Broker error leads to $45,000 settlement in ship despatch dispute as ITIC highlights need for clearer communication between brokers and owners
The claim, discussed in their most recent Claims Review, came after a ship owner initially requested ‘free despatch’, which implies no compensation for quick operations. However, due to a critical communication error by the broker, the request was inaccurately recorded as ‘half despatch’ in the recap document.
The incident involved a shipbroker who typically represented charterers in trades where ‘half despatch’ agreements – where the ship owner compensates the charterer at half the demurrage rate for early completion of ship operations – were common.
Although the owners were quick to point out the mistake, a stand-in broker, who was substituting for the original broker, agreed that owners had asked for ‘free despatch’ terms but then also failed to update the charterers or amend the recap document accordingly.
This oversight led to a situation where, after the voyage, the charterers expected to be compensated under the terms of ‘half despatch’ while the owners adhered to the ‘free despatch’ condition. When the owners refused to pay the expected despatch, the charterers sought compensation from the broker. In reality, the owner should have paid the despatch and then they should have sought a recovery from the broker. However, as it was obvious they would be successful in such a claim it was deemed prudent just to settle the matter directly with the charterer for US$45,000 to avoid higher legal costs and potential litigation. This was reimbursed by ITIC.
Following the incident, Mark Brattman, Claims Director at ITIC, stressed the importance of accurate and clear communication in maritime contracts to prevent such costly disputes.
“This case serves as a critical reminder of the need for meticulous attention to detail during all phases of negotiation and agreement. It is critical to ensure that all parties – including temporary replacements – are fully aware of the terms the parties intend to agree, which is essential to avoid misunderstandings and expensive legal claims.
“We recommend that brokers receive regular training on contract terms specific to their trade operations and encourage the use of checklists and double-verification processes to avoid similar errors,” Brattman added.
International Transport Intermediaries Club (ITIC) is the world’s leading provider of professional indemnity insurance to transport professionals across the globe.
As a mutual insurer, it has over 90 years of experience providing cover to companies in the marine, naval architecture, aviation, offshore and hydrographic industries. With 3,490 members in over 110 countries and a worldwide network of correspondents, ITIC is the acknowledged leader in its field.
ITIC’s insurance has been developed primarily to cover claims of negligence – errors or omissions. Cover can also extend to specialist areas such as debt collection, loss of commission income, cash in transit, and directors’ and officers’ insurance. ITIC’s wide coverage also includes unique discretionary insurance that could support claims not normally paid by other professional indemnity insurers.
