London, Monday 28th March 2022: A raft of consequences faces shipowners, insurers, and adjusters in dealing with the aftermath of ship collisions, speakers at the latest joint seminar in London of the Association of Average Adjusters and the International Underwriting Association made clear.
Casualties harbour potential cost implications for salvage, wreck removal, cargo damage, damage to ship, oil pollution, crew and passenger personal injury, limitation of liability, damage to fixed and floating objects, and claims from port authorities.
Alistair Johnston, partner at CJC Law; Chris Zavos, partner with Kennedys; and Michiel Starmans, director of the legal department at Amsterdam-based Spliethoff Group, set out in their talk on 24th March 2022, what they called Practical aspects of collision claims. Mr Starmans is current chairman of the Association of Average Adjusters.
The three speakers outlined how amid the complex interplay of factors early assessments can be made as to which ship might be to blame, the role of the Collision Regulations, and where parties might commence court proceedings if needed.
They ranged in their presentation over principles of collisions and liability, apportionment, forum shopping, limitation and security, insurance, quantum, and single and cross liability.
To illustrate the multiple factors that might be at play, Mr Johnston posed an imagined scenario of a laden handymax bulk carrier on voyage from Chile to India, which on its way out of inner anchorage at Singapore proceeding south westerly, collides in port limits during dense fog with a south easterly voyaging container vessel bound for Greece.
In that supposed instance, carriage contracts of relevance were that the Greek-owned bulk carrier was on voyage charter to a Portuguese entity, and the bill of lading was issued to shippers in Chile. The German-owned containership was on time charter to a US entity, and the charter had a vessel-sharing agreement with a Greek company and a Turkish company.
The collision bulkhead of the handymax is breached and water damages the cargo in number one hold. Residual bunker oil in the empty breached double-bottom heavy oil fuel tank causes a small oil slick, with the risk of pollution. On the boxship, extensive damage is caused amidships with containers underdeck being smashed; some containers on the forepart topple, and one crushes and kills a seafarer.
To start to deal with such casualties, the need was to go back to basic principles and the law of tort: that every ship owes a duty of care to all other users of the seas, said Mr Johnston. The objective standard of care was “good seamanship” (the ordinary skill and care of each seafarer according to their rank) plus observation of Navigation Rules. Should those two branches of the standard of care conflict, the first prevails. There is a burden of proof on the claimant to prove loss plus negligence or want of good seamanship which led to loss (causation).
Mr Johnston said that for quantum (the amount of damages awarded to a successful party in a claim) it was critical to assemble evidence as soon as possible: “Getting evidence together, the key pieces of information, makes it so much easier for everyone involved.”
What we needed to look at straight away is who is going to be the paying party and who the receiving party, said Mr Johnston. “We are looking at how blameworthy were the parties.” The Collision Convention 1910, incorporated into English Law by the Maritime Conventions Act 1911 (now section 187 of the Merchant Shipping Act 1995) lays the groundwork for apportionment of liability for damage. It says that the liability to make good the damage or loss shall be in proportion to the degree in which each ship was in fault.
Introducing the principle of liability in proportion to blame, the owner of a ship involved in a collision is liable to make good the damage suffered in proportion to that ship’s fault. (Distinct from that, liability for death and personal injury is joint and several.)
Mr Johnston highlighted the navigational general principles laid down by the International Regulations for Preventing Collisions at Sea 1972 (known for short as Colregs). Rule 7 says: “Every vessel shall use all available means appropriate to the prevailing circumstances and conditions to determine if risk of collision exists.” Rule 19 stipulates that in restricted visibility “every vessel shall proceed at safe speed… A power-driven vessel shall have her engines ready for immediate manoeuvre.”
The only real defence available to liability is the so-called “agony of the moment” where a vessel is put into a collision situation by the actions of another vessel, being under time pressure to react: “sudden and great danger.” This does not apply when a ship has contributed to creating the dangerous situation.
Under the Merchant Shipping Act, shipowners and salvors may limit their liability in accordance with the rules of the Collision Convention for claims “in respect of loss of life or personal injury or loss of or damage to property…occurring on board or in direct connection with the operation of the ship…”
In the notional collision example advanced by Mr Johnston, parties would have to consider which limitation of liability convention was applicable. Given the differing protocols among jurisdictions, parties might have a choice in this case of Singapore, UK (although there was no direct UK involvement, parties would consider the standing of English law and practitioners’ expertise in shipping matters), Germany, Greece, Mexico, India, Chile, or US. The financial implications for damage assessed could vary considerably, and Mr Starmans emphasised the difficulty that adjusters occasionally faced in the whole question of “forum shopping.”
In principle there is a right of full and complete indemnity for loss suffered by negligence of the other party. Restricting factors were remoteness of damage and pure economic loss. Claims arising might typically be for repairs; loss of earnings; costs of arriving at, lying at, and leaving the repair port; salvage; survey fees; and superintendence.
If a ship is considered lost, the owner recovers the reasonable market value of the vessel at the date of loss plus interest, and loss of earnings.
For harbour damage, there is strict liability. On the question of personal injury, representatives of the deceased could sue either vessel if both ships were at fault, and recover 100% from either, subject to limitation.
Mr Zavos said evidence in collision liability cases depends less than it used to on the recollection of those on board or surveys of the speed and angle of blow. These days, voyage data recorders and automatic identification systems provided a more accurate account of what happened – this is not to say that the evidence of those on board is irrelevant, but the focus is more now on the attribution of fault and relevance and interaction of the collision regulations.
Mr Zavos said that protection and indemnity (P&I) cover would generally fill any gaps in hull and machinery cover, including claims related to “fixed and floating objects.” For contact with such objects, the provisions of the Merchant Shipping Act did not apply. There is a rebuttable presumption that the responsibility lies with the moving object. He said that the financial limit of collision liability cover under International Time Charter-Hulls clauses is generally three-quarters of the sum insured “any one collision” plus three quarters of legal costs incurred with the consent of underwriters.
Most collision cases are resolved without recourse to the courts, particularly once issues on jurisdiction and limitation have been resolved between the parties, the speakers outlined.
Mr Johnston is a partner in CJC’s London office and is one of the three founders of the firm. His expertise covers all aspects of marine insurance, particularly collisions, groundings, fire and explosion, salvage, total loss, wreck removal, limitation of liability, pollution, general average, insurance coverage, shipbuilding, charterparty and bill of lading disputes.
Mr Zavos is a partner in Kennedys’ London office, specialising in dispute resolution in marine and offshore energy. Predominantly for Lloyd’s and global insurers and reinsurers, he has advised on complex coverage, liability defence, subrogation, and sanctions issues.
The Association of Average Adjusters’ annual dinner, a highlight of the international marine, insurance, and legal calendars, will take place for the first time since 2019, at the Savoy Hotel, London, on May 12, 2022. Tickets are available via the website www.average-adjusters.com The 2020 and 2021 events had to be cancelled because of Covid restrictions.
