2024 U.S. Dist. Lexis 49733 (W.D. WA March 20, 2024)
This was a dispute between a barge owner and the charterer of the barge. The charterer sued the barge owner after the latter said it would double the hire rate for the barge and declare the charterer in default.
The barge owner moved to amend its counterclaim to include a claim for breach of the duty of good faith and fair dealing based on the charterer’s refusal to turn over full insurance policies it was required to obtain pursuant to its charter agreement. The court denied the motion concluding that the amendment would be futile.
Section 7 of the charter agreement did not create a duty for the charterer to produce insurance documents at any time upon the barge owner’s demand. The agreement said that the charterer’s insurance policies (1) shall be subject to the barge owner’s approval and (2) shall be endorsed to require 30 days written notice to the barge owner in the event of any cancellation, non-renewal or other material change in policy terms or conditions. The court interpreted this language as stating conditions giving rise to the barge owner’s right to review and approve the charterer’s insurance policies after the barge owner’s initial approval of the policies. But the charterer did not have a duty to produce the policy documents absent the occurrence of the stated conditions, i.e. cancellation, non-renewal or other material change.
The lesson here for vessel owners who charter out their vessels is to include a specific provision in the charter agreement requiring the charterer to produce copies of any insurance documents on demand by the vessel owner.