CSC January’s Members Meeting

28.01.2020

CSC January’s Members Meeting

As usually in this year, the meeting was held on 22 Januaryn 2020, at Amathus Beach Hotel, in Limassol.  The audience were welcomed by Mr. Andreas Neophytou, the vice President of the Cuprus Shipping Chamber. We started with a report about Chamber’s activities during the last month. After that he announced a presentation prepared by Mr. Burkhard Fischer and Mr. Ronaldo Drege, Directors of Albatross Adjusters Ltd entitled: „How the adjuster’s role has changed – 150 years of evolution”.

A brief History of General Average was presented. The story of general average starts some 2,500 or 3,000 years ago whilst marine insurance has been transacted for centuries. All those early claims must have been adjusted by someone, somehow. 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 grounding of a vessel, the only way to refloat her was to deliberately thrown overboard some cargo. There must be many fierce arguments between the merchants as to whose cargo were 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:

Ship valued @ $200 pays $50

Cargo A valued @ 100 “ 25

Cargo C valued @ 300 “ 75

$600 pays $150

Cargo B jettisoned on  

amount of loss@ 200 “ 50

$800 pays $200

It will be seen that everyone whose property was at risk had sustained the same degree of loss i.e. 25%. The essential fairness of the general average system has been followed virtually by all countries with maritime trade throughout though the law in each country varies. Efforts made to attain international uniformity started in the year 1860 resulting in agreeing upon the York‐Antwerp Rules which are today widely accepted throughout the world. Almost every Bill of Lading or contract of affreightment provides for general average to be adjusted according to York‐Antwerp Rules. These rules have been reviewed and revised from time to time but the latest set, York/Antwerp Rules 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 Association of Average Adjusters founded in 1869. 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.”

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 Association of Average Adjusters is the association to which all qualified average adjusters in Great Britain belong. Some of its fellows practice in various parts of the world. On the record, there have been five Chinese qualified fellows, namely, Raymond T C Wong (1980), Christopher Y C Tang (1982), Edward S O Lau (1985), Benson K K Chiu (1992) and Yibing Xu (2008).

The aims of the Association are 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 Association is a regulatory body, being charged with promoting and ensuring both 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 and marine insurance communities.

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.

The 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 nowadays usually consulted as soon as a casualty occurs, and asked to formulate an opinion, with the little information then available, 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 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 discharges 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?

And so on. 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 average 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 salvage and general average security collection operation can be a major exercise involving contact being made with several hundred 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. 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 contributory value 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 is often engaged by the salvors in multi‐bill cases 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, where a collision recorded in the log book on a specific date the cause is clear. However, in many other cases the cause may not be readily apparent at the time of survey and will require considerable investigation by the average adjuster with assistance of his technical consultant.  Once it has been established that there is a prima facie claim under the policy, the average adjuster then ascertains whether a payment on account is warranted.    In this connection, 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 can safely settle account of the final claim. The average adjuster will similarly advise the assured what documents and information will be needed to substantiate his claim. The final adjustment of general and particular average will be a self contained document with all relevant evidence being immediately available.