Wreck removal, salvage liabilities, lost anchors

Larger claims often involve wreck removal, according to Head of Division Sam Kendall-Marsden in the latest Standard Club bulletin. This means it is important to understand the difference between wreck removal and salvage liabilities, as well as specific issues concerning lost anchors, he said.

As with all P&I clubs, a major portion of the Standard Club’s total claims cost relate to a minority of the total claims, and many of these larger claims involve wreck removal.

Club cover principally responds to ‘liabilities for or incidental to the raising, removal, destruction, lighting or marking of the wreck of an entered ship’. Kendall-Marsden noted that it was important to note that if the wreck and any stores and materials are saved, their residual value is credited to the club.

The most important provisos to this aspect of club cover are that the wreck must have arisen out of a casualty rather than neglect, there must be a legal obligation on the member to remove the wreck and the member cannot recover costs if it has transferred its interest in the wreck to a third party without the club’s consent, other than by abandonment.

Most wreck removals are the result of failed salvage operations, but Kendall-Marsden noted that it was important to understand when a salvage operation becomes a wreck removal, and where the hull & machinery cover might come into play.

“If a ship, say, runs aground, then the shipowner’s first instinct is to salvage its asset so that it can be put back into service. However, the ship may instead be determined to be a constructive total loss by its hull and machinery underwriters”, noted Kendall-Marsden.

A constructive total loss arises where a total loss appears unavoidable, or the costs of recovery and repair exceed the ship’s value, with “value” in this context usually referring to the ship’s insured value rather than to its repaired value.

The shipowner typically tenders a notice of abandonment to the h&m underwriters to secure payment. The underwriters commonly reject the notice, avoiding assuming liability for the stricken ship, but retain the obligation to pay out for the loss.

“If the relevant authorities have issued a legally binding wreck removal order on the member, the operation to recover the ship will become a wreck removal rather than a salvage.” At this point the underlying insurance liability in respect of the costs of the operation shifts from the h&m underwriters to the P&I cover.

Kendal-Marsden also writes of a particular aspect of wreck removal — when a ship loses an anchor overboard. Because lost anchors can present a hazard to navigation they are commonly required to be removed. Standard Club’s rules define a ‘ship’ to include the anchors. The cost of retrieving an anchor lost overboard as a result of a fortuity is therefore covered by the club. But a situation where, for example, a windlass fails and an anchor remains connected to the ship by its chain but cannot be recovered, or the anchor chain is deliberately severed and the anchor left on the seabed. “The costs of recovery under these circumstances are operational in nature and would not be covered by the club under its wreck removal rule”. http://www.standard-club.com/media/2533601/standard-bulletin-march-2017.pdf