew managers on terms no more onerous than either BIMCO Shipman or BIMCO Crewman. Under these agreements, the manager is not liable for the acts or omission of crew, unless negligent in their obligation as a manager. Although this exempts the manager from liability for any actions of the crew even if their action was negligent, this will not protect you if the loss has been caused as a result of the incompetence of crew the manager negligently selected or trained. 

A vital part of the selection process is checking the certification and documentation of crew. In the case of a tanker which had changed to electronic charts, it was a Flag State requirement that the second office had an ECDIS Certificate. Unfortunately, the manager overlooked this requirement and the second officer assigned by the manager did not have this certificate. A subsequent routine vetting inspection by one of the oil majors revealed the mistake and the oil major informed the owner that the ship had been put on technical hold. The charterer took advantage of the technical hold and negotiated a reduced charter rate. The owners claimed the difference in earnings from the manager of US$ 750,000, which was settled by ITIC.

If the crew are not certified to perform their designated function, the owner is in breach of the terms of their insurances. When a chief engineer was taken off a ship in the Arabian Gulf suffering from appendicitis, the manager had to replace him before the ship could sail. A chief engineer with impeccable references and qualifications was immediately flown to the ship by the manager. Two weeks later it was discovered that his references and certificates were fakes, causing significant losses to the owner.

More and more owners have entrusted the sourcing and employment of seafarers to ship and crew managers.  It is not difficult to see why, as it is generally only ship and crew managers who are investing in training or providing continuity of employment. However, as certain fleets expand, such as gas ships, ITIC is seeing problems caused by  ship managers offering to provide more than they can deliver.

A crew manager was accused of recruiting crew with inadequate gas ship experience. The manager had faced real difficulty in sourcing crew as the flag state limited the selection to being nationals of their state. The manager, being an optimist, decided to “muddle through” with what was available, but the inexperienced crew damaged the ship. The claim against the manager was US$ 500,000, which ITIC negotiated and settled at US$ 300,000.

This claim is an example of where a crewmember has all the proper certification but little practical idea of the job. Lawyers working for ship owners have observed that, in an increasing number of cases, cargo claimants have attempted to look behind the certification of the crew. The claimants' tactic is to see whether they can expose the crew as incompetent and therefore the ship as unseaworthy. The claimants' lawyers will investigate not only the interview process, but how the individual had been placed on board and any subsequent performance reviews. A typical allegation would be that if the owner or manager had arranged for a proper induction, they would have realised that the individual was incompetent. Ship manager members of ITIC have faced detailed enquiries into their recruitment and employment systems. Appropriate records of recruitment, training and reviews must therefore be maintained for at least seven years.

A technical and crew manager who had managed a tanker for three years, was sued by an owner for US$ 1.5 million. Multiple claims were made, mostly without any merit, relating to repair costs and loss of earnings. The owner's main grievance appeared to be the alleged negligence of the crew supplied by the manager. At an early stage in the arbitration proceedings the arbitrator ruled that the owner's lawyers were entitled to a full inspection of all the manager's files, which were found to include an internal memo (the "smoking gun") from the manager's superintendent criticising the performance of certain crew members and recommending their replacement. The claim was settled at the threshold of arbitration for US$ 300,000, mostly because of this memo. 

ITIC warns that managers must keep proper records, carefully select the crew for the job, and importantly not over promise what they can deliver on manning vessels.