London marine insurance market could benefit from a Claims Council to help resolve day-to-day dilemmas, suggests chairman of Association of Average Adjusters
A call for London marine insurance interests to consider establishing a Claims Council as a reference point for consulting on contentious matters and for flagging up emerging issues has come from the chairman of the Association of Average Adjusters.
Speaking at the annual meeting in London of the Association, Paul Rowland said that such a council could provide valuable guidance on the impact of court decisions and on the need to update or clarify insurance policy wordings. It could help prevent issues over interpretations of market practice escalating into costly and time-consuming disputes.
Mr Rowland said that London may lack the advantage of Scandinavian-based insurers who had recourse to a major commentary appended to their Nordic Marine Insurance Plan. The Nordic Plan is a set of standard policy conditions and is based on an agreement between the Nordic Association of Marine Insurers (Cefor) and the shipowners’ national associations of Denmark, Finland, Norway and Sweden.
He said: “I believe the [Nordic] commentary performs a crucial role in explaining how claims matters are dealt with on a day-to-day basis without the need for recourse to a ‘higher’ level.”
Producing a commentary relating to Institute Time Clauses, American Institute Hull Clauses and other policy conditions on which hull insurance is written in London would be far too extensive an undertaking, but “perhaps claims guidelines would be useful, or even some form of claims council.”
The committee comprising representatives of insurers, shipowners, adjusters and academics who kept the Nordic Plan under review “must be hugely valuable, ” said Mr Rowland. Perhaps London could find a claims council of similar value. The body might include claims professionals from insurers, shipowners, brokers, average adjusters, lawyers and possibly P&I representatives.
“It could meet periodically to consider claims issues and the practical repercussions of legal decisions and whether policy terms require amending, new wordings produced or whether simply an issue was so obscure that it is unlikely to come up very often.
“It might also consider issues that have been spotted on the horizon. I am a bit of an idealist and therefore I do feel that any claims council or market forum which, if possible, moves beyond protecting the interests of any particular group could be of greatest value.”
Mr Rowland said that the Average Adjusters Association had, to some extent, played its part in terms of practical claims handling by introducing various Rules of Practice. “I believe this has helped considerably in reaching a market consensus in terms of the treatment of certain practical claims issues. However, perhaps more is now required.”
Mr Rowland, who is a director of Richards Hogg Lindley, said that much effort was rightly being made to attract younger people to professions engaged in marine claims handling and adjusting. Overall however, the numbers had fallen “and to some extent we may be living off the family silver” in terms of relying to a great degree on the older, experienced people. “This means that there is considerable pressure on younger professionals to study and acquire knowledge and expertise at a far faster rate than was required of some of us when we were their age, ” said Mr Rowland.
As an example of the conundrums of conflicting views in apportioning correctly expenses of the parties following casualties, Mr Rowland cited the Association’s decision to extend one of its Rules of Practice to deal with payment for ship repair where the potential effect of the suggested “correct legal principles” appeared to conflict with claims practitioners’ understanding and treatment of such costs.
The amendment was introduced in response to a suggestion that once a policy expired, and repairs had not been done, the assured was entitled to claim only on an unrepaired damage basis. “For most experienced claims practitioners this suggestion was rather startling and, instinctively, I suspect that most practitioners would have felt that it was, at best, questionable.”
It could have led to the assured taking the vessel out of service prior to expiry of the policy specifically to effect damage repairs, as opposed to deferring repairs to the next routine drydocking and sharing certain common costs (and thereby significantly
increasing claim costs); or left an assured with an older vessel at the mercy of fluctuating market values. He had never heard of an insurer proposing that a ‘particular average’ case should be dealt with on that basis.
The “basic instincts” or “gut reactions” of practitioners were not infallible, but they were not some kind of primal sense. They were the outcome of hard-won commercial experience and what they believed to be the correct application of principles to claims.
“The Courts are, to some extent, at a disadvantage in this respect. An issue comes before them and they have to give effect to the wording of a commercial agreement one way or another based upon the evidence and argument – yes or no, right or wrong, black or white. They may not necessarily fully appreciate the impact of a decision on say, an obscure point under the ‘sue and labour’ clause, and how this may affect other aspects of claims under a hull policy. Nor do they get the opportunity to reach a decision that may be a murky grey, or what practitioners may call a compromise.”
The AAA, The Association of Average Adjusters promotes professional principles in the adjustment of marine claims, uniformity of adjusting practice, and the maintenance of high standards of professional conduct. Irrespective of the identity of the instructing party, the average adjuster is bound to act in an impartial and independent manner. The Association plays an important part in London insurance market committees, and has strong relationships with international associations and insurance markets.