Lloyds List article How to survive a casualty

Standard Club claims chief shares advice

Liz McMahon - Friday 15 February 2013

IT IS vital to get the response to a casualty right because wreck removal costs are an increasingly significant feature of maritime casualties and it is ultimately shipowners that bear the burden through increased insurance costs, Standard Club syndicate claims director Sam Kendall-Marsden says.

While some cost drivers such as location are matters of fortuity and cannot be controlled, Mr Kendall-Marsden says others can be and it is important to focus on these to mitigate the overall costs. For example, he says the plan, timing, contract selection and choosing the right contractor can all be managed.

“It is important to have a clear picture of true facts as quickly as possible and before you make a decision. You will find that you are bombarded with information immediately after the casualty, and not all of it will be accurate,” he advises.

At this point, an experienced P&I club claims handler may, if appropriate, deploy to the scene without delay to evaluate the situation and assist the member on site. Mr Kendall-Marsden says this may include liaising with the authorities and negotiating with salvors.

“It is vital to make contact with the authorities at an early stage and offer them a credible strategy. It is also useful to have knowledge of third-party experts, like the International Tanker Owners’ Pollution Federation, who have a database of local resources in many areas,” he says.

Mr Kendall-Marsden says tendering is a tried and tested method of arriving at the best solution at a competitive cost but an effective tender process depends on the bidders being provided with sufficient information and being allowed sufficient time to prepare bids.

“Be aware that if an LOF [Lloyd’s Open Form] is signed, the salvors may invoke Special Compensation P&I Club Clause and this could make it harder to terminate the contract and switch to the next phase of the response (possibly with alternative contractors) than may otherwise be the case,” he warns.

“This is because clause nine of Scopic prevents termination if the relevant authorities prevent the salvor from demobilising its equipment.”

In any event, it is critical to have a viable plan for the following phase of the response that the authorities will accept, Mr Kendall-Marsden says. This plan may include a “caretaking” phase with visible signs of progress to satisfy the authorities that progress is being made.

“Consider a lump sum contract to control costs, facilitate accurate reserving and share risk with the salvors. Bonuses and penalties can also be used to incentivise timely contractual performance,” he says.
Pinpoint all the major players in the casualty and their importance and how they can influence the process, Mr Kendall-Marsden says.

These include: the insurance manager and other relevant shipowner staff; P&I club claims manager; hull and machinery underwriters; the authorities (which will vary from case to case but which would invariably include the local coastguard); salvors; correspondents; lawyers; and pollution responders or advisers.

“Do not take any big decisions without your insurers and ensure that the insurance manager has strong relations with their club,” he says.

“Also ensure that individual masters and shoreside staff are sufficiently educated in how to respond so that they do not, for example, sign a contract presented to them by a salvor without first seeking advice.

“Ignoring local authorities or appearing not to understand their needs can make for a very unhappy experience. Challenging unreasonable requirements may be an option in appropriate cases.”

This article is copyright Informa and is reproduced with permission. Reproduction, retrieval, copying or transmission of this article is not permitted without the publisher's prior consent. Informa does not guarantee the accuracy of the information contained in this article nor does it accept responsibility for errors or omissions or their consequences.

This article appeared in Lloyd's List on 15 February 2013. For more information visit www.lloydslist.com