Liquid Bulk Carrier Claims: Actions & Documents When Facing Common Claims

Aerial view of two liquid bulk carrier ships docked at a port, with pipelines and loading equipment visible, illuminated in the evening light.

Liquid bulk carrier claims can arise from various parties involved in the transportation of liquid bulk cargoes.

When cargo is insured and a claim is made by the cargo owner, insurers must determine the validity of the claim and the extent of coverage.

Cargo owners typically file claims against bulk carriers if the cargo arrives damaged, contaminated, or there are losses during transportation. These claims often stem from breaches of contracts or agreements, such as:

  • Sales contracts, including specifications evidencing terms of sale.
  • Storage terminal contracts.
  • Agreements on trade allowances, cargo, and cleaning specifications.

These breaches can result in damage, loss, or contamination of the cargo. Transportation agreements often include the storage, loading, and unloading processes.

After compensating for the loss, cargo insurers should pursue recovery after subrogation, identifying the responsible party, whether it be the carrier or third parties such as terminal operators or freight agents.

Advancements in technology are revolutionizing the transportation and handling of liquid bulk cargoes, thereby enhancing the management of claims, assessing responsibilities, and evaluating and mitigating risks.

The most common claims in the liquid bulk carrier industry generally involve various types of cargo damage and operational issues. Here are some of the most frequent claims:

Contamination Claims

One of the most prevalent issues in liquid bulk transportation is contamination. Contamination can render the cargo unusable or significantly reduce its value.

Common causes of contamination:

  • Residual cargo from previous shipments not properly cleaned.
  • Incompatible cargoes mixed in the same tank.
  • Contaminated loading or discharge equipment.
  • Inadequate ventilation or temperature control leading to spoilage.
 Key actions in contamination losses/claims prevention:
  • Cleanliness: Essential to prevent residues from previous cargo and contamination of subsequent cargo being loaded/discharged. Different cargoes may require different cleaning methods to ensure tanks and equipment are thoroughly cleaned.
  • Sampling: Multiple sampling is crucial to determine who is liable for the contamination. Regular sampling at various stages, such as during loading and discharging, helps in identifying the point of contamination and the responsible party.
In cases of contamination claims, the recovery process centers on identifying and holding the responsible party accountable, whether it be the bulk carrier, terminal operators, or other third parties. This involves an investigation to determine the cause of contamination collecting all relevant evidence and, examining all relevant contracts to identify breaches and determine the responsibilities of each party.
 
 
technician in a safety helmet and high-visibility jacket samples liquid from a bulk carrier ship's pipeline system.
A marine surveyor samples liquid from a bulk carrier ship, ensuring accurate measurements and contamination checks. Image Source: Tank Eye.

Shortage Claims

Shortage claims occur when there is a discrepancy between the quantity of cargo loaded and the quantity discharged.

Common causes of shortages:

  • Inaccurate measurements due to equipment failure or human error.
  • Leakage during transportation due to faulty seals or equipment.
  • Theft during loading, transit, or discharge.

Shortage claims are common for various types of liquid bulk cargoes, including oil, chemicals, and foodstuffs.

In cases of shortage claims, the recovery process centers on accurate volume calculation to determine the exact quantity of cargo loaded and discharged. This involves precise measurements and calculations based on the dimensions of the tanks and the cargo’s properties. The most common methods to determine the amount of liquid cargo on tanker ships are the ullage method, sounding method, and draft survey.

Marine surveyors in safety gear conducting volume calculations on a tanker ship using specialized equipment.
Marine surveyors conducting volume calculations on a tanker ship to ensure accurate measurements and prevent shortages. Proper volume calculation methods like ullage, sounding, and draft surveys are crucial in the liquid bulk cargo industry.

Other Less Common Claims

Spillage and Leakage

Claims from spills or leaks can occur during loading, transportation, or discharge. These incidents not only result in cargo loss but can also lead to environmental damage and hefty fines.

Temperature Damage

Many liquid bulk cargos, such as chemicals or foodstuffs, require specific temperature conditions. Failure to maintain these conditions can lead to cargo degradation or spoilage.

Mechanical Damage

Damage to the cargo can occur due to mechanical failure of pumps, pipes, or tanks. This can result in contamination, spills, or cargo loss.

Pollution

Claims related to environmental pollution can arise from spills or leaks during transit. These claims are particularly serious as they can involve significant cleanup costs and legal penalties.

Improper Handling

Incorrect handling during loading or unloading can cause damage to the cargo or contamination. This includes the use of unsuitable equipment or procedures.

Delayed Delivery

Delays can lead to claims, especially for perishable goods or products with specific delivery timelines. Delays can occur due to port congestion, mechanical failures, or weather conditions.

Quality Deterioration

Changes in cargo quality can occur due to prolonged storage, exposure to unsuitable conditions, or chemical reactions. This can lead to claims for diminished cargo value.

Compliance Issues

Non-compliance with international regulations, safety standards, or contractual obligations can lead to claims. This includes issues related to documentation, certification, and adherence to safety protocols.

Essential Documents to Face Potential or Actual Claims

To manage potential or actual claims, it is crucial to maintain documentation. Key documents include:

  1. Original Bill of Lading (with both front and reverse sides)
  2. Copy of Charter Party
  3. Relevant Contracts/Agreements:
    Sales contract including specification evidencing terms of sale.
    Storage terminals contracts.
    Agreements on trade allowances, cargo, and cleaning specifications.
  4. Commercial Invoice
  5. Survey Reports (at loading and discharging ports) covering:
    • Cleanliness (Ship and Shore tanks and pipelines).
    • OBQ | ROB or empty certificate.
    • Shore tank measurements.
    • Ship measurements.
    • Sampling and results (certifying that cargo is not off-spec at any point).
    • Last cargoes loaded (in both shore and ship tanks).
      Vessels experience factor (V.E.F.).
  6. Letter of Protest if any discrepancies
  7. Notice of Loss / Claim Notification to any interested parties (Shipowners, Charterer, Cargo insurers, etc.)
  8. Loss Adjustment & Mitigation Assessment

Key Actions for Insurance Companies

Insurance companies must seek legal and technical consultants to manage and mitigate liquid bulk carrier claims. Here are some top tips and key actions to consider:

Immediate Notification

  • Start the notification process as soon as you become aware of any loss or damage.
  • Alert all relevant parties, including insurance companies, carriers, and any other involved parties.

Send a Surveyor

  • Evaluate the cause and extent of the loss or damage.
  • Ensure that an independent and qualified surveyor is engaged to provide an unbiased report.

Gather Relevant Documents

  • Collect all pertinent documents listed above to support the claim.
  • Ensure that all records are accurate and complete.

Protest Letter

  • Issue a letter of protest if there are any discrepancies or issues identified during the survey or inspection.

Submit Claim

  • Submit the claim to the relevant parties promptly.
  • Ensure that all required documentation and evidence are included to support the claim.

Loss Mitigation and Salvage

  • Take immediate steps to secure and protect the remaining cargo.
  • Engage in salvage operations if necessary to minimize the loss.

Seek Legal Advice

Maintain Detailed Records

  • Keep detailed records of ullages of the tanks, temperatures, and pressures of inert gas to support any claim arising from contamination or loss of cargo.

Implement Technological Solutions

  • Leverage advancements in technology to improve the management and documentation of cargo transportation.
  • Use digital tools and software for real-time monitoring, reporting, and analysis of cargo conditions and movements.

Engage in Dispute Resolution

  • Engage in dispute resolution processes, such as mediation or arbitration, to resolve claims efficiently and cost-effectively.
  • Avoid protracted litigation by seeking amicable solutions where possible.

Conclusion

Effective management of liquid bulk carrier claims requires a thorough understanding of the potential issues, meticulous documentation, and timely action.

At Marlin Blue, we help our clients to mitigate risks with custom strategies and to act swiftly to minimize claims impact.

Partner with us for efficient risk and claims management and benefit from our industry-specific expertise.

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