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AA Talk: HULL INSURANCE CLAUSES – Agency Commission Unrepaired Damage

(As noted in Issue 122 the Editor of this column would visit ITC-Hulls 1/10/83 with the assistance of the one “ITC HULLS 1.10.83” which was written by Mr. D. John Wilson who kindly allowed the Editor copyright on his book for any future editions.)

 

AGENCY COMMISSION

Almost every accident to a ship results in the Ship-owner or Manager encountering considerable extra work and, for instance, in the case of a serious stranding, this might include arranging for

  • Salvage,
  • Entry into a port of refuge,
  • Surveys,
  • Towage to another port for repairs,
  • Temporary and/or permanent repairs,
  • The obtaining of spare parts and forwarding to the port of repair,
  • Superintendence of the repairs,
  • Settlement of repair accounts,
  • Salvage security,
  • All General Average formalities, etc.

Actual out-of-pocket expenses incurred in making these various arrangements have always been claimable from Underwriters, but it has also been an established practice that the Owner (repeat, Owner) of a ship was not entitled to claim any remuneration for his own time and trouble on such affairs, whether as general or particular average.

The Association of Average Adjusters have a Rule of Practice No. A3 on the subject dating from 1906 and reading as follows:

AGENCY COMMISSION AND AGENCY

That, in practice, neither commission (excepting bank commission) nor any charge by way of agency or remuneration for trouble is allowed to the shipowner in average, except in respect of services rendered on behalf of cargo when such services are not involved in the contract of affreightment.

Over the years, however, and for various reasons, many ship-owners have formed separate companies to manage their ships for them – or have employed specialist ship managers – and these management companies have often put forward a separate fee for the extra work to which they were put in attending to the average matters listed earlier, plus their work of collecting the necessary documents and presenting them for adjustment purposes.  Whether such fees were permissible under the management contract is not known, but they were often claimed from and paid by hull underwriters.

Thus, over many years a practice has grown of allowing an agent or manager acting on the Assured’s behalf to charge a fee for the work involved in compiling the Assured’s claim for the Assured to recover this as part of the claim on policies of insurance on hull and machinery which is subject to English law and practice.  There is probably no parallel in any other branch of insurance.  However, as noted earlier, a ship-owner who manages his own ships and presents his own claims, cannot enjoy the privilege.  This produces a result which can be termed anomalous and this anomaly is even more marked where the difference between the management company and the ship owning company is little more than a technicality.

At one time it was considered whether the charges should not be allowed to any management or agency company which was a subsidiary or in any way affiliated to the ship-owning company.  In 1970, a Special Committee of the Association of Average Adjusters, which included representatives of Underwriters and Ship-owners, was appointed to consider the above-mentioned Rule of Practice in the light of modern conditions and make such recommendations as might be thought fit regarding its revision.  After considerable consideration, a Report was issued on 22nd January 1971 wherein “it was unanimously agreed that the present Rule of Practice should remain unaltered and the Underwriters’ Representatives would consult their principals for agreement that the present practice of allowing agency fees where these had been incurred in connection with the average be continued but reserving the right to question the quantum of such fees if considered unreasonable.”   Evidently, in practice Underwriters have continued to pay for the fees charged by vessel Owners’ managers for the time spent handling damage claims, dealing with brokers, surveyors, lawyers, adjusters and others, if they appear to be reasonable.

A further point which needs stating is that it was often the management company which appointed the average adjuster and, human nature being what it is, it was sometimes difficult for the average adjuster to contain the fees proposed by the management company within reasonable bounds.  Thus, allowance of large agency fees was not uncommon.

In 1983 the London market introduced a completely new set of Institute Clauses for the insurance of the hull and machinery of ocean-going (blue water) vessels to be used in conjunction with the new Marine Policy Form.  Obviously, Underwriters seized the opportunity to exclude liability for remuneration in connection with a claim altogether, whether to a ship-owner or to a managing company.  The wording they have chosen as follows (Clause 17 of ITC-83) does not seem to reflect their intention:

17        AGENCY COMMISSION

In no case shall any sum be allowed under this insurance either by way of remuneration of the Assured for time and trouble taken to obtain and supply information or documents or in respect of the commission or charges of an manager, agent, managing or agency company or the like, appointed by or on behalf of the Assured to perform such services.

A straight construction of these words means that fees payable to a management company for those services listed earlier in these comments may still continue to be claimed and paid.  Indeed, by inference, perhaps, even a ship-owner operating his own ships should now be entitled to claim similar remuneration?

In practice, however, Underwriters have made it clear that their intention was to exclude all claims for remuneration by the Assured, their managers or agents for time and trouble incurred on any aspect of a claim.  Accordingly, ship’s proportion of agency fee allowable in general average would need to be deducted from the claim on policy of insurance subject to ITC – Hulls 1/10/83.

For the record, whilst it was blindingly obvious, without any form of explanation, that agency charges included in a port agent’s general account covering expenses incurred in respect of the vessel thereat are not excluded by the terms of this Clause, to avoid the risk of having the settlement under the adjustment delayed, at one time, the following explanatory note, or similar, would appear in the adjustment:

“Adjusters’ Note:

The fee charged in the above account represent charges of port agents for handling operations connected with the vessel at the port.  Allowance therefor is not excluded by the terms of Clause 17 of the Institute Time Clauses – Hulls 1/10/83.”

It is noted that the wording of Clause 17 of the ITC – Hulls 1/10/83 is the same as Clause 19 of the International Hull Clauses (01/11/03).

Understandably, it is not uncommon to see Ship-owners special clauses incorporated in the hull and machinery policies of insurance subject to ITC – Hulls 1/10/83 specifically delete the Clause 17, thus enabling the Assured to enjoy the pre-1983 practice mentioned earlier.

No equivalent provisions are to be found in the American Institute Hull Clauses but it is noted that in practice Underwriters in the American Market would not pay for any agency charge which was made by the Assured himself.  For Underwriters to entertain payment, the charge would necessarily have to be made to the Assured – Owner by a managing agent or company.

UNREPAIRED DAMAGE

Section 69 (3) of the Marine Insurance  Act  1906  provides  that :

“Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage”.

Until about 1950 there was a well-established practice in the London market for negotiating any claim for unrepaired damage.  It was generally on the following lines:

  1. Where the ship was sold, to endeavour to find out what price the purchaser of the vessel would have paid for her if the damage did not exist, subtract the actual price paid, and claim from Underwriters in respect of the difference – (always assuming that this difference was less than the cost of repairing the damage!)
  2. Where the ship was not sold, to take the basic cost of repairs as estimated by Underwriters surveyor, generally to ignore dry-docking and other incidental charges, and to offer the Assured a figure less than this sum, the amount depending on the likelihood of whether or not the damage would eventually be repaired.

 

That is to say, prior to 1950 the settlement of claims for unrepaired damage was based on what the market considered to be the pure principle of Marine insurance, i.e. to INDEMNIFY the Assured for the actual amount he had lost – or was likely to lose – by reason of the unrepaired damage, and with the settlement based solely on the estimated cost of repairs and ignoring the insured value (other than as a limit on the amount payable).

 

There then followed a series of law cases in England and the U. S. A., including Elcock v.Thomson (1949), Irvin v. Hine (1949), the “Armar” (1954), and Delta Supply Co. v. Liberty Mutual (1963),

and these cases introduced the Insured Value of the vessel into the calculation.  Although never challenged by Underwriters in the Courts (e. g. see the “Medina Princess” – 1965), they regarded the introduction of the Insured Value into the calculation as something of an irrelevance, in the sense that any claim for repairs actually carried out was payable in full, regardless of whether the real value of the ship was over – or under – insured.

 

The position under the legal cases is best demonstrated by an extreme example where an elderly

ship with a sound market value not much more than her scrap value sustains a serious damage, e. g.:

The Courts decided that this 40% Depreciation was to be applied to the Insured Value of the vessel and the legal claim on underwriters to be either:

  1. a) The resultant figure, or
  2. b) The estimated cost of repairs,

whichever was the less.  For example:

It will be appreciated that the real loss sustained by the assured as the result of the accident is only the difference between the sound and damaged values, – i.e. 200,000 – but as most ships tend to be insured for more than their real value, the general effect of the legal cases was to produce a much larger claim for the assured, i.e.:

The London market introduced a new clause in 1983 dealing with the vexed question of unrepaired damage; Clause 18 of the ITC-Hulls 1/10/83 reads as follows:

  1.        UNREPAIRED DAMAGE

18.1     The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the Vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs.

18.2     In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent total loss (whether or not covered under this insurance) sustained during the period covered by this insurance or any extension thereof.

18.3     The Underwriters shall not be liable in respect of unrepaired damage for more than the insured value at the time this insurance terminates.

Clause 18.1 overrides the effect of the legal cases and, to a large extent, re-introduces the pre-1950 practice mentioned earlier.  The Insured Value will be ignored, other than as a limit on the amount of the claim.

Clause 18.2 is a restatement of the position under English as codified by Section 77(2) of the Marine Insurance Act  1906, which provides  that :

“Where, under the same policy, a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the assured can only recover in respect of the total loss”

The purpose of a marine insurance policy is to indemnify the Assured for losses which he sustains as the result of perils insured against and, in general, a ship-owner does not sustain any loss until he repairs the damage and incurs the cost of those repairs.  It follows, therefore, that if the vessel becomes a total loss before an earlier damage has been repaired, the Assured loses nothing by reason of that earlier accident.

English law applies the principle that “the greater absorbs the lesser”, and the subsequent total loss overrides and/or absorbs the earlier damage.

Even if the subsequent total loss is the result of some peril excluded – or not covered – by the policy, the same rule of “the greater absorbing the lesser” still applies, and there is no claim for the earlier partial loss left unrepaired – see the legal cases of Livie v. Janson (1810) and Wilson Shipping Co., Ltd. v. British and Foreign Marine Insurance Co., Ltd. (1919).

It should be noted that the above remarks apply only to situations where both the earlier partial loss and the subsequent total loss occur on the same policy.

As soon as a policy expires, the Assured has a legal right to claim from his Underwriters in respect of any damage sustained during the currency of that policy and which is presently unrepaired.  The agreed insured value in the succeeding policy is assumed to take account of the fact that the vessel was then in a damaged condition (even though the matter was probably not considered by Ship-owners or Underwriters at the time) and in the event of a total loss occurring on that following policy, the full insured value will be paid, while a claim for supposed depreciation will be paid on the earlier policy.

This point was covered in the interesting case of Lidgett v. Secretan (1871), where a vessel sustained damage during the currency of one policy and, while repairs were being carried out – but during the currency of  a following policy – the vessel caught fire and was totally lost, The Underwriters of the first policy were held liable to pay the cost of the repairs actually completed at the time of the fire, plus a claim in respect of the unrepaired damage, while the Underwriters of the second policy were liable for a total loss and the full insured value.  A very complete indemnity!

Clause 18.3, limiting claims to the insured value, was introduced to the ITC Hulls only in 1983 and relates to the equally new provisions in Clause 1.3 where the original insured value of the vessel may be reduced to some lower figure if the vessel sails for the purpose of being broken up.

Lines 117/119 of the American Institute Hull Clauses (June 2, 1977) reads as follows:

No claim for unrepaired damages shall be allowed, except to the extent that the aggregate damage caused by perils insured against during the period of the Policy and left unrepaired at the expiration of the Policy shall be demonstrated by the Assured to have diminished the actual market value of the Vessel on that date if undamaged by such perils.

The wording is quite different from the ITC Hull clause, but the effect of both is identical in that the judgements of the British and American courts have been set aside as commercial irrelevancies.  To support a claim, the Assured must demonstrate that the damage left unrepaired when the policy expired has actually brought about a depreciation in the vessel’s value.  The AIHC do not state that the indemnity cannot exceed the estimated reasonable cost of repairs as do the ITC Hulls, but, of course, that is also the position in the American market.

The following self-explanatory wording is commonly seen under the Ship-owners Special Clauses incorporated in hull and machinery policies of insurance:

“Underwriters’ liability in respect of unrepaired damage will be the estimated cost of repairs at the first reasonable opportunity including estimated dry-dock and services, tank cleaning, superintendence and removal, if necessary.”

 

Raymond Wong

 

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AA Talk: HULL INSURANCE CLAUSES – Constructive Total Loss

Raymond Wong

It is an amazing surprise that the Institute Time Clauses – Hulls 1/10/83 (ITC-83) remain widely used after some 34 years in hull and machinery insurance policies!

There were indeed attempts to modernize hull insurance cover, through a 1995 version of the ITC wording and the International Hull Clauses (IHC) 2003, but both failed to attract much market support.  In early April this year, it was reported that leading London underwriters would review the ITC-83 to see how they could be improved to meet current ship-owners and underwriters needs.

Understandably, Assureds likely believe the devil they know is better than the devil they do not know.  However, it is very common to see hull and machinery policies incorporating ITC-83 but adding on ship-owners’ special clauses with favourable wording either tailor-made or extracted from IHC and/or other hull forms.

For the next few issues of Seaview, the Editor of this column will revisit ITC-83 with an emphasis on claims-related clauses, identifying the major differences with the American Hull Form (which is being used by a few large fleets in Hong Kong).  There are plenty of analyses of the ITC-83 by English local market experts; the Editor would however comment with the assistance of the one “ITC HULLS 1 10 83” which was written by Mr. D. John Wilson, a well-respected average adjuster.

The Editor wrote in 1988 the following Forward for the Chinese version of the “ITC HULLS 1 10 83”, which was published in Taiwan:

I knew Mr. D. John Wilson by name in 1969 through the book he wrote on the ”One Hundred Year of The Association of Average Adjusters 1869-1969”.  I met John in London in 1973 when, in conjunction with the present Lord Donaldson, Master of the Rolls, and Lord Justice Staughton, he was editing the current tenth edition of the British Shipping Laws, Vol.7 – the Law of General Average and the York-Antwerp Rules.

For years John has enjoyed the somewhat daunting and unending task of helping the juniors of the Richards Hogg Group progress with their studies and average adjusting work.  He was indeed the man I had to satisfy before being put forward to sit for the examination of the Association of Average Adjusters (AAA).

We had the opportunity of working together in Hong Kong for a couple of years.  Apparently, he gained the impression that I was an interested person so that when I was visiting Tokyo where he was resident in August 1984, he granted me the privilege of reading his more or less final draft on the ITC HULLS – 1.10.83.  When I had read it from cover to cover, I was fully convinced that it would be the best (and perhaps the first) analysis and comparison of some of the clauses issued by the Institute of London Underwriters covering Hull, Freight, Disbursements and Excess Liabilities etc. plus the American Institute Hull Clauses.  I immediately asked John if he would allow the book to be translated into Chinese.  He gave his consent without hesitation but in return I had to make him a chop for his Chinese name.

Whilst I was deliberating how I should proceed with the translation, my colleague in Taipei, Edmund Chen, completely out of the blue, told me enthusiastically on the phone that he and Ms. Christine Wang would take up this formidable task.  Having now read the Chinese version, I believe that the joint vigorous effort of Christine and Edmund is going to be of great value to any Chinese practitioners and students in the field of shipping and/or insurance.  My heart-felt congratulations on their success.

As the Chairman of the AAA 1987/1988 John wrote an extremely valuable booklet on “The Insurance of Average Disbursements and other Subsidiary Interests following a Marine Casualty” which was published by the Association in May 1988.  John, I understand, is now working on the new edition of the British Shipping Laws, Vol.7 – the Law of General Average and the York-Antwerp Rules.

The Editor understands that John’s Analysis of the 83 Clauses was largely prepared for the Japanese market and the leading insurers there did all the printing, a copy was given to the Editor personally by John who kindly allowed him (the Editor) copy right on this book for any future editions.

It is worth reminding readers that the ITC-83 state that the insurance is subject to English law and practice, meaning that, subject to any overriding provision in the policy, the Marine Insurance Act 1906 and the UK Insurance Act 2015 will apply.

 

CONSTRUCTIVE TOTAL LOSS

A Constructive Total Loss is defined by section 60 of the Marine Insurance Act 1906, which is subject to any express provision in the policy.  In ascertaining whether a ship is a constructive (or commercial) total loss and not worth repairing, a prudent uninsured owner would have regard to three main factors:

  1. The estimated cost of repairing the ship,
  2. The estimated value of the “wreck” as scrap, and
  3. The estimated value of the ship when repaired.

As a general rule, if 1 + 2 is greater than 3, then the vessel is a C.T.L.

It will be noted that each of these three factors depends on an estimate, always a somewhat flexible or “elastic” figure.

An uninsured owner has only himself to consider when evaluating these estimates and making his decision whether to repair or scrap the vessel, but the position is totally different when the vessel is insured.  Each estimate will then provide a fruitful source for argument between the parties, more particularly when it is recognized that so much money used to be at stake under the particular conditions of an old fashioned policy of marine insurance subject only to the provisions of the Marine Insurance Act.

If the ship-owner under such a policy was able to demonstrate that the vessel was a constructive total loss and not worth repairing, on an estimated sound value of the ship when repaired of, e.g 500,000 he was entitled to recover the full insured value of the vessel – whatever that might be, e.g.1,000,000 plus his subsidiary insurances, if any, on Freight & Increased Value, etc. of a further, say 250,000, will equal 1,250,000.

In addition (and although this does not concern the ship-owner himself), many reinsurances of the ship on Total Loss Only conditions would be affected by the decision of the original hull underwriters as to whether or not the vessel was a constructive total loss.

Clause 19 of ITC-83 does contain an express provision, which reads as follows:

19. CONSTRUCTIVE TOTAL LOSS

19.1 In ascertaining whether the Vessel is a constructive total loss, the insured value shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck shall be taken into account.

19.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel shall be recoverable hereunder unless such cost would exceed the insured value. In making this determination, only the cost relating to a single accident or sequence of damages arising from the same accident shall be taken into account.

To reduce the areas of possible dispute between ship-owners and underwriters in ascertaining whether the vessel is a constructive total loss, this clause provides that:

The insured value shall be taken as the repaired value, and Nothing in respect of the damaged or break-up value of the vessel or wreck shall be taken into account.

There is thus only one factor left within the realms of estimate – (the likely cost of repairing the ship) – and, further, that estimated repair cost must be compared with the insured value of the ship instead of her market value.  In practice, most ships tend to be insured for more than their market value and it becomes more difficult, therefore, for the assured to demonstrate a constructive total loss and thereby enable him to recover the insured value of his vessel, plus any sums insured on subsidiary insurances such as Freight & Increased Value.

The first sentence of Clause 19.2 sets out in greater detail and reiterates what is already implied in the first section of the clause, i. e. that

“No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel shall be recoverable hereunder unless such cost would exceed the insured value.”

The second sentence of Clause 19.2 was largely borrowed from the American Institute Hull Clauses ( June 2, 1997 ).  The clause provides that only the costs relating to a single accident may be taken into account in determining whether the vessel is a constructive total loss.  This resolves a problem which had been discussed for many years and which was mentioned in the case of the “Medina Princess” (1965) and also in his address to the Association of Average Adjusters in 1982 by Lord Justice Donaldson, later Master of the Rolls.

For example, a vessel insured for 1,000,000 might sustain damage by grounding, repairs to which were deferred, but which would cost………………………………………………………………………………………..      400,000

 

Subsequently, the vessel is involved in a collision or some other accident, repairs to

which would cost ………………………………………………… …………………………..…….….      650,000

.                                                                                                                                                                                                  1,050,000

Clearly, the vessel is a constructive total loss within the terms of Clause 19.1, but should the assured be entitled to claim the insured value of the vessel, plus the sums insured on his subsidiary insurances, – and that without the application of any policy deductibles (under Clause 12.1 )?  Or should his claim be limited to one for Unrepaired Damage (under Clause 18 ) and be subjected to the application of the policy deductibles?

 

As already stated, this problem has now been resolved and a claim for constructive total loss can only be based on the costs relating to a single accident.

  1. Costs of recovery &/or repair of the Vessel which may be included in computing a C.T.L.
  2. Repairs to hull and machinery of the vessel, including spare parts
  3. (Add) 10% for contingencies – as recommended by the “Renos” 2016
  4. Air freight on spares
  5. Cost of dry-docking and general services
  6. Superintendent’s fees and expenses
  7. Towage to repair port (including crew wages and maintenance, bunkers, etc.)
  8. Cost of discharging cargo necessary to enable repairs be effected
  9. Cost of Class survey
  10. Port charges, pilots, towage, etc.
  11. General Average contributions payable by ship (cargo sacrifice)
  12. Cost of salvage of the vessel
  13. SCOPIC liability – as upheld by the Court of Appeal in the “Renos” 2018

Lines 134/139 of the American Institute Hull Clauses (June 2, 1977) reads as follows:

TOTAL LOSS

In ascertaining whether the Vessel is a constructive Total Loss the Agreed Value shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck shall be taken into account.

There shall be no recovery for a constructive Total Loss hereunder unless the expense of recovering and repairing the Vessel would exceed the Agreed Value. In making this determination, only expenses incurred or to be incurred by reason of a single accident or a sequence of damages arising from the same accident shall be taken into account, but expenses incurred prior to tender of notice of abandonment shall not be considered if such are to be claimed separately under the Sue and Labour clause.

The provision is largely of identical effect to their counterparts in the ITC-83, the difference being that the American Hull form specifically state that “expenses incurred prior to tender of notice of abandonment” and “are to be claimed separately under the Sue and Labour clause” cannot be ranked when calculating the cost of recovery and repairs of the vessel.

Ship-owners Special Clauses

The following self-explanatory wording is commonly seen under the Ship-owners Special Clauses incorporated in the hull and machinery policies of insurance (the wording being the same as Clause 21 of the IHC 2003):

21. CONSTRUCTIVE TOTAL LOSS

21.1 In ascertaining whether the Vessel is a constructive total loss, 80% of the insured value shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck shall be taken into account.

21.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel shall be recoverable hereunder unless such cost would exceed 80% of the insured value. In making this determination, only the cost relating to a single accident or sequence of damages arising from the same accident shall be taken into account.

Furthermore, there are other clauses amended to the effect that it would be necessary to show costs up to 80% of the Insured Value or Market Value at the Assured’s option (or whichever is lower).

 Raymond T C Wong

Average Adjuster

 

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Substituted Expenses in Particular Average on Ship?

The Institute organized an evening seminar on the subject “Substituted Expenses in General Average per York-Antwerp Rules” on 20th March 2018, a workshop in Hong Kong following the English Supreme Court’s decision on “The Longchamp” case, which was reported in the last issue of “Seaview”.

The Editor was not surprised to receive a question: “What about the substituted expenses in Particular Average?”.

It is worth recalling that the principle of substituted expenses is not generally recognized under English law, which position is, however, varied by the York-Antwerp Rules in the case of general average.

In the case of Wilson v. Bank of Victoria [1867] (which case pre-dates the York-Antwerp Rules), an auxiliary sailing ship, on a laden voyage from Australia to Britain, struck an iceberg and sustained damage, being dismasted.  The ship put into Rio de Janeiro where, on account of the prohibitive cost of repairs, only temporary repairs were carried out allowing the ship to proceed to destination under steam with coal being purchased at Rio and at Fayal for such purpose.  A claim was made by the Shipowners for contribution towards the cost of the coal purchased on the grounds that they were substituted expenses for the expenses that would have been incurred at Rio if permanent repairs had been effected there.  The claim was disallowed by the court holding that the use of the auxiliary engine to bring the vessel home, and the consequent expenditure on coal, was merely the performance of a service by the Shipowners to the owners of the cargo carried and was therefore not a subject for contribution.

The Editor has some notes on the subject of “Substituted Expenses in Particular Average” made by his former partners and colleagues who are highly respected average adjusters and would like to share these with readers of “Seaview”.

Particular Average, as defined by section 64(1) of the Marine Insurance Act 1906, is a partial loss of the subject matter insured caused by a peril insured against, and the measure of indemnity for the partial loss of ship is the reasonable cost of repairs, as provided by section 69 of the Act.

It is perhaps a fallacy to think that alternative means of repair are open to the Shipowners in circumstances where they are obliged (vis-à-vis their Underwriters) to effect repairs at the most reasonable cost.  There may in theory be several ways in which a Shipowner can go about effecting a particular repair, but only one of those ways can be the most reasonable.  Once the most reasonable course of repairs is determined, the other alternatives cease to exist and it therefore follows that the course adopted cannot have been a substitution for another alternative.

This was the gist of Wilson v. Bank of Victoria, i.e. that for there to be a substitution an alternative must exist.  It was held in that case that, in as much as the Master could, by the expenditure of a small sum on temporary repairs and coal, bring the ship safely to destination, it was his duty under the contract of carriage to do so.  Consequently, the perceived alternative of landing the cargo and repairing at the port of refuge was not an alternative open to the Shipowner at all and it was therefore a fallacy to say that the cost of the coal (which the Shipowners were seeking to recover in General Average) was incurred in substitution for those measures.  The principle can therefore be applied to Particular Average claims that, as the Shipowners are obliged to effect the most reasonable repair, the claim must be based on the actual cost thereof and not on the cost of some alternative prohibited from taking.

For Particular Average on ship, the test continues to be “the reasonable cost of repairs” and hence any cost which is not a repair cost cannot be allowed as part of the claim without the specific agreement of Underwriters.  An example of a non-repair cost which Underwriters do agree to bear or contribute to, depending on the circumstances, is the cost of removal from one place of repair to another because the latter is cheaper.  On the face of it, this appears to be no different to the situation where the Shipowners incur extra fuel costs, say by burning diesel instead of fuel oil, to get from a port of refuge, where repairs are expensive, to destination, where repairs are cheaper.  However, in the first example, Owners have derived no operational benefit from the removal cost.  That is not the case with the second example, where the voyage on which the extra operating costs have been incurred is a freight-earning voyage.

Mr. John Crump, in his address on “Reasonable Cost of Repairs” at the annual general meeting of the British Association of Average Adjusters in May 1992, highlighted a few interesting cases on which he commented as follows:

QUOTE

(A) A vessel has damage to her steering gear in an area where repairs are expensive. Class agrees that the vessel may continue to trade for a limited period until she reaches a cheaper repair area provided extra tugs are employed when entering and leaving ports.

(B) A vessel has a main engine damage and Class agrees a temporary repair until she reaches a more appropriate and cheaper repairing port. The repair adopted, however, involves burning diesel oil instead of the customary fuel oil during the interim period.

(C) Damage to a winch, or winches, is sustained during discharge. Rather than effect repairs at the discharge port, which is an expensive one, equipment is hired to enable the affected hold(s) to be discharged, thus enabling the vessel to repair later at reduced cost.

In case (A) the assured claims for the cost of extra tugs, in case (B) he claims for the extra cost of diesel oil over fuel oil consumption and in (C) the claim is for hire of equipment for discharge. In each case the claim is based on the fact that the extra costs incurred saved greater repair costs for which Underwriters would otherwise have been liable.  At the same time, I would submit that it is difficult, if not impossible, to argue that any of them in themselves form part of the cost of repairing the ship.

The only law case of which I am aware which is sometimes quoted as authority for applying the “substituted expenses” idea to insurance claims is Lee v. Southern Insurance (1870) LR5, CP397.

That case in fact involved not an insurance on ship but an insurance on freight and the facts were as follows:

A vessel was bound for Liverpool with a cargo of palm oil and stranded off the Welsh coast.  Cargo had to be discharged and the Shipowner arranged to forward it by rail to destination at a cost in excess of ￡200, thereby earning his freight which was at risk.  The vessel was then towed to Caernarfon, where she was made seaworthy for the rest of the voyage.

The forwarding costs were claimed under the freight policy, but the Court held that such claim must be limited to ￡70, which would have been the cost involved in reshipping the cargo onto the original vessel after repair.

The case thus involved a claim for particular or special charges, not a claim for particular average loss. I cannot see it as referring in any way to the “substituted expenses” concept, for the hypothetical reshipping costs of ￡70 were introduced solely as a test of the reasonableness or otherwise of the forwarding costs of ￡200. The older editions of Arnould report the facts of the case under the sub heading “Only reasonable expenses recoverable.”

Reverting to the three practical examples already mentioned, I submit that as a matter of principle the unfortunate assureds have no remedy for recovery of any of their extra costs under the hull policies.

At first sight this stance seems a harsh one, even ‘uncommercial’.  In each instance a peril covered by the policy has operated and the assured has, as a direct consequence, incurred costs.  As a result of his doing so Underwriters on the ship have been saved money.  Should they not respond on that basis?

It should perhaps first be pointed out that the assured too would almost certainly have saved substantial sums as a result of the actions taken. That, however, is not, in my view, the real point which is that the losses suffered by the assured as a result of incurring those extra costs relate to freight or earnings rather than hull insurance.  If the freight was at risk and insured for the voyage on which these various expenses were incurred, I would suggest they would form a particular or special charge on the freight policy. That is their essential character and the fact that nowadays freight is frequently at the risk of the cargo owner rather than the Shipowner so that the latter will then seldom have appropriate insurance cannot alter that character.

Could I add one final point about this type of case. It will doubtless be argued that if the assured cannot recover this type of expense from his Underwriters he may on occasion seek to avoid incurring it and allow the latter to take the rap for the increased repair costs that result.  I do not believe that argument to be realistic.  Even in those cases, probably rare ones, in which the assured himself does not gain from adopting the practical and commercially sensible course, it must be remembered that the test of ‘reasonableness’ of the ultimate repair cost must still be applied and if the assured increases the latter cost solely to save additional costs of keeping his ship operational in order to protect his freight or earnings, that increase will not, strictly, be for account of Hull Underwriters.

I submit that the concept of substituted expenses, which under English law is of doubtful validity in any context, can certainly have no application to a claim for particular average on a hull policy.

UNQUOTE

The following are few common examples where the damages are caused by perils insured against, the insurances being subject to English law and practice:

Example 1. 

Vessel sustains damage to stern-tube seals.  There are 2 alternatives open to the Shipowner – an emergency drydocking which will be claimed in full from Underwriters, or deferment of repairs for 3 months which will involve additional consumption of lubricating oil but save 50% of drydock dues.  Can the cost of lubricating oil be claimed from Hull Underwriters?

It is tempting to take the view that if it can be shown that Underwriters benefited from the extra consumption of the lube oil they should pay for it or contribute towards it.  It is submitted that since the Shipowners are obliged to effect repairs at the most reasonable cost, they do not, in reality, have the option of drydocking immediately.  The extra consumption of lube oil is thus of no benefit to Underwriters – they were only ever liable for the cost of repairs as deferred and carried out in drydock. The excess lube oil consumption is not a repair cost – it is an extra or enhanced operational cost.  There are no grounds for allowing it to Particular Average.

Example 2

Vessel under Time Charter.  Turbo charger breaks down in the South Atlantic. The vessel can continue to Santos but additional diesel oil will be consumed and will be charged by Time Charterers to Shipowners.  The alternative is that the vessel could be towed to Santos.  The vessel uses the extra diesel oil.  At Santos repairs are deferred again but more additional diesel oil is claimed on the basis that repair costs would be cheaper if repaired later.  Can the extra cost of diesel oil be claimed from Hull Underwriters?

Applying the same logic as in Example 1 above, there does not appear to be any ground that either the tugs or extra fuel getting to port could be charged to Underwriters.  The second set of alternatives, once at the port, are effectively the same as in Example 1 and cannot be allowed to Particular Average.

Example 3. 

Vessel’s crankshaft condemned but the new crankshaft will take 6 months to supply. Instead the Owners grind down existing crankshaft as temporary repair. Temporary repairs result in following –

(i) additional manning required in engine room;

(ii) turbo charger requires more frequent cleaning;

(iii) additional consumption of diesel oil;

(iv) as a result of running out of balance, some fretting results in main engine.

Can these additional costs (i) to (iv) be claimed from Hull Underwriters?

Firstly, Underwriters should recognize that the sole purpose of the ship is to be a freight or revenue earning instrument.  It is patently unreasonable to leave her out of commission for 6 months awaiting parts if, by way of a temporary repair, she can be quickly returned to employment with the permanent repair effected on delivery of the necessary parts. It follows therefore that the temporary repairs is in itself reasonable and forms a direct claim on Underwriters.

There is suggestion that where a temporary repair is reasonable, any extra operating costs which is known will result direct from the temporary repair would be treated as part of the cost of that repair.  However, it is submitted that whilst (ii) and (iv) can comfortably be allowed as Particular Average as they involve damage or quasi damage to the vessel, (i) and (iii) should be disallowed as they are merely the enhanced cost of running the vessel in semi-damaged condition.

Editor’s Note:  It is advisable that if claims are put forward at the request of the Assured, which are not in accordance with the law (and practice as it should be) then the Adjusters should seek prior agreement of the Underwriters before issuing the adjustment, making it clear to both parties what the position is.

 

(Editor: Raymond T C Wong Average Adjuster)

 

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AA Talk: Can Law be determined by reference to Practice?

Raymond Wong

“…, the law cannot be decided by what is understood among writers and practitioners in the relevant field … Experience shows that in many areas of practical and professional endeavour generally accepted points of principle and practice, when tested in court, sometimes turn out to be unsustainable.  I accept that it may be right for a court to have regard to practices which have developed and principles which have been adopted by practitioners, but they cannot determine the outcome when the issue is ultimately one of Law.”   

Lord Neuberger in “The Longchamp” [2017]

“THE LONGCHAMP”

Included in Issue No.118 is “An Adjusters’ Note on Substituted Expenses and Ransom Payments” contributed by Richards Hogg Lindley following the Commercial Court judgment on “The Longchamp” case having been reversed by the Court of Appeal, highlighting that the position under English law with regards to Rule F of the York-Antwerp Rules reverted to the position being in line with the views of the majority on the Advisory Committee of the British Association of Average Adjusters.

The Editor, however, did mention in this column that “Readers are reminded that the “Longchamp” case where the Court of Appeal has reversed the 2014 High Court judgment is coming up for trial in the Supreme Court.”

The Supreme Court, on 25th October 2017, allowed the Appeal, thus overruling the decision at the Court of Appeal.

The case has been widely reported but for sake of completeness and easy reference, the Editor would repeat briefly summary of the factual backgrounds and decisions.

 

The casualty

On 29 January 2009 the chemical carrier MV Longchamp (“the vessel”) was transiting the Gulf of Aden on a voyage from Rafnes, Norway, to Go Dau, Vietnam, laden with a cargo of 2,728.732 metric tons of Vinyl Chloride Monomer in bulk (“the cargo”).  The cargo was carried under a bill of lading dated 6 January 2009 which stated on its face that “General Average, if any, shall be settled in accordance with the York-Antwerp Rules 1974”.

At 06.40, seven heavily armed pirates boarded the vessel.  The pirates commanded the master to alter course towards the bay of Eyl, Somalia, where she arrived and dropped anchor at 10.36 on 31 January 2009.  At 14.05 on 30 January 2009 a negotiator for the pirates boarded the vessel and demanded a ransom of US$6m.  The vessel’s owners (“the owners”) had meanwhile formed a crisis management team who had set a target settlement figure of US$1.5m.  On 2 February 2009 an initial offer of US$373,000 was put to the pirates.  Negotiations between the pirates’ negotiators and the owners’ crisis management team continued over the following seven weeks with various offers and counter-offers being made.

Eventually on 22 March 2009, after a negotiation period of 51 days, a ransom was agreed in the amount of US$1.85m.  On 27 March 2009 the ransom sum was delivered by being dropped at sea.  At 07.36 on 28 March 2009 the pirates disembarked and at 08.00 that day the vessel continued her voyage.

It is worth noting that the cargo was subsequently valued at destination at US$787,186 and the value of the ship was assessed at US$3,947,096.  That is to say, the total value of the property at risk amounts to US$4,734,282 which sum is less than the ransom of US$6m initially demanded.

 

The relevant York-Antwerp Rules

Rule of Interpretation

In the adjustment of general average the following lettered and numbered Rules shall apply to the exclusion of any Law and Practice inconsistent therewith.

Except as provided by the numbered Rules, general average shall be adjusted according to the lettered Rules.

Rule A

There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

Rule C

Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.

Loss or damage sustained by the ship or cargo through delay, whether on the voyage or subsequently, such as demurrage, and any indirect loss whatsoever, such as loss of market, shall not be admitted as general average.

Rule E

The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average.

Rule F

Any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.

 

Adjustment dated 31 August 2011

The Adjusters allowed in general average the following expenses incurred during the negotiation period, which the cargo disagrees:

Commercial Court decision [2014]

The Court found that:

  • the expenses ii) – v) incurred during the negotiation period were allowable in general average under Rule F as “substituted expenses” (in lieu of US$4.15m saving);
  • the expenses i) and vi) were allowable in general average under Rule A;
  • payment of the original ransom demand of US$6m without negotiation would have been reasonable.

Court of Appeal decision [2016]

The cargo appealed challenging to the judgment on expenses i) – v) and the Court agreed that:

  • payment of the original ransom demand of US$6m without negotiation would have been reasonable;
  • the media response costs, i) are allowable in general average under Rule A;
  • consumption of bunkers is treated as an expense for the purpose of Rule F;

but found that:

  • the negotiation period expenses, ii) – v), did not fall within Rule F holding that negotiating a reduced ransom of US$1.85m (and the saving of US$4.15m) was not “an alternative course of action” to the payment of the original sum demanded – merely a variant (which decision apparently followed the reasoning supported by the leading textbooks and was in line with the conclusion made by the majority of the majority of the Advisory Committee of the British Association of Average Adjusters, reflecting the almost universal practice not to allow these items under Rule F in the circumstances).

Supreme Court decision [2017]

The owners appealed to the Supreme Court submitting that the negotiation period expenses, ii) – v) amounting to US$160,213.95, fell within the expression “expense incurred” by them within Rule F and those expenses were incurred “in place of another expense”, i.e. the saving of US$4.15m resulting from the negotiations.  Since the negotiation period expenses were less than the “general average expense avoided”, they were accordingly allowable in general average under Rule F.

The Supreme Court (by a majority of 4 to 1) reversed the Court of Appeal decision, allowing the negotiation period expenses, ii) – v), in general average under Rule F and finding that:

  • the language of Rule F did not require that the expenses were incurred following an alternative course;
  • it was not necessary to consider whether the initial ransom demand was reasonable under Rule A;

It is worth noting the issues considered by the Supreme Court, which are highlighted as follows:

  1. The Court found that it would not be necessary, and it would be wrong to assume that it would be necessary, to establish that it would have been reasonable to accept the initial ransom demand in order to justify the contention that the negotiation period expenses were allowable under Rule F.  Such assumption would mean that, “if a ship-owner incurs an expense to avoid paying a reasonable sum, he can in principle recover under Rule F, whereas if he incurs expense to avoid paying an unreasonable sum (i.e. a larger sum), he cannot recover.  The more obvious his duty to mitigate, and the greater the likely benefits of such mitigation, the less likely he would be to be able to recover.”
  2. The Court considered that the words in Rule F “another expense which would have been allowable as general average” were a reference to an expense of a nature/type which would have been allowable (rather than its’ quantum) under Rule A, under which a ransom would be allowable in general average.
  3. Lord Neuberger favoured the interpretation of Rule F which “produces an entirely rational outcome: whenever an expense is incurred to avoid a sum of a type which would be allowable, that expense would be allowable, but only to the extent that it does not exceed the sum avoided.” Accordingly, the negotiation period expenses in the amount of US$160,213.95 fell under Rule F as they were incurred to avoid paying US$6m, resulting in a saving of US$4.14m.
  4. The Court found that Rule C only applies to loss consequential on a general average act defined by Rule A. It does not apply to expenses covered by Rule F, which is concerned with sums expended in avoiding expense otherwise allowable as general average.
  5. The Court disagreed to the payment of a reduced ransom being not “an alternative course of action” to paying the original ransom demand but merely a “variant”. The Court found that incurring the negotiation period expenses was an alternative to paying a higher ransom; “the former involved incurring vessel-operating expenses whereas the latter involved paying a ransom”.
  6. The Court saw no reason for restrictively interpreting the word “extra” so as to require an expense to be of a nature which would not normally have been incurred in response to the peril threatening the adventure. The Court was of the opinion that the natural contextual meaning of “extra expense” was “simply an expense which would not otherwise have been incurred (but for the saving of the “other expense”)”.

The following comments made by the Supreme Court in the judgment are well worth noting:

  1. The York-Antwerp Rules are an international agreed sets of rules. In para 29 of the judgment, Lord Neuberger states: “Given that the Rules represent an international arrangement, it is particularly inappropriate to adopt an approach to their interpretation which involved reading in any words or qualification.  As already mentioned, it appears to me that, as a matter of ordinary language, Rule F applies to the negotiation period expenses for the reasons given in para 26 above.  To imply some qualification such as the requirement that those expenses must have been incurred so as to achieve an “alternative course of action” appears to me to be very dangerous.  In the same way as an international convention or treaty, the Rules should be interpreted by a United Kingdom court “unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation” …. “it is the unadorned language of the article to which attention must be directed”.”
  2. Lord Neuberger is not convinced that, as a matter of language, the passages in the leading textbooks support the conclusion that Rule F can only be invoked when the claimant has taken an “alternative course of action”, and he states in para 25 of the judgment: “… the law cannot be decided by what is understood among writers and practitioners in the relevant field … Experience shows that in many areas of practical and professional endeavour generally accepted points of principle and practice, when tested in court, sometimes turn out to be unsustainable.  I accept that it may be right for a court to have regard to practices which have developed and principles which have been adopted by practitioners, but they cannot determine the outcome when the issue is ultimately one of Law.” (The obvious precedents are the The Makis [1929] and The Alpha [1991]).

The English Supreme Court judgment is in contrast with the current practice of most average adjusters to disallow such negotiation period expenses and will no doubt affect the future English general average adjustments of substituted expenses under the York-Antwerp Rules.  It will be interested to see if the market would, like what it had done following “The Makis” case, seek to revert to the long accepted practice.

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AN INTERNATIONAL AVERAGE ADJUSTING CENTRE

Raymond T C Wong[1]

ABSTRACT

One of the business opportunities which has arisen as a result of the Belt and Road Initiative involves marine insurance and claims handling[2].   This has prompted an examination of one of the most valuable support services available to the maritime and insurance community, Average Adjusting, with a view to raising the awareness of Hong Kong being an international average adjusting centre.

 

I – INTRODUCTION

Nothing is 100% certain; nothing is 100% safe.  Marine casualties occur on a daily basis, thus the need for marine insurance which was highlighted by an act of the English Parliament in 1601:

“By means of insurance, if a ship is lost, there will not follow the ruination of any one man; instead, the loss will fall lightly upon many men, and more particularly on wealthy men who stay safely at home, rather than on those who adventure abroad and take risks, whereby all merchants, especially the younger ones, are able to be more adventurous in their trading and take greater risks.”

Marine casualties are often complex affairs and the improper handling of a situation can aggravate cash flow problems and lead to rights and liabilities vis-a-vis insurers and third parties being prejudiced.  Understandably, very few assured are capable or interested in handling complicated insurance related claims arising out of marine casualties.

Professional average adjusters, however, with their detailed knowledge of maritime practice, insurance, and law – supported by rigorous training and professional qualifications, are able to assist with virtually any aspect of a maritime casualty; they appear to be a combination of lawyers and accountants and are not there to make a profit/gain for any parties involved in the maritime adventure or the policies of marine insurance, only to make sure that claims are settled fairly.  It is for their expertise that average adjusters are appointed and/or consulted, almost invariably by shipowners, to advise and assist as necessary after a maritime casualty giving rise to general average, although under English Law at least[3], shipowners are not obliged to employ a professional average adjuster and they may draw up their own average adjustment.

For insurers including re-insurers, the concern is that claims are not aggravated and rights are not prejudiced by improper action after a casualty.  Later they are concerned that they pay no more and no less than the proper claim.  In the long established insurance market of London and those which follow the practice of London (including Hong Kong and Taiwan), it appears that the conventional insurers would be prepared to advise the Assured in the manner along the following lines:

“Marine insurance claims are likely to be complicated; we appreciate that the Assured is likely to be at a disadvantage.  We want you (the Assured) to feel confident that we will pay valid claims.  As a pledge of that confidence, we (the Insurer) will allow you to use an Average Adjuster of your choice and we will pay his bill.”

Hong Kong has been adjusting averages since 1945, and with its highly qualified adjusters having had work experience in major shipping and insurance markets, and a great amount of effort going continuously to the training of adjusting staff as well as claims practitioners (for the benefit of the marine insurance industry), has evidently acquired a considerable reputation internationally.

 

II – ADJUSTING AVERAGES[4]

The Average Adjuster adjusts averages which are losses or claims arising from maritime casualties.  So, the Average Adjusters are assessing and stating marine claims – insurance, general average and liability.

Average adjusting has been around for a very long time, dating back to when the story of general average started some 2,500 or 3,000 years ago.  In those far off times, merchants usually travelled with their cargo on board the ship.  In spite of all safety precautions, disaster could suddenly threaten these little ships.  Following the grounding of a vessel, the only way to refloat her may have been to deliberately throw overboard some cargo.  There must have been many fierce arguments between the merchants as to whose cargo was to be jettisoned, until presumably the shipmaster with common sense made an important decision which was subsequently embodied in the law of the Island of Rhodes about 2,500 years ago:

“If in order to lighten a Ship, merchandise is thrown overboard, that which has been given for all shall be replaced by the contribution of all.”

Assume that Cargo B was chosen to be jettisoned and the vessel refloated to resume her voyage, the contributions to the sacrifice were settled by the parties to the adventure upon safe arrival at destination, probably by the shipmaster adjusting and apportioning the sacrifice over the values of the property saved and/or made good as follows:

It will be seen that everyone whose property was at risk had sustained the same degree of loss i.e. 25%.

From the above brief recital, it is apparent that general average exists independently of insurance (though it can be looked upon as being a form of mutual insurance) and, indeed, had been in existence long before any policies of insurance as we know them today were in use.  Nevertheless, it is now common for the property owners to be insured so that they may recover anything they pay in general average from their insurers.  Consequently, the settlement of general average has, in practice, become a settlement between insurers.  Hence, whilst general average has nothing to do with insurance, insurance has much to do with general average.

The York-Antwerp Rules

The essential fairness of the general average system has been followed by virtually all countries with maritime trade although the laws in each country vary.  Efforts made to attain international uniformity started in the year 1860, resulting, ultimately, in the York-Antwerp Rules,  which are today widely accepted throughout the world.  Almost all contracts of carriage, being either charter parties or bills of lading, provide for general average to be adjusted according to the York-Antwerp Rules (to the exclusion of any law and practice inconsistent therewith).  These rules have been reviewed and revised from time to time, the latest version being York/Antwerp Rules 2016:

  • York Rules 1864
  • York/Antwerp Rules (“YAR”) 1877
  • YAR 1890
  • YAR 1924 (CMI started as custodian)
  • YAR 1950
  • YAR 1974
  • YAR 1974 as amended 1990
  • YAR 1994
  • YAR 2004
  • YAR 2016

It is worth noting that YAR 2004 was unfortunately approved without a consensus between shipowning and other interests, hence receiving negligible support.  Currently, the set of rules commonly incorporated in the contracts remains being the York-Antwerp Rules 1994.

The Professional Average Adjusters

Within the maritime industry, Average Adjusters belong to a unique and small profession.  The first known professional average adjusters practiced in the City of London from about 1800, though there is record that Lord Justice Mansfield, in his celebrated judgment in the case of Lewis v. Rucker in 1761, refers to the fact that:

“I thought a good deal of the points, and endeavoured to get what assistance I could by conversing with some gentlemen of experience in adjustment.”

In his address to the average adjusters in 1935, Mr. Justice Mackinnon said:

“Your profession is a singular one – not merely because the vast majority of your fellow-citizens have not the remotest idea what your duties are; but because, above any other profession that is not actually legal, you are required to have, and in fact possess, a very exact knowledge of a very special branch of the law.”

The pre-requisites of a qualified, professional average adjuster are expertise, experience and independence.  With his established reputation of impartiality and background of knowledge, he offers a non-litigious, non-adversarial method for settling claims by acting as an impartial intermediary between the parties concerned.  In this respect, the conventional average adjuster has a two-fold duty:

  • To the assured and/or the claimants in general average – to see that the claim presented is fully supported by the evidence, and that it is as complete as possible, i.e. that nothing is missed
  • To the insurers and/or the general average contributing interests – not to submit, without making an appropriate note of reservation, any item of claim which cannot be supported either in law or in practice.

It should be noted that an average adjustment is not binding upon the parties concerned and it is open to the respective parties to disagree with the average adjuster’s conclusion as to whether there is a claim in principle and/or to take issue with the average adjuster’s treatment of the figures.  However, it is true to say that the vast majority of claims go through as adjusted, the adjustment being accepted as correct settlement between the parties concerned.  In this connection, a former chairman[5] of Joint Hulls Committee addressing on the hulls claims in the London market said:

“The use of a reputable and highly qualified average adjuster to prepare the claim can significantly speed the agreement of the claim.  An adjustment prepared by a respected firm made up of highly qualified individuals will receive favourable treatment by the claims adjusters.  While the adjustment may well be queried, the underwriter knows that claims which are not covered by the policy have not been submitted and that the claim preparation is thorough and well researched.  This will prevent the unnecessary questioning of the adjustment due to insufficient research of the claim.”

Association of Average Adjusters founded in 1869[6]

“Just as a number of families in primitive society do not form a State, so a number of men, though they perform similar functions, do not make a profession if they remain in isolation.  A profession can only be said to exist when there are bonds between the practitioners, and these bonds can take but on shape – that of formal association”[7]

The first formal association of the individual average adjusters took place in London in 1869 at the prompting of the underwriting members of Lloyd’s and the Liverpool Underwriters Association.  The aims of the Association were as follows:

  • To promote professional standards and correct principles in the adjustment of marine claims by ensuring, through examination or otherwise, that those entering into membership possess a high level of expertise.
  • To achieve uniformity of practice among average adjusters by providing a forum for discussion and by establishing rules of practice where necessary.
  • To ensure the independence and impartiality of its members by imposing a strict code of professional conduct.
  • To provide service to the maritime community by establishing procedure by which advice on all aspects of marine claims may be obtained so as to facilitate their settlement.

The current membership categories[8] are as follows:

  • FELLOWS are full members of the Association who have satisfied the rigorous examination requirements of qualification by passing all six modules.
  • SENIOR ASSOCIATES have two passes out of three Fellowship modular exams (excluding the practical exam) one of which must be paper F1. In order to achieve Senior Associate status the examinees will still have to attain the 75% pass mark in the same way as average adjusting examinees who are aiming to become Fellows of the Association.
  • ASSOCIATES have passed Modules 1 & 2 of the Association’s examinations. This qualification is widely recognised in the marine insurance and shipping industries and is a stepping stone to becoming a Fellow.

The Association of Average Adjusters is the association to which all qualified average adjusters in Great Britain belong, but it has become an international organisation, there being fellows and associates coming from a wide range of countries.  On the record, there have been six Chinese qualified fellows, four of them currently being resident in Hong Kong and two in Singapore.

The functions of the average adjuster are principally the following:

  • The adjustment of general average.
  • The adjustment of claims on policies of insurance on any interest directly or indirectly exposed to maritime perils.
  • The preparation of statements of claim against third parties.
  • The division of recoveries from third parties, or of proceeds of sale.
  • The arbitration of disputes arising in relation to the above or associated matters.

To summarize, the Association is a regulatory body, being charged with promoting and ensuring both the skills and objectivity of the average adjusters.  Fellows of the Association are practicing average adjusters who, being expert in the law and practice of general average and marine insurance, and having qualified by examination of the Association, apply their expertise for the benefit of the maritime industry.

It is worth noting that the average adjuster may be appointed by any member of the maritime or marine insurance communities having an interest in the matter concerned and, irrespective of the identity of the party appointing him, he must always act impartially and independently.  He may advise any party seeking his opinion on any matter within the area of his expertise, and assist in the collection of general average, salvage, or other security, and in effecting settlements under average adjustments, or otherwise as required.

Following a Maritime Casualty

The average adjuster is usually consulted and asked to formulate an opinion as to where the various liabilities will fall and who will pay under the bills of lading, charter party, insurance policies, salvage agreement, and any other contract which may be in existence.  Assume that:

A vessel, insured on hull and machinery, etc. subject to ITC – Hulls 1/10/83, with a General Average Absorption Clause, entered with a P&I Club, and laden with cargo in containers shipped under multi-bill of lading providing for general average in accordance with York/Antwerp Rules 1994, is involved in a serious collision sustaining damage to her stem and forward shell plating, with serious leakage in the forepeak and nos.1 and 2 holds.  To avoid any chance of sinking, the master decides to strand the vessel on a generally sandy and sheltered beach.  It is considered necessary to discharge part cargo into barges, fit patches and then pump out and refloat with tug assistance.  Various salvors offer to refloat the vessel on the basis of Lloyd’s Open Form of salvage contract but, in the interest of economy, the necessary barges, stevedores and tugs are engaged on a daily rate basis.  Fire breaks out during refloating operation which is extinguished with fire hoses from the attending tugs with LOF being signed retrospectively.  Vessel is towed to port of refuge for necessary repairs, where cargo is forcibly discharged and subsequently transshipped….

Parties to the adventure, the shipowner in particular, are now faced with various problems.  The questions in the shipowner’s mind usually include:

  1. What needs to be done at this stage (upon hearing of the collision and voluntary grounding)?
  2. Whom do we need to inform/instruct?
  3. Shall we opt for the Lloyd’s Open Form, or shall we engage assistance on a daily hire basis?
  4. What are pros and cons of these different types of services?
  5. Who provides security for any salvage services, and how are the various expenses to be funded?
  6. Do insurances on average disbursements, shipowner’s liability, or any other interests need taking out? And who will pay the premiums?
  7. Do we need to appoint a cargo surveyor in the general interest?
  8. Shall we declare general average taking into account the General Average Absorption Clause in the hull and machinery policy?
  9. What general average security shall we take from cargo?
  10. Do we need an admiralty solicitor?
  11. What about security for the collision and jurisdiction?
  12. What about pollution liability from either vessel?
  13. How should we react to time charterer who asks us not to declare general average?
  14. What is the significance of the fact that the freight is prepaid?
  15. What is the significance of the remarks about the intentional grounding?
  16. Will there be 2 deductibles on the hull & machinery policy claim?
  17. Are the attending tugs engaged on daily hire entitled to claim salvage following their successful efforts made to extinguish the fire?
  18. What will happen, and what should we do?
  19. Will this fire mean an extra policy deductible?
  20. Do we need another set of general average security forms?
  21. Who will provide security to colliding vessel and what will it cost?
  22. Who will provide security to salvors and what will it cost?
  23. Who will provide security to Harbour Authority at port of refuge for possible pollution?
  24. Who will pay the cost of forwarding the cargo to destinations? Can we abandon the voyage and ask the cargo to take delivery where it lies at its own expense?
  25. Will the salvors permit the cargo to be forwarded before its security for salvage has been provided? If not, who is to provide such security?
  26. Do we need to place any insurance on the cargo?
  27. If so, why? On what conditions?  For how much?  And who is the assured?
  28. Suppose the forwarding vessel were to be totally lost on the voyage when carrying the cargo ex our vessel, do we lose any general average contribution they would have paid?
  29. If so, how can this be avoided?
  30. Who will draw up specification for damage repairs and take tenders for the repairs?
  31. Who will know/decide which yards should be asked to tender?
  32. Who will provide money to pay repair yard for their required advance payment?
  33. Who provides the funds for progress repair payments?
  34. Do we have a constructive total loss on H&M policy? [There is a CTL when the cost of recovery and repairing the vessel exceeds the insured value.]

(a) What is the estimated cost of repairing the vessel and what may be included in the computation of that figure?

(b) Can the cost of salvage be included?

(c) Do we have to give credit for any general average contributions received from cargo towards those repairs?

(d) Do we have to credit the scrap value of the vessel?

(e) What is notice of abandonment?

These questions, and many more like them (and those to follow during the salvage and collision proceedings respectively), which may cause a severe headache to the shipowner, are dealt with daily by professional average adjusters as they coordinate the involvement of salvors, superintendents, repairers, underwriters’ surveyors, P&I representatives, lawyers, etc.

The collection of general average security can be a major exercise involving contact being made with several hundred (or more) different cargo interests concerned – receivers, shippers and insurers (also average agents and/or lawyers acting for them), and it is essential to have the full co-operation of the ship’s agents at ports of loading and discharge.  Understandably, the average adjuster is often engaged by the salvors in multi-bill cases to assist in collecting the salvage security.

Once the cargo has been delivered, the average adjuster will then circularize the cargo interests to obtain details of any damage sustained by the cargo which could form a deduction to assess the salved and contributory values and/or a claim in general average. The average adjuster will advise the claimants in general average as to what documents/information are required to substantiate their claims.

In the meantime, when the salvage award is published by arbitrator or agreed between the salvors and the property interests, the average adjuster will likely be engaged by the salvors to assist in collecting the payments due from the parties concerned.  Then, there follows the main part of the average adjuster’s task which is the preparation of the actual general average adjustment.

Concurrently with preparation of the general average adjustment, the average adjuster is processing the particular average claim on the hull and machinery policy.  The first step is to establish whether there is a valid claim under the policy, hence the examination of the terms and conditions of the policy.

Is the cause of damage a peril insured against?  In a case like the one assumed herein, with a collision recorded in the log book on a specific date, the cause is clear.  However, in many other cases (involving machinery damages, in particular), the cause may not be readily apparent at the time of survey and will require considerable investigation by the assured under guidance of average adjuster with assistance of his technical consultant, with a view to ascertaining if a prima facie claim can be established under the policy.

Generally, in recognition of the cash flow difficulties a major loss can cause, underwriters are willing to arrange a payment on account if certified by the average adjuster.  What happens in practice is that the average adjuster will arrange for the cost of repairs (and other major items of expenditure) or in appropriate cases estimates thereof, to be approved by the attending underwriters’ surveyor and he will then prepare a payment on account certificate which sets out the basic facts and figures and recommends a figure which underwriters mat safely settle without prejudice on account of the final claim.  In the certificate, the adjuster also states where the funds are to be paid and in some cases the funds may be channelled through the client’s account with the bank of the adjuster.

The average adjuster will advise the assured what documents and information will be needed to substantiate his claim for the preparation of the adjustment.

The Adjustment

The final adjustment of general and particular average will be a self-contained document with all relevant evidence being immediately available with a view to providing:

(a) Background details that enable the parties concerned to understand the circumstances leading up to the casualty, as well as the casualty itself;

(b) Key details relating to the policy coverage and relevant provisions concerning general average in the contracts of carriage;

(c) A concise summary of the liability position – apportionment of general average and application of general and particular average claims on the hull and machinery policy of insurance.

The adjustment format of a big average adjusting firm[9], which is commonly adopted with modification by adjusters, breaks the adjustment into several “free-standing” sections, starting from a brief over-view and then moving into progressively greater level of details; like a layer cake – the light icing of key facts is on top and the heavy details are at the bottom.  The layers are made up as follows:

  1. The Front Page – The first page is a summary of everything that is in the adjustment.  The headings will be similar in every case but there can be variations as circumstances require – Vessel, Voyage, Casualty, Insurances, Casualty Summary, Adjustment Summary, Recovery, Additional Information, and Claim Summary.  The purpose is to give a single snapshot of the case – what is usually called an “Executive Summary”.
  2. The Adjustment of Claim – This section is the core document which must be self-contained with a summary of facts together with explanatory notes making the parties concerned to feel confident that all potentially difficult or controversial areas have been drawn to their attention and the adjuster’s treatment explained.  If something is critical to a claim it should be summarized or quoted in full.  It includes a summary of the disbursements including the adjuster’s charges which form part of the claim/loss (which are classified by the adjuster between general and particular average and so forth), followed by the apportionment of general average and the application of the claims to the policy – again this is to make it possible for somebody to get a full picture.
  3. Appendices – These usually consist of:

(a) Reports and correspondence and

(b) Disbursement details where accounts covering the damage repairs and other expenses are shown in abbreviated form with each item allocated either as claimable or being disallowed.

(c) Accounts (for repairs and major expenditure)

(d) Additional appendices, for example including the apportionment of general average over individual cargo interest can be shown as necessary.

(e) Financial balance

A further major exercise will be for the average adjuster to collect debit balances due from cargo interests world-wide and take care of the sums due to the creditors under the adjustment.

Further Adjustment

In the meantime, the average adjuster will draw up a statement of claim against the colliding vessel.  In this connection, it is interested to note that in the case of The Normanstar 1929 the adjuster’s fees for preparing the ship and cargo claims for the purpose of the reference to the Registrar of the Admiralty Court were allowed as part of the costs of the reference, it being held by Mr. Justice Hill that the course adopted had saved legal expenses which would have been allowed as costs.

Following the conclusion of collision settlement, the average adjuster will draw up a further adjustment dealing with:

  1. Claim under the Collision Liability Clause (in terms of the H&M policy and P&I cover) in respect of the damage done to the colliding vessel which the assured is legally liable;
  2. Division of the Recovery and interest thereon from the colliding vessel between various parties concerned;
  3. Apportionment of costs in the collision proceedings.

Again, in the case discussed above, the average adjuster will be engaged in distributing the net recovery funds attaching to the cargo interests who have paid their contributions under the previous adjustment of general average.

Adjustment Fees

Under English law and practice, where the appointment of a professional average adjuster can be justified, the cost of adjustment would either be shared amongst all the interests in general average or paid solely by underwriters in cases of claim for partial loss on the policies of insurance.

As noted earlier, the shipowner is not obliged to employ a professional average adjuster and in general average cases, the appointment is generally justified under one of three headings:

  • At common law, i.e. through customs[10]
  • By implication where the York-Antwerp Rules apply[11]
  • By way of general average security in the form of Lloyd’s Average Bond and/or Average Guarantee[12]

Shipowner are similarly not under any contractual obligation to present their partial loss statements to underwriters by using the services of a professional average adjuster.  However, if they do so, the adjustment charges are customarily settled by underwriters as part of the claim under English practice, by virtual of an implied contractual obligation under the policy.  Apparently, to avoid unnecessary arguments between the assured and insurers (particularly where risks are placed in insurance markets that do not follow the Anglo-Saxon model for marine claims settlement), a specific Adjusters clause is commonly found being incorporated in the policies of insurance, thus making it a contractual liability of underwriters to reimburse the adjustment fees reasonably incurred.

III – INDEPENDENCE AND IMPARTIALITY

The concepts of impartiality and independence referred to the Association of Average Adjusters above are of paramount importance in the profession.

Impartiality is not favouring one more than another, being unbiased.  It is one of the cornerstones of the profession’s survival.  The all-time wise words of a past Chairman[13] of the Association of the Average Adjusters:

“He (the average adjuster) is nothing unless impartial.  If he is to be useful, he must be independent.  Should he prove so, he becomes the means of preventing questions capable of being solved amicably, from rushing precipitately into litigation.”

It is contended that strictly (legally) speaking, an Average Adjuster is the agent of the party who appoints him and therefore the adjuster is partial.  In most general average cases, the shipowner appoints the adjuster but it is submitted that he does so on the basis that he is appointing someone who will, whether he likes it or not, act impartially in accordance with the rules of the Association of Average Adjusters.  Indeed, it is believed that by virtue of his position in a general average case, the average adjuster can incur certain liabilities in tort to other parties to the common maritime adventure.  Hence, the adjuster would on the one hand endeavour to give the best professional advice to the shipowner but on the other hand endeavour to ensure that the interests of the other parties to the adventure are not prejudiced.

To help preserve the average adjuster’s impartiality, the parties concerned must be convinced that impartiality is desirable and the adjuster must have the confidence of the parties concerned, in vast majority of cases, the assured and insurer.

Because the shipowner appoints the adjuster, who would understandably be in favour of appointing an adjuster who is prepared to be biased in his favour, there have been criticisms of adjusters having been driven into the arms of the shipowners, though in the majority of cases they are not justifiable, insofar as they involve Fellows of the Association of Average Adjusters.  Regrettably, it is not surprising to see, however rarely, cargo insurers look to average adjusting practitioners who would be prepared to challenge in adversarial manner every single allowance made in the adjustment of general average, thus disgracing the decent image of average adjusters.

Reputable professional average adjusters, whilst possessing a wide variety of skills and a breadth of expertise concerning all forms of maritime claims, having a general knowledge of law, do not act as paid advocates; also they ought not to be constrained by friendship, prejudice, or fear.

Furthermore, it is a matter of great importance that the average adjusting firm is completely independent and entirely owned and controlled by the working Principals concerned, there being no outsider financial interest and the adjusting firm is not involved in any business which might impair their impartiality.  Unfortunately, in the commercial world, it has become inevitable to see acquisitions of average adjusters by public listing companies, etc. where other subsidiaries within the same group are involved in activities giving rise to conflicts of interests.  This could arguably depreciate the value of average adjusters, although it is anticipated that repectable adjusters who have lost their independence will handle matters professionally when and where a conflict of interests arises.

IV – AVERAGE ADJUSTING IN GREATER CHINA

It appears that the profession was first introduced to the Far East in the mid 1920’s when Mr. William R.M. Stevens of Messrs. William Richards & Son, founded in 1813, arrived in Shanghai, who, as soon as possible, opened his own office there.  After the Second World War, Mr. Stevens set up the first average adjusting firm in Hong Kong in 1945, being subsequently joined by his son, Mr. Nigel Stevens, who was born in China.

William Richards & Son, and another leading firm, Hogg, Lindley & Co. coincidentally opened their respective offices in Hong Kong in 1965.  They, however, merged in 1969 to form a separate partnership, Richards Hogg International to develop on a joint basis their world-wide interests.  In the meantime, Stevens lined up with William Elmslie & Son and changed its name to Stevens, Elmslie & Co. whilst Frank B. Hall, an American insurance broking firm with average adjusting arm opened an office in Hong Kong.

The Department for Average Adjustment under the Legal Affairs Department of the China Council for the Promotion of International Trade was set up in Beijing 1969, to handle general average claims.  Indeed, in mainland China, average adjusters are referred to as “general average adjusters”.  Unlike the traditional London type market, the insurers in mainland China have a different system for dealing with local hull claims – a direct settlement between the insurer and the assured.  Only in very rare occasions are the services of professional average adjusters utilized on policies of insurance claims.

It is believed that the first professional average adjusting firm to enter Taiwan was Stevens, Elmslie & Co., shortly followed by Richards Hogg International in 1975 using Overseas Adjusters & Surveyors Co., Ltd., as the trading name.  Stevens, Elmslie ceased doing business in Taiwan in 1991.

It is worth mentioning the great efforts made by Richards Hogg International in promoting its local staff without reservation and offering training courses on marine claims to the shipping/insurance community world-wide.  Indeed, virtually all the Chinese fellows of the British Association of Average Adjusters received on-the-job training at this firm.  Mr. Raymond Wong (王德超) qualified by examination in 1980, Mr. Christopher Tang (邓炎祥) in 1982, Mr. Edward Lau (刘世安) in 1985, Mr. Benson Chiu (赵国坤) in 1992, Mr. Yibing Xu (徐义斌) in 2008, and Mr. Matthew Cao (曹傑) in 2015.

The fast growth in shipping resulted in few more foreign firms opening offices in Hong Kong during late 1970’s and throughout the 1980’s.  This included Francis & Arnold, Manley Hopkins Son & Cookes, G.W. Cockrill, London Ltd., and R.K. Hastings & Co.  Apparently, all ceased from doing business in the early 1990’s and no longer exist in the region now.  Meanwhile, Richards Hogg International and the Department for Average Adjustment of the China Council for the Promotion of International Trade, Beijing formed a cooperation based in Hong Kong in 1985 leading to the subsequent establishment of a joint venture company, Dari Co., Ltd. in 1993.

 

Following a series of acquisitions/mergers and closures, the former brand names, Richards, Stevens, Hogg, and Lindley together make up Richards Hogg Lindley, trading under Charles Taylor plc from 1998 onward, which, after having merged Dari Co., Ltd. into its operation in 2012, became the only professional average adjusting firm in the Hong Kong SAR.  Having only one average adjusting firm in an international shipping centre is not recommended for the profession but this remained the status quo until 2015 when an independent average adjusting firm, Asia Maritime Adjusting (Hong Kong) was set up in Hong Kong, followed by Asia Maritime Adjusting (Shanghai) in Shanghai where Charles Taylor Adjusting has had a joint venture company since 2001.

Currently, there are one State owned average adjusting department, Department for Average Adjustments in Beijing, with offices or adjusting centres (as they call it) in Shanghai and Tianjin, two genuine adjusting firms in Shanghai, one in Taipei, and two in Hong Kong.  Whilst needless to say, there are well experienced adjusters in all these locations, we only have 4 fully qualified Fellows, 2 Senior Associates and 4 Associates of the British Association of Average Adjusters practising under professional average adjusting firms, all except 2 Associates being based in Hong Kong:

Hong Kong has maintained its leading position in Greater China and, indeed, virtually all the adjusters currently practising in mainland China and Taiwan received training in Hong Kong.  Comparing with Singapore (which appears to have 4 professional average adjusting firms with 3 Fellows, no Senior Associate, 4 Associates and 4 adjusters over 20-year experience), Hong Kong has less firms but more practising adjusters with qualification (by examination) of the British Association of Average Adjusters.

 

V – HONG KONG AS AN INTERNATIONAL AVERAGE ADJUSTING CENTRE

As submitted earlier, Hong Kong has been adjusting averages since 1945, and with its highly qualified adjusters having had work experience in major shipping and insurance markets, and a great amount of effort going continuously to the training of adjusting staff and claims practitioners (for the benefit of the marine insurance industry), has evidently acquired a considerable reputation internationally.

In the foreseeable future, Hong Kong remains the right place for adjustment of general average and hull claims in the Asia-Pacific region.  Obviously the vast market to promote average adjusting business is in mainland China.  It is now up to the average adjusting practitioners to keep moving forward proactively and constructively to convince the market of the usefulness of the profession at affordable prices.  Through co-operations that the current average adjusting firms in Hong Kong have and will have with colleagues and counterparts in mainland China, it will not be in the too distant future to see another Far East adjusting centre, probably in Shanghai.

Adjustment of General Average

It is common to see standard forms of contract of carriage contain clause providing for general average to be adjusted in London where, needless to say, many highly qualified adjusters are based.   However, increasingly there are contracts of carriage which allow Carrier an option to decide where the adjustment should be drawn up.  It is widely accepted that in absence of a specific contractual provision, the adjustment will be stated at the port of destination.  Furthermore, the parties involved may agree to amend the place of adjustment.

Whilst English is the recognized language for shipping, the Chinese language has become popular doing business in China, a vast market; Hong Kong is fluent in both languages.

Hong Kong should not feel shy to seek support of shipowners and charterers directly and/or through shipbrokers, encouraging/persuading them to consider to adopt the following general average wording in bills of lading and charter-parties respectively:

“General Average shall be adjusted in Hong Kong or at place at Carrier’s option, according to the York/Antwerp Rules, 1994, and as to matters not provided for by these rules, in accordance with the law and practice obtaining at the place where the adjustment is drawn up.”

Adjustment of Hull Claims

Any hull claims system should have as its’ main objectives[21] the following:

  • Speed of settlement
  • Economy of settlement
  • Accuracy of settlement
  • A satisfied Insurer (and Re-insurer)
  • A satisfied Assured

The non-adversarial approach of highly qualified average adjusters would help achieve these objectives.  An important issue which the average adjusters need to bear in mind is that Underwriters are always seeking to reduce the overall costs of dealing with their claims, hence the adjustment charges must be “value for money”.

It is becoming norm to have an Adjuster clause incorporated at the request of the assured in the policies of insurances on hull and machinery taken out in Hong Kong and Taiwan, an example being as follows:

“The Assured have the option to appoint

  • Richards Hogg Lindley, or
  • Asia Maritime Adjusting (Hong Kong), or
  • A Fellow of the British Association of Average Adjusters

for preparing claim statement and/or average adjustment etc. The Underwriters shall be responsible for payment of reasonable fee of the average adjusters irrespective of whether a claim ultimately arises under this insurance.”

Insurers in the mainland China who underwrite overseas risks would have experience in using professional average adjusters who must not miss the golden opportunity of demonstrating the value of the Adjuster’s use and duty.

 

VI – CONCLUSION

The profession has changed with the passage of time; yet the unique skill and expertise of highly qualified average adjusters must endure to meet the changes in the requirements of a modern shipping industry and insurance market.  It is simple: the profession must convince the market of its usefulness.

In conclusion, this paper is best defined by the most frequently quoted expression[22] of the position of the average adjuster:

“The use of the adjuster individually is to grease the wheels of commercial machinery, to do work which neither the assured nor the underwriters have either time, training or inclination for, in such a manner as to expedite settlements without resort to the expensive machinery of law: His duty is to act fairly to both parties to the contract of insurance or the contract of carriage, to set down all material facts, withholding nothing of importance, to present the figures of the suggested settlement in such a manner as to be capable of being easily grasped, and above all, in all cases wherever definite law or practice is not clear, to place the matter before the parties interested in such a manner as to facilitate an agreement between them. Adjusters acting in this sense well deserve the name of beneficent parasites.”

It is with earnest hope that those committed professional Average Adjusters currently resident in Hong Kong will take the lead working together with their counterparts in the region, aiming for this worthy goal as rounded off by Mr. E. R. Lindley: “Adjusters acting in this sense well deserve the name of beneficent parasites.”

 

[1] Mr. Raymond Wong is the first Chinese Fellow of the British Association of Average Adjusters, starting his career in average adjusting in 1966; now Principal of Asia Maritime Adjusting (Hong Kong) – www.averageadj.com

[2] It is recognized that claims handling is the “shop window” of insurance

[3] Wavertree Sailing Ship Co. v Love (1897)

[4] Revised extract from the paper on the subject “Adjusting Averages” compiled by Mr. Wong in 2010.

[5] Mr. Mark Brockbank

[6] Information collected from the publications of the Association of Average Adjusters

[7] “The Professions” by Carr-Saunders & Wilson, quoted in the “100 Years of the Association of Average Adjusters 1869-1969”

[8] Website of the Association of Average Adjusters – www.average-adjusters.com

[9] Richards Hogg Lindley

[10] As submitted in para 313 of Lowndes & Rudlof on General Average and York Antwerp Rules – 10th edition

[11] Chandris v Argo Insurance Co., Ltd. (1924); para C.34 of Lowndes & Rudolf on General Average and York-Antwerp Rules – 14th edition

[12] Castle Insurance Co. v Hong Kong Islands Shipping Co. – The “Potoi Chau” (1984)

[13] Mr. Manley Hopkins in his chairman’s address in 1875

[14] Association of Average Adjusters

[15] Richards Hogg Lindley

[16] Asia Maritime Adjusting (Hong Kong)

[17] Department for Average Adjustment

[18] Asia Maritime Adjusting (Shanghai)

[19] Charles Taylor Adjusting

[20] Overseas Adjusters & Surveyors Co., Ltd.

[21] E R Lindley, in his address to AAA in 1904

[22] C J Barstow, former Chairman of AAA in this Lecture on Hull Claims Services in 1996

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兩岸三地航運物流研討會 2017

日 期   ：        2017年11月20日

地 點   ：        紀利華會演講廳: 香港跑馬地黃泥涌道188號

主 旨   ：        研討會已在兩岸三地成功舉辦了九屆，增加了兩岸三地航運學會之間的瞭解、交流和合作，增進了同行業之間的友誼，促進了兩岸三地航運業的可持續發展。經過多年的發展，研討會已在當地政府和業界享有一定的影響力，並得到各方的肯定。今年是第十屆「兩岸三地航運物流研討會」, 移師香港舉行, 定於2017年11月20日在香港紀利華木球會舉行, 由香港海運學會主辦，深圳海運協會和中華航運學會協辦。

是屆大會主題是 “開創兩岸三地合作契機”，其中包括 :

–   大中華地區航運或物流的最新發展方向

–   有關的基建及政府的配合政策

–   船舶管理或供應鏈的管理與革新

–   關於海事保險的發展

–   區內航運業或物流服務業經營者之間的合作，競爭及共同發展策略

–   航運和物流管理上的科技應用

–   航運和物流業從業員的培訓

–   多聯式運輸系統

–   航運和物流高等教育發展

–   郵輪/渡輪兩岸三地發展

–   一帶一路結合新南向政策

語言   ：         普通話

費 用   ：        港幣 $1,000.00

(包括研討會入場費，午，晚宴，論文集, 紀念品)

報名手續：填妥隨函回條 ，連支票 (抬頭 “海運學會” ) 於11月10日前寄回本會.

 

會 議 程 序 :

第十屆兩岸三地航運物流研討會

2017年11月20日 紀利華會演講廳

 

——————————————————————————————

回    條

姓 名 __________________  公 司 _____________________

出席午膳 (1230-1400)       出席晚宴 (1800-  )         〖請在合適格內加“√”〗

地 址 ________________________________________________________

電 郵 ________________________________________________________

聯 絡 電 話 ____________________________________________________

 

填妥回條連同支票寄回香港干諾道中152-155號招商局大廈16字樓1605-7C室或可經電郵info@seatransport.org  預留座位.

 

 

 

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INTERDISCIPLINARY MARITIME PRACTICE WORKSHOP SERIES II Eighth (12th) SESSION

INTERDISCIPLINARY MARITIME PRACTICE WORKSHOP SERIES II Eighth (11th) SESSION ON THURSDAY 26TH OCTOBER 2017

This is the second series of workshops with a theme of “Interdisciplinary Maritime Practice” (IMP), which is jointly organized by The Hong Kong Logistics Management Staff Association (HKLMSA), C.Y. Tung International Centre for Maritime Studies, PolyU (ICMS) and the Hong Kong Seamen Union (HKSU). It employs the same methodology and format like the IMP Workshop Series I of 2014, which was conceived to cover the entire lifespan of a ship, from the decision to purchase to its final loss or scrapping, and to provide a platform for eminent professionals from the Hong Kong Maritime Industry to share their expertise and valuable experience with fellow professionals, young entrants in particular, in the shipping fraternity of the Greater China Region, in interactive sessions of Q&A discussions.

 

The Twelfth and Last Session of the IMP Workshop Series II is on Ship Management and Operations which will be a brief summary of the essence of the previous eleven sessions as below:

1) Offshore Wind Energy & IMP Methodology & its Applications

2) Financing of Shipping & Related Projects

3) Project Management

4) Ship Types, Machineries & Equipment

5) Value of Maritime Professional Services

6) Shipbuilding and Sale & Purchase

7) Marine Insurance (Hull & Machinery, Protection & Indemnity)

8) Casualty Management Part I – P&I and Average Adjusting

9) Casualty Management Part II – Salvage and Average Adjusting

10) Ship Chartering and Administration

11) Casualty Management Part III – Surveys, GA, CTL, & Claims Handling

An introduction will be presented on the scope and responsibilities of Ship Management & Operations. Case studies will be used to illustrate how the expertise and experience presented during the past sessions by the moderators and participants are applied in an interdisciplinary manner for the topic in practice.

The Moderator for this 12h Session will be Mr. Wong Cho Hor of Five Oceans Maritime, with other members of the Panel of Moderators and Advisors in attendance.

All members, non-members and guests are cordially invited to attend the Twelfth Workshop.

Twelfth Workshop:

Time/Date :         7:00 pm – 9:45 pm on Thursday 26th October 2017
Venue :                  HK Polytechnic University Room Y301
Language :           English (Questions in Cantonese and/or Putonghua are welcomed, though)
Charge :                 Members – HK$50.00  Non-members – HK$100.00

 

Parties who are interested can contact Miss Catherine Chow at Tel: 2771-6180 or info@hklmsa.org.hk for details, or by using this link for registration.

*Sandwiches will be served during the break at about 8.30pm to participants, and iced drinks subject to availability and arrangement. Hence it would be appreciated if confirmation for attendance can be made as far as possible to facilitate the catering.
 

The Panel of Moderators is:

Raymond TC Wong          Chairman of IST and Honorary Advisor of HKLMSA

Prof. Chin-Shan Lu           Director of ICMS

Manson Cheung                Executive Member of both ICSHK and HKLMSA

Cho Hor Wong                   Executive Member of HKLMSA

Dr. Tze Leung Yip              Deputy Director of ICMS

 

Supporting Organizations

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INTERDISCIPLINARY MARITIME PRACTICE WORKSHOP SERIES II Eighth (11th) SESSION

INTERDISCIPLINARY MARITIME PRACTICE WORKSHOP SERIES II Eighth (11th) SESSION ON WEDNESDAY 20TH SEPTEMBER 2017

This is the second series of workshops with a theme of “Interdisciplinary Maritime Practice” (IMP), which is jointly organized by The Hong Kong Logistics Management Staff Association (HKLMSA), C.Y. Tung International Centre for Maritime Studies, PolyU (ICMS) and the Hong Kong Seamen Union (HKSU). It employs the same methodology and format like the IMP Workshop Series I of 2014, which was conceived to cover the entire lifespan of a ship, from the decision to purchase to its final loss or scrapping, and to provide a platform for eminent professionals from the Hong Kong Maritime Industry to share their expertise and valuable experience with fellow professionals, young entrants in particular, in the shipping fraternity of the Greater China Region, in interactive sessions of Q&A discussions.

 

The Eleventh Session of the IMP Workshop Series II is on Casualty Management Part III focusing on the various actions and claims aspects arising from the casualty (collision followed by fire and grounding):

  • Surveys
  • General Average where the voyage is abandoned
  • Constructive Total Loss of the vessel
  • Additional Insurances following a maritime casualty
  • Examination of Average Adjustment by Underwriters Claims Adjuster

Moderators for this 11h Session will be Mr. Raymond Wong of Asia Maritime Adjusters, Mr. Wallace Yeung of Gard (HK) Ltd., and Capt. Richard Gains of Brookes Bell Hong Kong Ltd.

Mr. Wong will preside over the case study as Average Adjuster jointly with Mr. Yeung as Underwriters Claims Adjuster, highlighting differences in cover and treatment of certain areas between the ITC-Hulls and the Nordic Plan. Capt. Gains will speak on surveying aspect of casualty management.

All members, non-members and guests are cordially invited to attend the Eleventh Workshop.

Eleventh Workshop:
Time/Date :        7:00 pm – 9:45 pm on Thursday 17th August 2017
Venue :                 HK Polytechnic University Room Y301
Language :           English (Questions in Cantonese and/or Putonghua are welcomed, though)
Charge :                 Members – HK$50.00  Non-members – HK$100.00

 

Parties who are interested can contact Miss Catherine Chow at Tel: 2771-6180 or info@hklmsa.org.hk for details, or by using this link for registration.

*Sandwiches will be served during the break at about 8.30pm to participants, and iced drinks subject to availability and arrangement. Hence it would be appreciated if confirmation for attendance can be made as far as possible to facilitate the catering.
 

The Panel of Moderators is:

Raymond TC Wong          Chairman of IST and Honorary Advisor of HKLMSA

Prof. Chin-Shan Lu           Director of ICMS

Manson Cheung                Executive Member of both ICSHK and HKLMSA

Cho Hor Wong                   Executive Member of HKLMSA

Dr. Tze Leung Yip              Deputy Director of ICMS

 

Supporting Organizations

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INTERDISCIPLINARY MARITIME PRACTICE WORKSHOP SERIES II Eighth (10th) SESSION

INTERDISCIPLINARY MARITIME PRACTICE WORKSHOP SERIES II Eighth (10th) SESSION ON THURSDAY 17th August 2017

This is the second series of workshops with a theme of “Interdisciplinary Maritime Practice” (IMP), which is jointly organized by The Hong Kong Logistics Management Staff Association (HKLMSA), C.Y. Tung International Centre for Maritime Studies, PolyU (ICMS) and the Hong Kong Seamen Union (HKSU). It employs the same methodology and format like the IMP Workshop Series I of 2014, which was conceived to cover the entire lifespan of a ship, from the decision to purchase to its final loss or scrapping, and to provide a platform for eminent professionals from the Hong Kong Maritime Industry to share their expertise and valuable experience with fellow professionals, young entrants in particular, in the shipping fraternity of the Greater China Region, in interactive sessions of Q&A discussions.

 

The Tenth Session of the IMP Workshop Series II is on Ship Chartering & Operations focusing on the common issues in main clauses or terms in Charterparties and post fixture operation and administration, using case studies. There will be an brief introduction to the topic.
Moderators for this 10th Session will be Mr. Manson Cheung of ABC Shipping (HK) Ltd. and Mr. Jagmeet Makkar of Pastiche Holdings Ltd. and Skills Plus Pte Ltd.
All members, non-members and guests are cordially invited to attend the Tenth Workshop.
Tenth Workshop:
Time/Date :        7:00 pm – 9:45 pm on Thursday 17th August 2017
Venue :                 HK Polytechnic University Room Y305
Language :           English (Questions in Cantonese and/or Putonghua are welcomed, though)
Charge :                 Members – HK$50.00  Non-members – HK$100.00

 

Parties who are interested can contact Miss Catherine Chow at Tel: 2771-6180 or info@hklmsa.org.hk for details, or by using this link.

*Sandwiches will be served during the break at about 8.30pm to participants, and iced drinks subject to availability and arrangement. Hence it would be appreciated if confirmation for attendance can be made as far as possible to facilitate the catering.
 

The Panel of Moderators is:

Raymond TC Wong          Chairman of IST and Honorary Advisor of HKLMSA

Prof. Chin-Shan Lu           Director of ICMS

Manson Cheung                Executive Member of both ICSHK and HKLMSA

Cho Hor Wong                   Executive Member of HKLMSA

Dr. Tze Leung Yip              Deputy Director of ICMS

 

Supporting Organizations