Insurance Education: Towing vs. Salvage
08-12-2008, 08:33 PM
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Insurance Education: Towing vs. Salvage
You asked and you shall receive 
I know that there has been a lot of discussion in regards to what is towing and what is salvage. I have researched this for awhile now and have found a great article written by Foremost Insurance Company that might help shed some light on the debates out there.
By posting this, I am not taking sides, endorsing anything. This is strictly for informational purposes and nothing should be "assumed" by this article.
Do You Have Enough Towing and Assistance Coverage?
Imagine this...it's blustery, wet and very dark. An evening that causes you to remark, "A good night to be ashore!" The phone rings. It's the dock master at your yacht club. Your pride and joy, the light of your life, the recipient of lots of your money, your boat, has broken loose from its mooring and has been driven ashore by the gale. Since the tide is rising, it will get pushed farther and farther up the beach if it manages to hold together that long. A panicked call to the local, commercial towing outfit brings a positive response to your request for a "quick tow off the beach."
A short while later you observe the operation from the road near the scene. Your boat is pounding on the bottom, and it looks very risky getting the tow line aboard and secured. "These two guys are really earning their $125.00 per hour tonight," you mutter to yourself. Within minutes of hooking up, they have your boat refloated and are towing it to the nearest yard to be hauled.
Soon, the one hour and 45 minute operation is over. You do some quick arithmetic and figure that this won't cost you more than $300 or $400. You meet the captain of the tow boat, sign a form, and three days later you get a letter from the tow company with the words, "This is a Salvage Demand for $8,500." Why would anyone expect that much money for less than two hours' work? It couldn't be legal, could it? The term salvage conjures up images of large tugs and huge commercial vessels in danger.
According to United States maritime law, it is not only legal, it's encouraged!
Salvors receive generous rewards for their services. Over 200 years of U.S. case law has fine-tuned the definition of salvage and how much of an award is fair. To help you understand the difference between salvage and simple towing, here's a brief explanation of the two terms.
Salvage
The courts have defined it as the act of saving a vessel and/or its cargo so that it retains all or a portion of its value. Public policy in the United States is to encourage people to attempt salvage and to render aid to vessels and property in peril.
For an action to be considered salvage it has to meet three criteria:
1. The vessel must be subject to a marine peril.
2. The salvage effort must be voluntary.
3. The salvage effort must be successful, either in whole or in part.
If these criteria are met, a salvage service has been performed. The marine peril does not have to be present or imminent, and only a reasonable expectation of peril in the future is required to meet this point.
If there is a previous contract in force, the service is not considered voluntary. For instance, the master and crew of a vessel are under a contractual obligation to do everything in their power to aid their own vessel and cannot collect a salvage award.
As the owner of a recreational vessel, you have the same duty. The Coast Guard has a search and rescue mission and cannot make a salvage award demand. Finally, there must be success. The term is "No Cure, No Pay." If there is nothing salvaged or if what is left has no value, there has been no salvage service performed.
Arriving at the amount of the award
After it has been determined that a salvage service was performed, how is the amount of the salvage award arrived at? The US admiralty courts have said that compensation for salvage is not considered pay for labor, but rather a reward for services and an encouragement to voluntarily save vessels and cargo in the interest of maritime safety and commerce.
This point is what drives many cases to arbitration or to litigation. What a salvor thinks he can get for his reward can be much more than the owner/insurer thinks it is worth. There are six factors that are considered today that were set down in a Supreme Court decision in 1870 and are referred to as The Blackwall factors after the name of the vessel involved in the case. In descending order of importance these factors are:
The degree of danger (peril) from which the vessel was rescued
The post-casualty value of the property saved
The risk incurred by the salvor in saving the property from impending peril
The promptitude, skill, and energy displayed in rendering the service and saving the property
The value of the property employed by the salvors and the danger to which it was exposed
The cost in terms of labor and materials expended by the salvors in rendering the salvage service
No two cases are alike
No two cases are alike and an appropriate award for two seemingly similar acts may be quite different. Awards appear to have a high cap of 50% of the post-casualty value of the vessel in extreme cases, but generally fall within 5% to 20% range.
The good news
The good news for boat owners is that a salvage demand is covered by your marine insurance policy if the cause of the incident is a covered loss. The company will assess the demand to determine its validity. If the amount is reasonable and fair, the company will pay it. If it is not, they will negotiate it, agree to a binding arbitration, or in rare cases end up in an admiralty court where the judge will determine the fair amount of the award.
Some salvage operations are done on a fixed price basis or a time and materials contract. Know the details of what you are contracting for. Ask up front how the salvor/tower is looking at the job so you are not surprised after the job is completed.
Even if the job is a legitimate salvage service, you are not likely to hear the word salvage used until after the job is completed. If there is time and opportunity, contact your insurance company and let them know what is happening.
Towing
If your vessel has a breakdown or runs out of fuel, you call for a tow and are usually charged an hourly rate for the service. You may not feel you are in peril, but if your vessel were not towed, could you foresee a possible danger such as an eventual grounding or being unable to run to safe harbor to escape severe weather?
Yes, you could. Technically then, this type of towing is really salvage. Remember that the fact a peril exists (and that it doesn't have to be imminent) is the deciding factor and not the degree of that peril that determines whether it is salvage.
The degree of peril
The degree of peril (and in this case the degree is very slight) is used to determine the award. It is easier, quicker, and often more profitable for a towing and salvage company to charge an hourly towing rate. In fact, a lot of them use an informal "one boat, one hour" rule even for refloating a grounded vessel and charge by the hour with a surcharge for the ungrounding effort.
The key word in identifying simple towing is "convenience." If the purpose of the tow is to get you into port more quickly, or to hasten an ungrounding that would occur at the next high tide without assistance, for convenience only, it is a simple tow.
Find out how you will be billed
There are a lot of misconceptions about marine towing and salvage, but there is also a lot of pertinent case law, as well as a fair number of books and papers written on the subject. At a minimum, if you do call for a tow, ask how it will be billed: will it be an hourly charge, a "no cure-no pay" salvage, a time and materials operation, or a fixed price?
(End of Article)
Best Piece of advise I can give you: KNOW YOUR POLICY AND CARRIERS STANCE ON THIS and also KNOW YOUR COVERAGE AMOUNTS. If you don't know, ask. All policies are different.
I know that there has been a lot of discussion in regards to what is towing and what is salvage. I have researched this for awhile now and have found a great article written by Foremost Insurance Company that might help shed some light on the debates out there. By posting this, I am not taking sides, endorsing anything. This is strictly for informational purposes and nothing should be "assumed" by this article.
Do You Have Enough Towing and Assistance Coverage?
Imagine this...it's blustery, wet and very dark. An evening that causes you to remark, "A good night to be ashore!" The phone rings. It's the dock master at your yacht club. Your pride and joy, the light of your life, the recipient of lots of your money, your boat, has broken loose from its mooring and has been driven ashore by the gale. Since the tide is rising, it will get pushed farther and farther up the beach if it manages to hold together that long. A panicked call to the local, commercial towing outfit brings a positive response to your request for a "quick tow off the beach."
A short while later you observe the operation from the road near the scene. Your boat is pounding on the bottom, and it looks very risky getting the tow line aboard and secured. "These two guys are really earning their $125.00 per hour tonight," you mutter to yourself. Within minutes of hooking up, they have your boat refloated and are towing it to the nearest yard to be hauled.
Soon, the one hour and 45 minute operation is over. You do some quick arithmetic and figure that this won't cost you more than $300 or $400. You meet the captain of the tow boat, sign a form, and three days later you get a letter from the tow company with the words, "This is a Salvage Demand for $8,500." Why would anyone expect that much money for less than two hours' work? It couldn't be legal, could it? The term salvage conjures up images of large tugs and huge commercial vessels in danger.
According to United States maritime law, it is not only legal, it's encouraged!
Salvors receive generous rewards for their services. Over 200 years of U.S. case law has fine-tuned the definition of salvage and how much of an award is fair. To help you understand the difference between salvage and simple towing, here's a brief explanation of the two terms.
Salvage
The courts have defined it as the act of saving a vessel and/or its cargo so that it retains all or a portion of its value. Public policy in the United States is to encourage people to attempt salvage and to render aid to vessels and property in peril.
For an action to be considered salvage it has to meet three criteria:
1. The vessel must be subject to a marine peril.
2. The salvage effort must be voluntary.
3. The salvage effort must be successful, either in whole or in part.
If these criteria are met, a salvage service has been performed. The marine peril does not have to be present or imminent, and only a reasonable expectation of peril in the future is required to meet this point.
If there is a previous contract in force, the service is not considered voluntary. For instance, the master and crew of a vessel are under a contractual obligation to do everything in their power to aid their own vessel and cannot collect a salvage award.
As the owner of a recreational vessel, you have the same duty. The Coast Guard has a search and rescue mission and cannot make a salvage award demand. Finally, there must be success. The term is "No Cure, No Pay." If there is nothing salvaged or if what is left has no value, there has been no salvage service performed.
Arriving at the amount of the award
After it has been determined that a salvage service was performed, how is the amount of the salvage award arrived at? The US admiralty courts have said that compensation for salvage is not considered pay for labor, but rather a reward for services and an encouragement to voluntarily save vessels and cargo in the interest of maritime safety and commerce.
This point is what drives many cases to arbitration or to litigation. What a salvor thinks he can get for his reward can be much more than the owner/insurer thinks it is worth. There are six factors that are considered today that were set down in a Supreme Court decision in 1870 and are referred to as The Blackwall factors after the name of the vessel involved in the case. In descending order of importance these factors are:
The degree of danger (peril) from which the vessel was rescued
The post-casualty value of the property saved
The risk incurred by the salvor in saving the property from impending peril
The promptitude, skill, and energy displayed in rendering the service and saving the property
The value of the property employed by the salvors and the danger to which it was exposed
The cost in terms of labor and materials expended by the salvors in rendering the salvage service
No two cases are alike
No two cases are alike and an appropriate award for two seemingly similar acts may be quite different. Awards appear to have a high cap of 50% of the post-casualty value of the vessel in extreme cases, but generally fall within 5% to 20% range.
The good news
The good news for boat owners is that a salvage demand is covered by your marine insurance policy if the cause of the incident is a covered loss. The company will assess the demand to determine its validity. If the amount is reasonable and fair, the company will pay it. If it is not, they will negotiate it, agree to a binding arbitration, or in rare cases end up in an admiralty court where the judge will determine the fair amount of the award.
Some salvage operations are done on a fixed price basis or a time and materials contract. Know the details of what you are contracting for. Ask up front how the salvor/tower is looking at the job so you are not surprised after the job is completed.
Even if the job is a legitimate salvage service, you are not likely to hear the word salvage used until after the job is completed. If there is time and opportunity, contact your insurance company and let them know what is happening.
Towing
If your vessel has a breakdown or runs out of fuel, you call for a tow and are usually charged an hourly rate for the service. You may not feel you are in peril, but if your vessel were not towed, could you foresee a possible danger such as an eventual grounding or being unable to run to safe harbor to escape severe weather?
Yes, you could. Technically then, this type of towing is really salvage. Remember that the fact a peril exists (and that it doesn't have to be imminent) is the deciding factor and not the degree of that peril that determines whether it is salvage.
The degree of peril
The degree of peril (and in this case the degree is very slight) is used to determine the award. It is easier, quicker, and often more profitable for a towing and salvage company to charge an hourly towing rate. In fact, a lot of them use an informal "one boat, one hour" rule even for refloating a grounded vessel and charge by the hour with a surcharge for the ungrounding effort.
The key word in identifying simple towing is "convenience." If the purpose of the tow is to get you into port more quickly, or to hasten an ungrounding that would occur at the next high tide without assistance, for convenience only, it is a simple tow.
Find out how you will be billed
There are a lot of misconceptions about marine towing and salvage, but there is also a lot of pertinent case law, as well as a fair number of books and papers written on the subject. At a minimum, if you do call for a tow, ask how it will be billed: will it be an hourly charge, a "no cure-no pay" salvage, a time and materials operation, or a fixed price?
(End of Article)
Best Piece of advise I can give you: KNOW YOUR POLICY AND CARRIERS STANCE ON THIS and also KNOW YOUR COVERAGE AMOUNTS. If you don't know, ask. All policies are different.
08-13-2008, 05:40 PM
#4
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The policies do however all have different coverages. For example, an ACE policy will only pay salvage costs up to 25% of the hull value with no deductible.Policyholders really need to look over that long boring book behind their declaration pages. Information on what their particualar boat policy covers for salvage will be in there.
08-13-2008, 06:29 PM
#5
Registered
the other day me and my brother were sitting on the beach, and had just come in from sea dooing. the kid a couple doors down was rigging up his hobie (he had no clue what he was doing). so the weather starts to get nasty, but the kid continues to attempt to rig up the sailboat. he was trying to raise the main and jib with the boat pointed perpendicular to the wind. we walk over and offer help and advice , but he says he knows how to sail, so we walk back to our beach chairs and wait for the show to start. so we see them start to sail, and they get about 500 feet and the kids sister is sitting on the low said, and they go to come about, and the hobie flips. so we see this, and being decent people, see the weather is getting bad, and that they wont be able to flip it back by themselves. so we cruise down there in the waves and rain, and the kid is trying to get the boat back over (the kid was about 95 pounds wet). so we offer help, and they accept. it took about 45 minutes to get the boat back up, and take it back to their cottage. we finally get them back there and the sister thanks us and the other kid just takes the boat and pulls it ashore. i was insulted that the kid did not thank us, and his father/mother the next day didnt even have the class to come over and say thank you, when they sat on their deck and watched the whole thing go down.
so my question is, could i have sent them a letter demanding 1/3 of the value of the sailboat? i think it would be funny in principal, just because the kid and his parents were dirt bags. btw it was the sisters birthday, so i felt bad for her who didnt even want to go sailing in the first place, but atleast she had the class to say thank you very much.
so my question is, could i have sent them a letter demanding 1/3 of the value of the sailboat? i think it would be funny in principal, just because the kid and his parents were dirt bags. btw it was the sisters birthday, so i felt bad for her who didnt even want to go sailing in the first place, but atleast she had the class to say thank you very much.
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