INSURANCE COVER AND DAMAGE OR FAILURE OF SHIP'S OWN EQUIPMENT

INSURANCE COVER AND DAMAGE OR

FAILURE OF SHIP'S OWN EQUIPMENT

Introduction

Although there are no legal requirements to compel a shipowner to insure his vessel (provided his vessel is free of mortgage commitments), most owners trading today have various forms of insurance cover. Normally, a shipowner may recover any loss which he suffers if:

The damage is due to an insured peril;

The owner can provide sufficient evidence of the cause and extent of the damage suffered;

The vessel was in a seaworthy condition at the time of the incident which caused the loss and was engaged in a lawful trade; and

The value of the loss exceeds any deductible that may apply to the policy.

The terms of all marine insurance policies place an obligation on owners to maintain the vessel's equipment in a thoroughly efficient state. The term equipment as it relates to a commercial vessel covers the hull, machinery, stores, provisions, bunkers, and all other fittings that may be required for the trade in which the vessel is involved.

Any damage to or failure of the ship's equipment which could affect the vessel's seaworthiness or the efficient state of the vessel must be reported to owners as soon as it occurs. This rule applies to any defect in the vessel's equipment which can be reasonably detected by the due diligence of the officers on board in the performance of their duties.

Owners are also under an obligation to maintain a safe working environment at all times on board the vessel. A relatively minor defect in a particular piece of equipment may affect the safety of the working environment. For example, if the safety guard on a motor or part of machinery falls off, and if the initial failure of the equipment is not noticed, it often becomes normal for the crew to operate this equipment in what may be a dangerous manner. The Master, therefore, must be constantly vigilant against such minor defects.

If the ship's equipment becomes damaged, owners will generally be able to recover any loss if the requirements listed above are fulfilled. However, the Master is under a duty to act as if the vessel is uninsured and provide a full and complete record of the incident.

This chapter examines the following:‑

The type of evidence required from the Master in the event of equipment failure

Evidence relating to the cause of damage,

Evidence required if damage causes stoppage or delay,

Evidence required when damage or failure impairs vessel's efficiency;

The scope of the insurance cover

Risks covered ‑

Hull and Machinery,

P&I,

Role of various parties Involved ‑

Salvage Association,

P&I Surveyor,

Classification Society Surveyor.

Stevedore damage.

In the appendix to this chapter, a case history is provided and the procedures to be followed in the event of stevedore damage are discussed.

Evidence required from the Vessel

Although the list provided below is not exhaustive, it gives an indication of the type of evidence required by the various parties involved in the event of equipment failure

Evidence related to cause of damage

Damage report prepared by the Master or chief engineer;

Photographs of the damaged equipment in place and after removal;

Parts of the damaged equipment and other relevant items which should be retained for inspection;

Log books and maintenance records relating to the piece of damaged equipment;

Any other records relating to the damaged equipment showing running hours, or evidence of

previous inspections or surveys;

Reports from other personnel involved in the incident.

Evidence required if damage causes stoppage or delay (in addition to above)

Deck and engine log books covering the period of the incident;

Statement of fuel remaining on board at the beginning and end of the stoppage;

Details of any deviation caused by the incident;

If deviation to a port of refuge is required:

a. reports or confirmation of class by classification society surveyor,

b. statement of facts from port agent,

c. details of all shore assistance provided that it is attributable to damage;

Names of all the surveyors who have attended the vessel with full details of the organisations they represent;

Copies of telex and radio messages sent or received, particularly those directed to time charterers dealing with deviation and off‑hire times.

Evidence required when damage or failure impairs vessel's

efficiency

Details of additional time and fuel used as a consequence of the inefficiency;

Details of the extra labour and equipment used and a record of times when they were used;

Copies of all correspondence from the port agent holding vessel liable for delays.

If the vessel's efficiency has been impaired as a result of damage to equipment, the

Master should follow the procedures listed below:

Ensure that statements and time sheets are accurate before signing them;

Ensure that written permission is obtained from the port authority, if as a result of delay caused by the vessel's inefficiency, the vessel has remained alongside a berth after completion of cargo operations.

Many disputes have occurred when ships have remained alongside on the strength of a verbal assurance from a jetty foreman, and consequently, owners have been faced with high penalty charges for remaining on the berth. The port agency will have details of charges involved.

Risks covered

The extent of cover provided by marine insurance policies varies enormously. The Master should verify his owner's cover for each vessel. The lists provided below give an indication of the type of risks covered by hull and machinery and protecting and indemnity ('P& I') policies.

Hull and Machinery (relating to damage to ship)

1. Perils of the sea, rivers, lakes, or other navigable waters;

2. Fire and explosion,,

3. Violent theft by persons outside the vessel;

4. Jettison;

5. Piracy;

6. Breakdown of or accidents to nuclear installations or reactors;

7. Contact with aircraft or similar objects or objects failing from aircraft, contact with land conveyances, docks or harbour equipment, or installations;

8. Earthquakes, volcanic eruptions, or lightning;

9. Accidents in loading, discharging, or shifting cargo or fuel;

10. Bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull;

11. Negligence of the Master, officers, crew, or pilots;

12. Negligence of repairers or charterers;

13. Barratry of Master, officers, or crew;

14. Pollution hazards (which includes damage to ship caused by preventive measures);

15. Three‑fourths collision liability (payment to third party).

M Cover (relating to damage to or failure of ship's equipment)

Damage to third party's equipment and property;

2. One‑fourth collision liability;

3. Oil pollution.

Role of Parties Involved

Salvage Association ‑ acting on behalf of hull underwriters ‑

When damage to a vessel occurs which may give rise to a claim, owners have a duty to advise underwriters promptly. The underwriters will contact the Salvage Association, who will in turn instruct a surveyor to attend the vessel. The surveyor's job is to establish the facts surrounding the damage. The Salvage Association is an independent organisation which has representatives all over the world.

PM Surveyor ‑ acting on behalf of owners ‑

When damage occurs to the property of a third party ‑ for example, if a pipe fails during bunkering and oil is spilled into the harbour ‑ owners' PM club will protect their interests in the ensuing investigation and clean up operation. When damage occurs, the owners or Master should alert the local P&1 representative, who will instruct a surveyor to attend and assist. He will submit his report to the owners, and, if necessary, will also arrange security with the club.

Classification Society Surveyor‑ acting on behalf of Class ‑

The role of a classification society in the merchant shipping community of today is to:

Develop rules and standards for the design and construction of vessels;

Conduct surveys during the construction of vessels in order to verify that all rules and

standards are complied with and to conduct regular surveys during a vessel's service in

order to monitor the standard of maintenance;

Assign class when rules and standards are upheld.

When damage to any part of the ship occurs which could affect the vessel's seaworthiness, a surveyor representing the vessel's classification society will attend.

All marine insurance policies impose an obligation on owners to maintain the vessel in class. If class is suspended as a result of a failure to comply with survey requirements or as a result of un-repaired damage, insurance cover is terminated automatically from that time. However, if the damage is an insured risk, termination of cover will only occur if the vessel sails from her next port of call without the prior approval of the classification society.

Stevedore Damage

If stevedores cause damage to the ship's equipment, the Master must take care to comply with the terms of the charter party relating to stevedores. Stevedores often are appointed by charterers, shippers, or receivers. However, charter parties may contain terms which provide that charterers are not responsible for any damage caused by stevedores. Examples of such clauses are as follows:

'Charterers, Shippers, or Receivers shall not be responsible for the act and default of the Stevedores at loading/discharging ports. All claims for damage allegedly caused by Stevedores to be settled directly between Owners and Stevedores at loading/discharging ports. Master to notify Stevedores of damage, if any, in writing within 24 hours after occurrence, otherwise Stevedores not to be held liable.'

'Charterers not to be responsible for Stevedore or other damage to the vessel unless notified in writing by the Master at the time of the occurrence of the damage or as soon as practical, The Master is to co‑operate with Charterers and Agents in giving prompt Notice of Claim in writing to party causing damage and securing their admission of liability. Copy of correspondence,

together with original letter acknowledging liability, if any, to be sent to Charterers. On damage occurring, Master shall immediately report telegraphically to Charterers.'

Charterers may not always escape liability as a result of such a clause. However, as owners rarely have any contractual contact with stevedores and thus have no direct recourse against them, it is important that the Master complies with any such clauses. Moreover, if all the documentation covering the incident has not been completed at the time of the incident, recovery may not be possible.

The Master should also ensure that all un-repaired stevedore damage is noted in any off‑hire survey and that charterers are invited to inspect damage repairs being carried out in dry‑dock. If the damage is minor and does not effect the vessel's seaworthiness or efficient state, repairs may be deferred to the next dry‑docking.

APPENDIX

Case History

The subject vessel was a chemical tanker, on passage from Swansea to Gothenburg and Fredericia. She was loaded with 990MT of ethanol and isopropanol. She sailed from Swansea on 12 December, 1981.

On 13 December, the vessel met severe heavy weather with winds up to force 10.

During the morning of 14 December, the wind increased to force 11. The vessel passed through the Dover Straits, and at 0648 hours, the Sandettie NE buoy was seen close on the starboard bow. The vessel's helm was put immediately hard over to port, but this failed to have any effect on her set. At 0650 hours, a bump was felt on her starboard quarter followed by an explosion and abnormal noises from the engine room.

It was assumed that the propeller had touched the chain of the buoy. The 2^nd engineer, on duty in the engine room, promptly advised that the main engine gear box was vibrating and that smoke was issuing from the stern gland. He requested that the engine be stopped.

On stopping the main engine, an inspection was made of the main engine gear box, and it was observed that the gear box casing had completely fractured just above the holding down bolts. It was also noted that the propeller was being turned by water movement. In addition an inspection was made of the stern tube seals. These appeared to be intact as there was no evidence of leakage into the engine room.

A mayday call was sent by radio at 0655 hours requesting immediate tug assistance.

The call was answered by the Dover and French coastguards, and another vessel in the vicinity agreed to stand by until a suitable tug arrived.

Attempts were made by the ship's engineers to secure the shafting, but these were unsuccessful due to heavy seas turning the propeller. A constant watch was kept on the vessel's position. Due to the strong WSW wind causing the vessel to drift towards Fairy Bank and the anticipated change in the current direction, the Master decided to anchor. At 0750 hours the port anchor was let go with the Fairway Bank buoy bearing 105 degrees, at a distance of two miles.

The vessel made contact with a tug steaming from Dunkirk at 1100 hours. The Master of the tug requested agreement of services being rendered under Lloyd's Open Form of salvage agreement. This was accepted by the Master, and the tug came alongside at 1105 hours, at which time the standby vessel was released.

The Master explained to the tug Master that prior to commencement of tow, the vessel's propeller shaft would need to be secured to avert the possibility of the propeller turning (due to movement through the water), and causing failure of the stern tube seals. To assist this operation, the tug Master was requested to hold the vessel's head to windward. Connection of the tow was completed at 1227 hours, and by 1235 hours, the tug held‑hauled the vessel's head to windward. The ship's engineers then secured the propeller shaft and gear box using timber, wires, and bottle screws.

This work was completed by 1730 hours when the port anchor was weighed, and towage towards Dunkirk commenced. The vessel arrived in berth at Dunkirk at 2400 hours, following which the tug Master boarded, and the redelivery certificate was signed by the Master.

The following morning, the Master attended the offices of the tug owners and signed Lloyd's Open Form of salvage agreement. Security was lodged by the owners with Lloyd's (220,390 for ship and freight and 29,610 for cargo).

On 15 December, a surveyor, appointed on behalf of hull underwriters, accompanied by another surveyor, acting on behalf of the classification society, and owners' superintendent, made an examination of the damage to the M.E. gear box. A diver was employed to inspect the vessel's bottom and stern area. The diver's report showed that two blades of the four bladed propeller were damaged, one of them damaged severely.

It now became apparent that the vessel's cargo would need to be discharged before the vessel could be repaired. As Dunkirk had no facilities for storage of the alcohol, it would become necessary to tow the vessel to a suitable port. Enquiries revealed that there were alcohol storage tanks available in Antwerp. A contract was arranged with the owners of the salvage tug for towage to Antwerp.

The classification surveyor agreed to permit towage, provided that the propeller shaft and gear box were secured in order to prevent the propeller turning during towage.

The work was completed on 16 December, and the vessel left Dunkirk at 1145 hours under tow of the attending tug.

The tow was handed over to Antwerp tugs at the entrance to the river Scheldt, and the tow continued to Antwerp where the vessel berthed alongside the shore tank installations at 1118 hours on 17 December. Discharge of the cargo into the shore tanks was commenced at 1625 hours, and completed by 0305 hours on 18 December. At this stage, gas freeing of the vessel's cargo tanks began.

At Dunkirk, a specification for repair of damage was drawn up, and two repair contractors in Antwerp and Hamburg were requested to submit repair quotations. On the basis of these quotations, the repair contract was awarded to an Antwerp yard.

The vessel dry‑docked following completion of gas freeing on 18 December. She was attended by the hull underwriters' surveyor and owners' superintendent. On examination it was found that the intermediate gear box casing, lower gear box casing, and the forward bearing housing were fractured. In addition, the gear teeth on both the pinion and main gear wheels were chipped and hammered, the flexible coupling was damaged, the intermediate shaft bearing brasses were fractured and distorted, three propeller blades were damaged to varying degrees, the tailshaft was bent, and finally, the tailshaft coupling bolts were damaged.

In view of the extensive damage, the gear box needed to be replaced. Enquiries revealed that a suitable gear box was not immediately available. The manufacturers of the original gear box agreed to deliver a new gear box by the end of March 1982.

The damaged gear box and coupling were removed from the vessel on the 23 December and delivered to the gear box manufacturers in order that some of the undamaged parts could be used in the new gear box.

The vessel remained in dry‑dock until 29 January during which time all repairs apart from work connected with the gear box and flexible coupling were undertaken. She then was placed alongside a lay‑by berth awaiting arrival of the new gear box.

In view of the anticipated delay to the vessel, arrangements were made to charter a substitute vessel for delivery of the cargo to its destination. Loading of the cargo into the substitute vessel was carded out on 8 January. The cargo was delivered at Gothenburg on 11 January and at Fredericia on 12 January.

The new gear box and repaired flexible coupling were delivered to the yard on 27 March and fitted into the engine room. Installation of the gear box and realignment of the main engine were completed on 8 April. Following satisfactory engine trials and class approval, the vessel left Antwerp at 1648 hours the same day.

Under the terms of the Lloyd's Open Form of salvage agreement, negotiations were subsequently opened between various lawyers representing the ship and freight, cargo, and the tug owners. The parties agreed to a salvage settlement of 100,000 plus the costs of the salvors' lawyers of 2,918.57. This amount of 102,918.57 was apportioned between ship and freight and cargo on the basis of values adopted during negotiations, and the relative amounts were settled by the respective parties.

Main Items of Evidence used in Claim

(Lloyd's standard form of Salvage agreement was signed by the Master on owner's behalf on 15 December in Dunkirk).

Provided by the Ship

Deck log book;

Engine log book;

Master's report to the company;

Master's statement taken by the solicitor representing owners;

Chief engineer's statement taken by solicitor representing owners.

Provided by Other Sources

Diver's report at Dunkirk;

Salvage Association's reports from surveyors at Dunkirk and Antwerp;

Class surveyor's reports and certificate of seaworthiness for Voyage to Antwerp

Survey report covering transfer of cargo from ship to shore tanks in Antwerp;

Accounts and time sheets for all stages of investigation and repair;

Valuation certificate for vessel and cargo based on value at time of casualty;

General average adjustment.