Misc

Question 1

Treatment of the cost of overtime to expediate repairs

Answer 1

– In general not allowable in particular average, unless it can be demonstrated that there was a saving, then the excess cost of overtime will be allowed up to the saving in total number of days required on repairs and therefore in other expenses such as port charges, general services
- If the overtime is unavoidable. A particular repair may have to be carried out continuously for technical reasons. In such cases the excess cost of overtime is allowed as part of the reasonable cost of repairs without reference to savings.
- D10 Liner vessels:
Where a vessel is operating to a fixed and advertised schedule, the cost of temporary repairs and overtime that are reasonably incurred to maintain that schedule may be allowed to particular average without regard to savings to hull underwriters

Question 2

Treatment of the cost of temporary repairs

Answer 2

• In general not allowable in particular average without considering first whether the effecting of the repairs has resulted in a saving to underwriters may be a saving in drydock dues and other expenses if the repairs are postponed until routine drydocking and repair period
• Effecting temporary repairs may result in a saving to underwriters when they enable permanent repairs to be effected at a cheaper repair port.
• Impossibility: if there is no facility to effect full permanent repairs at a port the cost of temporary repairs effected there is allowable in particular average.
• Unreasonable delay: if the full permanent repairs cannot be effected because a certain part necessary for the permanent repairs is not available for an unreasonable period, the cost of temporary repairs may be allowable as particular average. The reason is that a vessel is a valuable freight-earning instrument and it would be unreasonable to keep a vessel out of service for a long period when relatively minor temporary repairs would enable her to continue trading.
• Allowable in GA when necessary for the safe prosecution of the voyage
• D10 Liner vessels:
  Where a vessel is operating to a fixed and advertised schedule, the cost of temporary repairs and overtime that are reasonably incurred to maintain that schedule may be allowed to particular average without regard to savings to hull underwriters

Question 3

Treatment of progressive damage sustained over more than one policy period

Answer 3

• Percentage of progressiveness will be estimated by an engineer per year, this is then apportioned in relation to the damage repairs
• I.e. 10,000 damage repairs
• Policy year A: 40% of damage pays £4,000
• Policy year B: 40: of damage pays £4,000
• Policy year C: 20% of damage pays £2,000

Question 4

General average absorption clauses

Answer 4

The insurer will cover the assured’s general average expenditure / sacrifice up to a specified amount without the assured having to exercise his rights to contribution from other parties liable to contribute. Help advance the move away from declaring general average for claims which are either small or uneconomic to adjust. I.e. If there is a large amount of cargo owners.

Question 5

Increased value policy

Answer 5

Increased value policy insures the full value, or mortgage value of a vessel and/or the additional costs of replacing a vessel if it is a total loss.
Comes into effect during constructive total loss of the vessel. The assured will receive the total value insured under the primary insurance and all additional amounts insured by the increased value policy, regardless of the sound value of the vessel at the time of the event giving rise to the constructive total loss.

Question 6

Excess liability policy

Answer 6

Excess liabilities policies provide coverage in respect of the balance of any general average, salvage, sue and labour charges and collision liabilities which are not recoverable under the original policy by reason of underinsurance.

Question 7

Loss of hire insurance under ABS Loss of charter hire insurance 1/10/83

Answer 7

• Shipowner may wish to have some form of coverage to protect him against the loss of hire in the event of the vessel being place off hire or unable to trade in consequence of damage sustained as a result of an insured peril under ITC Hulls, American Institute Hull clauses, Norwegian Hull Form, or breakdown of machinery provided breakdown hasn’t resulted from wear or tear or want of due diligence by the assured. LOH provide for the assured to be indemnified at a fixed daily rate subject to a deductible period of X, and a period not exceeding X amount of days.
• If the vessel is prevented from earning hire on separate occasions, which shall not in any event exceed three, in respect of any one accident or occurrence falling within this insurance, for the purpose of ascertaining the amount claimable hereunder the total time that the vessel is off hire shall be taken into account, provided that the repairs are completed within 12 months of the expiry of this insurance.

Question 8

P&I Insurance

Answer 8

• Loss of life or injury, repatriation expenses, medical expenses of crew;
• Costs of removal of wreck, liabilities to harbour authorities, etc;
• Pollution;
• Claims in General liability to cargo arising out of the vessel’s breach of the contract of affreightment;
• the proportion of general average expenditure, special charges or salvage unrecovered from other parties to the marine adventure by reason of a breach of the contract of carriage;
• collision liabilities not covered under hull and machinery insurance policies;
• ship’s proportion of general average, special charges or salvage not recoverable from hull and machinery insurers by reason of the contributory value being in excess of the insured value, provided that the club can be satisfied that the vessel was insured for a reasonable value when the policies were effected.
• Items such as these may be covered by a protection and indemnity association if the vessel is fully entered.

Question 9

Lloyd’s Open Form

Answer 9

The duties which LOF sets out do not come into effect until the contract is signed; there is no pre-existing contractual relationship between the ship and the salvor which would exclude the salvor from the definition of a volunteer.
- English law.
- Contractors agree to use their best endeavours to save the property and to take the property to the named place or to such other place hereafter agreed. If no place named then the contractors shall take the property to a place of safety
- “No cure - no pay” make it clear that success is a fundamental requirement for the contractor to receive a reward.
- While performing salvage services the contractors shall use their best endeavours to prevent or minimise damage to the environment.
- Prior services rendered by the contractors shall be deemed covered
- It is the duty of the property owners to:
a. allow contractors to make reasonable use of the vessels machinery, gear, equipment free of expenses provided the contractors shall not unnecessarily damage, abandon, sacrifice any property on board
b. Contractors entitled to all such information as may be reasonable required without difficulty or delay
c. owners of property shall cooperate fully with contractors in obtaining entry to the place of safety
- When there is no longer any reasonable prospect of a useful result, owners / contractors shall be entitled to terminate the services hereunder by giving reasonable prior written notice
- In many cases the parties agree to be bound by the Special Compensation P & I Club clause (SCOPIC) which provides an alternative remuneration to salvors.
- Salvage reward is in relation to how much is saved of the property.

Question 10

Open cover

Answer 10

The open cover is a contract for 12 (twelve) months which gives the Insured continuous protection to cover large number of shipments / despatches and the premium of which would be adjusted from the respective cash deposit account maintained by the Insured

Question 11

Documents the assured would be requested to provide when submitted a cargo claim

Answer 11

(1) Manifest of the cargo on board at the time of the accident.
(2) Copy of the bills of lading showing the front and reverse sides.
(3) Details of the outturn of cargo delivered.
(4) Any reports of survey on the cargo held directly following the casualty or at the port(s) of destination.
(5) General average security documents furnished by cargo interests (i.e. average bonds and general average guarantees).
(6) Counterfoils of any general average deposit receipts issued.
(7) Copy of the commercial invoice(s) covering the particular consignment(s).

Question 12

Depreciation basis

Answer 12

The depreciation in the sound market value is the claim.

Question 13

Salvage loss basis

Answer 13

Insured value - net proceeds of sale
If it is not economical to wait for the vessel to be repaired and forward the cargo, some owners will elect to sell cargo at the port of refuge, avoiding a bigger loss.

Question 14

Time bars applicable to policy claims under English Statute Law

Answer 14

6 years from cause of action (damage discovered / casualty occured)