Insurance and Claims

VESSEL INSURANCE COVERAGE

Company vessels are covered by several types of marine insurance policies, including Hull and Machinery – which cover the loss of or damage to the vessels’ Hull and Machinery, and Protection and Indemnity (P&I) – which covers the Owner’s legal liability for loses or damages allegedly sustained by third parties. There is one important exception to this. If a vessel collides with another vessel or any other object, buoys, lock walls, shore cranes, etc., the damage done to the other vessel (and her cargo) or to the other object, will be covered by the Hull and Machinery insurance. This extension applies only in case of collision, that is, physical contact with the other vessel or object. It does not apply in case of a surging damage done by your vessel to another vessel or object. The damage claims are subject to deductibles or franchise. In H&M policies the deductible may range from 40K to 400K US$, whereas in P&I policies the deductible may vary from 2K to 40K US$. Keep in mind that the underwriters shall pay only the amount in excess of deductible for claims which exceed the deductible amounts. Master shall be fully aware of the deductible amounts in ship’s policy documents.

HULL AND MACHINERY INSURANCE

This insurance covers practically every accidental damage to vessel which may occur in the course of normal navigation such as damages resulting from heavy weather, grounding, fire, collision, crew negligence, stevedores’ negligence, etc.

It is the Master’s sole responsibility to take all measures necessary to protect the safety of the vessel, her crew, cargo and the marine environment. If time and circumstances permit, the Company should be advised of the situation.

PROTECTION AND INDEMNITY INSURANCE

This insurance covers the Owner’s expenses resulting from his legal liability toward third parties such as crew (due to illness, injury or death), stevedores (due to injury during loading or discharging), cargo owners (due to damaged or lost cargo), port authorities (because of pollution), immigration authorities (because of stowaways), etc.

CLAIMS UNDER GENERAL AVERAGE

Following claims are usually covered under ‘General Average.

• Breakdown at Sea
• Fire
• Stranding
• Collision

Following claims can be included under ‘General Average’.

SHORTAGE OF FUEL

It may be that while the vessel is en route from one port to another, heavy weather may be encountered which greatly retards the vessel’s headway and results in an extraordinary consumption of fuel which will prevent the vessel from reaching it’s destination safely. If the situation should arise and the vessel is obliged to put into a “Port of Refuge”, the expenses arising there from may be recoverable in General Average from all interests.

PORT OF REFUGE

Any one of the above situations, as well as others, may obligate the vessel to deviate from the regular course and put into a Port of Refuge, for the common safety and benefit. This putting into a port of refuge may constitute a General Average Act. A careful record must be kept of all stores consumed, wages, overtime, fuel, etc. as these must be considered later by the General Average Adjusters who will decide to what extent they may be allowed as General Average Expenses. The record should include fuel and stores aboard at the time the deviation commenced and at the time the vessel regained her course for the port of destination.

If cargo damage is involved, instructions from the Head Office regarding the appointment of a cargo Surveyor for General Average purposes should be obtained and a Surveyor appointed. His recommendations should be carefully followed. In fire cases, it is important that the Surveyor be instructed to deal with two categories :

1) Cargo damaged by fire, smoke and heat, either along with or in combination with some other cause, and

2) Cargo damage only by water and/or steam and/or other Agent employed to extinguish the fire.

If the cargo has been damaged by both categories of loss, the Surveyor should mention in his report the percentage of each category that should be considered applicable.

The Surveyor’s report should identify each damaged shipment by it’s respective Bill of Lading number, Shipper and consignee and report on the packages separately.

The Surveyor may recommend sale of some damaged cargo but no sale should be made without the written consent of the Owners of the goods.

The Company or their Agents will advise in such matters when they arise. Cargo so badly damaged as to be completely unidentified may be sold if the cargo Surveyor recommends. Where cargo is removed from the ship at a Port of Refuge and is temporarily held on lighters or ashore, the Company should be advised of the kind and quantity of cargo involved with respect to each lighter on each separate location ashore so that they may affect the necessary insurance.

MASTER’S RESPONSIBILITY UNDER GENERAL AVERAGE ACT

When the ship and cargo are in peril, the Master has the duty and authority to take all reasonable steps necessary to avert the peril or minimise its consequences so as to deliver the vessel and cargo safely to its destination. These actions may involve incurring expenses of an extraordinary nature or even sacrificing part of the vessel or cargo to save the remainder.

The course of action adopted in these circumstances is known as a General Average Act. The expenses incurred are General Average Expenses and the sacrifices made are General Average Sacrifices.

It is strongly urged that, whenever possible, the Company be informed of the facts by telex or other electronic methods, so they may, from their experience or in consultation with Average Adjusters and other experts, be in a position to offer advice. It is important that the information sent to the Company is accurate and sufficient to enable them to correctly visualize the situation and provide complete and practical advice. Refer Nautical Institute publication “Mariners’ Role in Collecting Evidence” for further guidance on General Average.

RECORDS OF INCIDENTS

The sequence of events at the time of an incident should be accurately and promptly recorded in Bridge and Engine Bell Books and subsequently in Logbooks (engine bell book need not be filled up for engine orders if an automatic engine movement recorder is provided, though all other information concerning notices and happenings should be faithfully recorded). Bell Books and Logbooks are of the greatest importance in legal proceedings, as are any other contemporary documents or records, such as navigational charts and records and tracings / printouts from the Course Recorder, Echo Sounder, Telegraph Order Printer, etc. All such documents relating to an accident, together with any notes made on scraps of paper or in other notebooks must be carefully preserved and not altered in any way. Admiralty Charts may continue to be used, but the original markings must not be rubbed off.

The Master should keep careful records of all happenings in these exceptional situations so as to be able to furnish the Company promptly with:

a) Signed copies of all Protests or other sworn statements.

b) Signed extracts from Deck and Engine Log books from beginning of loading to completion of final discharge.

c) Signed statements prepared by the Master and/or Chief Engineer of all extra consumption of fuel, lubricating oil, fresh water, engine and deck stores and accounts for their replacement, if replaced on the voyage with vouchers showing purchase price.

d) Reports of surveys on ship and cargo with copies of sales accounts where cargo is sold.

e) Manifest of all cargo on board at the time of accident.

f) Stowage plan.

g) Bill of lading.

h) Dock bill and other documents.

i) Crew list.

j) Signed copy of the Salvage Contract.

k) Receipted accounts for all extra expenses incurred. Underwriters’ Surveyor and the Cargo Surveyor should so far as possible, approve these to the extent that the supervision of the accounts may come within the scope of their duties.

l) Payroll Accounts showing wages paid to Master, Officers and crew during the prolongation of the voyage, due to deviation or while detained at a Port of Refuge, together with overtime sheets showing the nature of the work performed in the overtime periods and the hourly rate paid for the specific hours worked.

m) Record of written communications, faxes, telephone and other communication charges.

n) Charter party, statement of off-hire.

DETAILS OF REPAIRS / SURVEY

If the ship has sustained damage following a collision or a stranding, a joint survey of the damage may take place. The Company will arrange this, and two surveyors will be present. One will represent the insurance underwriter’s interests and will probably have been appointed by the Salvage Association, London or as advised by underwriters. The other surveyor will represent the owners of the other ship or interest involved. He is entitled to be told the place and time where the accident occurred.

CLASSIFICATION SOCIETY SURVEY FOR SEAWORTHINESS

Company vessels are built and classed under the rules and supervision of one of the Classification Societies. In the event a vessel sustains damage which affects classification, a Surveyor of the relevant society e.g. ClassNK, shall be called to attend and approve the repairs and issue a certificate of seaworthiness.

Any damage or casualty to hull machinery, equipment, structural integrity, quality or fitness of a particular use of service is to be reported immediately to the Company. The required notice can then be given to the Classification Society to make the necessary arrangements for survey.

It should be noted that the Rules call for the automatic suspension of class, if notification is not given promptly of any such instance. This could have significant consequences including possible loss of insurance coverage.

NOTIFICATION OF DAMAGE TO OUTSIDE PARTY

Whenever a vessel suffers any damage, expense or delay through an accident in which any outside interest or party is involved, the Master shall notify such outside party or interest in writing, if possible, holding them responsible for any and all damages and/or delay sustained by his command. Such a letter of protest may be passed through the local Agent if the accident occurs in port.

The notification should not contain any details of cause or probable cause or any other conclusions.

The Master must use his discretion when serving such notices, as obviously no good purpose can be served in holding another vessel responsible when, for example, the other vessel was properly moored and one vessel strikes her when manoeuvring.

Where damage is caused by a tug or other local craft in a foreign port the Master should notify the Agent immediately, instructing him to give notice of the damage to the Owners of the tug or craft at the same time inviting Owners to inspect the damage, provided such inspections could take place without unduly delaying the ship.

ADMISSION OF LIABILITY

Under no condition shall the Master or any other member of the ship’s complement admit liability, either written or verbally implied, of the Company, the vessel or any of the personnel attached to the vessel, for any accident or damage.

In some countries the giving of immediate notice is an essential legal requirement and failure to give such notice may mean that a claim cannot be pursued against the Owners of the tug or craft. If a letter of protest is received from the Master or Agent of another ship or craft, which has, or is alleged, to have been damaged, no admission of liability shall be given. Receipt of letters from other parties alleging damage may be acknowledged, but liability must never be admitted. Such letters shall be answered:

Receipt of your letter dated . . . . . . . . . is acknowledged without prejudice and liability is denied”.

Interviews must not be given by any of the vessel’s personnel to unauthorized persons following an accident, but all assistance should be given to the Company representatives such as surveyors, lawyers or shore staff. It is equally important to clarify the identity of all third parties before disclosing any information to them.

Copies of letters of protest and any correspondence exchanged shall be sent to the company.

The Master shall immediately deny, in writing, any responsibility if he receives notice from an outside interest or party that he or the vessel is being held responsible for any alleged damage. He shall cause a careful examination to be made without prejudice of all such damage and submit a report thereon to the Company.

Where damage has been caused to any other ship, jetty or other property, this must also be described as far as it can be ascertained. If the damage is extensive this must always be inspected on behalf of the Company by an independent surveyor, appointed by the Company, the Agent or the local P&I Correspondent. Trivial damage can be inspected and reported upon by the Master or Chief Engineer, provided they feel competent to do so, and its extent agreed with a representative of the owner of the damaged property.

Should it be it necessary or desirable to hold a survey of the damage, the Master, if not notified to the contrary or if the Company is handling directly, shall notify the Master of the other vessel in writing or the time and place of the survey and invite him to have a representative present.

NOTIFICATION OF DAMAGE TO COMPANY

In all cases of damage or suspected damage the following type of information should be relayed to the Company – latitude and longitude at time of the incident, weather conditions, visibility, condition of the ship which made it necessary to engage assistance, damage sustained to ship, damage to cargo, injuries to personnel, damage to other ship or property, pollution, salvage operation and salvor’s agreements. These and any other facts pertinent to the case should be sent immediately by email / telex and as time permits, followed by a written and signed official report.

REPORTS TO GOVERNMENTAL AGENCY

All governmental regulations of the vessel’s flag, territorial waters jurisdictions and international agreements shall be strictly observed and reports completed as required by these authorities. However, where compliance with these reports requires or intimates an admission of liability by the vessel, the matter must be referred to the Company by telex / email or letter, according to urgency, for review. The forms for reporting to the various flag authorities can be found in the annex at the end of this manual.

CLAIMS UNDER STEVEDORE DAMAGES

STEVEDORES DAMAGE

In almost every voyage and time charter parties, there is a reference in a clause to Stevedores Damage. Master and deck officers shall be fully conversant with this clause. These clauses have to be closely followed, if during cargo operations damages have been sustained to the vessel, or her equipment, stores and/or cargoes by the stevedores working the ship, in order that the ship can be compensated for any damage. The Master should take every precaution with the stevedores in order to maintain smooth operations.

NOTIFICATION

It is of utmost importance that the officer on watch on the deck keeps a close vigilance on any act of negligence on the part of the stevedores working on the vessel and notify immediately to the responsible stevedore superintendent holding them liable to remedy any damages sustained at their cost prior the vessel’s departure. This verbal notification should be promptly followed by issuance of a written damage claim. The damage claim is to be made addressed to the stevedores with three copies. First copy shall be forwarded to the Company by the vessel with a covering letter. A copy of this covering letter should be attached to the second copy and put in ship’s file. The third copy will be given to stevedores for their records. The stevedores must sign on all copies. Normally stevedores would like to put remark “signed for receipt without admission of liability”. It is not desirable but acceptable.

In addition to the claim by letter, company must be notified and Incident report should be made in Phoenix. Additional information as below must be included along with the report:

1) Location – which part of ship?

2) Bill of Lading No. (where applicable).

3) Marks & No. (applicable for cargo cases).

4) Quantity (applicable for cargo).

5) Commodity (applicable for cargo).

6) Description of damage (applicable to cargo as well as gear or ship).

7) Causes of damage (applicable to cargo as well as gear or ship).

An advice by telex / email / fax to be sent to all parties (owners, head charterers, voyage charterers, etc.) mentioned in the charter party and copied to the Company. It’s imperative that the stevedore damage be advised immediately to these parties and within 24 hours of the occurrence.

A necessary statement of facts and damage report should also be prepared and signatures of all concerned parties obtained. If the damages sustained are serious, which could affect the validity of any ship’s certificate, an appropriate survey should be carried out by a surveyor of the Classification Society. As far as practicable, photographs of the damages sustained should be taken to serve as evidence in case of any dispute.

If the damage is repaired by stevedores on the spot, a note to this affect should be made on the report. If the damage is repaired by ship staff, Master should enclose to the damage report, on a separate sheet of paper, following details:

• S.N.
• Damage Details
• Repair Details
• Staff Worked
• Time Worked (each man)
• Materials Used

On the basis of above, an invoice will be prepared for submission to charterers. (Note: if the damage is not actually repaired in the port where damage occurred, the above information should still be sent to Company on the basis of best estimates. When the damage is so extensive that it is required to be done by workshop and/or postponed for dry-docking repairs then following section will apply.

When the repair is carried out in dry-dock, a separate jobs list arising out of this damage is to be made and similarly a separate invoice to be obtained.

REPAIRS

Every effort should be made to ensure that the stevedores repair any damage while working cargo at their pier, without delaying the vessel. If it is evident that repairs cannot be effected at the port, a comprehensive report must be prepared promptly and a copy given to the responsible stevedores. The original copy is to be retained on board and one copy should be immediately forwarded to the Company and a copy given to the stevedores. In order to ensure that there is a timely survey and repair specification developed, these copies are not to be routinely retained on board until the end of the voyage, but forwarded to the Company immediately.

Any time the vessel has outstanding stevedores damage at the end of the voyage and repairs are expected to be made then, a separate requisition or work sheet must be prepared with the date and port to identify the repairs to the particular damage report. When repairs are made without a Superintendent’s attendance, repair cost must be billed separately and identified by the repairer.

If repairs are accomplished by the crew, a full record of their hours worked with overtime and rates must be submitted separately with complete list of stores and spare parts used in affecting repairs and again identifying the specific damage report it relates to.

If stevedore damage repairs are deferred until the vessel enters a ship repair yard, the damage reports must be compared to and coincide with copies the Superintendent will have in his possession. This method of handling these stevedore repairs is the only manner that will ensure that in each instance the responsible party is billed for the cost of repairs.

CLAIMS UNDER P&I (PROTECTION AND INDEMNITY)

P & I risks broadly include all third party liabilities except collision, for example, those arising out of cargo losses and contaminations, damage to jetties, oil pollution and personal injuries or fatal accidents. Be aware that collision and FFO (contact with Fixed and Floating Objects) is covered under H&M policy for ships having this cover. As a part of their service to Members, the Associations have worldwide network of Correspondents. The list of the names and addresses of these Correspondents and the Associations’ Rule Books are issued annually, and copies thereof are sent to each entered Company ship.

P&I CLAIMS

The P&I Club must be informed immediately when an incident occurs, which could lead to a claim. This is to be done both through the Company and the local Correspondents. It is essential that the P&I Club is informed as soon as possible. Some claims will be rejected if the Club is not informed at the time of the incident. Any delay in reporting may make it very difficult to resolve a dispute at a later date.

Any time a third party calls for a survey of cargo, of the ship or anything connected with the ship which could lead to a claim, the P&I Club representative must be informed in time to allow their Surveyor to be present to represent the ship Owner’s interests.

ITEMS COVERED UNDER P&I

• Claims for loss of life and personal injury.
• Hospital, medical and funeral expenses arising from injury claim.
• Crew sickness and repatriation expenses.
• Quarantine expenses.
• Oil pollution.
• Cost of raising a wreck.
• Cargo damage due to improper navigation.
• Third party collision damage / Damage to piers, jetties, wharves and other stationery objects not covered by Hull & Machinery Insurance.
• Cargo as irrecoverable proportion of General Average.
• Cost of Government Inquiries.
• Heavy weather damage to cargo from ingress of water, cargo shifting or lack of ventilation in bad weather.
• Cargo damage due to improper stowage.

The P&I Clubs also indemnify owners against:

• Claims in respect of wrong delivery of cargo.
• Ship’s liability for cargo after collision not covered by insurance.
• Fines or Penalties imposed as a result of innocent breaches of customs, immigration or public health laws.
• Fines or penalties resulting from acts of battery, including smuggling by servants of the owners.

The P&I Clubs also cover owners against claims for accidents to stevedores, officials visiting the ship, passengers and other persons on board with the permission of the Master.

OIL SPILLS

Before a claim of the P&I can be successful, the owner must show that every reasonable precaution has been taken to prevent the incident and limit the extent of the damage. In the case of oil spill all normal procedures for handling oil must have been followed and all local government requirements obeyed. Please refer to SOPEP / SMPEP manual and local Vessel Response Plans as applicable for further details.

CREW ACCIDENT & ILLNESS

The P&I Club provides the owner with insurance cover against medical and repatriation expenses and the cost of crew wages while in hospital, provided that the Club is informed at the time of sickness or injury.

When a member of the ship’s personnel is to be paid off and landed at a foreign port on the advice of a doctor, the P&I Club should be informed. The Club will either arrange for a further medical examination of the sick person or consult the doctor who made the original recommendation. When the decision is finalized, the medical and repatriation expenses will be met by the P&I Club as well as the cost of bringing out replacement crew.

When a ship’s personnel dies, the P&I Club will pay the cost of a standard burial. The cost of returning the crewmember’s body to his home will be done by the Company if not covered by the P&I Club.

The P&I Club will meet the cost of medical expenses of ship’s personnel visiting a doctor in port and obtaining medicines, subject to deductibles, which vary ship to ship.

When an accident happens to any of the ship’s personnel, a full report must be made including the name of any witness and whether or not the victim was on duty at the time. The report should be forwarded to the Company.

CARGO CLAIMS

HEAVY WEATHER

Whenever heavy weather is encountered and there is a possibility of cargo damage resulting either from the ingress of water or the shifting of cargo, the Master should notify the Company and the P&I Club’s local representative so that a Club Surveyor can attend to conduct a survey as the vessel berths. The Master should not rely on the receivers’ surveyor but should always obtain an independent survey from the P&I Club.

VENTILATION

Certain cargoes require controlled ventilation operating continuously. If continuous controlled ventilation becomes impossible because of mechanical breakdown or weather conditions, damage to the cargo may result from the condensation, overheating or other factors.

The P&I Club Surveyor should always be called in if ventilation damage is suspected or confirmed.

IMPROPER STOWAGE

Whenever cargo damage occurs as a result of the collapse of section of cargo, the P&I Club Surveyor should be called in.

The damage may be caused by the use of under strength packing materials or by improper stowage methods on board.

SURVEYS

Whenever cargo receiver state they intend to carry out a cargo survey the P&I Club should be asked to send a Surveyor to represent the ship owner’s interests.

The P&I Club Surveyor’s experience of surveying many cargoes of different types enables him to recognize whether or not the receiver’s claims are justified.

Whenever the Master considers that the cargo he is loading or about to load is not as described because of condition, moisture content or packaging, he should call the company and make the proper contact to arrange for the P&I Club to survey the complete cargo before it is loaded. The Surveyor will advise the Master how to clause the Bill of Lading if this is necessary, with the most appropriate wording describing the defect.

Whenever the Master considers it necessary to note Protest on arrival in port, the P&I Club should be informed of the Note of Protest.

SPECIAL COMPENSATION P&I CLUBS (SCOPIC) CLAUSE

Historically, Lloyd’s standard form of salvage agreement (LOF) was intended to be a cure-no pay agreement and these words are retained in the heading of the latest version, LOF 2011.

The salvor enters into an LOF agreement with, usually, the master of the stricken vessel, who signs the agreement on behalf of ship interests and cargo interests (if any). The salvor undertakes to use his best endeavours to save the ship (and cargo) and if the salvor succeeds, in whole or in part, the salvor is entitled to an award not exceeding the valve of the property salved. If the salvor fails to save any property then the salvor receives nothing for his efforts. However, following some high-profile casualties involving spillages from large oil tankers, together with an increase in awareness of the need to protect the environment, a safety net was introduced in LOF 1980. This provided that even where no property was salved the salvors would be entitled to receive, from ship interests alone, their reasonably incurred expenses plus a small increment where the salvor used his best endeavours to prevent escape of oil from a tanker casualty.

In 1981 an international conference of the CMI was held in Montreal resulting in a draft International Convention on Salvage. The CMI Conference was the precursor to the London Salvage Convention in 1989. This introduced into an international convention, for the first time, the concept of “special compensation” in respect of efforts by salvors to protect the environment. Although based on clause 1(a) of LOF 1980, it was much wider in its scope and, for example, was not restricted to oil tanker casualties. Article 14 of the Convention dealt with special compensation and provided that where a salvor had carried out services to a vessel which, either itself or by its cargo, threatened the environment and that salvor had failed to earn a reward under Article 13, then he should be entitled to receive from the ship owners his expenses as defined. There is provision allowing for the increase of the special compensation up to a maximum of 30% of the salvor’s expenses and the tribunal has the discretion to increase such special compensation further up to 100% of the salvor’s expenses. Salvor’s expenses are defined as out of pocket expenses reasonably incurred and a fair rate for equipment and personnel actually and reasonably used in the salvage operation.

The special compensation was payable by the ship owners’ liability insurers, that is their P&I Association. Despite the good intentions of the 1989 Convention, major disputes arose, not only over the existence of a threat of damage to the environment, but also over a “fair rate”. The P & I Clubs were concerned at the number of cases in which salvors were arguing that there was a threat of damage to the environment when they felt that there was no such threat. The salvors were concerned that the allowed compensation in respect of a fair rate for personnel and equipment used did not include a profit element. They reckoned that fair rate meant a fair rate of remuneration, whereas ship owners contended that it was a fair rate of expenditure. The ship owners’ view was upheld by the House of Lords in the NAGASAKI SPIRIT, a decision intensely disliked by salvors. Following that decision, negotiations took place between all parties interested in salvage resulting in the SCOPIC clause being agreed in 1999.

The SOPIC clause is supplementary to LOF 1995 but, once invoked, if its provisions are inconsistent with the provisions of the main agreement or inconsistent with the law applicable thereto, the SCOPIC clause shall prevail, to the extent necessary to give business efficacy to the agreement. Similarly, once invoked, the method of calculating special compensation under the SCOPIC clause shall prevail over the method employed in Article 14 of the London Salvage Convention 1989.

The salvor has the option to invoke the SCOPIC clause at any time and he must do in written notice to the owners of the vessel. Calculation of SCOPIC remuneration commences from the time of the written notice whilst any salvage services rendered before the notice is given are assessed in accordance with Article 13 of the Salvage Convention. Within two working days of receipt of the salvor’s notice, the ship owners must provide initial SCOPIC security to salvors in the sum of US$3 million, inclusive of interest and costs, either by way of a bank guarantee or P&I club letter of undertaking. If subsequently, by reasonable assessment, the ship owners contend that the initial security is too large, they can request a reduction in the same. Similarly, if the salvors reasonably assessed that the initial security is too small they can require the ship owners to provide further security which the owners are obliged to do so once a reasonable sum has been agreed. Any increase or decrease in the security can be decided by the arbitrator in the absence of agreement. If owners fail to provide initial security, then the salvor has the option of giving notice to owners to withdraw from the SCOPIC clause, in which case the salvor will look to the provisions of the main agreement for assessment of the award.

Once the SCOPIC clause has been invoked, the owners of the vessel may appoint a Ship owners’ Casualty Representative (“SCR”) to attend the salvage operation. The SCR must be chosen from a panel appointed by a committee, which has three representatives each from the International Group of P&I Clubs, the International Salvage Union, the International Union of Marine Insurance and the International Chamber of Shipping. This committee, which meets once a year, is also reasonable for an annual review of the tariff rates referred to above.

The SCR has the same primary duty as the salvor, namely to use his best endeavours to assist in the salvage of the vessel and her cargo and to prevent damage to the environment. However, the salvage master remains responsible overall for the salvage operation. The salvage master must keep the SCR informed throughout the salvage operation and must consult with him on the conduct of the salvage operation if circumstances allow. The salvage master, who, under the SCOPIC clause, must provide daily reports concerning the salvage operation, must also provide these to the SCR once on site. The SCR can either endorse the salvage master’s daily report or, if unhappy with it, prepare a dissenting report. If the SCR produces a dissenting report, then any initial payment due for SCOPIC remuneration shall be restricted to the tariff rate applicable to what, in the SCR’s view, is appropriate having regard to the equipment or procedure employed, until any dispute is resolved by either agreement or arbitration. As soon as reasonably possible after the salvage services have terminated, the SCR shall produce his final salvage report which will include a calculation of the SCOPIC remuneration to which salvor may be entitled. Whilst the ship owners have the primary responsibility of paying the fees and expenses of the SCR, the arbitrator shall have jurisdiction to apportion the fees and expenses of the SCR and to include them in his award.

The hull & machinery underwriter(s) and the cargo underwriter(s) may also each appoint on Special Representative called respectively the Special Hull Representative and the Special Cargo Representative at their own expense. These Special Representatives must be technical men, not practising lawyers, and may attend the casualty to observe and report the salvage operation. The salvage master and the SCR shall cooperate with the Special Representatives and grant them full access to the vessel. The SCR shall consult with them, and provide to them a copy of the salvage master’s daily report. The appointment of Special Representatives does not effect the right of either ship or cargo interests to send other experts or surveyors to the vessel for any lawful purpose, including inspection of ship’s documentation. However, the salvor can restrict access of such other persons if he feels that the salvage operation may be impeded or endangered.

A code of practice between the International Group of P&I Clubs and London Property Underwriters determines that the fees and disbursements of the SCR shall be split 50/50 between the liability underwriters and property underwriters and that the latter’s apportion shall be divided amongst the property underwriters according to the slaved value of the property salved.

The SCOPIC clause further sets out comprehensive tariff rates for personnel, tugs and other craft, portable salvage equipment, out of pocket expenses (i.e., Those monies reasonably paid by the salvor to any third party), and bonuses due. The tariffs are contained in an appendix to the SCOPIC clause. Where out of pocket expenses relate to hiring of personnel or equipment from another International Salvage Union member, they are to be calculated according to the tariff. IN other cases, the salvor will be entitled to his actual out of pocket expenses in full, subject to the SCR being satisfied that they are reasonable. Generally, the salvor will also be entitled to a standard bonus of 25% of the tariffs rates. The SCOPIC remuneration will only be payable by the ship owners to the extent that it exceeds remuneration calculated in accordance with Article 13 of the Salvage Convention. If the SCOPIC clause has been invoked but the assessment of the award under Article 13 is greater than the SCOPIC assessment then the award to the salvors shall be discounted by 25% of the difference.

If there is no potential salvage award under article 13, then any undisputed amount of SCOPIC remuneration must be paid by owners within one month of presentation of the claim, with interest accruing from the date of termination of the services until the date of payment at US prime rate plus 1%. If there is a claim for Article 13 salvage remuneration, as well as a claim for SCOPIC remuneration, 75% of the amount by which the assessed SCOPIC remuneration exceeds the Article 13 security must be paid by owners within one month of demand and any undisputed balance paid when the Article 13 salvage award has been assessed and falls due, with interest calculated as before. The salvors must indemnify the owners in respect of any overpayments in the event that any SCOPIC remuneration proves to be less than the sum paid on account.

The contractor shall be entitled to terminate the services by giving written notice to owners if he reasonably anticipates that the total cost of his services will exceed both the value of the property being salved and all sums to which he will be entitled as SCOPIC remuneration. The owners are also entitled to terminate their obligation to pay SCOPIC remuneration but they must give the salvors at least five days clear notice of such termination and, in these circumstances, the SCOPIC remuneration shall be calculated to include time for demobilization to the extent that such demobilization reasonably exceeds the five days notice of termination. Any termination by either party shall only apply if the contractor is not restrained from demobilizing his equipment by a government or other officially recognized body having jurisdiction over the area where the services are being rendered.

There is a detailed Code of Practice between the International Salvage Union and the International Group of P&I Clubs. It encompasses, amongst other things, the specific reasons whereby the P&I Club may refuse to provide security and the form of such security. The P&I Clubs undertake to advise the salvors within two working days of the SCOPIC clause being invoked as to whether or not they will provide security. Under the code of Practice, if no SCR has been appointed, then the P&I club is entitled to appoint an observer to attend the advised of the same. If the SCOPIC clause has been invoked, the P&I clubs will advise their member not to exercise their right of termination without reasonable cause. Both the P&I clubs and the ISU agree to recommend to their members the incorporation of the SCOPIC clause in any LOF.

The SCOPIC remuneration is not a general average expense and is for the ship owner to bear alone. Therefore, no claim in respect thereof shall be made in general average or under the vessel’s hull & machinery policy by the owners of the vessel.

The discussions and negotiations leading to the agreement between interested parties concerning the SCOPIC clause have been long and hard. It is therefore to be hoped that the result will be that the determination of the SCOPIC remuneration will be acrimony-free to the benefit of all.

PRESERVATION OF LOGS AND EVIDENCE

In general, all logbooks, night order books, bell books, charts and other records, which might have any bearing on an accident or casualty, shall be carefully preserved for future reference.

Events occurring immediately prior to a collision are of vital importance and the course recorder data roll must be preserved. Where radar was being used prior to the collision, all notes regarding the information obtained from the radar screen and the interpretation placed upon this information, together with details of any plotting must likewise be preserved.

In oil pollution incidents, adequate samples of the product spilled and of the contaminated waters should be preserved in sealed containers. These samples may be invaluable in defending a large claim, which easily arise from even a small spill.

Broken parts, samples of suspected lubricating oil and material having a bearing on machinery failure must be preserved.

When a personnel accident has resulted from the breakage of the ship’s equipment and it is practicable, the broken pieces should be retained on board, in case the equipment is called for as evidence at a future date.

Physical evidence should be labelled and certified by two officers aboard the vessel and shall not be disposed of without obtaining permission from the Company.

PHOTOGRAPHS AS EVIDENCE

Following shall be strictly adhered to:

• No photographs shall be taken except those commissioned by the Master.
• Before any such photographs are taken, the Master shall obtain written acknowledgment from the photographer that all copyright rests with the ship owner and that all negatives, digital copies and prints will be delivered to the Master.
• All negatives, digital copies and prints shall be forwarded to the Company, and no copies shall be retained on board.
• Each print should be endorsed on the back “Copyright reserved by (insert name of vessel owners)”.

NOTE OF PROTEST

A Note of Protest shall be executed before a Notary or Officer of a Court whenever during a voyage, heavy weather or an accident has been occasioned to which known or envisaged damage to the vessel or its cargo has been or may be attributed. The Note of Protest shall be executed not later than 24 hours after arrival at the first port, or after the occurrence of the accident if occasioned in port. When circumstances preclude noting protest then the protest, shall be executed on arrival at the next port.

EXTENT OF PROTEST

Under no circumstances shall a Master specify in the Note of Protest any damage that is envisaged. The words “fearing damage” are adequate to afford proper protection and any specification of damage appearing in the Note of Protest may prejudice the interest of the ship. Under no circumstances shall a Note of Protest be extended (that is detailing damage) without authority from the Company.

Obviously, it is necessary for a Master to ensure that the logbook entries, particularly for heavy weather, must support the need to note protest.

If Protest is noted, the following documents may need to be produced to the notarizing official concerned:

a) Ship’s papers including the Official Log.

b) Extracts (in duplicate) from the Ship’s Log Book relating to the event which is the subject of the Protest; and.

c) Deck and Engine Log Books written up and signed up to the time of arrival at the port where Protest is to be noted.

Master should reserve the rights of his principals to extend the protest at a later date.

DEVIATION FOR PERSONAL INJURY

Deviation to obtain urgent medical attention is the Master’s prerogative and, if that course is adopted, the Master should send the following information to the Company or agent at the port the vessel is putting into:

• Employee’s name.
• Employee’s rank or rating.
• Full details of injury.
• Advice obtained from Radio Medical Service.
• Special facilities required on arrival at port.
• ETA

The message to the Company should include the name and (contact) address of the personnel looking after the patient while ashore. In such cases, it will be in order for the Master to sign acceptance of expenses (if required) arising from the medical attention as may be required. The local P&I correspondent must be informed to monitor treatment expenses. Subsequently, the Master should send completed written reports to the Company.

SALVAGE SERVICES RENDERED TO OTHER VESSELS

In case a Company vessel is involved in salvage services to another vessel, no agreement as to compensation or award shall be made, except under special instructions from the Company. The Master shall endeavour to obtain from the Master of the salvage vessel, or person in charge of the property to which the salvage services have been rendered, a signed statement of the nature and extent of the services, including acknowledgment of the fact that the salvaged property is in safety and that no further aid is necessary.

Logged entries shall contain a summary of the services rendered and shall include any time lost by reason of the salvage, any gear, equipment or stores lost consumed or any personal injuries sustained during the salvage services. The Engine Log-Book shall contain an entry on fuel or Engine Room gear, equipment or stores lost or consumed by reason of the salvage service. The Master shall make a report of the essential facts by telephone or telex/email/fax means to the Company, to be followed by a written report stating the complete details of the salvage services rendered.

SALVAGE SERVICES REQUIRED BY COMPANY VESSELS

In cases of extreme emergency when salvage assistance is necessary, the decisions to be made for the safety of the crew, vessel and cargo are the prerogative of the Master. However, maintaining contact with the Head Office can derive considerable assistance

If, in the Master’s opinion, the vessel is in imminent danger and requiring immediate assistance, the Master shall endeavour to secure the necessary assistance of outside craft on a towage basis, expressed as a towing job, or on a flat agreement for a stipulated amount. Failing this, the Master has the authority to bind the ship and the cargo interests to salvage assistance. This should be on the terms and conditions contained in Lloyd’s Open Form of Salvage Agreement which incorporates the principle of “No cure, No pay”.

Lloyd’s Open Form (LOF), “LOF 2020” format should be used for engaging in a Salvage Agreement, unless specified otherwise by Company. LOF 2020 is available as the company’s form EP 7 along with other versions of LOFs.

The Master will have to sign the Lloyd’s Open Form, but in the event that time, weather or other circumstances prevent signing, the Master must signal the salvor as follows :

“ACCEPT SALVAGE SERVICES ON BASIS OF LLOYD’S OPEN FORM – NO CURE NO PAY – ACKNOWLEDGE REPEATING FOREGOING – MASTER”

It is the duty of the Master to ensure that the vessel assist the salvor to the fullest and keeps the salvor fully informed of the vessel’s capabilities, including engines and steering.

WAR RISK

WAR POLICIES

1) The policy covers damage caused by:

• Any mine, bomb or torpedo not carried as cargo on board the vessel.
• Civil war, revolution, rebellion, insurrection, or civil strife, arising there from.
• Strikes, lockouts, political or labour disturbances, civil commotion, riots, martial law, military acts, or vandalism.
• Hostilities or warlike operations.

2) War Risk Policies DO NOT cover:

• Outbreak of war between any of the great nuclear powers. (Entire market suspends cover).
• Delay or demurrage (General Average detention expenses are covered).
• Requisition by the Government of the Flag State for military purpose.

3) Other points to remember are that:

• War risk policies do not have deductible and are not subject to annual aggregate deductibles as in normal hull and machinery covers.
• Unlike conventional policies, war risk policies pick up liability for protection and indemnity risks.

NOTIFICATION FOR ENTRY INTO JWC LISTED AREA

Master to notify Hull & Machinery underwriters (keeping owners & technical department in copy) in advance of likely entry & likely exit from the Joint War Committee (JWC) listed area.

NOTIFICATION FOR STS OPERATION

Ship’s Hull & Machinery underwriters to be notified prior every STS operation, unless the insurance policy specifies that it is not required or owners advise similarly in writing.