Defining crew and wages just two of many challenges for adjusters, says Richards

Deciding who qualified as “crew” and what qualified as wages were just two areas of marine claims “shaded in grey,” according to Willum Richards, chairman of the Association of Average Adjusters

In his Chairman’s Address at the Association’s annual general meeting on May 10th Richards urged the insurance market to apply its “policy-reforming zeal” to key areas of marine claims that continue to lack clarity.

Looking at what Richards called “the grey world of the fishing vessel claim,” he said that the insurance issues which arose with large bulk carriers, tankers and container ships or large, multi-bill of lading general averages were often seen in the fishing vessel arena, but trying to use the same concepts in fishing vessel or offshore supply boat claims as are used with tankers and bulk carriers produced “nonsensical and inequitable results”, he claimed.

Fishing vessels are a huge class ranging from small, inshore craft with a crew of two or three, to substantial ocean-going factory vessels with more than 40 people on board and values above $50 million. Richards noted that in 2015 UN statistics indicated the world fishing fleet to be around 4.5m vessels, while there were only 17,000 general cargo ships, 11,000 dry bulk carriers, 13,000 oil or chemical tankers and just over 5,000 container ships.

Of the 4.5m fishing vessels, some 1.7m were not powered, being little more than rowing boats. Those over 100 gt numbered only 40,000.

Richards said that fishing vessels were not an insignificant market segment, but in some instances their insurance cover was placed by brokers and underwriters who were unfamiliar with marine conditions. “Whilst there are specialists, in many parts of the world fishing vessels are often broked and insured by people who are more confident discussing the cover available for farm irrigation systems and cattle in transit than general average”, Richards claimed.

Richards said that most of the development of marine policy wordings, law and instruments such as the York-Antwerp, Hague-Visby and Rotterdam Rules usually concerned commercial vessels on a voyage from A to B, with third-party cargo or passengers. “If, after several hundred years, we are still making mistakes and struggling to understand the intricacies of maritime law for ‘proper shipping’, imagine the situation when one ventures off and starts to look at some of the darker backwaters of the marine insurance world where the light of legal precedent and consideration rarely, if ever, penetrate.”

He said that fishing vessel insurance raised questions and adjusting issues which had a wider application to other areas of shipping. However, he warned that trying to fit some of the rules and policy wordings from mainstream shipping into the fishing trade could be challenging. It could leave an average adjuster wondering whether some of the law was really intended to produce the bizarre outcomes which often resulted.

Examining the complexities, Richards said that the Institute Fishing Vessel Clauses, under which many commercial fishing vessels are insured, date from 1987, and owe their parentage to a blend of the Institute Time Clauses (Hulls) and the British Trawler All Risks Clauses. It was in the adaptations for the fishing industry that some of the problems were found.

Clause 9 on wages and maintenance states that underwriters should pay the cost of wages and maintenance of members of the crew retained while a vessel is undergoing repairs for which the underwriters are liable. “With the wage bills on some vessels approaching $100,000 a week, you can easily see how the wages element can start to dominate a claim for a relatively inexpensive repair,” said Richards.

It was, therefore, important to have agreement on what was meant by the terms “crew”, “wages” and “maintenance”.” Should we consider everyone who works on a vessel part of the ship’s complement or some smaller subset and if so who? Fishing vessels could have a complement of only one or two people or they could have more than 40 with many engaged exclusively on processing the fish”, noted Richards.

Cruise ships and ferries likewise would have a marine team who navigate the vessel and large numbers of staff to entertain the passengers or work in a casino, together with cleaners and cooks who may loosely be referred to as hotel staff.

The fishing vessel clauses make an allowance for the wages of the “crew” only. Is this intended to exclude the master and any officers, asked Richards? “One might think so if there is to be a consistent definition across the various Institute Time Clauses at least”, he said.

The Merchant Shipping Act says the complement is more or less everyone on the ship except the master; in 1971 the Association of Average Adjusters advisory and dispute resolution panel said it is everyone engaged under articles and of so-called “sea-going rank”. meanwhile the Institute Time Clauses (Hulls) and the York-Antwerp Rules did not provide a definition of crew, but made allowances for the wages and maintenance of the “master, officers and crew” which, Richard said, indicated that the term “crew” was not intended to include the master and officers.

Richards suggested that the crew should be taken as everyone on board the vessel who works towards its commercial purpose (be that of transporting and entertaining passengers or catching and processing fish) and who is engaged directly or indirectly by the shipowner or insured.

“If insurers want to restrict allowances for ‘wages’ to a smaller subset of individuals, then I would suggest, as Scandinavian underwriters have tried to do with the Nordic Plan, that clearer and more specific wording would be required and would not be overly complex to draft. A few well-chosen words would suffice”, Richards said.

Moving on to the concept of general average for fishing boats, Richards noted that for fishing vessels and offshore supply vessels (OSVs), the voyage profile of the vessel leaving a port for a point in the ocean to go fishing and then returning to the port they started from did not fit well with the law and rules around general average which were predicated on a voyage from Port A to Port B.

Inequitable results were often the result, whereby the shipowner either got all his expenses of returning to his home port considered as general average, or none of them. This depended on the stage of the fishing campaign at the time of a casualty. The difference between all or nothing, under the current rules, could be a singular point of time, said Richards.

With fishing vessel claims there is often a “benevolent cargo owner” in that he is also the owner of the ship. The cargo or catch insurer is often also either the hull insurer, or at least the lead insurer or holding a significant share of the hull cover. Richards felt, therefore, that it should be possible to generate a wording whereby equity was achieved for both hull insurers and the insured. “Allowances based on the percentage of expected catch on board at the time of the loss would seem sensible”, Richards said. He concluded that the current all-or-nothing approach would almost certainly unduly benefit the insurers or the insured at the expense of the other, but in very few cases would it comply with the concepts of equity and fairness which Richards said were “in the DNA of General Average”.

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