Recent court ruling found cargo insurer not liable for general average contributions

Recent court ruling found cargo insurer not liable for general average contributions
Recent court ruling found cargo insurer not liable for general average contributions

A recent UK court decision has concluded that a cargo insurer was not liable for general average contributions as the owner had failed to exercise due diligence, which led to the breakdown of a vessel’s main engine.

The crude oil tanker, “Cape Bonny”, was sailing between Argentina and China when the number 1 main bearing failed catastrophically. The breakdown happened when the vessel was trying to avoid a tropical storm and towage assistance was needed. The shipowner declared general average and contributions were sought from the parties to the common maritime adventure, which naturally included cargo interests. The cargo’s contribution was assessed at about US$ 2.5 million.

General average is governed by the York-Antwerp Rules and is included into charterparties and bills of lading. However, parties to the maritime adventure are not liable to contribute if they can successfully prove a breach of contract.

A breach of contract is possible if the vessel was not fit to sail before and at the beginning of the voyage and the Owner had failed to exercise due diligence to make her seaworthy. The cargo interests must prove unseaworthiness and the Owner must prove due diligence.

The engine manufacturer’s representative did not determine the cause of the bearing failure. Thus, the Owner and cargo interests had to identify what the cause was and provide proof that they were more probably correct.

The shipowner claimed that the damage to the bearing was caused by welding slag within the lubricating oil pipework that had been dislodged during the bad weather during the voyage. The court rejected that, as it was not supported by metallurgical analysis. Furthermore, it was judged that any slag from the building process would have detached long before 2011 at the time of the incident, some six years after newbuild.

The court agreed with the cargo interests’ allegation that the presence of metal particles in the lubricating oil was most probably from spark erosion or chain drive gear damage, which had not been removed because the automatic blowdown filters were defective.

The court ruled the ship was unseaworthy before and at the beginning of the voyage.

Arguments over due diligence regarded the proper response to notable increases in crankshaft deflections in the way of number 1 unit taken one month before the incident. This could indicate a bearing wear but it did not cause the crew to investigate further. The Owner could not show that anyone had considered the importance of the increases, but argued that it was reasonable not to investigate further as the deflection was still within allowable limits. The cargo interests argued that it was the increase that was important, not that the deflection was still within allowable limits and that if the increase had been investigated, the bearing wear could have been found and and it could be repaired.

The court said that:
“A prudent engineer or superintendent would have decided, in the light of the May 2011 deflection readings, that bearing clearance measurements should be taken. The failure to do so was a failure to exercise due diligence to make the vessel seaworthy.”

This court ruling reminds shipowners and operators of the importance of due diligence to make a vessel seaworthy and the importance of providing evidence of exercising it.

It also clearly demonstrates to shipboard engineers and shore-based superintendents that their actions and lack of actions can have important economic consequences.

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