Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of Parallelewelten.
Bill of lading is the receipt of goods and document of title. In the above scenario the master of Mv.County should not have signed the clean bill of lading and would have instead claused the bill of lading mentioning the rusty steel cargo which would have given the accurate description of goods, or he could have issued two bill of lading one for the good cargo and another for the damaged one (oxidised steel). In the court of law this bill of lading cannot be used as an evidence by the ship owner to support that the cargo was damaged before collision ie. it was damaged before loading. Signing a clean bill of lading is false representation of the condition of cargo by the shipper to the buyer and Letter of Indemnity cannot be used in the court of law for justification of the damaged cargo (oxidised steel). If the cargo carried by the shipper was in good condition with clean bill of lading, the shipper could have claimed for the cargo loss from the cargo insurer but since this was not the case the buyer can sue the carrier for damages and recover the loss from them or from the insurance underwriters who in turn will claim from the ships P&I. If the shipper/buyer of the cargo proves that the cargo was damaged during carriage and the carrier (master) has not exercised due diligence they can sue the carrier as the master has signed clean bill of lading.
The carrier shall exercise due diligence before and at the beginning of the voyage to keep the vsl seaworthy by properly manning, equipment and supply and the spaces of the ship fit and safe for the reception, carriage and preservation of cargo (Hague Visby Rule Article III). ‘A ship is deemed to be seaworthy when she is reasonably fit, in all respects, to encounter the ordinary perils of the seas of the adventure insured’’- Marine insurance Act. Solas regulation (Chapter V) states that the vessel should have at least two operational radars and non compliance of these rules will be breach of Solas regulation. Master/ Owner of MV.County where aware about the faulty radar, but the vessel still sailed to sea and therefore not performing due diligence for the sea worthiness of the ship. The seller can sue the carrier for un-seaworthiness and claim for the damages. If the carrier proves that due diligence was exercised and the vessel was seaworthy on sailing and the faulty radar was unforeseen, neither the carrier nor the ship shall be responsible for loss or damage (H-V rules Article IV para 2).
To mitigate the loss the master have to provide evidence and records of log of all events, navigation equipment status at the time of collision supported by printout records of these equipments.
In the case of MV.Westoe she departed in a seaworthy condition. The medical evacuation of the chief officer whilst on her voyage due to unforeseen circumstances will not declare the vessel unseaworthy. However the defendant can sue MV.Westoe for collision damage if proved that MV.Westoe was under staffed and was not meeting the Safe Manning criteria and that the staff was overstressed and fatigued and not complying with the ILO work and rest hours requirements and proper and efficient lookout was not maintained during the time of collision. If proved the Hull and Machinery insurance will be paying for the structure damage of Mv.County and if not proved then County’s Hull and Machinery Insurance will bear cost of the damage.
REPERCUSSIONS OF THE LOSSES INCURRED IN TERMS OF SALVAGE, GENERAL AVERAGE, HULL AND MACHINERY AND P&I INSURANCE
MV. County (Bulk Carrier)
If the ship has exercised due diligence then the shippers cargo insurers will pay for the loss of the damaged cargo. If the vessel did not performed due diligence the loss for the lost and damaged cargo will lie under particular average and the shipper can claim for the damaged cargo from the cargo insurer who in turn will claim the amount from the ship owner or from his P&I insurance. The damage to the hull lies under particular average. The loss for damage caused to hull will be borne by H&M insurance (3/4th RDC by H&M and 1/4th by P&I). If the cause of collision lies on the other vessel the vessel’s H&M insurance can claim the cost from the other vessel’s (MV.Westoe) H&M.
The owner and master were aware of the faulty radar equipment, but the vessel still sailed well knowing that the vessel is unseaworthy. Marine insurance policy requires the vessel to be seaworthy at the time of sailing. As these conditions have not been met the vessel cannot be covered under hull and machinery insurance.
The collision caused severe hull damage and water ingress and there was threat to life, property and environment. The master wisely opted for Lloyds Open Form (LOF). Delay in salvage operation would have caused excessive flooding and the vessel would have sunk leading to loss of life, harm to environment by pollution and loss of cargo. By opting LOF the master saved the valuable time which can be utilised in towing the vessel to the safer place. Lloyds open contract is simplified and the agreement can be made by radio or other telecommunication means. A copy of this agreement need not to be on board and can be signed on later date. LOF is based on ’’no cure no pay’’ which means the salvor will only be paid if the property is saved i.e. no reward will be made for an unsuccessful salvage. The reward paid does not exceed the total value of the vessel and the cargo onboard. The agreement is not likely to be disputed.
On the vessels behalf it should be checked whether B/L is as per 1994 or 2004 rules. It is recommended by the P&I club to use 1994 rules. If 1994 rules are followed it will come under general average i.e. the expense will be borne by both H&M and P&I insurance.
General average is “An extraordinary sacrifice or expenditure intentionally and reasonable in time of peril for the purpose of preserving the property imperilled in common maritime adventure”. (ref college handout). The above statement means that there should be at least two parties involved for general average to take place. The sacrifice or loss made should be intentional/ deliberate in order to preserve life property or environment. As act of collision is not intentional the damage sustained to hull and machinery as a result of collision will not be general average however the loss of cargo by jettisoning to save the vessel is intentional and will come under general average. Good recordkeeping of events supported by evidence is beneficial in the settlement of general average claims.
Marine insurance is to overcome the insurer against marine loss. The insurer and the assured play a relation of utmost good faith. P&I (protection and indemnity) is marine insurance against 3rd party liabilities, ¼ RDC death injury and property claim. It is an association formed by individual ship owners to protect themselves and other ship owners against marine losses which are not covered by their underwriters or out of the abilities of their marine insurer. It is a non profit making organisation to support and share the losses of its members. The club provides free guidance on the scope of cover provided by the club. Some of the risks covered by P&I are against injure, illness or death, collision, pollution, damage to property or cargo, salvor expenses etc. Hull and machinery insurance provides covers against any physical damage to hull and its machinery. Most of the hull and machinery policies cover third party liability and 3/4th RDC and the rest is covered by P&I.
During the investigation it was revealed that MV.County sailed with the faulty radar. The un-seaworthiness of the vessel deprives the owner of the vessel from general average contribution from the cargo owners and the owner cannot claim salvage cover and all the expenses arising will be paid by the ship owner. All incurring cost after the salvage operation will be settled by the ship owner.
MV.Westoe (Timber vessel)
Investigation supported that the vessel sailed in a seaworthy condition and therefore the owners can claim for the insurance. The loss/ damage to cargo due to collision will come under particular average and not under general average. To claim for general average the act should be intentional and sacrificial in order to save life, property and environment. The cargo owner can claim the loss for the damaged cargo from their cargo insurer.
The loss of cargo due to jettisoning of 300 tonnes of timber will come under general average as the action was intentional to prevent further water ingress due to collision which could have caused the vessel to sink or capsize resulting in total loss of property and damage to environment. The ship owner can claim for general average contribution for the lost timber and every one will bear the loss.
The hull damage caused due to collision will come under particular average as collision is an unintentional act. Hull and Machinery will bear the loss incurred.
The vessel sustained only minor hull damage and opted for “Daily hire agreement”. This towage agreement is cheaper and is beneficial when the vessel is having safe time to negotiate between different parties before entering into agreement with one party. In this way the owner can hire the most suited but still cheap salvage assistance. However in case where risk is imposed to the vessel in terms of loss to cargo, life or environment this type of towage agreement may not be suitable as it takes time to negotiate between the parties offering salvage assistance. A reward will be given to the salvour for the salvage operation as per criteria laid down in salvage convention (article 13).
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