The Barnstable

Background

A steamship called the Barnstable was owned by a shipping company and let out under a charter party to another company that hired its own officers and crew and paid running expenses. The charter agreed that the owners would “pay for the insurance on the vessel.” While the charter was in force, the Barnstable collided with another vessel and caused damage. The shipowner sought relief in admiralty court, and lower courts issued decrees that the Supreme Court reviewed.

Reasoning

The Court framed the central question simply: does an owners’ promise to “pay for the insurance on the vessel” make the owners liable for collision damage caused by crew appointed and paid by the charterer? The Court explained that, under U.S. admiralty practice and statute, a charterer who mans and navigates a ship is treated as the responsible party for navigation errors. Further, the Court held an ordinary hull insurance policy does not typically cover damage the insured vessel does to another vessel, so the insurance clause most naturally meant the owners would pay insurance premiums, not assume the charterer’s liability. Parol evidence about side agreements was inadmissible, and an assignee takes the charter’s plain words.

Real world impact

As a result, the Court found the charterers, not the owners, primarily responsible for collision losses caused by the charterers’ crew. Owners who agree to pay premiums are not automatically on the hook for such collision claims absent a clear contractual promise. The Court reversed the lower decrees and sent the case back to the district court for proceedings consistent with this ruling.