Loss of hire is the income a vessel would have earned but for an incident. It arises in charterparty disputes, collision and damage claims, and under loss of hire insurance. The principle is simple, but the calculation turns on several judgements that are often contested.
The period of loss
The first step is to establish how long the vessel was out of service because of the incident. That means separating time caused by the damage from time spent on owner's work, routine maintenance or class surveys carried out at the same yard visit. Deductibles under insurance policies also need to be applied to the correct period.
The right daily rate
Where the vessel was on time charter, the agreed hire rate is the starting point. If it was trading spot or the charter would have ended, market evidence from fixtures, broker assessments and index data is used instead. Experts must justify the rate chosen and explain any adjustments for vessel specification or trading area.
Savings and mitigation
Costs the owner did not incur while the vessel was idle, such as bunkers, port costs and some crew expenses, are deducted. The calculation must also consider whether the owner acted reasonably to reduce the loss, for example by chartering in a substitute or rearranging employment.
This article is general guidance for lawyers, insurers and commercial parties instructing maritime specialists. It is not advice on any specific matter.
For matter-specific advice, submit an expert requirement with brief details of the dispute, parties and relevant deadlines.