THE MYTH THAT SUBROGATION IS NOT IMPORTANT ONCE A CLAIM IS SETTLED, CAN HINDER TRADERS FROM TAKING PROACTIVE MEASURES TO PROTECT THEIR INTERESTS IN THE LONG RUN.


MYTH #3 - OVERRELIANCE ON P&I CLUBS TO RESOLVE CARGO DAMAGE


DISPUTES… A prevalent misconception is the notion that P&I Clubs will champion claim settlement and amicable resolution. However, the reality is different as P&I Clubs represent the vessel owner exclusively and have a financial interest in rejecting the cargo interest’s claims or to pay the least amount possible. This can leave grain traders at a disadvantage during disputes, resulting in lower claim payouts and prolonged negotiations. To protect their interests effectively, grain traders regardless of the sales contract terms should take part in defending cargo interest, collecting evidence and mitigating losses rather than relying solely on the P&I club.


GRAIN TRADERS REGARDLESS OF THE SALES CONTRACT TERMS SHOULD TAKE PART IN DEFENDING CARGO INTEREST


MYTH #4 - IGNORING SUBROGATION


ACTION AFTER CLAIM SETTLEMENT… My experience at Recoupex in handling bulk cargo claim recoveries, shows that a staggering 85% of traders tend to neglect the recovery process once they have received payment from their marine insurer. However, this nonchalant approach is a critical mistake with far-reaching consequences. Firstly, overlooking subrogation efforts prevents traders from being actively engaged in loss prevention strategies for the future. By participating in the process, they can identify areas for improvement, streamline in-house procedures and even pinpoint unreliable business partners to avoid subsequent transactions. Moreover, marine insurers may lack industry-specific knowledge, which can jeopardize the likelihood of recovery. A trader’s involvement is crucial in ensuring that subrogation efforts are not only initiated but also aligned with the intricacies of the grain trading industry. In summary, the myth that subrogation is not important once a claim is settled, can hinder traders from taking proactive measures to protect their interests in the long run.


As experts in cargo claim recoveries, we’ve observed a significant industry trend that underscores the increasing importance of active engagement in claims recovery within the realm of commodity trading. This shift in perspective places a strong emphasis on cooperation among various parties representing cargo interests. Furthermore, it involves the pursuit of even small value claims, which were often absorbed as losses in the past. The goal is to contain financial exposure from cargo claims and to be active in loss prevention. This proactive approach is a clear indication that traders are committed to maintaining stable marine insurance loss ratios to avoid premium hikes. In summary, the evolving landscape of commodity trading now demands that traders actively participate in the claims recovery process. This shift in mindset reflects a profound commitment to the long-term profitability and sustainability of their trade, as well as a strategic approach to safeguarding their interests and optimising their financial performance.


Lina Jasutiene, PhD Shipping lawyer Founder of Recoupex


7 | ADMISI - The Ghost In The Machine | Q4 Edition 2023


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