Marine
Commercial and Hull Liability Quote Information
The more information you can provide at quotation stage will enable us to provide a quotation more efficiently. The following areas are key underwriting concerns.
- Towage Conditions
- Hull Materials and Methods of Construction
- UK Vessels and Current Legal Liabilities
When we are ask to insure a towage contract, whether we are covering the tug or the towed object, it is essential to know what towage conditions are being used. This is due to our liability under the policy being affected by such conditions or agreements.
It should be noted that towage conditions do not apply if the assured owns both the tug and towed object.
There are three common towage conditions that are normally encountered.
- UK Standard Conditions
- 'Towhire' - International Ocean Towage Agreement (Daily Hire) 'Towcon'
- International Ocean Towage Agreement (Lump Sum)
UK Standard Conditions
Under the UK Standard Conditions the owner of the towed object (the 'Hirer'), as the employer of the Tugowner, assumes all liabilities (including collision), arising out of, or during the course of, the tow.
The only exceptions are:
- liability for any loss where it can be proved that the loss was caused by the Tugowner failing to exercise reasonable care in maintaining the tug in a seaworthy condition
- liability for death or personal injury resulting from negligence of the Tugowner
Important Note
Although not specifically stated in the conditions, it may be assumed that the Tugowner would be held liable in all instances where he is guilty of 'gross negligence'.
"Towhire" - International Ocean Towage Agreement (Daily Hire)
"Towcon" - International Ocean Towage Agreement (Lump Sum)
These two are basically the same conditions and differ only with regard to the agreements concerning the price of the towage contract. "Towhire" would be used for long term hire and "Towcon" for single voyages. Despite their titles, both these conditions may be used on UK contracts.
The parties to these contracts are basically made liable for their own risks. The Tugowner is liable for damage to the tug, third party liability arising from contact with the tug and removal of wreck of the tug whether or not the same is due to the fault, negligence or breach of contract of the Hirer. Likewise, the Hirer is liable for damage to the tow, third party liability arising from contact with the tow and removal of wreck of the tow whether or not the same is due to the fault, negligence or breach of contract of the Tugowner.
It follows that if the tug and tow are in collision with each other, they will each be liable for their own losses. Each party must exercise due diligence with regard to the seaworthiness or tow-worthiness of their own vessel.
Obviously, the UK Standard Towage Conditions are preferable when insuring the tug and Towcon/Towhire are preferable when insuring the tow and loadings should be applied when this is not so.
It should be noted that these conditions and agreements do not affect the Tugowner's or Hirer's rights of limitation as laid down by the Merchant Shipping Act 1979.
There are a wide variety of materials used in boat construction each with its own particular advantages and disadvantages and each requiring different underwriting consideration. The more common materials found are examined here.
Steel is probably the most common material used for ships' hulls today. It is strong, long lasting and easy and inexpensive to repair and maintain. Welded joints (whilst sometimes unsightly) are stronger than if the hull's shape has been formed by cold bending or rolling. Unless it is protected in some way i.e. by paint, steel will rust. This process is exacerbated by electrolytic action in the water - the vessel's hull acts as the anode of a giant battery, which is eroded over time. The fitment of sacrificial anodes to the hull can slow the process down.
Wood is the only natural boat building material in use today although, due to the technological advances in man-made materials, its use is on the decline and nowadays tends to be use in the trimming of a vessel rather than in the hull construction.
General Advantages
- relatively inexpensive material
- minor repairs may be undertaken by the amateur (but beware poor quality, inadequate repairs)
- easy and inexpensive to maintain
- strong and light
General Disadvantages
- Moisture - if the timber has a moisture content of more than 30% it can be attacked by microscopic fungi which causes "Wet Rot" - salt water tends to retard the rot. Excess moisture is heavy and destroys performance. It can also weaken glue and metal fastenings and can cause the timbers to warp.
- Gribble - a 3 mm long worm living in salt water which bores in and out of wood, crumbling the surface exposing and making fresh wood to attack. Gribble cannot penetrate paint.
- Fire - wood is obviously flammable and will burn particularly if it has absorbed petrol etc. from the engine.
- Teredo - a tiny worm which grows up to 20 cm in the UK as it eats its way through timber. Damage is invisible from the outside until the collapse of the structure is imminent.
- Reaction - acids in timber attack metal fastenings or react with them and affect the wood itself.
- Movement - wood expands as it absorbs water and contracts as it dries out often causing cracking. Older boats need to absorb water to swell their planking and keep the seams tight. The outer veneer on plywood stretches when it is bent to form a curve and this may later on result in tension cracks. Compression of plywood may also lead to cracking.
- Repairs - major repairs can only be undertaken by professional shipbuilders, which will inevitably be expensive.
A variety of different woods are used in boat building - traditionally constructed vessels use a combination of hard and soft woods. The more common species and their particular traits are noted below:
- Pine - a soft wood with good rot resistance. Tough and durable although some species are susceptible to shrinkage and warp easily.
- Mahogany - a hard wood with good rot resistance. Used mainly for interior fitting, bulkheads and visible planking. Iron fittings may cause this timber to rot.
- Teak - a hard wood which is naturally oily and therefore resists rot superbly. Although it is difficult to paint and relatively heavy it can be used for almost any part of the hull construction although its high cost would prohibit this.
- Oak - a hard wood which resists rot well. Used where high strength is required e.g. backbone, timbers, floors, etc. The acid in oak can corrode iron and the wood may be disfigured by steel.
- Plywood - usually made from laminated layers of utile, this wood is strong and flexible. Only marine ply should be used in boat building and may is recognised by the markings BS1088 WBPAA (or A or B). Over time ply may delaminate and lose its strength.
Wood may be laid in a variety of ways to form the hull and the different methods are explained below together with their inherent problems:
- Double Diagonal - a form of construction in which thin planks are laid diagonally in two layers at right angles to each other with calico soaked in linseed oil sandwiched between. Strong, light and stable but very difficult and expensive to repair if either layer is damaged - a number of planks on both layers need to be removed either side of the damaged plank before it may be replaced
- Ply - the hull skin is composed of sheets of plywood. The angle where the topsides meet the bottom are called chines. The chines are susceptible to abrasion by rubbing and this may lead to delamination of the plywood. An inexpensive method of construction favoured for small dinghies and tenders. Vessels kept in the water require attention every 5 years.
- Hot-moulded - a number of veneers are glued up and moulded to shape in a pressure chamber and heat cured. Strong, light and stable but very difficult and expensive to repair.
- Cold-moulded - veneers are laid on to a mould or on to frames and stringers and bonded cold with an epoxy resin.
- Clinker - overlapping planks, like weatherboarding, which can expand and contract as the wood absorbs water and dries out. The simplest of wood hull constructions which is easy and inexpensive to maintain and repair.
- Carvel - planks arranged horizontally, as in clinker, but with edges butting up against one another smoothly. The planks are cut so that the edges meet in a V-shape which is filled with cotton caulking compound and stopping to allow for expansion and contraction by the timber. In some cases the V-shape is filled with wooden splines instead to give a fairer finish. A good method of construction which is easy and inexpensive to repair and maintain. Care must be taken to ensure that the caulking is kept in good condition.
- Strip planking - a method of carvel planking where the planks meet squarely and are glued together instead of caulked. The narrow planks are not supposed to swell or worse, shrink, otherwise splits may appear.
Concrete is laid on a steel mesh supported by a wood or steel framework. The structure is then finished with a smooth, fine grain plaster/cement mix. Whilst these vessels are reasonably resistant to impact damage they are highly susceptible to electrolytic action. It is a misconception that repairs can be effected by the "home" shipbuilder - repairs should always be left to the professionals. Ferro-cement vessels are also prone to drying-out which causes cracks in the concrete and seriously weakens the structure
A light material which, weight for weight, is stronger than steel. Unpainted aluminum forms a white oxide which resists corrosion. Aluminum cannot be welded in the conventional sense and needs specialist equipment. Any bends in the metal must be gentle as acute bends weaken and fracture the metal - consequently aluminum vessels usually have a sharp edge where the deck meets the hull. Whilst aluminum is a relatively expensive material the labour, although specialised, should be relatively inexpensive.
Glass Reinforced Plastic (GRP)
Probably the most common hull material in use for small vessels due to its low cost and the ease with which complicated shapes may be formed. It is easy and cheap to repair but beware amateur repairs which generally do more harm than good. Over a period of time the protective gel-coat erodes - this deterioration may be aggravated by scratches and other minor damaged. Once water can penetrate the gel-coat the glass fibre strands in the GRP will absorb the water (much like a sponge) and affect the weight and buoyancy of the vessel. This process is known as "osmosis" and often manifests itself as bubbles in the gel-coat of the hull. The situation may be cured but involves removing the vessel from the water, grinding or sandblasting the gel-coat off and drying out the hull, either naturally or by using heaters, before applying a new gel-coat.
The Merchant Shipping Act 1995 contains the provisions for the limitation of liabilities and enacts the London Convention 1976 and the Athens Convention 1974 into English Law. From 13 May 2004 the London Convention 1976 has been amended by the 1996 Protocol to the London Convention and the figures in this section reflect these changes.
- Who can limit their liability?
- What type of liability can be limited?
- What type of liabilities cannot be limited?
- What vessels can have limited liability?
- What is the limitation for third party liabilities?
- What is the limitation of liability for the passengers?
- Can the right to limit liability be lost?
- Why do assureds ask for policy limits above their statutory limitations?
Who can limit their liability?
- Shipowners (including managers, charterers and operators)
- Salvors
- Employees of both
What type of liability can be limited?
Liability arising from;
- Loss of life, personal injury
- Damage to property including consequential loss
- Salvage operations performed by salvors
- Delay in the carriage of cargo, passengers and luggage
- Removal/destruction of cargo
- Sue and Labour claims from third parties
What type of liabilities cannot be limited?
Exceptions include Salvage and General Average claims against the vessel, Removal of Wreck and certain compulsory insurances such as Nuclear Risks, Pollution Risks and Employees Liability.
British ship owners can not be liable for loss or damage to property on board caused by fire on the vessel unless the loss resulted from a personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.
What vessels can have limited liability?
Whilst there is not a definitive legal definition of a "ship" it is generally thought that:
- any ships, seagoing or not (pleasure or commercial use)
- structures launched and intended for use in navigation as a ship or part of a ship
can limit their liability where liability arises whilst the "vessel" is in the water.
Some examples found in case law of "vessels" not held to be ships are static vessels such as floating restaurants or offices, fixed piers, jetties and the like, buoys, lightships, craft on artificial lakes or reservoirs and Air Cushion Vehicles.
What is the limitation for third party liabilities?
This is laid down by the London Convention (the Athens Convention deals with passengers only).
The amount is based on the tonnage of the vessel as calculated using the Merchant Shipping (Tonnage) Regulations 1982 which enacted the Tonnage Convention 1969.
There are specific limits for vessels under 300 and 2000 tonnes which should encompass the majority of vessels that we insure in the UK Marine Centres.
| Under 300 tonnes | |
|---|---|
| Loss of life, personal injury | 1,000,000 SDRs |
| Other claims | e.g. property damage 500,000 SDRs |
| Total | 1,500,000 SDRs |
| 300 tonnes up to 2,000 tonnes | |
|---|---|
| Loss of life, personal injury | 2,000,000 SDR's |
| Other claims | 1,000,000 SDR's |
| Total | 3,000,000 SDRs |
For vessels over 2,000 tonnes there are tables giving the amounts according to their tonnage.
If the amount claimed for 'Loss of life, personal injury' exceeds the fund available then the amount provided for 'Other claims' can be used but is shared ratably between the two. If there are no 'Other claims' then claimants for 'Loss of life, personal injury' may claim the combined fund.
What is the limitation of liability for the passengers?
This is where it can get a bit confusing as both the London and Athens Conventions provide for this.
A passenger is defined as being a person carried for reward under a contract of carriage.
For the Athens Convention to apply there has to be an international contract of carriage by sea on a sea going vessel
.For the UK, an 'international' contract of carriage occurs where either:
- the contract of carriage is made in the UK
- the departure or destination is in the UK or
- the departure AND destination are within the UK, Channel Islands or IOM.
Regarding the last definition, which will be the most relevant to us, it must be remembered that for the Athens Convention to apply, the voyage must be by sea on a sea going vessel.
The legal definition of 'sea' in this context is water that is NOT smooth or partially smooth and this is defined in, believe it or not, the Merchant Shipping (Smooth and Partially Smooth Waters) Regulations 1987!
These regulations actually describe each area of the UK coast and define where the smooth and partially smooth waters are.
Passenger Vessels have to be classed under the Merchant Shipping (Passenger Ship Construction) Regulations 1980 and this will define where the vessel can operate, i.e. whether a vessel is sea going or not. For example Class V vessels can only operate on smooth waters. There are eight classes altogether.
See appendix B
Therefore, ONLY the London Convention will apply where the vessel is operating on Smooth or partially smooth waters.
London Convention limitation for passengers
The limitation of the assured is 175,000 SDR's per passenger.
Passengers' luggage under the London Convention would be included under the third party 'Other Claims' limitation amount. British ship owners liability to certain valuables is excluded if loss or damage resulted from the theft or other dishonest conduct unless the nature and value are declared or the claimant can prove that the owner or master or a crew member/servant committed the offence.
Athens Convention limitation for passengers
The limitation of UK carriers for death or personal injury is 300,000 SDR's MAXIMUM PER passenger for UK carriers (46,666 SDR's for non UK carriers).
It is important to note that the maximum fund provided by the 1976 London Convention also apply to a voyage by sea on a sea-going vessel i.e. 46,666 SDR's multiplied by the number of passengers that the ship is certified to carry subject to the 25m SDR's ceiling. There is a 2002 protocol which will remove this two tiered approach and apply the Athens Convention only. This protocol is however only in draft form and therefore many years from implementation.
Loss or damage to Passenger's Luggage and Vehicles is also limited under the Athens Convention and the limitations per passenger are;
- Cabin luggage 833 SDR's
- Vehicles and luggage contained therein 3,333 SDR's
- Other luggage and valuables in safe keeping 1,200 SDR's
Notes on the Athens Convention
Luggage does not include articles or vehicles carried under a charter party, bill of lading or other contract for carriage of goods or live animals.
The carrier is not liable for certain Valuables unless they have been deposited with him for safe keeping. The limitation can be increased by agreement in writing.
The claimant must prove that the death, personal injury, loss or damage was caused by the carrier unless it arose in connection with shipwreck, collision, stranding, fire, explosion or defect of the ship in which case it is assumed that loss or damage was caused by the carrier unless he can prove otherwise.
There are provisions regarding contribution if the claimant is partially or wholly to blame and also provisions as to notice of loss of or damage to luggage and time bars.
Carriers must advise passengers they are being carried subject to the Athens Convention otherwise they are committing a criminal offence. The limitation would still apply however as it is statute and the carrier would merely be fined for not bringing it the passengers' attention.
Can the right to limit liability be lost?
A person loses the right to limit if the claimant proves that the loss resulted from the person's personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.
This however, is VERY difficult to prove and even if it is, we as insurers can then reject the claim on the grounds of willful misconduct as per section 55(2) (a) of the Marine Insurance Act 1906.
This is a straightforward situation where the owner/operator/assured is the same person as is the case with most pleasure craft, fishing vessels and the like.
In the case of a company the 'person' is the governing mind of the company i.e., the main board or one of the directors. Therefore if the master or a crew member of the vessel concerned causes the loss or damage, the 'company' becomes vicariously liable but they can still limit their liability (even if the employee acted in such a way as to lose his right to limit) UNLESS the 'company' also acted in a similar manner.
As we insure the company, it follows that if it was proved that they acted in a manner resulting in unlimited liability, again we can use the exclusion contained in the Marine Insurance Act 1906.
Why do assureds ask for policy limits above their statutory limitations?
It may seem that we are able to give precise limits of cover for liability based on the tonnage of a vessel and the number of passengers it carries but it must be remembered that legal costs are invariably incurred which are unlimited and in addition to the claim.
Also some liabilities that we cover cannot be limited, e.g. Removal of Wreck, Salvage and General Average claims brought against the assured.
Assureds may accept higher limits under agreement/contract but this would have to be disclosed to us and considered accordingly.
Please speak to your usual Marine contact for further details.
