The International Transport Intermediaries Club (ITIC) – a mutual insurer that provides professional indemnity cover for transport intermediaries operating in the marine, offshore, renewable and aviation industries – has urged shipowners, charterers and brokers to be vigilant in reviewing bills of lading (BoL) for potential errors or oversights.
In the latest edition of the Claims Review, which is a collection of recently closed claims, ITIC highlights a case where errors on updated bills of lading resulted in an oil cargo being collected by the wrong consignee and a three-way split for the cost of damages.
In the example case, a ship was headed to a discharge port carrying petroleum product cargo. The charter party contained a clause which allowed the charterers to change the port of discharge and, subsequently, request new bills of lading in exchange for a Letter of Indemnity (LOI). The charterers invoked this clause.
The owner prepared new bills of lading and sent these to the shipbroker to pass on to the charterer. However, the shipbroker neglected to pass the new bills of lading to the charterers. In the meantime, charterers authorised the Master to sign the new bills of lading, assuming that everything else, except the new port of discharge which they had requested, had stayed the same. However, the consignee’s name was erroneously changed for unknown reasons on the new bills.
The new consignee collected the cargo before the error had been spotted. The actual consignee and the bank who had provided the letter of credit took action, which delayed the ship. These delays caused an initial loss to the charterer in the region of US$ 400,000.
The charterers claimed against the shipbroker for not passing the amended bills to them for review; as they say, they lost the chance to spot the error. ITIC reminded charterers of their duty to mitigate their losses and pointed out that they had authorised the Master to sign the new bills of lading without seeing them.
After the charterers mitigated the claim, the damages amounted to US$ 75,000, which were then split three ways between charterers (as they had authorised the signing without seeing the bill of lading), owners (as they made the error with the consignee’s name) and shipbrokers (for failing to pass the document to the charterers for review). ITIC paid US$ 25,000 in respect of the shipbroker’s share.
“As a provider of professional indemnity insurance to transport intermediaries operating in the marine, offshore, renewable and aviation industries, ITIC regards the sharing of case studies and learnings as an important part of helping industry and individuals to better understand and mitigate risk,” said ITIC’s Claims Director, Mark Brattman. “This case study highlights how seemingly simple errors can have significant implications and serves as a reminder of the need for vigilance by all parties in completing important documentation such as bills of lading.”