EXAMINATIons October 2010
The Association’s examinations (Modules 1 and 2 only) were held on 27 October 2010 at examination centres in London, Liverpool, Hong Kong, Singapore, Athens, Mumbai, Gothenburg, Tehran, Dubai, Doha, Cape Town and Mexico City.
The following candidates were successful (all candidates have been advised accordingly):
MODULE 1: MARINE INSURANCE ACT 1906 AND RELATED INSURANCE PRINCIPLES
(Markers: Tim Madge and David Pannell)
Ed Carey (London) Pass
Alexander Greene (Liverpool) Pass
George Angelis (Athens) Pass
George Koleth (Singapore) Pass
Derek Coop (Cape Town) Pass
Alejandro Martinez (Mexico City) Pass
Patrik Almström (Gothenburg) Distinction
Kesavan Kannan (Dubai) Pass
Note: Four candidates failed to satisfy the examiners. Two candidates failed to sit this Module.
MODULE 2: HULL AND CARGO CLAIMS
(Markers: Keith Martin and David Pannell)
Daniel Gibbins (London) Pass
Freya Macleod (Liverpool) Pass
Stylianos Magkanaris (Athens) Distinction
Lauder Shao Jie (Hong Kong) Pass
Sriram Pappu (Mumbai) Pass
Derek Coop (Cape Town) Pass
Mohammed Banaei (Tehran) Pass
Note: Five candidates failed to satisfy the examiners. Two candidates failed to sit this Module.
NEW ASSOCIATE MEMBERS:
The following 8 candidates have now satisfied the examiners in Modules 1 and 2 and thus become Associate Members:
Patrik Almström (Swedish Club, Göteborg)
Daniel Gibbins (Blue Seas Adjusters, London)
Freya Macleod (Richards Hogg Lindley, Liverpool)
Stylianos Magkanaris (Swedish Club, Piraeus)
Lauder Shao Jie (Charles Taylor Adjusting, Hong Kong)
Sriram Pappu (Marsh India Insce Brokers, Mumbai)
Derek Coop (Kiln Group, Cape Town)
Mohammed Banaei (IRISL, Tehran)
EXAMINATIONS 2011
Details of the arrangments made for the Associaiton's examinations in 2011 are now available in the Examinations section.
annual meetings 2010
We are pleased to announce that at the Annual Meeting of Fellows on 12th May, John Ahern was elected as Chairman of the Association for the ensuing year and Mr Paul Silver was elected as Vice-Chairman.
The Annual General Meeting of the Association took place on 13th May in the Old Library at Lloyd’s; the meeting was addressed by the Chairman, Mr Justice Tomlinson - his address, entitled "Underwriters decline notice of abandonment - some new questions raised by an old phrase", can be downloaded HERE.
The following Press Release was issued by the Association on 13th May:
Association of Average Adjusters
Press release
13 May 2010
Who gets the residual value?
Who is entitled to the residual value of a marine hull, so badly damaged that it is declared a constructive total loss (CTL), was the challenging question put to the Association of Average Adjusters (AAA) at their annual meeting held yesterday (Thurs) in the Lloyd’s Old Library, London. It is a particularly relevant issue at a time of volatile hull values.
AAA Chairman for 2009-10, High Court judge Mr Justice Tomlinson, spoke to the meeting on the subject under the title “Underwriters decline notice of abandonment – some new questions raised by an old phrase.” He was the presiding judge in the important 2009 case of the WD Fairway, a mega-size trailer hopper dredger which became a CTL as a result of a collision off the coast of China.
Mr Justice Tomlinson described how once a ship or rig has been so badly damaged that it is declared beyond repair, it may still have material commercial value. As such, there can be a tussle between the owners and underwriters about who is entitled to what. Underwriters will not accept a notice of abandonment, because it would also mean accepting the associated liabilities, such as wreck removal and pollution. At the same time, having paid the claim, they want to protect their interest in the residual value, which would be much clearer in law if they did accept notice of abandonment.
A further complication is that the law governing the marine insurance contract, more specifically English law in this analysis, is rarely the law which applies to the location of the damaged ship or rig.
What Mr Justice Tomlinson called “the ritual steps of the dance which invariably follow the occurrence of a CTL” usually resolve the issues between owner and underwriter by co-operation, but it is not inevitable thanks to what he described as the “idiosyncrasies of the marine insurance contract.”
New chairman and members
John Ahern of Rogers Wilkin Ahern, who was the Vice-Chairman of the association in 2009-2010 has been elected Chairman for the 2010-2011 year. The new Vice-Chairman is Paul Silver of Richards Hogg Lindley Group.
Following its autumn and spring examinations, the AAA has accepted 18 new associate members. John Ahern welcomed the resurgence of interest in the profession and its qualifications. He said: “A total of 18 new associates for the year augurs well for the future. Our warmest congratulations to all of them and to the other successful examination candidates.
“The fact that a number of examinees failed to satisfy the examiners shows that the exams, even under the modular system now in place, are not an easy passage and require the necessary input of time and effort, especially on the Fellowship level papers, and this is as it should be to ensure that the Association’s qualifications maintain the required professional standards of excellence to enable us to serve our clients with the necessary level of expertise in maritime law and marine insurance.”
The new associate members are:
Danny Bell (Liverpool)
Richard Brooks (London)
Liliana Quito Castillo (London)
Rachel Fox (Liverpool)
Vanessa Heng (Singapore)
Ben Johnson (London)
Angeliki Kallini (Piraeus)
Adriaan Levendal (Christchurch NZ)
Maria-Irini Mavroudi (Piraeus)
Tristan Miller (Colchester)
Tak Vyankatesh Murlidhar (Doha)
Nicholas Rowe (London)
Debbie Symonds (London)
Robert Tomlinson (London)
Charlotte Warr (London)
Adam Whittle (London)
Graham Wilkie (Sunderland)
Efstathia Zachopoulou (Piraeus)
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Fellowship Examinations
Guidance Notes for candidates and a synopsis of Modules3/5 has been added to the Examinations page.
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Autumn Seminar 2009
The Association's autumn lunchtime seminar was on the topic of the Rotterdam Rules or the "United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea" to give the full title.
Before the presentations, the Association's Vice-Chairman, John Ahern, was pleased to read out the names of the successful candidates at the October sittings of Modules 1 and 2 of the Association exams.
MODULE 1: MARINE INSURANCE ACT 1906 AND RELATED INSURANCE PRINCIPLES
Robert Tomlinson (London) - Distinction
Ben Johnson (London) - Pass
Nicholas Rowe (London) - Distinction
Djan Venturim (London) - Pass
Rachel Fox (Liverpool) - Distinction
Maria-Irini Mavroudi (Piraeus) - Pass
Heng Sok Koon Vanessa (Singapore) - Pass
MODULE 2: HULL AND CARGO CLAIMS
Liliana Quito Castillo (London) - Pass
Charlotte Warr (London) - Distinction
Danny Bell (Liverpool) - Pass
Angeliki Kallini (Piraeus) - Pass
Adriaan Levandal (Christchurch) - Distinction
Tak Vyankatesh Murlidhar (Doha) - Pass
Graham Wilkie (Sunderland) - Pass
Three candidates failed to satisfy the examiners.
As a result of completing both Modules 1 and 2, the following were now Associate Members:
Liliana Quito Castillo (London)
Charlotte Warr (London)
Danny Bell (Liverpool)
Angeliki Kallini (Piraeus)
Adriaan Levandal (Christchurch)
Tak Vyankatesh Murlidhar (Doha)
Graham Wilkie (Sunderland)
The first speaker was Fionna Gavin of Ince & Co. With a Master's degree in international trade and specialising in charterparty disputes, she has been watching closely as the Rotterdam Rules have been evolving into their final form, and has also been acting as adviser to the Department for Trade.
She summarised the present position with regard to the 21 signatories to date and emphasised that this was only the first stage with each signatory needing to enact legislation. The most significant changes included the extension beyond the actual “tackle to tackle" carrier to the concept of Maritime Performing Parties - one of many ways the Rules have attempted to embrace multi-model transport.
There had been a significant and broadly accepted shift of liability in favour of cargo interests, with the exercise of due diligence to keep the ship seaworthy now an obligation throughout the voyage, (rather than just up to its inception) and the abolition of the "nautical fault" defense. The carrier is presumed to be at fault if loss or damage arises while the cargo is in his care and the burden of proof lies with the carrier to prove absence of fault or an excepted peril. However, the Rules leave the door upon to the carrier proving that he is liable for only part of the loss, as distinct from the more "all or nothing" approach of the Hague Visby Rules, and this may create a degree of uncertainty.
Fionna concluded by reviewing the controversy that had arisen over the Volume Contracts provisions of the Rules, explaining that this had in fact been instigated by major USA Shippers and contained significant safe-guards for cargo interests.
Richard Cornah, recent past Chairman of the Association, followed on to give his initial impression of how the Rotterdam Rules may affect General Average. Having attended, with several other AAA Fellows, the recent General Assembly of the Association Mondiale de Dispacheurs in Marakesh, he had benefitted from a distinguished panel of speakers who had been invited to attend to present papers on the new convention. He reminded the audience that the principles of General Average remained important to quantify and allocate costs even if there was no contribution from ship to cargo. Distinctions still had to be made between extraordinary expenses and ordinary voyage costs, and a line had to be drawn on pollution expenses between property and liability insurers.
While hull insurers would not be greatly affected (except in the relatively rare cases of ship sacrifice) the P&I Clubs would clearly be paying cargo's proportion of general average much more frequently, as cargo declined to pay on the grounds of a breach of the contract of affreightment.
An immediate practical implication would be that the greatly increased likelihood of cargo sustaining a defence to contribution would make it unwise to automatically incur the costs of an expensive security collection from a multi-interest cargo. However, deciding not to collect security is not a call the shipowner should make without consulting their P&I Club, whose cover is likely to be conditional on proper security having been collected and a demonstrable breach of contract having occurred.
In LOF salvage cases, cargo will still have a direct liability to provide security to salvors and pay their proportion of the award before seeking recovery from the carrier, albeit with a much greater chance of success under the Rotterdam Rules. Counter-security may become a much bigger issue and this may result in delays. It is possible that Owners and their P&I Clubs may agree to provide security and pay 100% of the salvage in order to reduce costs and achieve a quick negotiated settlement, but the bigger the exposure the greater the temptation to let matters run their normal course.
That temptation can only be increased by the Rotterdam Rules repeated reference in Article 17 to "all or part" of liability for a loss and the concept of a loss being apportioned somehow if the carrier can partly disprove his fault. In a collision where it seems likely that both ships are equally to blame, the owner knows that he is no longer protected by the "nautical fault" exception, but equally he is not at fault in respect of the blame attaching to the other vessel. On that basis could he not recover 50% of any general average contribution due from his cargo?
Many of the most serious casualties have involved containership fires originating in cargo. These have given rise to complex legal disputes, particularly on factual issues with one party alleging poor stowage (perhaps over a heated bunker tank) and the other pointing to the (undeclared) dangerous nature of the cargo. Whilst under the Rotterdam Rules it is highly likely the carrier will have to accept some degree of fault there will remain considerable incentive to allege partial fault of others. Some difficult decisions will need to be made very quickly about whether to collect general average security in such cases.
In conclusion, Richard Cornah noted that there were a number of areas, such as burden of proof and apportionment of loss, where the legal experts could not agree on the correct construction of the Rules, and saying that in time the "Courts will decide". However, this could involve a very long wait since the Rules (unless signatory states opt-out of the relevant Articles) may make exclusive jurisdiction clauses unenforceable so that decisions will be given by a wide range of Courts that may not produce a consistent view. As Fionna Gavin pointed out in discussion after the presentations, cases involving bulk cargoes are likely to be decided by Arbitrators whose rationale may never be published. Perhaps it should be the future commercial users of the Convention, and their insurers, who should take the lead in reaching a consensus.
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annual meetings 2009
We are pleased to announce that at the Annual Meeting of Fellows on 13th May, the Honourable Mr Justice Tomlinson was elected as Chairman of the Association for the ensuing year. Mr John Ahern was re-elected as Vice-Chairman and will perform the executive function of Chairman.
The Annual General Meeting of the Association took place on 14th May in the Old Library at Lloyd’s.
The Chairman, Richard Cornah, reported on the examination results during 2008/09.
The Associate level papers can be taken at two sittings and the exams in October produced a further 11 successful candidates.
Module 1 (MIA and related insurance principles)
Amy O’Neill (Liverpool) – Distinction
Daniel Bell (Liverpool)
Adam Whittle (Liverpool)
Matthew Smith (London) – Distinction
Konstantinos Georgiou (London) – Distinction
Daniel Gibbins (London)
Mukesh Gautama (Mumbai)
Matthew Jie Cao (Hong Kong) – Distinction
Peter Xiao Ming Fei (Hong Kong) – Distinction
Tony Sio Keong Ng (Hong Kong) – Distinction
Alf Inge Johannessen (Bergen) – Distinction
Module 2 (Hull and Cargo Claims)
Konstantinos Georgiou (London) – Distinction
April 2009 (All Modules)
The springtime exams were held between 3rd and 8th April 2009. 25 candidates applied to sit these examinations of whom 21 duly presented themselves at examination centres in London, Liverpool, Hong Kong, Nicosia, Mumbai, Athens, Doha, Bergen, Sofia and Christchurch (NZ).
The following candidates satisfied the examiners:
Module 1 (MIA and related insurance principles)
Liliana quito Castillo (London) – Distinction
Charlotte Warr (London) – Distinction
Debbie Symonds (London) – Distinction
Jonathan Cardy (London)
Tak Vyankatesh Murlidhar (Doha)
Angeliki Kallini (Piraeus) – Distinction
Adriaan Levendal (Christchurch) – Distinction
(One candidate failed to satisfy the examiners.)
Module 2 (Hull and Cargo Claims)
Alf Inge Johannessen (Bergen) – Distinction
Jonathan Cardy (London)
Matthew Smith (London)
Mukesh Gautama (Mumbai)
Amy O’Neill (Liverpool) – Distinction
Tony Sio Keong Ng (Hong Kong) – Distinction
Matthew Jie Cao (Hong Kong)
Peter Xiao Ming Fei (Hong Kong) – Distinction
(Four candidates failed to satisfy the examiners.)
Module 5 (Collision, Ancillary Insurers and Cargo Claims)
Burkhard Fischer (Cyprus)
(Mr. Fischer has now passed 5 out of the 6 Fellowship Modules)
The Chairman was pleased to note that the following have now satisfied the examiners in Modules 1 and 2 and thus become ASSOCIATE MEMBERS:
In October 2008:
Mr. Konstantinos Georgiou (London)
In April 2009:
Mr. Alf Inge Johannessen (Bergen)
Mr. Jonathan Cardy (London)
Mr. Matthew Smith (London)
Capt. Mukesh Gautama (Mumbai)
Ms. Amy O’Neill (Liverpool)
Mr. Tony Sio Keong Ng (Hong Kong)
Mr. Matthew Jie Cao (Hong Kong)
Mr. Peter Xiao Ming Fei (Hong Kong)
The outgoing Chairman's address was on the topic "Why Me?" (Which policy pays in cases of progressive or discovered damage). A copy of the address in PDF format can be downloaded HERE.
The Annual Report 2008/9 is also available for download; see below.
Successful Students at the AGM
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Spring Seminar - 30th March 2009
The worsening economic climate has meant that during 2009 Owners have had to contemplate seriously the prospect of putting vessels into long term lay-up. The topic for the Spring seminar was therefore easily chosen – “All laid up and nowhere to go” and the response confirmed a high level of interest.
Michael Laurie of BMT Marine and Offshore Surveys began his presentation looking back at the period in the early 1980’s when rafts of ships could be seen in Elefsis Bay and many other locations. BMT have been working with Market Insurers and the P&I Clubs to draw up fresh guidelines regarding suitable lay-up locations and the procedures required for laying up and re-activating a ship. He explained the difference between “hot” lay-up (a short term measure where there may be some crew reduction but the ship is kept ready for almost immediate employment) and “cold” lay-up ( a longer term strategy where a vessel is “moth-balled” with all machinery de-activated and preserved). He also outlined the various factors that needed to be taken into account in approving a lay-up location, in terms of local geography, climate risks, and available services, such as tugs, in the event of an emergency. He went on to emphasise the importance of sufficient time and resources being made available both when laying up and re-activating the vessel – compared with the 1980’s, modern vessels are fitted with complex electronic systems that are vulnerable to humidity and extremes of temperature. Download a copy of Michael Laurie's presentation HERE.
Richard Cornah dealt briefly with a number of coverage issues that can arise with vessels in lay-up or with the machinery problems that often seem to occur when vessels are re-activated after a long “cold” lay-up. During a long term lay-up a vessel may be exposed to damage caused by the negligence of watchmen or contractors who may not come within the terms “crew” or “repairers” for which coverage is specified under Institute Time Clauses Hulls 1.10.83.
Jean Richards of Quantum Shipping Services arrived hot foot from an overnight flight from New York to give a fascinating, if rather chilling, overview of the commercial and financial realities underlying the present crisis. An expert on the commercial side of shipping, with a reputation as a trouble-shooter for companies in financial difficulties, Jean clearly felt that the industry was in for a bumpy ride and that long term lay-up was the only realistic solution in many trades. Although there had been signs of revival in some of the freight indices, charterers were being highly selective in terms of which vessels they would take on; in particular, vessels with long chains of charterers were likely to be avoided because of fears that one or more might turn out to be a financially weak link. Generally she did not find much encouragement in the fact that many new-buildings were being cancelled or failing because of financing problems – the statistics showed that the number of vessels already trading were sufficient to keep the market unbalanced for some time to come.
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Autumn Seminar - 18th November 2008
“WAR AND PEACE”
Which is more dangerous for the shipowner?
The second lunchtime meeting of 2008 took place on 18 November and was attended by over 70 people from all sectors of the market. With the topic of piracy having been the subject of several other recent seminars, the chosen theme was to look at other situations in which an owner may be deprived of the use of his vessel.
In answering the question “War and Peace – which is more dangerous for the shipowner?” Andrew Paton’s presentation concentrated on the significant hazards of peacetime arrests and detainments. A Fellow of the Association since 1987, Andrew Paton has been closely involved in the management and running of the Standard War Risks Association; he outlined some of the practical difficulties of interpreting cover wordings and exclusions when vessels are seized, for example, following allegations of fraud or drugs finds. Panellists Colin Bryan (Director at Millers Insurance, specialising in War Risks) and John Culley (from Thomas Miller, managers of the UK War Risks Association and Hellenic War Risk Mutual and Chairman of the combined group of War Risks Associations) added their own observations regarding these difficult and complex situations.
During lunch, the hijacking of a Saudi owned tanker the previous day meant that piracy was again a favourite topic of conversation, particularly with regard to whether hull or war policies were the right home for this risk.
The majority of the recent cases off Somalia have involved Fellows of the Association in dealing with the General Average aspects and advising generally on questions such as the parties who could be brought in to contribute to ransom payments. The new (13th) edition of Lowndes, co-edited by Richard Cornah (the current Association of Average Adjusters Chairman), also contains additional material regarding the basic principles involved, which has provided timely guidance for many facing these problems for the first time.
The seminar also provided an opportunity to announce that 11 candidates had passed Module 1 (Marine Insurance Act and related principles) of the Association of Average Adjusters exams, of which 7 passed with distinction having scored more than 80%. Konstantinos Georgiou passed both Modules 1 & 2 at this October sitting thereby becoming an Associate Member of the Association. The Chairman congratulated those involved and hoped that many would go on to tackle the four higher level modules required to achieve Fellowship.
EXAMINATIONS 2009
The examinations of the Association of Average Adjusters will be held during the week commencing 6th April 2009; the deadline for applications is 30th January - see Examinations section for further details.
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Annual Meetings 2008
At the Annual Meeting of Fellows held on Wednesday 7th May, Richard Cornah was re-elected as Chairman of the Association for the ensuing year and John Ahern was re-elected as Vice Chairman.The Annual General Meeting of the Assocaition was held in the Lloyd's Library on Thursday 8th May. Nine candidates, eleven modules passed, four new Associates and one new Fellow – these statistics provided the opening highlight of the meeting. Candidates sat for the exams in Liverpool, London, Nicosia, Mumbai, Chennai and Shanghai, reflecting a worldwide interest in the highly regarded examinations of the Association.
The Chairman, Richard Cornah, commented that the new format for the Associate level, with two modules dealing with the Marine Insurance Act and hull and cargo claims, had proved popular, and more candidates were expected to sit these exams in October. He also outlined the work being undertaken by training consultant Charlotte Warr in promoting a qualification system for marine claims practitioners, which had received the backing of all the major bodies in the London market, and he welcomed the part the AAA exam modules were intended to play in the proposed structure.
Turning to the annual chairman’s address, Mr Cornah said that the problems of environmental liabilities and costs loomed large over the handling of most major casualties. The 1994 York Antwerp Rules had produced a workable compromise between property and liability insurers regarding the allocation of costs of pollution prevention measures when a ship entered a port of refuge in an emergency, and whilst detained there.
With particular average (partial loss) claims on vessels, the practice of adjusters had generally been consistent since the 1960s, but Mr Cornah explained that periodically hull underwriters challenged those practices, creating uncertainty about a major element of some claims. When a vessel which has sustained serious bottom damage goes into dry-dock, bunker tanks frequently leak oil into the dry-dock as it empties, giving rise to very significant additional costs. Reviewing the limited legal authorities available, Mr Cornah suggested that in such circumstances the work of collecting and cleaning up bunker oil must be seen as part of the cost of repairing the vessel, rather than a matter for liability insurers. Case law also strongly supported the view that oil contamination of sound parts of a vessel constituted damage, and the costs of cleaning should be allowed accordingly.
However, the treatment of such costs in relation to a dry-docking would always ultimately depend on the facts; if a vessel dry-docked primarily to stop continuing pollution, it was likely that the costs would be a liability matter, and so for the ship’s P&I club to handle. Generally, the best approach remained to take the predominant reason for a dry-docking at face value and to avoid complex discussions of costs which were likely to lead to disputes between property and liability insurers, Mr Cornah advised.
A copy of the Chairman's paper can be downloaded HERE
The Annual Report for 2007/8 is also available for downloading - see below.
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"An Introduction to Hull Claims"
This useful document, prepared by Richard Cornah and Paul Rowland on behalf of the Association, is now available for download in the Fellows' and Subscribers' Areas.
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“A WAY WITH WORDS”
Market Seminar - 19th March 2008
The Association’s first market seminar of 2008 was held at the Balls Brothers, Mincing Lane, London on 19th March 2008 to consider issues arising from the drafting and interpretation of policy wordings.
The Chairman, Richard Cornah, welcomed the participants to the seminar and mentioned that invitations to purchase tickets for the Association’s Annual Dinner on 8th May 2008 had just been posted. He drew attention to the fact that this year’s event would be held at the Sheraton Park Lane Hotel, as the usual venue was being refurbished. The Chairman then introduced the speakers; Michael Harvey, Fellow and past Chairman of the Association and Tim Taylor, partner in London solicitors Barlow Lyde & Gilbert.
Michael Harvey mentioned that although disputes concerning the intent of coverage and the interpretation of the language of marine and energy insurance policies are becoming more prevalent, many of them might have been avoided had more care been exercised in drafting the language of the policy. After giving examples of particularly poor drafting, where the intention of the drafter was not at all clear, Michael Harvey then explored issues concerning the use of terms in their correct context; such as “insured value” and “sum insured”. These terms have particular implications as to whether the subject-matter of marine insurance policies is insured on a valued or unvalued basis.
Other problem issues highlighted included the use of numerous terms intended to mean the same thing, attempts to introduce positive cover via exclusion clauses and the apparent failure to read a policy in its entirety to eliminate inconsistencies and conflicts.
Tim Taylor provided a legal overview of the issues of intent and policy construction. After reviewing recent legal history concerning the interpretation of policy language, he explained the rules to be applied and, in particular, highlighted that words should be given their natural and ordinary meaning unless that meaning flouts business common sense and that evidence of the subjective intent of the parties was not relevant.
Tim Taylor also dealt with the issue of contre preferentum and pointed out that it should not always be assumed that wordings should be construed against underwriters. With regard to exclusion clauses he explained that they are always construed strictly and that the burden of demonstrating that they apply, rests with those asserting so. Finally, he outlined the problems of assuming that foreign laws are the same as English law and illustrated the issue by reference to a claim involving both of the speakers which required the application of Iranian insurance law.
After taking questions from the floor, the Chairman concluded proceedings by thanking the Speakers.
Downloads:
“SALVAGE AND THE SUPER SHIPS”
Market Seminar - 12th December 2007
The Association’s second market seminar for 2007 was held at the London Underwriting Centre on 12 December 2007 to consider some of the issues that may arise with the new generation of very large container vessels that are coming into service.
In welcoming the audience of Annual Subscribers and guests, the Chairman, Richard Cornah, drew attention to the changes in the structure of the Association’s examinations that had been recently been announced on the AAA website. The Associate level now consisted of two self-contained papers that were aimed equally at trainee adjusters and market practitioners: the first dealt with the Marine Insurance Act and related principles and the second dealt with hull and cargo claims at an introductory level. To encourage people entering the marine market, the Association was also publishing “An Introduction to Hull Claims” – copies were handed out at the meeting and it will soon be available as a download in the Annual Subscribers section of the AAA Website. The Chairman thanked Mike Harvey for his work in the re-modelling the website, which now includes a special area for Annual Subscribers, which contains very useful topical and archive material.
Richard Cornah then moved on to present an introductory paper highlighting some of the problems experienced by adjusters when assisting with the collection of salvage security in cases involving large container vessels. With about 100 ships currently on order with capacity in excess of 12,000 TEU, and many others in the 8,000 plus range, the salvage community,(properly interests, their insurers and the salvors) needed to consider whether current procedures will work when such large numbers of containers are involved.
He highlighted insurance solutions that were already in place that could respond to lower level casualties, but with LOF awards often exceeding US$10 million (because of the high values and technical difficulties involved in such services) there would continue to be situations in which security and salvage payments would have to be sought from multiple cargo interests. In the hope of prompting further debate, he went on to outline some possible ways of making such cases more manageable. These included ignoring the often numerous lower value interests that make little difference to the overall salved fund, creating a more flexible approach to salvage security limits and encouraging more cargo interests to take out insurance, since the average of 12% of containers that are not insured create an enormous administrative burden in collecting cash deposits. It was also suggested that container operating consortia could do more to develop contingency plans and consider ways of reducing clashes over questions of liability. (A full copy of the introductory paper can be down-loaded HERE)
Broadening the discussion, panellist Simon Stonehouse, of Brit Insurance and Chairman of the Joint Hull Committee, agreed that this new generation of super ships presents a number of challenges to hull insurers. Apart from the high values at risk, there were concerns that the demands of tight schedules must enhance the likelihood of casualties occurring, particularly in the context of crew and officer shortages. Inexperienced or low quality crew would be more likely to succumb to pressures to cut corners. Ship operators were also vulnerable to the dangers of mis-declared and hazardous cargo, which had been the origin of many of the most serious casualties in the last decade. Whilst financial recoveries might sometimes be made, the serious consequences of mis-declarations for life and property surely meant that criminal sanctions would also be appropriate.
Mike Lacey, Secretary General of the International Salvage Union confirmed that salvors were concerned that aspects of the LOF system were perceived to be expensive and would welcome any review. However, he felt salvors already faced considerable difficulties in ensuring that they received proper security and would be concerned to see any watering down of the present system or ability to exercise their lien. Given the sophistication of the IT systems that have evolved with the container sector, he felt it was surprising that one of the greatest practical difficulties faced by salvors’ was the lack of prompt and accurate information regarding cargo details. This made it difficult to establish values when considering an appropriate security demand, but more importantly posed a real danger for slavors personnel working close to containers.
The third panellist, Kevin Clarke Manager of Lloyds Salvage and Arbitration Branch, agreed that low value and uninsured cargo took up the disproportionate amount of time for his team when processing security for large containership cases. While welcoming any reduction in the time and trouble involved, he expressed concern that it might be difficult to establish an appropriate “cut-off” point for lower values in the early stages of the case. The range of values that he had seen was remarkable, with the highest value for a single container being in excess of US$60 million. The variations made it very difficult to predict what the total of cargo value for any particular container vessel might be.
After taking questions from the floor, the Chairman concluded proceedings by thanking the panellists and hoping that the debate would continue.
Changes to Examinations
The Association is pleased to announce further changes to the examination system that will take effect from April 2008. Previously the Associate level has marked the progress of candidates who have passed three out of the six modules required for Fellowship. However in response to demand from within and outside the profession, the Associate level will now have a free – standing examination of its own. This will consist of two modules – one on the Marine Insurance Act 1906 and basic principles, and a second on Hull and Cargo Claims (of which 75% will relate to Hull). The pass mark will be at 60%, with a Distinction being awarded for an 80% pass. The format of the new Associate qualification is also designed to fit in with the structure of qualifications being planned for the London market. The emphasis of the new paper will be on practical claims and insurance issues that are encountered by trainee adjusters and market practitioners.
The Fellowship examination structure has also been reviewed and details of the format of both levels can be found in the Examinations section of this site.
Report of Annual General Meeting - 10th May 2007
The future of marine claims is a subject of vital importance to the shipping and insurance industries but one where question marks persist as to whether there are adequate resources and training for present, let alone future, demands, according to the Association of Average Adjusters which held its 138th annual general meeting at Lloyd’s on Tursday 10th May 2007. A panel of distinguished speakers joined Nigel Rogers, the current Chairman of the AAA, to give different perspectives on the topic “Claims – The Future”.
Peter McIntosh, the Chairman of the Joint Hull Committee and marine hull underwriter with Ark Underwriting at Lloyd’s, began by giving the underwriting view. Mr McIntosh highlighted the recent spate of serious marine hull casualties and concluded that a strategy was required if marine insurers were to make the most of the resources available to them in servicing such claims and developing further such resources for future demands.
Charlotte Warr of Sarnia Training followed and dealt with a past lack of commitment to training and qualification within the industry, and described her own initiative for a new marine insurance claims examination in which she is being assisted by the AAA and others.
John Poulson, a senior surveyor of many years experience who recently joined Noble Denton, gave a worrying picture as to the manpower shortage for crewing the expanding world fleet with competent and well trained personnel, with the knock-on effect on a diminishing pool for the next generation of top surveyors and superintendents.
Nigel Rogers continued by examining the current state of average adjusting, focussing on the declining number of qualified experienced practitioners, and a lack of cohesion amongst the different component parts engaged in claims servicing. He went on to talk about the concept of an Association of International Marine Claims Professionals (AIMCP), the idea of which was discussed at the International Marine Claims Conference in Dublin in October 2006 with the debate to be continued at the next conference later this year. He said that among the objectives of any such body would be to raise the profile of claims servicing within the marine insurance industry overall and to advance specific initiatives.
As Mr Rogers concluded, “Our support for initiatives such as Charlotte Warr’s training and qualification programme, as well as the Dublin conference, and by seeking to work more closely with other components of the marine claims community, average adjusters firmly endeavour to meet the aspirations highlighted by Peter McIntosh and to play our part in providing the clients of this and other markets with the best possible claims service".
Chairman's Address - May 2006
Nigel Rogers was re-elected Chairman of the Association at the Private Meeting of Fellows on 10th May.
The following day the Chairman delivered his annual address at the Annual General Meeting. A copy of his Address on the subject of Shipbuilders' Risks, can be downloaded from this page
"Which policy pays?"
Report of the Association's Seminar held on 24th November 2005
Disputes between insurers as to which policy year should pay for long term damages are likely to increase, if the market consensus on how to deal with such claims is allowed to break down. Assureds will be caught in the cross-fire as they wait for valid claims to be settled, according to Richard Cornah, Vice-Chairman of the Association of Average Adjusters (AAA).
"Which policy pays" was the subject of a seminar organised in London by the AAA on Thursday 24 November 2005. Speaking to a capacity audience, Cornah set out the issues which occur when it is not obvious which insurer and which policy year should respond to a particular claim.
Such difficulties are common where there is
" Mystery damage which is discovered only when a ship is dry docked, or during other routine inspections.
" Progressive damage which develops over time until it results in a loss.
Cornah told the AAA seminar that in the absence of legal authority on the subject, the market had developed a pragmatic approach to such claims by apportioning losses over the relevant policy years on the basis of a technical analysis of how the damage progressed.
However, some insurers were arguing that the claim should only attach to the policy when the damage started or to the policy when it was discovered, according to their position in the policy "chain". This was most often the case when an insurer was in run-off or when the business had changed markets, thus breaking the commercial relationships.
Cornah concluded: "Apportionment with an eye to how the damage progresses remains the best response to these difficult issues. It has the flexibility to mirror the particular circumstances and the lack of litigation indicates that this approach has succeeded fairly well. In the current circumstances, we need to maintain a consensus on methods. This means paying attention to the wordings and their plain sense and to the facts of each case, to minimise the number of disputes."
Seminar panellist Tony Hazell of Xchanging Services commented that the same issues arise with energy claims and it is sometimes necessary to reach different solutions for policies covering physical damage and business interruption. The amounts at stake were often very large and the recent hurricane damages had highlighted such issues again.
Bob Clarkson of LIMIT and David Kingston of JLT Insurance Brokers both emphasised that if there is a potential problem over which policy or policies should pay, this should be highlighted at the earliest stage. The average adjuster has a role in doing this and can help to establish a dialogue as the claim progresses.
A copy of the presentation documentation, in PDF format, can be downloaded from this page.
Annual General Meeting 2005
At the General Meeting of the Association on 12th May 2005, Michael Harvey, the outgoing Chairman, delivered the Annual Address to the Association the title of which was:
"A tale of blocked pipes, fly tipping, acid, Degas and a alcoholic beverage."
A copy of the Address, in PDF format, can be downloaded from this page.
Michael Harvey (Chairman) congratulates Geofrey Hudson on 50 years of Membership
Shipbuilders' Risks - Constructing Solutions
Report of the Association's Seminar held on Thursday, 3rd March 2005
Nigel Rogers - Peter Macintosh - Arthur Todd - David Taylor
An insurance market initiative to tackle mounting losses to underwriters totalling hundreds of millions of dollars in shipbuilders' risks was put under the spotlight at a meeting in London organised by the Association of Average Adjusters.
The seminar, 'Shipbuilders' risks - constructing solutions' was part of a wider market effort to tackle the problem, said the Association's Vice-Chairman Nigel Rogers. He said the market has suffered huge losses. 'As a result of this the market has instigated a series of initiatives which have to do with loss prevention and policy wordings amongst others.'
He told the audience drawn from the insurance, legal and surveying markets that the Association was ready to make the expertise of its Fellows available to the market in any deliberations.
Losses of about $700 million in shipbuilding contracts have prompted underwriters to review insurance contracts, Peter McIntosh, chairman of the Joint Hull Committee, told the meeting. In one case alone, the Diamond Princess, losses totalled $310 million, whereas the annual market earnings from the sector were about $100 million, he explained.
The losses were against the background of a general soft insurance market between 1996 and 2001, which led to an absence of underwriting discipline reflected in wording extensions and the broad coverage given.
The situation was further aggravated by a lack of understanding of risk and exposure.
Added to this was a shipbuilding boom between 1993 and 2003 which saw a 13% increase in the number of ships added to the world fleet, an extra 20% in deadweight tonnage.
During this time there was an increased frequency of casualties and escalation in their costs, he explained.
'There is potential for a crisis,' Mr McIntosh explained. 'There is a reducing appetite in the market for certain types of risks.'
The JHC was now putting together a subcommittee of experts to discuss revision of clauses including IBRC 1988, he explained. 'At the end of the year I hope to be able to report on that,' he added.
'Effective project surveys and reporting will assist in the processing of claims should they arise,' Arthur Todd from Brookes Bell Jarrett Kirman told the seminar.
'Shipbuilding contracts and processes are much more complex these days. Contract terms and delivery schedules from key sub-contractors and suppliers are of great importance.'
David Taylor, the Association's immediate past chairman, added: 'The seminar to consider shipbuilders risks was prompted by the very recent decision of the Joint Hull Committee to review builders' risks coverage.
'It comes at a time when there is a rising demand for new vessels while at the same time there is the threat of excessive shipbuilding capacity even though the booming freight market has seen owners re-investing profits in newbuildings.' He added: 'The event has an added significance because it graphically demonstrates the increasing working relationship between the Association and the insurance market while also coinciding with the decision by BIMCO to draft a new shipbuilding contract - harmonious indeed.'
International Marine Claims Conference - 2004
The inaugaugural conference took place in Dublin in September 2004. It was attended by over 140 delegates comprising of Underwriters' Claims Adjusters, Lawyers, Surveyors and Average Adjusters. The Chairman of the Association, Michael Harvey, was nvited to address the Conference and a copy of his paper can be downloaded from this page.
York-Antwerp Rules 2004
The new York-Antwerp Rules 2004 were voted through in the final plenary session of the Comite Maritime International (CMI) conference in Vancouver on 4th June.
Following the 1994 version of these Rules that govern the adjustment of General Average, the International Union of Maritime Insurers (IUMI) had proposed a radical reform to reduce the scope of General Average by limiting the Rules to situations relating to the immediate "common safety" of ship and cargo, effectively reverting to the English law position. European and US law had traditionally recognised a more extensive concept by including expenses at a port of refuge necessary to complete the voyage - the so called "common benefit" principle. The history of the York Antwerp Rules since 1860 has been a search for uniformity between conflicting principles adopted by maritime nations.
The IUMI proposals, both for overall radical change and for changes to individual rules, were formally put to CMI in 1999 and were debated at several subsequent meetings. A Working Party produced a lengthy review of all the issues that formed the platform for the Vancouver debate.
At Vancouver, there was little support for the radical restriction to the "common safety" concept, with delegates taking the view that the existing system for dividing costs at a port of refuge was well understood and generally worked well. The greatest advantage was that action can be taken promptly within a known framework, leaving legal issues to be sorted out later.
However, there was considerable support from the delegations (made up from the Maritime Law Associations of over 40 Countries) for many of the incremental changes proposed by IUMI, and a number of these were agreed and form the basis of the new 2004 Rules. These consisted of:
- the exclusion of Salvage from General Average, unless paid by one party on behalf of all parties, thus amending the present Rule VI.
- an amendment to Rule XI so that crew wages will no longer be allowed at a Port of Refuge.
- an amendment to Rule XIV so that savings to Hull Insurers achieved by effecting temporary repairs to accidental damage at a Port of Refuge are accounted for first, before any allowance in General Average is considered.
- the removal of any allowance for commission.
- the adoption of a procedure whereby the rate of interest (currently 7%) will be reviewed annually by CMI.
- the introduction of a Time Bar provision, where national jurisdictions permit.
The York Antwerp Rules are not a Convention and only take effect by incorporation into the Contract of Affreightment. The process of adoption is therefore relatively slow with many contracts still specifying the 1974 Rules. The 2004 Rules represent the first occasion when a new set of Rules have been published without a consensus between Shipowning and other interests.
Speaking also on behalf of BIMCO, Intertanko and Intercargo, the International Chamber of Shipping (ICS) delegate told the conference that they considered it premature to produce a new set of rules after only ten years and before the 1994 version had become the norm. With General Average Absorption clauses in hull policies (whereby the hull insurers pay all General Average expenses up to a specified limit) removing some 50% of general average cases and improvements in shipping standards, many of the problems highlighted by IUMI had fallen away. ICS therefore felt that the 2004 Rules would be an unhelpful source of confusion.
Fellows of the Association of Average Adjusters played a active part in formulating the Working Party report and in the discussions at Vancouver. They will also be playing their usual role in helping to make the new Rules, where applicable, work fairly and commercially in practice.
Annual Meetings of the Association - May 2004
At the Association's Private Meeting of Fellows on Wednesday 12th May, Michael Harvey, was elected as Chairman and Nigel Rogers as Vice-Chairman for the ensuing year.
A call for an international association for marine claims professionals was delivered at the Association's Annual General Meeting in the Lloyd's Old Library on Thursday 13th May.
Outgoing Chairman, Mr David Taylor, said to secure its future, the Association would need to change and adapt to a changing world, but by the same token, the world needed the skills and professional standards the Association stands for.
"My stern warning to the market is that if you do not support this profession, by the very passage of time, you will lose its expertise and with it a competitive advantage.
"While its expertise is not of course wholly based in London, there are Fellows around the world in the Association and together their professional standards produce a level of expertise which is global and has no equal."
The Association has an examination system in place already, and Mr Taylor pointed out that the insurance market, in London and internationally, has a need to establish some recognition for claims practitioner skills by certification or examination.
"The problem is that we haven't had recognition of that need until now neither have we had the appropriate certification or examination method," he added.
One way forward would be the evolution from the current Association to an association of claims professionals as "an opportunity yet again for London to take the lead," he observed.
"Given that average adjuster associations in other countries - the US, Canada and Japan - are likely to have an identical successor problem, is there not perhaps a place eventually for an International Association of Marine Claims Professionals with common examinations and professional rules - surely the perfect epitome of a global community?"
Such a professional body would issue a qualification which has a value as a career proposition, he suggested.
"The marine market bemoans the fact that it is short of professional skills and acknowledges that this deficit is largely self inflicted. Claims adjusters have not been valued, or have not been until recently," he added.
"There is a sea change, however, which I detect in insurers' attitudes to claims personnel which is perhaps typified by the first International Claims Conference in Dublin, at the end of September."
And he added: "I sincerely believe that the Association has a future, but it has a different future. There is a crying need for skilled claims professionals in the market and world-wide.
"There is no professional body or association to which marine claims professionals can affiliate, there is no certification process."
Incidental costs of claims cost Lloyd's £500 million a year alone - rising to more than £1 billion a year across the market as a whole.
" I believe there are key executives who are seeing a proper emphasis upon the skills of claims adjusters and the way claims are handled as being a more promising and permanent road to profitability, not to mention a road to securing loyal business."
Mr Taylor said that the Association should be the basis of any new body as it is at the heart of the maritime community, both in London and world-wide. "The International Hull Clauses recognise the role and contribution of the average adjuster and the shipping community world-wide has been vocal, in its insistence that its adjustments be maintained and that they retain the right to appoint the adjusters," he added.
"I earnestly hope that those within the market and within the adjusting profession and earnestly within the legal profession can give recognition to the fact that claims expertise is needed, needs to be recognised and needs to be established through the establishment of proper professional standards.
"Step forward the Association of Average Adjusters to lead the way into a brand new world.
"The Association is, I believe, on the threshold of a new future which maintains its standards of integrity and excellence and serves the interests of the market and the interests of those who serve the market. It is an exciting prospect."
A full copy of David Taylor's Speech is available for download from this page.
Major Casualties - the Modern role of Surveyors
Report of the Association's Seminar held on Thursday, 26th February 2004
Traditional responses to the conflicting demands between cargo and vessel interests after major casualties lead to unnecessary and expensive litigation the industry was warned at a seminar in London organised by the Association of Average Adjusters.
Brussels-based average adjuster Janusz Fedorowicz of Fedorowicz & Partners SA, told a gathering of 60 brokers, underwriters, adjusters, ship operators and surveyors that such "heavy losses and costs" were avoidable through better communication.
The problem does not arise in every case, but it can be serious in the case of sensitive cargoes and where cargo values exceed that of the vessel, he explained. He sees a trend of early intervention by cargo interests, including charterers. The resulting communications difficulties can lead to entrenched positions, which become difficult to overcome.
"Cargo interests may be prevented from obtaining vital information as to the state of the cargo which may deteriorate as vessel interests try to wrangle out of a difficult situation," Mr Fedorowicz said.
"Enormously expensive litigation can ensue without the parties giving themselves a real opportunity of finding an amicable solution. Whilst a lot of concern is voiced about costs, little appears to be done to explore other avenues of disposing of difficult cases.
"This is detrimental to all parties concerned, particularly traders and carriers whose main commercial object is far removed from litigation," Mr Fedorowicz added.
"Indeed, during the course of centuries sea carriers and merchants have developed a remarkable partnership which should not only be maintained but be further developed to meet the challenge of the growing global trade."
And he observed: "It is easy for the parties to say 'no' to access in disputes - but it takes skill and judgment to say yes."
Chairman of the Association, David Taylor, said possible solutions might include a protocol to agree terms of access for surveyors; a standard indemnity clause for surveyors going on board dangerous ships and clearer instructions to surveyors to concentrate on providing factual information, staying away from offering opinions, at least initially.
Hugh Brown, partner of Holman, Fenwick and Willan, questioned whether a protocol was needed. In the majority of cases the access of surveyors to a casualty is agreed between the parties, although this often took time and could involve legal expense.
"Nonetheless, when the situation cannot be resolved, a protocol, perhaps based on a code of practice between the P&I Clubs and the London property underwriters, is one possibility. It could be in a form similar to the codes of practice entered under the successful SCOPIC (Special Compensation P&I Clause)."
"However, I am sceptical whether this would work, simply because every casualty is very different and has to be dealt with on its own facts."
Concern over the workings of a Protocol for access for surveyors was expressed by John Murkett, from Britannia P&I "Is it needed, as in the majority of cases access is agreed?" he asked the seminar.
"There are questions to answer not least the practicalities of how a protocol would work, as access will depend on type and location of each casualty."
He pointed out that the Owners P&I Surveyors represent P&I insurers and have a role to establish the facts, record the facts and send an objective report to P&I insurers.
"Where other Surveyors need access there are questions of who can attend on board, when they can attend and issues of safety," he pointed out. "Some of these issues may be limited by local authorities, the need for an indemnity and the need to reach agreement regarding the scope of access.
"This may normally be agreed but we all have to be aware of the risk of a local court order or arbitrators order," he added. "We have to be sure that access is being sought because of concern for the state of the cargo, not as a fishing expedition on liability."
Mr Taylor concluded: "The general view is that a direct dialogue between the hull and cargo underwriters on the one hand and P&I Clubs on the other could only lead to better understanding of this and other common problems in major casualties.
SEMINAR - 18th November 2003
Two topical industry issues were brought promptly under review at our Seminar on 18th November.
Underwriters, brokers, shipowners, adjusters and other representatives of the industry heard a debate, chaired by Association chairman David Taylor, on the review of the New International Hull Clauses 2002 (IHC) and the possible revision of the York Antwerp Rules 1994.
The "continuing and positive dialogue" offered by the Joint Hull Committee (JHC), which issued its latest review only on November 5, was welcomed by Donald Chard, Senior Manager, Legal Affairs and Documentation of the Chamber of Shipping.
He told the session, which was chaired by Michael Harvey, AAA Vice-Chairman and a member of the JHC working group which had revised the hull clauses, that the review of the 2002 policy wordings provided an early opportunity for discussion to help narrow the gaps between assureds and their underwriters.
Chris Zavos of Hill Taylor Dickinson examined the changes to the Inchmaree clause introduced by the Joint Hull Committee in the International Hull Clauses (01/11/02), specifically the cover for loss and damage caused by latent defect.
Further changes were introduced in the International Hull Clauses 2003, to address comments raised by owners and adjusters.
"The Joint Hull Committee's rapid response to concerns raised over the cover for latent defect and the treatment of common costs is a good example of the JHC's proactive and co-operative approach to the International Hull Clauses," he said.
Giving an adjusters point of view, Keith Jones, Fellow of the Association, concentrated on the provision for compensation for damage caused by a latent defect.
The IHC 2002 wording excluded the cost of correcting damage from latent defects, reflecting changes brought about by the "Nukila" decision, creating problems for adjusters in the determining these costs.
"Concern was raised by the adjusting fraternity that no guidance existed to ensure that a uniform approach was adopted to arrive at the cost of correcting the latent defect," he told the seminar.
"Underwriters have made what they see as a concession in the 2003 clauses by excluding only half the common costs of correcting the latent defect," he said. This still a wording he does not find satisfactory, he continued.
"From a practical adjusting viewpoint we will need to determine: when the common costs start and finish, are we talking costs of dismantling and rebuilding or do we include equally common costs such as superintendence or class society attendance or towage to a repair port if required?"
He went on to advise that when the Additional Perils Clause is included in the cover, and consequential damage has been sustained, it has the effect of buying back the common cost deduction and extended coverage to the latently defective part.
Turning to General Average, Tim Madge, immediate past Chairman of the AAA chaired a session on the possible revision of the York Antwerp Rules 1994.
Bent Nielsen, from Kromann Reumert, Copenhagen and Chairman of the Comite Maritime International's International Sub Committee (ISC) on the Revision of the York Antwerp Rules, outlined the genesis of the present system and the review.
The ISC had now completed its preparatory work and a final report is being completed. A CMI conference, to be held in June 2004 in Vancouver, will - based on this report - finally decide which, if any, of the proposals are to be accepted.
However, he said that efforts were aimed at reducing the amount paid under General Average for some elements of claims after a major international incident."
Mr Chard said that it was premature to review the current rules which had been in operation for only nine years and that any changes to the principles of general average should be the subject of wide debate.
Annual Meeting of Fellows - 2003
At the Annual Meeting of Fellows on Wednesday 7th May 2003, David Taylor was elected as an Honorary Member and Chairman of the Association for 2003/4. Michael Harvey was re-elected as Vice-Chairman.
The Association has issued the following Press Release concerning the Annual meeting of Fellows and the General Meeting of the Association which was held on Thursday 8th May:
All Risks Hull Cover - the way ahead?
The fragility of the hull insurance markets, following six consecutive years of losses, meant that a new all risks wording was not adopted during the recent rewrite of the London clauses the annual meeting of the Association of Average Adjusters in London was told yesterday (Thursday) .
Peter McIntosh of the Wellington Syndicate said that the new International Hull Clauses (IHC 1/11/2002) are, however, a step in that direction.
"The diverse client base in the London markets has a need for a varying bouquet of products," he said. "London underwriters look at each owner's requirements on their own merits and price each risk accordingly.
"This market has the ability to offer a very broad range of products, giving insurance cover for anything from small specialised craft to brand new cruise ships. If there is a specific demand for an all risks policy individual underwriters should be capable of creating their own bespoke wording if they deem it appropriate."
"The main priority in today's price driven market is for hull underwriters to prove that they are able to satisfy their capital supplier's profit requirements, whilst offering a stable product to their clients base," he continued.
"The disastrous results produced recently by all of the major markets that insure international tonnage prove that underwriters have failed to adequately price and assess risk no matter which type of policy has been offered."
The Association's Chairman, Tim Madge, said evidence from its seminar on IHC held in January indicated that there was some contentment with the ITC named perils form, which enjoys considerable precedent, case law and market practice to rely on to settle claims.
"We decided to hold this debate to see whether an All Risks Hull cover was the way ahead if market conditions become more favourable or owners' insurance requirements change in the future," he added.
Howard Bennett, Hind Professor of Commercial Law at the University of Nottingham compared all risks and named perils approaches to hull insurance from a legal standpoint.
"The real difference of legal principle between named perils and all risks cover seems to lie in the field of burden of proof," he said. "When dissected, what this does is to provide underwriters with a measure of protection against some sub-standard tonnage."
"The case for subjecting reputable owners running well-maintained vessels to the same rules as other less desirable owners seems hard to maintain", he added, "although the effect of other legal principles was that the rules on burden of proof offered protection to underwriters only in particular circumstances."
Added Professor Bennett, "Given the weakness of the general law on sub-standard shipping, underwriters might be understandably loath to relinquish any protection they have."
Ann Waite, Claims Director of Dex explained that in Dex had decided "after much consideration," that its Codex wording introduced in 1999 would be based on an all risks rather than the traditional London market Named Perils form. "Well-managed fleets were entitled to a straightforward approach to their insurance", she said.
"In most cases, an all risks wording allowed Insurers to become involved with claims handling at an early stage," she explained. "Owners benefited from earlier support from their Insurers, which could result in savings to both parties. Insurers also benefited, as they were likely to experience more timely information flow allowing accurate reserving and protection of possible subrogation rights."
David Kingston of the JLT Group put a broking view when he said that after years of experience in collecting claims, he favoured all risks policies. "Under a perils policy the assured shoulders the burden of proof, and I believe this makes it more confrontational in some cases," he observed. "In an all risks policy, which places the burden of proof on underwriters, we find the parties are often more co-operative."
Michael Harvey, of Harvey Ashby Limited, the AAA's vice-chairman commented on practical aspects from an adjusters' point of view. "All risk policies do not make the handling of claims necessarily less adversarial," he observed.
All risks policies do not cover everything, he pointed out, and do not necessarily provide greater coverage than the new International Hull Clauses if they include the Additional Perils extension.
Problems could arise in hull claims: "Whether or not claims are handled in a hostile environment has everything to do with the philosophy and attitude of the parties involved and nothing to do with the insuring conditions."
It was the first job for the average adjuster is to deal with the misconceptions that exist with regard to All Risks coverage, continued Mr Harvey.
"Proponents of all risks hull coverage should not delude themselves into believing that they are some sort of panacea in terms of claims handling, he warned. "The markets which provide all risks, or all damage cover are popular from a claims perspective because of the environment in which their claims are handled not because of the terms of coverage."
Mr Madge was addressing the meeting after two years as chairman and the meeting confirmed the appointment of Mr David Taylor of London-based International Underwriting as chairman for the coming year in succession. Mr Harvey will continue as vice-chairman.
Mr Taylor said that he felt especially privileged to be made an Honorary Fellow and to be invited to be Chairman for the coming year. He said that he had been educated as a maritime lawyer, in a culture that recognised the great worth of the average adjuster.
He had been Secretary of the association for more than 20 years and was Chairman of the CMI Committee responsible for producing the 1994 York Antwerp Rules. "My close involvement with the production of the International Hull Clauses 2002 has made me particularly aware of the role which the average adjuster could properly play in the modern world of marine claims," he said
"I hope I can be instrumental in helping the Association further its work and reputation in the London and global market, providing a real platform for discussion and debate, acting positively as an agent for change, where needed, as well as providing superior adjusting skills."
The latest exam results the Association are:
Mr. P.R.Schroff from J.B.Boda, Mumbai, who became an Associate last year, has passed a further module covering General Average.
Ms. Rathna Sudharshan from Jani, Clancey & Richards, Mumbai, succeeded in passing a further module covering Particular Average.
SEMINAR 16th January 2003 - The New International Hull Clauses
The Association held a most successful Lunchtime Seminar at the Innholders' Hall on 16th Janauary 2003. The subject of the Seminar was the new Internatonal Hull Clauses and, in particular, the Claims Practitioner's viewpoint.
The Moderator of the Seminar was Tim Taylor of Hill Taylor Dickinson and the panel of speakers comprised Peter McIntosh of the Wellington Syndicate and Richard Cornah and Michael Harvey, both Fellows of the Association. After presentatons by the Speakers there was a lively discussion followed by a buffet lunch.
ANNUAL MEETINGS May 2002
At the Private Meeting of Fellows on Wednesday 8th May, Tim Madge was re-elected as Chairman and Michael Harvey was re-elected as Vice-Chairman.
The following Press Release was issued by the Association following the Annual General Meeting on Thursday 9th May: -
News from the Association of Average Adjusters - May 9, 2002.
Differences between three major insurance markets were discussed at the annual meeting of the Association of Average Adjusters in London yesterday (Thursday).
Mr Tim Madge, chairman of the Association, led the debate on the contrasting approaches to the three markets at the Baltic Exchange in front of 250 Fellows and subscribers. Periodically there are suggestions for reforms in each of the markets and at such times experts look to the differences between them, he said.
Mr Madge, who is a partner of Mediterranean Average Adjusting Company, reviewed the Institute Time Clauses (ITC). The greatest differences between the ITC American and Norwegian conditions were in respect of unrepaired damages and constructive total loss (CTL).
Mr Howard M. McCormack, of law firm Healy & Baillie, chairman of the Average Adjusters Association of the United States reviewed the position with the American Institute Time Hull (AITH) Form. He said that although there had been much debate over possible changes in recent years, there was no date set when proposals would be put to the market.
Mr Per-Age Nygard, claims manager and head of Legal Department of the Norwegian Hull Club, explained that the Norwegian Plan 1996 is based on the "All Risks" principle. The starting point is in the owners' favour and the burden is on the insurer to prove that one of the exceptions from cover is applicable.
At the meeting Mr Madge was confirmed as chairman for a second year. Mr Michael Harvey of Colchester-based Harvey Ashby Limited continues as his vice-chairman. Mr Madge told the Association that its series of seminars continued to grow in popularity and more subscribers were joining in order to support it. There are plans for another seminar later in the year.
SEMINAR - APRIL 2002
On 11th April the Association held another of its successful lunch-time Seminars under the title "The Erosion of the Duty of Utmost Good Faith - the implications for claims adjusting and underwriting in the light of recent legal decisions." The following summary of the Seminar was issued as a Press Release on 12th April:
Legislation to amend Section 17 of the Marine Insurance Act of 1906 was called for yesterday to clarify the principles of utmost good faith under which marine insurance claims are settled.
Bringing together about 130 people to discuss the issue, Association of Average Adjusters chairman Mr Tim Madge said: "The cardinal principle of utmost good faith between the assured and underwriters in marine insurance contracts was established as long ago as 1766 - but recent law cases suggest this duty is being eroded. This is raising doubts and concerns amongst underwriters."
According to John Dunt, Partner of London-based Clyde & Co., recent court cases have interpreted Section 17 of the Act more narrowly to the extent that this section "is no more", at least in relation to hull and machinery claims.
He reminded the seminar that good faith is vitally important to adjuster, underwriter and assured.
"The problem is that this narrower approach by the Courts to the pre-contractual phase of the duty of utmost good faith has spilled over into the post-contractual period so that the Courts have now begun to erode the continuing duty of good faith in the claims process," Mr. Dunt said.
A possible solution lies in the most recent judgment - by Lord Justice Mance in the case of Agapitos v. Agnew - arising from the loss of the "Aegeon" in 1996, which introduces the concept of "fraudulent devices" which may point the way forward, at least for the time being.
But this may be only a stop-gap solution. "When Parliament has time there is no doubt that legislation is needed to remedy the defects with s.17 which I fear have now gone too deep to be remedied by the Courts, even by the House of Lords," Mr. Dunt told the seminar.
He urged drafters to look at the proposals from the Australian Law Reform Commission to amend the Australian equivalent of Section 17 (Section 23) as a guide to future legislation.
The proposals from the Australian Law Reform Commission were outlined by Derek Luxford, a Partner of Australian lawyers, Phillips Fox. These recommend that the law be amended so there is a requirement in marine insurance contracts that each party acts towards the other party with the utmost good faith. The proposed Australian legislation does not impose the so-called "Draconian" remedy of avoidance of the whole contract of insurance, which has been the cause of recent problems in England.
The Australian proposals require that the duties of utmost good faith should extend "for the life of the relationship between the parties to the contract of marine insurance except in relation to any claim or other aspect of that relationship which is subject to litigation between the parties," Mr. Luxford explained.
Under the Australian proposals the duties of utmost good faith cease when one party commences litigation against the other, but only in relation to the claim or other aspect of the relationship which is subject to the litigation.
Mr. Brian Ashby, of Harvey Ashby Ltd a Fellow of the Association, reviewed the practical implications of the recent court decisions, dealing with the utmost good faith. Using examples that average adjusters encounter in practice he urged the market to support application of the highest possible standards of integrity in the claims process.