Both-To-Blame Collision Clause: Meaning, Overview, Example

The Both-To-Blame Collision Clause is a contractual provision primarily found in marine insurance policies and charterparty agreements, such as those governing the carriage of goods by sea. Its core purpose is to address a specific scenario: a collision between two vessels where both are deemed partially or wholly at fault. In such cases, the clause seeks to protect shipowners from certain financial liabilities that may arise under the “cross-liability” principle in maritime law.

Under traditional maritime law, when two ships collide and both are found negligent, liability is apportioned based on the degree of fault. This is known as the “both-to-blame” situation. Each vessel is responsible for its own damages, but cargo owners on one ship may claim against the non-carrying vessel (the other ship involved in the collision) for damages to their goods. The non-carrying vessel’s liability to the cargo owners is typically covered by its insurance, specifically Protection and Indemnity (P&I) insurance. However, the Both-To-Blame Collision Clause modifies this dynamic by shifting some of the financial burden back to the cargo interests, ensuring that shipowners are not disproportionately penalized when both vessels share fault.

In essence, the clause stipulates that if both ships are to blame for a collision, the cargo owners cannot recover their losses from the carrying vessel’s insurance in a way that would indirectly penalize the shipowner for the other vessel’s fault. Instead, the cargo interests bear a portion of the loss, typically through their own cargo insurance. This provision is particularly significant in jurisdictions like the United States, where the legal framework for maritime collisions differs from international conventions.

The clause is rooted in the interplay between maritime law, insurance practices, and the contractual obligations outlined in bills of lading and charterparties. It is a response to the complexities of liability allocation in collisions, ensuring that the financial consequences are distributed equitably among the parties involved—shipowners, cargo owners, and insurers.

Historical Context and Legal Framework

To fully appreciate the Both-To-Blame Collision Clause, it’s essential to understand its historical and legal origins. The clause emerged in response to the peculiarities of U.S. maritime law, which diverges from international standards in handling collision liabilities.

Maritime Collision Liability: The Basics

When two ships collide, maritime law typically governs the allocation of liability. Internationally, the 1910 Brussels Collision Convention (formally the International Convention for the Unification of Certain Rules of Law with Respect to Collisions Between Vessels) establishes that liability is divided based on the proportion of fault. If both vessels are at fault, damages are apportioned accordingly. For example, if Vessel A is 60% at fault and Vessel B is 40% at fault, each pays a corresponding share of the total damages.

In the United States, however, the legal approach historically followed the “divided damages” rule until the 1970s. Under this rule, when both vessels were at fault, each bore half the total damages, regardless of the degree of fault. This created inconsistencies, particularly when cargo owners sought to recover losses from the non-carrying vessel, which was often fully liable to them under U.S. law, even if only partially at fault for the collision.

The Problem Addressed by the Clause

The issue arose because cargo owners could claim against the non-carrying vessel under U.S. law, and the non-carrying vessel’s P&I insurance would cover these claims. However, the non-carrying vessel could then seek indemnification from the carrying vessel for a portion of the payment, based on the shared fault. This created a scenario where the carrying vessel’s shipowner faced indirect liability for cargo losses, even though the cargo was carried under a bill of lading that limited the shipowner’s responsibility (e.g., under the U.S. Carriage of Goods by Sea Act, or COGSA).

The Both-To-Blame Collision Clause was introduced to counteract this. By including the clause in bills of lading, shipowners ensured that cargo owners could not recover losses from the carrying vessel in a both-to-blame scenario, effectively requiring cargo interests to rely on their own insurance. This shifted the financial burden and aligned the interests of shipowners and cargo owners more equitably.

Evolution and Modern Application

The clause gained prominence in the 20th century as global shipping expanded and collisions became more frequent. Its inclusion became standard in many bills of lading, particularly for shipments to or from the United States. However, its validity has been debated in legal circles. In 1995, the U.S. Supreme Court case United States v. Reliable Transfer Co. abolished the divided damages rule, adopting proportional fault allocation similar to international standards. This reduced some of the clause’s original necessity, but it remains relevant in certain contexts due to ongoing differences in how cargo claims are handled.

Internationally, the clause is less critical because the Hague-Visby Rules and other conventions limit the carrier’s liability for cargo damage, and the Brussels Convention governs collision liability uniformly. Nevertheless, the clause persists in contracts to provide clarity and protect shipowners from unforeseen liabilities in complex legal disputes.

Overview of the Clause’s Structure and Function

The Both-To-Blame Collision Clause typically appears in the fine print of a bill of lading or as part of a charterparty agreement. Its language is technical, designed to address specific legal scenarios. A standard version might read:

“If the vessel comes into collision with another vessel as a result of the negligence of the other vessel and any act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or management of the vessel, the owners of the cargo carried hereunder will indemnify the carrier against all loss or liability to the other or non-carrying vessel or her owners insofar as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of said cargo, paid or payable by the other or non-carrying vessel or her owners to the owners of said cargo and set off, recouped, or recovered by the other or non-carrying vessel or her owners as part of their claim against the carrying vessel or carrier.”

This dense wording can be broken down into key components:

1. Condition of Both Fault: The clause applies only when both vessels are negligent, leading to a collision.
2. Cargo Owner’s Obligation: Cargo owners agree to indemnify the carrier (the carrying vessel’s owner) for any liability the carrier incurs to the non-carrying vessel that stems from cargo claims.
3. Protection for the Carrier: The clause prevents the carrier from being indirectly liable for cargo losses through cross-claims, ensuring that cargo owners bear the cost via their own insurance.
4. Scope of Liability: The clause limits the carrier’s exposure to claims that would otherwise arise from the non-carrying vessel’s partial fault.

In practice, the clause functions as a risk allocation tool. It ensures that cargo owners, who benefit from lower freight rates due to the carrier’s limited liability, assume responsibility for insuring their goods against collision-related losses in both-to-blame scenarios.

Practical Implications

The Both-To-Blame Collision Clause has several implications for stakeholders in the maritime industry:

• For Shipowners: The clause reduces financial exposure in collisions where their vessel is partially at fault. Without it, shipowners could face significant indirect liabilities through cargo claims, even when adhering to standard navigational practices.
• For Cargo Owners: The clause underscores the importance of securing comprehensive cargo insurance. Since the clause limits recovery from the carrier, cargo owners must ensure their policies cover losses in both-to-blame collisions.
• For Insurers: P&I clubs and cargo insurers must account for the clause when underwriting policies. P&I insurance typically covers collision liabilities, but the clause shifts some cargo-related risks to cargo insurers.
• For Legal Practitioners: The clause adds complexity to collision disputes, requiring careful analysis of bills of lading, insurance policies, and applicable laws in different jurisdictions.

The clause also highlights the importance of clear contractual terms. Disputes often arise when cargo owners are unaware of the clause’s presence or misunderstand its implications, leading to legal challenges that test its enforceability.

Example of the Both-To-Blame Collision Clause in Action

To illustrate how the Both-To-Blame Collision Clause operates, consider the following hypothetical scenario:

Scenario

Two cargo ships, Vessel A and Vessel B, collide in U.S. territorial waters due to navigational errors by both crews. Vessel A is carrying a shipment of electronics valued at $10 million, owned by CargoCo. After an investigation, a court determines that Vessel A is 70% at fault for the collision, and Vessel B is 30% at fault. The collision causes $5 million in damage to CargoCo’s electronics.

Under U.S. law, CargoCo can claim the full $5 million from Vessel B (the non-carrying vessel), as Vessel B is liable to cargo owners for damages caused by its negligence, regardless of its degree of fault. Vessel B’s P&I insurance pays CargoCo the $5 million. However, Vessel B then seeks to recover a portion of this payment from Vessel A, arguing that Vessel A’s 70% fault contributed to the loss. Without the Both-To-Blame Collision Clause, Vessel A would be liable to indemnify Vessel B for $3.5 million (70% of the $5 million paid to CargoCo).

Application of the Clause

Fortunately for Vessel A’s owners, the bill of lading issued to CargoCo includes a Both-To-Blame Collision Clause. The clause stipulates that CargoCo cannot hold Vessel A liable for losses recovered from Vessel B in a both-to-blame scenario. As a result:

1. CargoCo receives $5 million from Vessel B’s P&I insurance.
2. Vessel B cannot recover the $3.5 million from Vessel A, because the clause prevents Vessel A from being indirectly liable for cargo claims.
3. CargoCo’s own cargo insurance covers any additional losses not recovered from Vessel B, ensuring that CargoCo is fully compensated without penalizing Vessel A’s owners.

Outcome

The clause protects Vessel A’s owners from a $3.5 million liability, aligning the financial consequences with the contractual agreement in the bill of lading. CargoCo, having secured cargo insurance, is made whole, and Vessel B’s insurers bear the cost of the cargo claim, consistent with their underwriting obligations. This example demonstrates the clause’s role in balancing the interests of shipowners, cargo owners, and insurers in a complex collision scenario.

Criticisms and Controversies

Despite its utility, the Both-To-Blame Collision Clause is not without critics. Some argue that it unfairly burdens cargo owners, who may not fully understand the clause’s implications when signing bills of lading. Others contend that it complicates the already intricate process of resolving collision disputes, leading to protracted litigation. In some jurisdictions, courts have scrutinized the clause’s enforceability, particularly when it appears to conflict with statutory protections for cargo owners.

Additionally, the clause’s relevance has been questioned in light of legal reforms, such as the U.S. adoption of proportional fault in Reliable Transfer. As global shipping practices evolve, there is ongoing debate about whether the clause remains necessary or should be replaced with clearer, more equitable mechanisms for allocating collision liabilities.

Conclusion

The Both-To-Blame Collision Clause is a critical yet complex feature of maritime law, designed to navigate the murky waters of liability in ship collisions. By protecting shipowners from indirect cargo claims in both-to-blame scenarios, it ensures a fairer distribution of financial risks among shipowners, cargo owners, and insurers. Its historical roots in U.S. maritime law highlight the unique challenges of aligning domestic and international legal frameworks, while its continued use underscores the importance of precise contractual terms in global shipping.