US law - Carriage of calcium hypohclorite
US court decides that shipper of calcium hypochlorite is strictly liable for total loss of vessel.
Fire and loss
Following a trial in the United States District Court for the Southern District of New York, PPG Industries, Inc. (PPG), the manufacturer and shipper of a cargo of calcium hypochlorite hydrated (cal-hypo), was recently found liable1 for the loss of a 1,799-teu vessel, the DG HARMONY (the vessel) and her cargo after a 1998 shipboard fire that burned for three weeks and resulted in the vessel being declared a constructive total loss.2
Cal-hypo is a bactericide used to purify water. It will decompose at room temperature. Decomposition causes cal-hypo to self-heat. If the heat so generated can not escape quickly enough, the material eventually explodes and will cause a fire. Cal-hypo decomposes at a greater rate at higher ambient temperatures. Decomposition is also influenced by the way in which the material is packed and stowed. In this case, the cal-hypo was placed in 120 136-kilo drums which were placed on pallets stacked three high in ten unventilated, non-refrigerated containers. The court noted that “[t]he placement of drums of cal-hypo adjacent to each other will make it more difficult for the heat to dissipate. Hence the critical temperature for a stack of drums will be lower than for an individual drum, because it is harder for the heat to dissipate. A container stuffed with drums creates more heat and the container walls inhibit the ventilation of the drums.”
PPG denied that the shipboard fire was caused by its cargo and, alternatively, argued that it had complied with existing regulations and that the fire was caused by negligence of the vessel’s crew in placing the containers next to heated fuel oil bunkers. Cal-hypo is classified as a Class 5.1 oxidizer in the International Maritime Dangerous Goods (IMDG) Code where it is designated as “UN 2880”. The IMDG Code stowage instructions for UN 2880 require that this cargo be stowed away from sources of heat where temperatures in excess of 55º C for a period of 24 hours or more would be encountered.3 The Material Safety Data Sheet, which PPG prepared, specified that the product was to be stored “in a cool, dry, well-ventilated place,…away from heat, sparks, flames direct sunlight and other sources of heat”.4
Following the casualty, PPG commissioned stability tests on cal-hypo which demonstrated that the product was even less stable than previously assumed and it subsequently stopped shipping the cargo overseas in 136-kilo drums, limiting the drum size to no more than 45 kilos. Although the court concluded that at the time of the casualty “PPG was not actually aware of the full risks of shipping cal-hypo in 300-pound drums in the manner in which it was shipped here”, the court nevertheless ruled that PPG was strictly liable for the loss of the DG HARMONY and her cargo. In so ruling, the court relied on Section 4(6) of the Carriage of Goods by Sea Act (COGSA), following the 2002 decision of the Second Circuit Court of Appeals in Senator Linie GMBH & Co. KG v. Sunway Line, Inc.5 In that case, the court stated: “In contrast to a carrier, which typically is in the position of taking aboard its vessel a large quantity and variety of cargoes, a shipper can be expected to have greater access to and familiarity with goods and their manufacturers before those goods are placed in maritime commerce. If an unwitting party must suffer, it should be the one that is in a better position to ascertain ahead of time the dangerous nature of the shipped goods. That party in many cases will be the shipper.”6
PPG also argued that the slot charterer and the vessel interests should be precluded from benefiting from COGSA’s strict liability provision because they had consented to carry the cal-hypo knowing that it was a hazardous product. The court conceded that vessel interests had consented, but found that this consent was not informed because PPG failed to warn them of the risks created by the manner in which the cargo was packed.
Negligence/failure to warn
The fact that PPG was both the shipper and manufacturer of the cal-hypo meant that it had “greater access to and familiarity with” the cargo and was “in a better position to ascertain ahead of time [its] dangerous nature” than the vessel. The court used PPG’s access and familiarity with cal-hypo, and particularly the fire that consumed the M/V CONTSHIP FRANCE, as the basis for finding PPG negligent for failing to earlier investigate and warn of the risks of transporting cal-hypo in 136-kilo drums. Indeed, the court went so far as to state that PPG “should have known that the provisions of the [IMDG] Code applicable to UN 2880 were inadequate…at least where it is shipped in 300- pound [136-kilo] drums packed 120 to a container” (emphasis added).7
The court rejected the argument made by PPG that any liability under Section 4(6) of the Carriage of Goods by Sea Act should be limited to the party with whom PPG was in privity (i.e., the slot charterer who had issued the bill of lading), not the vessel owner and the owners of other cargo aboard the vessel.
The decision in this case confirms that shippers of dangerous cargoes, particularly those who also manufacture them, may be held strictly liable to a widely drawn class of injured parties if they do not take reasonable steps to investigate and provide warnings to vessel interests about the risks of transporting those cargoes, even if the shippers comply with existing regulations. Paradoxically, the court’s lengthy and comprehensive opinion – describing in great detail the properties of cal-hypo, and the precautions that should be taken to avoid the devastating losses suffered by the DG HARMONY and her cargo – may limit the extent to which carriers can recover against shippers/manufacturers in future cases involving cal-hypo. It will therefore be important for carriers to assimilate the lessons of the M/V DG HARMONY and the earlier M/V CONTSHIP FRANCE and to take those loss prevention measures that address the risks of which they are now aware.
|1 || ||In re M/V DG HARMONY and Consolidated Cases; United States Federal Court for the Southern District of New York; Chin DJ.; No. 98 Civ. 8394 (DC), 2005 U.S. Dist. LEXIS 23874; 18th October 2005.|
|2 || ||The case, which was brought by vessel interests and some by-stander cargo interests, was heard non-jury before Judge Denny Chin. Proceedings were bifurcated so that the court could first determine whether the defendant, PPG, was liable, with damages to be determined at a later hearing if the court found liability. In its Opinion and Order dated 18th October 2005 (reported at 2005 U.S. Dist. LEXIS 23874), the court ruled that PPG was liable under theories of strict liability, negligence and failure to warn. The damages portion of the case will now be heard. According to an article that appeared in TradeWinds (internet version) on 22nd October 2005, lawyers involved in the case have indicated that damages from USD 25 million to USD 75 million may be awarded.|
|3|| ||In 1998, when this casualty occurred, the IMDG Code provided that “sources of heat” included “sparks, flame, steam pipes, heating coils, etc.” Effective 1st|
January 2003, the “sources of heat” provision was amended to specifically include “top of side walls of heated fuel and cargo tanks”.
|4 || ||In 1997, another cal-hypo cargo shipped by PPG on the M/V CONTSHIP FRANCE caused a devastating explosion and fire on that ship. PPG successfully defended itself in the subsequent court case (which was tried before another judge in the United States District Court for the Southern District of New York) on the basis that the vessel had negligently placed the containers next to heated bunker tanks. In the DG HARMONY case, the judge found fault with PPG for failing to specifically warn the vessel of the risk of placing the cargo next to heated bunker tanks, given the experience it had gained from the fire aboard the M/V CONTSHIP FRANCE the year before.|
|5|| ||291 F. 3d 145 (2d Cir. 2002).|
|6|| ||291 F. 3d at 168.|
|7|| ||Interestingly, the court did not find that vessel interests should have been alerted to this elevated risk notwithstanding that approximately two months before the casualty the master of the DG HARMONY had received a Swedish Club P&I Circular, issued after the M/V CONTSHIP FRANCE casualty, which specifically warned that the current IMO recommendation (contained in IMDG Code) that cal-hypo not be exposed to a heat source in excess of 55º C for longer than a 24 hour period did not accurately reflect the risk of carrying this cargo under deck “for the type and size of packaging used routinely to ship this material around the world” and that “the temperatures at which the runaway reaction is likely to begin may be much lower than that recommended by the IMO”.|