Course Work Assessment for Module 5

Khalid Momodu
Post Graduate Diploma in Marine Insurance
LP0074
John Liljedahl LLM
27th June 2012

QUESTION A
In handling this particular claim as an insurer, one will first want to understand under
what terms of carriage the injured passenger had purchased his ticket. This helps in
determining the extent of liability the insurer is exposed to. However, the UK P&I
club rules provide that coverage by the insurer is subject to the terms of this contract
of carriage being pre-agreed by the club. As an insurer, it is also pertinent to
consider the potential jurisdiction in which the claim is to be made against the
owners of the Stargazer. This is important because one has to consider how
international and local legislation interacts in determining how liability is to be
assumed.
Insurers will be concerned about the jurisdiction in which the claim is brought
against the carrier because of the operation of the national laws and international
conventions. Thus, Article 17 of the Athens convention of 1974 has identified
different jurisdictions a claimant can choose from in bringing a claim against the
carrier namely;

The principal place of the carriers business

The contractual place of departure
The claimants place of residence
The place where the contract of carriage was made

According to article 3, any liability for injury or death has be to as a result of fault or
negligence on the part of either the carrier, his agent or employee and the burden of
proof lies on the claimant in establishing such fault. This ability of the carrier to limit
liability ensures that their claim outlay on any incident is substantially reduced. It is
also possible for the insurers and the carrier to establish the contributory negligence
of the passenger in further reducing their liability. At any rate, carriers subject to the
Athens convention can limit their liability to a sum that does not exceed SDR
46,6661
Where the domicile in which the action is brought against the carrier is not a
signatory to the convention, the national law will apply and depending on the law
there may be stricter or more flexible regime for passenger liability claims.
Obviously, insurers will be more concerned about this particular situation as this
situation can potentially increase their liability to the carrier.

1 SDR refers to Special Drawing Rights. SDRs represent a claim to currency held by
IMF member countries for which they may be exchanged.

As far as the liability of Stargazer in the incident is concerned, as the ferry was not
involved in any incident, article 3 of the Athens Convention provides that the
passenger will have to prove that his injury was caused by the negligence of the
carrier or his agents or employees. However, if the reason for the passengers fall
was as a result of a defective condition of the vessel, liability will attach.

QUESTION B
Date: 20th June, 2012
To: UK Port Authority
Subject: Letter of Undertaking
Incident: Damage to Crane during mooring operation on the 18th of June 2012
Dear Sir,
In consideration of your refraining from arresting, or otherwise detaining the
Stargazer for the purpose of obtaining security in respect of your claim arising out
of the damage and subsequent loss to your crane, and in consideration of your
refraining from commencing and/or prosecuting legal or arbitration proceedings
otherwise than before the court referred to below, the UK P&I club hereby
irrevocably undertake to pay you on demand such sum or sums as may be due to
you from the owners of the Stargazer in respect of your said claims either by
agreement between the parties or by final judgment of a court of competent
jurisdiction provided always that our liability hereunder shall not exceed the sum of
16 Million pounds, plus interest and costs.
The owners of the Stargazer hereby agree to submit to the exclusive jurisdiction
of the High Court of England and Wales in respect of the claims of the UK Port
Authority arising out of the Incident, with English Law to apply.
Within 14 days of a written request from UK Port Authority to do so, the Owners of
the Stargazer hereby undertake that they will irrevocably nominate Messrs Ince
and Company to accept service of proceedings on their behalf in respect of the
claims of the UK Port Authority.
This undertaking shall be governed in accordance with the laws of England & Wales
Yours Faithfully
For UK P & Club

On the question of liability to pay for the loss caused by towing the Stargazer, it
must be stated that the towage contract amounts to a standard type of towage
contract as all vessels coming into the U.K port are assisted to berth by towing.
Thus the P&I club will provide indemnity if it is determined that the club has preagreed the terms of the towage contract. Most clubs will approve standard forms of
towage contract like the UK Standard Conditions for Towage and other services.
Also, because the towage of the Stargazer is of a customary type and nature, the
P&I club will provide coverage for the loss. The loss provided for will customarily
involve not just cost for the damaged property but also contingent costs and
expenses.
More importantly, it must also be mentioned that even though the real cause of the
damage was later discovered to be caused by the tug operator, majority of towage
contracts used place such incidents as the sole responsibility of the towed vessel.

QUESTION C
Legal liability for Oil pollution is governed by a number of national and international
conventions which emphasise a strict legal liability for loss and damages resulting
from a pollution incident. The legal basis in this case is based on one of strict
liability.
The incident has both implications for damage to the environment and territorial
waters in addition to third party property damage i.e. Yachts owners within the
vicinity of the harbour. As regards to damage to the environment, international
conventions specifically provide the liability regime under which situations like this
should be dealt with.
In the United Kingdom where this incident has occurred, Shipowners are bound by
the legal regime derived from common law and two international pollution
conventions. These conventions are namely;
1. International Convention on Civil Liability for Oil Pollution Damage of 29
November 1969 (CLC 1969)
2. International Maritime Organisation Protocol to amend the International
Convention on Civil Liability for Oil Pollution Damage of 29 November 1969
(CLC 1992)

It must also be mentioned that the National legislation which will normally deal with
an incident like this is the Merchant Shipping Act 1995 and it contains specific
provisions2 found in the CLC 92.
The strict nature of liability under the CLC conventions is such that where the
shipowner is found guilty of fault in a pollution incident there will be no cap on its
liability. Conversely, where the shipowner was not at fault, liability is capped
depending on the Gross Tonnage of the vessel.
With respect to damage to other third party property within the harbour, the common
law position as regards strict liability3 is the basis for liability. Thus, the owners of the
Stargazer will be liable to other property owners for any damage caused
irrespective of fault.

QUESTION D
The cargo insurers have insured the consignment on Institute Cargo Clauses A
door-to-door basis, and this coverage entails that cargo insurers will be responsible
for all risks of loss or physical damage. This is especially so as such disappearance
of goods is not excluded under the policy. Also, it must be noted where the goods
are covered on the door to door basis, it is specifically the intention of the policy to
cover transit risks which from the circumstances of loss could possibly be the only
way the goods disappeared.
Consequently, the carriers can be held liable for the loss to the consignment as long
as there had been a pre-agreement between the carrier and the insured that the
contract of carriage to apply is based on the CMR convention4. The reason for this is
because the CMR convention places a much higher liability on carriers than any of
the other Contracts of carriage. In this particular case, where the nature of the
carriage involves land and sea transit, the CMR convention will apply especially
because it cannot be easily established that the loss emanated from an event that
had occurred on the vessel.
Thus, as provided by the CMR convention, the limit of liability of the carriers will be
SDR 8.33 per kilo and this is what Insurers will be able to recover from the carriers.
Taking the loss into perspective, the carriers maximum liability is calculated by
multiplying SDR 8.33 by 200 kilos (i.e. volume of goods lost) and this amounts to
16,660 kilos.
2 This appears in Chapter III, section 152-171 of the Merchant Shipping Act 1995
3 Rylands V Fletcher (1865)
4 The CMR convention is known as the International Convention relating to the
Carriage of Goods by road

Bibliography
Hazelwood, S.J., Semark D., P&I Clubs: Law and Practice (London: Lloyds List,
2010)
Rose, F.D., Marine Insurance: Law and Practice (London: LLP, 2004)
Gurumo, Tumaini S. and Han, Lixin. The Role and Challenge of International Oil
Pollution retrieved from the International Journal of Environmental Science and
Development website on June 21, 2012
www.theijoem.com
Tsimplis, M.N. Liability in respect of passenger claims and its limitation retrieved
from the Journal of International Maritime Law published by Lawtext publishing
limited website on June 21, 2012
www.lawtext.com