Broker Hit With $380,000 Penalty for Missed Email

A shipbroker recently had to settle a negligence claim for $380,000 after failing to tell a charterer about a navigation restriction on a vessel, according to brokerage insurer ITIC. 

The broker was arranging a charter party between shipowners and charterers, and the owners told him that the vessel's "navigation area is R1" - a restriction on how far the vessel was allowed to navigate from shore. 

This restriction was listed on the ship's official certificate, but for technical reasons (email spam filters and problems with the WhatsApp chat application) the broker did not forward the certificate to the charterers, nor did he inform them of the R1 restriction. 

The charterers finalized the charter party without realizing that the ship's navigation area was limited, and they proceeded to send voyage instructions to the ship's master. They found out about the R1 notation from the vessel's captain, when they learned that the ship could not be used for the intended voyage - after the deal was signed and cargo arrangements were made.

The charterer opened negotiations with the shipowner and reached an accommodation, canceling the original charter agreement and setting up a new deal that took the ship's actual capabilities into account. During these negotiations, the charterer learned that the broker had been informed that the ship had an R1 restriction, before they lifted subjects. This displeased them, and they pursued an arbitration claim against the broker for the extra expenses they had incurred, which were considerable: more bunker fuel for a longer voyage, extra insurance, legal expenses, and the cost of finding a replacement ship. 

The broker also faced the potential threat of an even larger claim from his shipowner client, not just from the charterer. A settlement was reached in arbitration for about 70 percent of the charterer's demand, or about $380,000.

"Brokers must ensure that all critical information, particularly operational limitations, is accurately conveyed to prevent costly disputes and maintain trust within the industry," commented ITIC claims director Mark Brattman. "This case serves as a stark reminder of the essential role that precise and timely communication plays in maritime transactions."