Both-to-Blame Collision Clause

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If two sea vessels collide then, in some instances, the Both-to-Blame Collision Clause comes into effect.  This clause is detailed on the Bills of Lading of the Carriers concerned, usually in relation to shipments entering US waters and is additional to the usual contractual shipping agreements.

Usually damage caused during shipment is covered under the Ocean Marine Insurance Policy.

With regards to collisions, this policy states that if a ship/vessel collides with another ship due to the negligence of both, owners and shippers of both vessels must share in the proportional losses in accordance with the monetary values of their cargo and interests before the collision.  The owners of the cargo and company responsible for the shipment are all required to contribute to the payment of the losses.

To cover this risk, liability can be limited through the use of Ocean Marine Insurance, which provides protection in event of damage or destruction of a ship’s hull or the ship’s freight.  However, Ocean Marine Insurance does NOT provide cover against Both-to-Blame Collision Clauses.

The Both-to-Blame Collision Clause was initiated by the US Courts who applied the Both-to-Blame Collision rule on both ships involved in the event and apportioned liability (regardless of the circumstances pertaining to the collision) on a 50/50 basis.  (This was changed in 1975 following judgement in the case United States v Reliable Transfer Co, and so the 50/50 rule is no longer consistently applied).  Since then, more Shipping Lines have included this clause in their Bills of Lading.

So how does this Clause work.

If Ship A collides with Ship B, due to the fault of Ship B, the owner of any goods in Ship A, which are damaged or lost by the fault of Ship B, can claim 100% of the damage from the owners of Ship B.  However, due the Both-to-Blame Collision Clause, and in circumstances where apportionment of blame is deemed to be 50/50, the owner of Ship B has the right to claim 50% of their liability from the owners of Ship A.  This leaves Ship A with a bill for half the cost of the damage, so Ship A passes that cost back to the owner of the goods, by way of the Both-to-Blame Collision Clause in the Bill of Lading.

It might occur to anyone who is the Shipper, in this instance, that this is unfair on them.

Which is why Both-to-Blame Collision liability is provided by all the Institute Cargo Clauses (A-C) as part of the standard additional cover, along with General Average and Salvage Charges.  So the Shipper is covered, as long as they take out Goods in Transit insurance which covers the liability if the Both-to-Blame Collision Clause is applicable.

The problem here is that many organisations, either out of ignorance, an erroneous belief that they are covered under the Carrier’s Marine Insurance Policy, lack of funds or bad communication with the other parties involved in the transaction, often forgoTransit Insurance for their shipments.  Some organisations work on the basis that very few shipments do run into problems and so perceive Transit Insurance as a luxury rather than a necessity.

However, it should be noted that more and more shipping is plying the seas and, in certain areas, the concentration of shipping is so high that the chances of collisions have increased quite dramatically.  Bearing this in mind, combined with the possibility of the Both-to-Blame Collision Clause being present, it is perhaps false economy not to pay out for Transit insurance.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training. She is based in the United Kingdom. If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com or to access other articles on International Trade matters please do check out our website at www.point-point.com.

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