Shipowners Chance 'Negative Equity' in Event of CTL

By George Backwell
Wednesday, May 14, 2014
Keith Jones: Photo AAA

Shipowners have been warned they could face being saddled with ‘negative equity’ in the insurance aftermath of disasters at sea, according to Keith Jones the outgoing chairman of the Association of Average Adjusters (AAA) at its London AGM, reports UK shipping trade association Maritime London.

Jones listed a potential series of pitfalls awaiting shipping companies when a ‘constructive total loss’ (CTL) is declared. He urged owners to be wary from the outset of the costs over which they had control, of the expensive business of maintaining a wreck pending investigation of the cause of the casualty, and cautioned that they may be unable to recover their costs if the sums exceeded the eventual proceeds of sale of the wreck.

“I am afraid there may be more unhappy monetary endings in the future when it comes to proceeds of sale, or rather the negative equity caused due to the lack of them,” remarked Mr Jones.

He said that despite the problems over ‘proceeds of sale’ having been underlined in 2010 by a previous chairman of the association, Sir Stephen Tomlinson, there was no sign of change in the approach by hull underwriters.

Mr Jones said that in a CTL case where the cause of the damage or the costs of repair are in dispute, the owner is in a difficult position as he needs to retain the wreck in order to be able to prove his case – “but then of course the costs of maintaining the wreck continue to mount. In some cases this could mean that once the cause or costs question has been resolved, the costs of maintaining the wreck throughout this period are far in excess of the proceeds realised.

What if ‘reasonable costs’ exceeded the proceeds? “In such circumstances this is unlikely to end well for an owner as he is no doubt under a legal obligation to maintain the wreck in any event,” said Mr Jones.

(A CTL occurs when a ship is so damaged by an insured peril that the cost of repairing the damage would exceed the value of the ship when repaired. Under the Marine Insurance Act 1906 – the linchpin of most law in its field – where there is a CTL the assured may either treat the loss as a partial loss, or abandon what is insured to the insurer by giving notice of abandonment.)

Source: Maritime London

 

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Legal

Impact of Upcoming Regulations on Wreck Removal

The Nairobi International Convention on wreck removal was ratified by India recently and will be enforceable from April next year. This will place financial responsibility

Buckeye Pipeline Quietly Makes Key Acquisition

Houston-based logistic firm Buckeye Partners has spent more than $3.5 billion buying assets since 2010, transforming itself from a quiet regional pipeline utility into an emerging energy powerhouse.

Bangladeshi Albedo Survivors Helped by their Govt.

Yesterday, 16th September 2014, Chirag Bahri, MPHRP's Regional Director for South Asia, attended a ceremonial event organised by the Ministry of Shipping, Bangladesh

Finance

Houston Shipping and Offshore Conference Program Announced

The fourth Houston Shipping and Offshore Conference has announced the final program for its Friday, October 10 conference at the Houstonian Hotel, Club & Spa, 111 N.

For Europe's LNG Ports, Russia Gas Fears and US Exporters Buoy Demand

Gas buyers nervous of Russia cutting supply are helping solve Europe's problem of too many underused liquefied natural gas (LNG) terminals, as they seek space at France's Dunkirk plant.

Statoil: COSL Pioneer Temporarily Suspended

Due to overcapacity in their rig portfolio, Statoil will lay up the COSL Pioneer rig in the fourth quarter of 2014. The rig is currently carrying out an assignment

Casualties

Arctic Wreck Found after 169 Years

After more than 169 years, Canadian researchers discovered one of the two ships from the doomed Arctic expedition of Sir John Franklin, cracking one of the largest mysteries in sea exploration.

Bangladeshi Albedo Survivors Helped by their Govt.

Yesterday, 16th September 2014, Chirag Bahri, MPHRP's Regional Director for South Asia, attended a ceremonial event organised by the Ministry of Shipping, Bangladesh

Lake Charles Tugboat Engine Room Fire Extinguished

The Coast Guard informs that along with the Black Bayou Fire Department it has responded to a tugboat on fire near Lake Charles, Louisiana. At approximately 1:15 p.

People in the News

Prime Minister Solberg Visits DNV GL

Norway’s Prime Minister Erna Solberg visited DNV GL Høvik yesterday, September 16. Group President & CEO Henrik Madsen was host. “The Prime Minister was both

MARAD to Mark the Return of MV Cape Ray

Maritime (MARAD) Administrator Paul N. Jaenichen will host a ceremony on Friday, September 19, 2014 in Portsmouth, Va. to honor the civilian crew who helped to

Maersk Sees US Approval of Shipping Alliance as Formality

U.S. regulatory approval of a proposed shipping alliance involving AP Moeller Maersk should be a formality, the Danish company's chief executive said on Wednesday.

Insurance

RRI Launch Marine Services J/V with a Trans-Atlantic Reach

Regional Reporting Inc. (RRI) and Global Risk Evaluations (GREvL) inform of the creation of a joint venture aimed at expanding their marine services offerings.

3rd India Ship Recycling Conference Set to be a Big Draw

Delegate registeration for the 3rd India Ship Recycling Conference is going on at a hot pace with a lot of interest having generated with the new Indian Government

Arctic Shipping Routes: P&I Insurance FAQs

The UK P&I Club has compiled an FAQ which focuses on the implications for P&I insurance of choosing to use the Northern Sea Route. The Northern Sea Route (NSR),

 
 
Maritime Careers / Shipboard Positions Maritime Standards Naval Architecture Offshore Oil Port Authority Salvage Ship Electronics Ship Repair Ship Simulators Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1173 sec (9 req/sec)