Shipbroker pays the price for failure to put it in writing

International Transport Intermediaries Club (ITIC) has emphasised the potentially costly consequences of a failure on the part of shipping intermediaries to confirm in writing any initiatives performed on behalf of their principals.

In the latest issue of its Claims Review, ITIC says it has seen an increasing number of claims on its shipbroking members relating to the receipt and forwarding of messages. Emphasising the importance of accurate record-keeping and the need to reconfirm telephone conversations in writing, it reports how the failure of a shipbroker to provide written confirmation of the appointment of an arbitrator in a dispute between its principal, a charterer, and a shipowner, exposed the broker to a claim and costs in excess of $200,000 at a court-ordered mediation in the United States.

The shipbroker found itself in the middle of a dispute between the owners and charterers involving a demurrage claim in excess of $400,000. The charterers failed to settle and the owners initiated arbitration in London. As the charterers failed to nominate their arbitrator, the owners nominated a sole arbitrator. Despite orders from the sole arbitrator to serve defence submissions, no communication was received from the charterers. The arbitrator subsequently awarded owners the full amount of the demurrage claim plus interest and costs - a total of $575,000.

The owners tried to collect the award against the charterers through the US courts. The charterer’s defence was that they had never been advised of the arbitration proceedings and therefore had not had an opportunity to appoint an arbitrator. The charterers also alleged that the shipbroker had failed to inform them about the arbitration, and brought the broker into the US action.

The broker confirmed that it had advised the charterer by telephone about the appointment of an arbitrator, and again when arbitration proceedings had started. But it had failed to confirm this by email and the charterer, well aware of the lack of written confirmation, simply denied that such telephone conversations had taken place.

ITIC notes that, if the court had found the broker to be an ‘agent’ of the charterer, it could have been argued that the service of notices regarding arbitration proceedings on the broker could be deemed to be service on the charterers, with the result that the arbitration award was enforceable against the charterers, who in turn may have pursued the broker for the full value of the award.

The case was concluded at a court-ordered mediation by means of a payment to the owners of $450,000. The broker contributed $75,000 to the settlement, and the legal costs of defending the broker were in excess of $140,000 – a total of $215,000.

“This was a high price to pay,” says ITIC, “for a simple failure to follow up a telephone conversation with an emailed confirmation.”

Copies of the ITIC Claims Review can be requested from: chris@merlinco.com

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com.

For more information:                             

Charlotte Kirk                                              

ITIC                                                                

Tel. +44 (0)20 7338 0150                          

Fax. +44 (0)20 7338 0151                         

charlotte.kirk@thomasmiller.com      

ITIC continues to reward loyalty with renewal credit payments to members

FOR the seventeenth year in succession, International Transport Intermediaries Club (ITIC) has paid a renewal credit to its members. For the year ended 31 May, 2012, members received a total of $5.2m. In the past seventeen years, ITIC has returned more than $67.3m to members in credits.

ITIC Chairman Peter French says, “One of the unique strengths of a mutual is the absence of shareholders, allowing its members to benefit from any financial surplus.  Solvency II, the new regulatory regime with which all insurers within the EU will have to comply by 1 January, 2014, will have an impact on the future capital requirements of the business.  This will necessitate our maintaining strong reserves not only to ensure compliance, but also to sustain continuity credits at renewals in the future.” 

From 1 June 2012, ITIC has reduced the level of the continuity credit for renewing members to either 2.5 per cent or 5.0 per cent of their expiring premium. This reflects both the tougher investment environment and the challenging claims market, whilst also preserving the strength of its reserves. ITIC’s combined reserves, at $78.4m, continue to remain comfortably higher than current and anticipated future regulatory requirements. 

Professional indemnity insurers tend to see a sharp increase in both the number and the value of claims during an economic downturn and ITIC is experiencing claims inflation of ten per cent each year. French says, “It is often easier for a client to sue or counter-sue its service provider than to settle an invoice or a claim. Claims increased significantly in 2009, levelled off a little in 2010 and initially showed an increase again in 2011. However, there are now signs that this higher claims activity may be starting to reduce.”

 

At renewal, ITIC introduced special deductibles for those types of claims that occur most frequently, such as demurrage claims for ship brokers, refrigerated cargo claims for ship agents and legal costs in US litigation for ship managers.  In this way, the club has increased its premium income while continuing to retain approximately 95 per cent of its members at renewal each year.  

ITIC emphasises that this is an excellent result in the prevailing economic climate.

l ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com

For more information:                             

Charlotte Kirk                                              

ITIC                                                                

Tel: +44 (0)20 7204 2928                          

Fax: +44 (0)20 7338 0151                         

charlotte.kirk@thomasmiller.com