club Surfing

Towing vs Salvage

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Monday, June 8, 2009
By Captain Tony

” The thin veneer we call civilization can disappear where a shipwreck is concerned.”
Richard Loran, Shipwrecks of Great Britain and Ireland

Understanding the difference between towing and salvage can save boaters money and aggrevation. Historically and legally, salvage is any voluntary and successful rescue of a boat., its cargo and/or its passengers from a peril at sea. BoatUS, however, narrows this definition. When contracting for towing services on behalf of its 600,000 members, it requires that marine assistance companies distinguish between simple towing and/or soft groundings and the more serious and expensive salvage efforts where distress or danger exist.066400341

The distinction between towing and salvage is reflected in the different types of programs available to boaters. Towing assistance, like the pre-paid service available to BoatUS members from the TowBoatUS fleet, provides help for breakdowns and light groundings. The far more expensive salvage claims are covered only by yacht insurance policies.

If the salvor wants to do the job but does not know what the cost will be but will make claim afterwards, the final amount will be decided one of three ways — negotiation with your insurance company; binding arbitration (including the BoatUS Salvage Arbitration Program, a lowcost option available to any boat owner, insurance company, and marine assistance company) or, rarely, through litigation in federal admiralty courts.

All boaters should review their marine insurance coverage with their agent. The best protection against a salvage bill is adequate insurance. Boaters should make sure the policy provides for salvage up to the full value of the boat, not a percentage of its value, and that there is no deductible for salvage costs. The BoatUS marine insurance program offers this level of service.

As millions of recreational boat owners get ready to launch their vessels this season, knowing the difference between towing and salvage could save them boatloads of money should they need help on the water, says BoatUS, whose towing companies are the nation’s largest fleet of assistance towing vessels.

Historically and legally, salvage is any voluntary and successful rescue of a boat, its cargo and/or its passengers from a peril at sea. Salvage often results in a “demand” for a percentage of the boat’s post-casualty value – sometimes a considerable amount of money. Towing costs much less and is billed by the hour, averaging $140 per hour.

The distinction between towing and salvage is reflected in the different types of programs available to boaters. Towing assistance, like the pre-paid service available to BoatUS members, provides help for breakdowns and light groundings. The far more expensive salvage claims are covered only by yacht insurance policies such as BoatUS Marine Insurance.

08-29-05_08181Since the same marine assistance company often provides both towing and salvage services, it is essential that the boat owner reach an understanding with the marine assistance provider before action is taken, cautions Jerry Cardarelli, BoatUS Vice President of Towing Services.

BoatUS Towing Service Providers are required to inform the captain of a boat before beginning any work if the procedure is salvage, not towing. If this isn’t possible due to wind and sea conditions, the towing company should tell the captain as soon as possible.

However, boaters should not assume they will always be told. Boaters should always ask whether the job is towing or salvage before they accept a tow.

If the answer is “salvage,” the boater should ask if the company – or “salvor” – will give a fixed price or one based on time and materials before beginning the job. If so, get the price in writing or, if an oral agreement, try to have someone witness it, Cardarelli suggests.

If the salvor wants to do the job first and says he does not know what the cost will be but will make a salvage claim afterwards, the final charge will be decided one of three ways: negotiation with the boater’s insurance company; binding arbitration (a variety of forums exist, including the BoatUS Salvage Arbitration Program, a low-cost option available to all boat owners, marine assistance and insurance companies); or – rarely – through litigation in federal admiralty courts.

If the salvor does not give a price before doing the job, the boater should ask the salvor if he uses or will agree to use the BoatUS Open Form Yacht Salvage Contract, which assures any claim can go to binding arbitration if negotiation fails.

“As long as the situation is not dangerous and not deteriorating, boaters should feel free to look for another company by radio or by calling the BoatUS 24-hour dispatch service for help at 1-800-391-4869,” Cardarelli said.

To further protect the interests of the boating public, BoatU.S requires, when contracting for towing services on behalf of its 650,000 members, that marine assistance companies distinguish between simple towing/soft groundings and the much more serious and expensive salvage efforts where distress or danger exist.

To be an approved BoatUSTowing operator, marine assistance companies must agree that Towing/Ungrounding is any operation not involving immediate danger to the boat or to a legally protected marine environment. It requires just one towing vessel with lines attached to a grounded boat to refloat it or to the disabled boat to tow it. If a grounded boat can rest without peril until the tide returns to float her free, or a boat is drifting in calm conditions after losing power, it almost always calls for towing, not salvage.

Salvage, on the other hand, involves imminent peril to a grounded, sinking or stranded boat or to a protected marine environment, or the use of more than one towing vessel and/or special salvage equipment such as air bags or high capacity pumps.

Cardarelli reminds boaters to review their boat insurance coverage. “The best protection against a salvage bill is adequate insurance,” he said, noting that boaters should make sure their policy provides for salvage up to the full value of the boat, not a percentage of its value, and that there is no deductible for salvage costs. “The BoatUS marine insurance program offers this level of service,” he adds. boat_recovery_3872

Finally, even though the U.S. Coast Guard no longer tows recreational boats unless it’s a life-threatening situation, they will help boaters contact commercial assistance and stand by on the radio to make sure they get that help. “You can ask the Coast Guard to call the BoatUS 24-hour dispatch service for you,” Cardarelli said. Click Here to go to sign up for Vessel Assist.

Maritime commerce has been the backbone of all of great societies, and certainly was essential to the survival of the original 13 colonies. Even though the modes of transportation have changed dramatically, what hasn’t changed are the risks associated with the sea.

Historically, the only chance of survival for a vessel in peril was the willingness of another ship nearby to render assistance. Countless lives and millions of dollars in cargo were saved because another vessel was willing to go out of her way to respond to a call for help. To reward these acts of heroism, the vessel was generously awarded an amount that reflected a percentage of the value of what was saved.

As is often the case, there were disagreements as to what was a proper reward for the efforts of the rescue vessel. And to complicate matters even further, the rescued vessel and the rescuer were often from two different countries. Disputes were common as to what country’s laws applied, and how the matter would be settled.

Often, the only thing the vessels had in common was that they were insured through Lloyd’s of London. So Lloyd’s developed a “Standard Open Form Salvage Contract” which set to paper the criteria on which the salvage award would be based, and where and how any disputes would be settled. This program was very successful and continues to this day, being utilized by Lloyds underwriters for both commercial vessel and yachts. The Lloyds contract is still the recognized standard for salvage contracts in the international maritime community.

Unfortunately, for recreational boats in the United States which did need to be “rescued” the Lloyds Contract has proven to be a difficult and disadvantageous route to dispute resolution. First of all, the Lloyd’s Open Form Salvage Contract is hard to read, -with a lot of thee’s and thou’s- and even harder to understand. Ever more daunting was the requirement that any dispute be arbitrated in London England. This meant that a dispute involving two Americans and a salvage in American waters had to go to London, hire English barristers (lawyers) and pay substantial amounts of money to prepare a case to be heard by the Lloyd’s Arbitration Committee. It would not be unreasonable for the owner of a boat worth $35,000 to spend half that just to have the case decided.

To make matters even more expensive, the Lloyd’s system was based on English law, which includes the provision that the loser pays both sides’ attorneys’ fees. Salvage claims are almost always a matter of negotiation, since the price is usually not established before the work is done. So if the boat owner’s offer to settle a salvage claim was further away from the award than the demand of the salvor (and it often was), the boat owner would also be responsible for the salvor’s legal fees as well. Concern over becoming responsible for the salvor’s barrister fees adds pressure to the boat owner (or his insurance company) to settle the salvage claim at a higher amount than they would other wise think is reasonable. Of course this pressure exists for the salvor as well.

The American judicial system recognized the inequities in this approach, and ruled that if both parties (the boat owner and the salvor) were U.S. citizens, they could not be forced into arbitration in a foreign country. What remained was how to give both the salvor and the boat owner the same protections provided in the Lloyd’s Open Form Salvage Contract. BoatUS drafted a model ” Open Form Salvage Contract” in 1989, which provided the needed protections and required domestic arbitration of any dispute.

Domestic arbitration refers to United States arbitration forums, including one available through BoatUS , The Boat Owners Association of The United States’ Salvage Arbitration Plan, created at the same time as the Open Form Salvage Agreement. The Society of Maritime Arbitrators (SMA) in New York and Miami Maritime Arbitration in Florida also have salvage arbitration forums.



Q: What does the term “Open Form” mean?

A: When the price or reward for the salvage effort is left open in the agreement, to be decided later when the boat is safe and the two parties can calmly discuss the matter, that agreement is referred to as an “open form salvage agreement”.

Q: What if I don’t sign a contract before my boat is salvaged? Can the salvor still make a claim?

A: It is important to understand that a contract is not necessary in order for a salvor to make a salvage claim. The salvor only needs to demonstrate that the effort was voluntary (he had no pre-existing obligation to come to the rescue), that he was successful and that the vessel rescued was in peril. This type of salvage claim is often referred to as “pure salvage”.

Q: So what if you find yourself in the predicament of needing a salvor to save your boat, you allow him to do it and now he wants you to sign a contract. Do you have to sign any contract just because the salvor puts it in front of you?

A: NO. The salvor still has a pure salvage claim against your boat. He must have your permission to render assistance if you are on board (you can not be forced into anything), but the absence of a signed agreement may mean that there will be some convincing necessary to get the salvor to resolve any dispute by arbitration as opposed to litigation. There is always litigation in Federal Court and, while not the most economical method of resolving the value of a boats “rescue”, it is tried and true.

Q: What if a salvor insists that you sign a Lloyd’s Open Form Salvage Contract?

A: BoatUS recommends that you refuse. Offer as an alternative the attached BoatUS Open Form Salvage Contract, or simply suggest that the salvor does not need a contract at all. You can always refuse his services and call for other commercial assistance.

Q: If I’m insured with BoatUS, how can you help me if I’m in need of salvage assistance?

A: If you’re insured in the BoatUS Insurance Program, call our 24 hr dispatch and we’ll get you the assistance you need right away. We’ll also take care of the negotiation with the salvor. Your BoatUS insurance policy also covers the full amount of the award, up to the boat’s insured value.

Recreational vessel salvage can seem as risky as the reefs and shoals from which some stranded boats are rescued.

On one hand is the salvor. His claim for payment for saving a boat from harm is based on his expertise, his exposure to danger and his use of high-tech and expensive equipment. On the other hand is the boat’s insurance company or, in some cases, the uninsured boat owner, protesting the amount of the salvage claim because the salvor over-stated the risk or effort involved.

Salvage disputes are often settled through negotiations between the salvor and the boat owner’s insurance company. Should these negotiations break down, however, the BoatU.S. Salvage Arbitration Plan can help resolve disputes objectively, quickly and inexpensively.

Since the Plan’s inception, dozens of disputes between salvors and insurance companies have been processed, involving cases from New England to the Gulf of Mexico to the Great Lakes. The BoatU.S. Salvage Arbitration Plan puts the decision-making in the hands of knowledgeable marine professionals, who review the facts of the case and reach a settlement based on admiralty law.

The BoatU.S. Salvage Plan is impartial. The Plan relies on a three-member arbitration panel to settle the dispute. The salvor and the insurance company each select an arbitrator from a list of marine professionals and admiralty attorneys who are experienced in salvage matters. The two panel members then choose a panel chairman, who is always an admiralty attorney.

Once the arbitration begins, there are no direct communications between the parties involved or between them and the arbitration panel. All communication is conducted in writing and no in-person testimony is necessary. Both complainants have the opportunity to rebut any information presented by their opponent.

BoatU.S. plays absolutely no role in the process leading to the panel’s salvage award decision. It serves only in an administrative capacity, facilitating communications between the arbitration panel and the complainants.

The BoatU.S. Salvage Plan is inexpensive. The Plan provides for a maximum per-party fee of $1,000 – considerably less than court proceedings. Fees are based on an hourly rate of $75 (with a five-hour maximum) for each arbitrator and an hourly rate of $100 (with a ten-hour maximum) for the chairman, plus a flat fee of $250 for administrative costs.

The BoatU.S. Salvage Plan is fast. Unlike court proceedings, which can drag on for years, the Plan requires the panel to develop a settlement award no more than eight weeks after being convened. And, since both parties have already agreed that any decision reached by the panel is binding, there is no lengthy appeal process to prolong the proceedings.

To learn more about the Boat Owners Association of The United States Salvage Arbitration Plan, you may request a copy of the Plan book and a list of arbitrators by writing to:

Administrator
Boat Owners Association of The United States
Salvage Arbitration Plan
880 S. Pickett St.
Alexandria, VA 22304

Click Here to Email Salvage Arbitration Although BoatU.S. can not provide legal advice regarding salvage disputes, we can refer boaters to admiralty lawyers around the country. For attorney referrals, call 800-283-2883.

Losing a vessel to the forces of nature, or worse, through navigational error, is traumatic and disheartening.

066400151 But you will almost certainly discover a new low point when you first receive the salvor’s bill for salvage work or wreck removal. The phrase “sticker shock” comes to mind, but understates the case. The salvors expectations are created by 200 years of Admiralty Court decisions – including recent ones – where judicious minds felt that significant “rewards” were necessary to encourage people to invest their capital and risk their lives to save others in peril on the sea.

SALVAGE

To deal with the cost and complications of salvage claims, boaters should insure with a yacht insurance company that employs specialists in marine claims.

Ask your agent to determine this (they will know which companies have these specialists, and if they do not know, consider shopping for a different agent).

Also, ask your agent or read your boat insurance policy to make certain that it:

1. Specifically covers salvage charges (or the costs to rescue the boat from perils at sea).
2. Provides salvage coverage equal to the value of the boat.
3. Provides the salvage coverage in addition to the repair of any damage to the boat.
4. Does not apply a deductible or other adjustment to the payment.

The BoatUS Yacht Policy provides this level of coverage for salvage.

Click Here To Go To Marine Insurance

PAYING FOR WRECK REMOVAL

Contrary to popular myth, you cannot abandon a vessel at sea or on a reef, collect your insurance and forget about it. The Owner of a vessel remains liable for subsequent problems associated with that vessel.

One such problem will be immediately visited upon you – somewhat akin to Scrooge’s experience with the Ghost from Christmas Future. If your boat went down in, or near a navigable channel, the U.S. Coast Guard will require its removal. If the Owner fails to respond, the Coast Guard will remove it for them and expect the Owner to pay the bill (large bill) along with a possible fine.

This can all be avoided with a marine insurance “protection and indemnity” policy that specifically provides coverage for removal of wreck. Boaters should confirm with their agents that:

1. Their insurance company’s claims department is experienced at raising sunken boats and removing wrecks from reefs, beaches and other places they don’t belong. Such a company’s marine insurance claims specialist would help you locate the right type of assistance, and very importantly handle all negotiations, arbitration or litigation associated with a wreck removal bill.
2. Their boat insurance policy specifically includes a removal of wreck feature in their liability (protection and indemnity section) equivalent to the normal limit of liability ($300,000 recommended) which would pay the bill and the cost of litigation.
3. There is no deductible or other adjustment to the cost of removing the wreck.

TO PAY FOR TOWING

The cost of towing is straightforward. Marine Assistance companies charge an average of $200 per hour from the time they leave their dock, to the time they return to their dock.

Time (portal to portal) Rate Cost
1.5 hours to scene $200.00 per hour $300.00
10 minute ungrounding 24ft @ $14.00 per ft. $336.00
1.5 hours return time $225.00 per hour (night) $312.50
Total
$948.50

Most towing companies expect cash or credit cards and some accept personal checks.

BoatUS Members can avoid the potential problem of coming up with a payment on the spot by selecting one of the BoatUS Towing Services higher options.