Towage Guidance Note - UK P&I Members Area

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6However, even “knock for knock” type contractscan be quite complicated and the Club thereforerecommends that tows are fixed on the TOWCONor TOWHIRE forms which are published byBIMCO (www.bimco.dk) and are similar contractsproviding for lump sum or daily hire payment. Asthese contracts are often heavily amended, theClub must see the specific terms prior to approval.Warranties and approvals in towagecontractsMost towage contracts including, for example, theTOWCON will have contractual provisionsrelating to safety of the towage. Underwriters andothers rely on these provisions. For example clause12 of the TOWCON provides in part,“…the Hirer shall supply to the Tugowner orthe Tugmaster, on the arrival of the Tug at theplace of departure an unconditional certificateof towworthiness for the Tow issued by arecognized firm of Marine Surveyors or SurveyOrganisation…”In summary, towage contracts should always bepresented to the Club prior to signature wherepossible, and certainly prior to commencement oftowage.P&I assessment categoryTwo: Safety aspectsWhilst the Club can approve or disapprove atowage contract, the Club does not actuallyapprove or disapprove towage based on safety.In a technical insurance sense, the Club’s Rule onlyactually applies after a claim and the Club’s Managersthen decide whether or not to pay a claim.In order to provide some certainty to Membershowever, the Managers will work closely withthem to form an opinion in advance about how aclaim would be treated under Rule 5J. The finaldecision as to whether to commence a tow or notwill however rest with the Member and the Club.The standard against which the Club’s Managers orBoard consider claims arising during towage, andin fact from all other causes, is found in Rule 5,“5J. Contraband, blockade running, unlawfultrade, imprudent or hazardous operationsNo claim shall be recoverable from the Associationif it arises out of or is consequent upon an enteredship carrying contraband, blockade running orbeing employed in an unlawful trade or if theDirectors, having regard to all the circumstances,shall be of the opinion that the carriage, trade orvoyage was imprudent,unsafe, unduly hazardousor improper.” (emphasis added)This particular Rule has at times sounded draconianto Members because of reference to such crimes asblockade running. However where a planned tow isunsafe, reference to this Rule is in no way meant tosuggest wrongdoing or moral culpability on the partof the Member, but the simple reality that someships are so badly damaged or weather conditionssuch that towage will be unduly hazardous.In these circumstances the Club needs to balancethe mutual Members’ collective interest inavoiding exceptionally high risk tows, with thepossibility of buying special one-off marketinsurance for these riskier tows.In an event where a tow proceeds and P&I claimsarise but are not indemnified, a Member could askthe Directors to exercise their discretion. Thepurpose of this note however is to try and helpavoid that scenario.Factors of immediate concern in applying Rule 5 are:• Safety of Life – will the tow unduly put livesat risk?• Warranty Survey – if the warranty surveyor hasreservations, an owner should not anticipateClub cover.• Navigation Permits – some waterways willrequire advance permits.• Attention to P&I risks – the Club hasexperienced situations where otherorganisations have approved a tow but the vesselis leaking oil. A Club cannot reasonably beasked to accept pollution risks where reasonablemeasures can be taken to prevent oil pollution.• Class and Flag state approval – Under the Rulesa vessel is not covered where it does not meetthe mandatory safety requirements.The Club may decide after a claim arises that atow was not safe, if, for example, the Club was notinformed by the Member about importantinformation or if, for example, relevant informationor documents from class, authorities, the warrantysurveyor is withheld from the Club. However, the UKClub endeavours as best possible to provide guidance
7to Members before towage starts and therefore earlyand continuous dialogue with the Club is important.Example: Towage to a nearby yard is arranged onan acceptable contract and with a tow warrantyand the P&I club confirms coverage. After the towcommences, a better repair contract is found witha yard much further away and the tow takes adifferent route exposing it to storms and forces notcontemplated in the original tow warranty. Thetow may be deemed imprudent or unsafe.By the very nature of ship casualties, many towswill have unsafe elements. Fortunately, there is adeveloped insurance market for these special risks,although often at significant cost in terms ofadditional premium.In summary, when determining if a planned tow isimprudent, unsafe or unduly hazardous, the ClubManagers will pay particular attention to anyrecommendations of the warranty surveyor, and mayat times retain independent naval architects to advise.Case study: Following redelivery by salvors, anowner works with the Classification society toassess the structure of the vessel. After a week, thewarranty surveyor is asked to attend and “rubberstamp” the tow as planned. However, the warrantysurveyor makes new recommendations forstrengthening the structure and will not issue atowworthiness certificate or tow warranty. Hullunderwriters will not hold the vessel covered untilthe tow-worthiness certificate is unconditionallyissued. The vessel is delayed and tugs waiting tostart the tow go on demurrage.What exactly does it mean for P&Icoverage if the Club has contract orsafety reservations?If the Club does not approve the contract or doesnot deem a tow safe, it does not mean the Memberis automatically without any P&I cover. Claimswhich would arise under the standard Rules willstill be covered by the Club – what is not coveredare purely contractual risks or losses directly linkedto safety, depending on the Club’s concerns.Example: An owner signs a contract which requiresthe owner to indemnify the tug boat for any loss itmay suffer. This indemnity is too wide in scope forClub approval. During the tow however a memberof the ship’s crew falls and requires emergencyevacuation The Club will pay the crew claim.What is SOL cover?In some situations the Club will not be able toapprove P&I coverage for a tow. The procedurewill then be for the owner or his broker to obtainwhat is known as “Ship Owner’s Liability” or SOLcover as it is known. An SOL policy essentiallyreplaces or buys back standard P&I cover with afixed premium cover, typically with a limit ofbetween USD 10-50 million.The SOL market is well developed and a numberof underwriters are able to provide quotations forcovering non-standard contract risks or coveringtows with particular technical or safety concerns.The Managers most frequently see SOL coversplaced in the London market. Premium, limits anddeductibles are negotiated on a case-by-case basisand the underwriters may have a number ofquestions about the tow as planned.In some situations a Club may agree to cover the tow,but elect to lay off a part of the Club’s exposure inthe market. This would be purchased as a reinsuranceof the Club and not an SOL policy insuring theowner. The Club has the discretion to indemnifythe Member for the costs of SOL cover, dependingon the circumstances. The costs may also form partof General Average claims, though this varies.The Managers of the UK Club are able to helpMembers and their brokers obtain SOL quotationsfrom the market, if requested by Members. TheManagers will typically ask that the Member orbroker sends the details of the tow to the SOLunderwriters, as full disclosure of the risks isimportant at the time of placing SOL cover.Because SOL is a policy of the ship-owner, it isimportant that the owner disclose as muchrelevant information as possible, eg details of thetow, recommendations of class or the warrantysurveyor, including adverse surveys, condition ofthe vessel, etc. However, the Managers are oftenable to assist in accelerating the process andfrequently obtain quotations the same day.Towage to breakers or other movementsof dead shipsThe principles of seeking P&I Club approval fortowage to repair yards also apply to towage tobreakers. In either scenario P&I coverage may beaffected because towage will not be in theordinary course of trading or customary.
Page 1: P&I coverage duringpost-casualty to
Page 4 and 5: 4Where hull damage has been sustain
Page 8: 8ConclusionsThe Club’s Managers r

Towage Guidance Note - UK P&I Members Area

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