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Superyacht Salvage: Insurance Implications

Posted: 24th Mar 2017 | Written By: Jonas Ball
Salvage

Does your hull insurance policy cover towing and salvage costs? Pantaenius is involved in a variety of salvage operations every year, some of which are highly complex. However, in many cases yachts need to be salvaged at short notice and with little planning, so it's important to know how to avert the threat of damage or total loss.

Furthermore, the salvor might be a professional salvage company or the captain of a fishing vessel or a private or commercial yacht responding to a vessel in distress at sea. If their efforts are successful, they are entitled to charge a reasonable salvage fee. What many people don't realise is that this fee can equate to as much as 100% of the value of the vessel. Pantaenius explains how a salvage should be handled in order to avoid nasty suprises later.

The International Convention on Salvage, 1989

While the duty to rescue people in hazardous situations at sea has been recognised since time immemorial, and is incorporated by the UN's SOLAS Convention into international maritime law, there is no additional obligation to attempt to salvage the stricken yacht at the same time.

In order to provide an incentive to assist in salvage operations - even ones that cause detours or, in the case of commercial vessels, loss of earnings - the International Convention on Salvage was concluded in 1989. Accordingly, to claim a salvage fee, the salvor must satisfy three criteria under this convention:

  • The salvaged vessel or the items it carries must be in danger

  • The salvor must act voluntarily, i.e. without being required by law to assist

  • The salvage operation must be successful

In practice, the question as to whether the affected vessel is in danger and whether a salvage fee is due (as opposed to the usually much smaller reward for towing assistance) is rarely clear-cut. Therefore professional salvage companies frequently rely on their own definitions to determine the circumstances under which they are entitled to a salvage fee. 

Pantaenius yacht on rocks

The amount of the salvage fee, as defined in the International Convention on Salvage, 1989, depends on 10 different criteria. Determining factors include the value of the salvaged vessel, the extent to which it was successfully salvaged, the expertise of the salvor, the amount of time they gave up, their willingness to assist and the suitability of the equipment used. The salvage fee charged by a professional salvage company therefore tends to be higher than that charged by the captain of a private vessel.

Hull Insurance & Salvage Cover

At Pantaenius, the terms of our hull insurance cover salvage costs provided the insured vessel is in direct danger of being damaged. However, when it comes to emergency salvage, every yacht owner or captain should be mindful of some basic rules to avoid exceeding the terms of their cover.

The most important rule is never to agree on any salvage fee in advance. Instead you should contact your insurance partner as soon as possible so they can supervise any negotiations. Under no circumstances should you make any statements about the value of the yacht or sign any agreements. The in-house claims department at Pantaenius can be contacted around the clock and is very experienced in handling such situations.

If this is not possible or if a salvor insists on an immediate agreement, Pantaenius recommends that you use the Lloyd's Open Form (LOF) agreement. This standardised agreement does not specify a salvage fee and contains a 'no cure – no pay' provision. Once the vessel has been successfully salvaged, the remuneration will be decided later by an arbitral tribunal.

Pantaenius Salvage2

Correct Conduct in the Event of Salvage

  • Contact your insurance partner as soon as possible

  • Do not sign a salvage agreement. If you have to, use only Loyd’s Open Form (LOF)

  • Do not agree a salvage fee or make any statements about the value of your yacht

  • Contribute to the salvage as much as you can

  • Make notes or records of the precise circumstances and the duration of the salvage

10 Criteria for the Assessment of a Salvage Award

  • Value of salvaged ship and all property preserved

  • Competence and efforts of salvor to prevent environmental harm

  • Extent of success of salvor

  • Circumstances and extent of danger

  • Competence and effort of salvor for safe guarding vessel/property and for saving life

  • Spent time and effort and loss

  • Liability and other hazards

  • Promptness of salvage service

  • Availability and assignment of boats

  • Availability and capability of equipment


About Pantaenius
Pantaenius has acted as an Insurance Broker since 1899, providing Yacht Insurance since 1977, with offices in Germany, United Kingdom, Monaco, Spain, Denmark, Sweden, Austria, America and Australia. 

 

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