Major casualties

When a ship experiences a major casualty, its officers, owner and insurer often face an immediate legal, financial and operational dilemma, in addition to the obvious costs and logistical challenges of returning the ship to operation. The dilemma is whether to repair or salvage.

Salvage or repair — key distinctions

This article does not provide legal advice or legal information. However, the primary distinction between whether the assistance needed by and rendered to a casualty classifies as salvage or as underwater repair is the presence of peril. Salvage operations are performed to prevent the imminent loss of a vessel that is actively exposed to damage or destruction. Underwater repair is a routine commercial service performed on a vessel that is not in imminent danger.

This classification is of enormous interest to owners and insurers because of the difference in cost. Standard underwater repairs are billed at predictable, pre-negotiated commercial rates. These rates can be high but the savings from avoiding off-hire time, lightering and emergency drydocking tend to dwarf the cost of a repair. Salvage, operating under the “no cure, no pay” principle, can result in an award worth 10% to 20% or more of the total value of the ship and cargo.

It is greatly in an insurance company’s financial interest to treat the operation as a repair, rather than salvage whenever possible. For the salvor, however, it can be considerably more advantageous to have the operation classified as salvage.

To avoid legal complications, the initial decision should be based on an accurate and fully informed assessment of the circumstances and available options.

The initial decision

In some cases, the appropriate response is obvious:

• The ship is sinking = initiate salvage immediately
• The ship is safe but has a hole in the hull = underwater repair

But often the distinction is blurred or there is not enough information for the captain, manager, owner or insurer to decide.

It is in these latter cases that impartial advice from an experienced and expert underwater repair company can come to the rescue, potentially saving the insurer a substantial amount of money.

Experience and expertise

Hydrex is an underwater maintenance and repair company that has worked on both sides of the salvage/repair equation for more than 50 years, building extensive knowledge, experience and expertise in the realm of dealing with casualties. It is known for its ability to undertake very large repair jobs that combine diving, engineering and welding expertise, sometimes in conjunction with salvage companies. The technical team is therefore in an excellent position to help a shipowner or insurance company make the right decision in any casualty situation where the correct approach is not obvious.

Case studies — free hardcover casebook

To share some of this experience and expertise, the company has prepared a book of case studies of major vessel interventions. This book is available at no cost on request and provides a realistic idea of what is possible.

Consultation and estimate

In addition to the book of case studies, Hydrex offers a free initial consultation and estimation service, which insurers, owners, managers and ship officers can use. The purpose of this consultation is to help determine whether an on-site underwater repair is feasible or whether the ship is in peril and a salvor should be contacted immediately. If an underwater repair is determined to be an option, an estimate for the work will be provided.

When there is insufficient information to determine the path to take, a thorough underwater inspection can be organised and mobilised rapidly to fill in the gaps so that the correct decision can be reached.

Informed decisions

As with any decision, having all the information and knowledge to hand makes it easier to determine the right course of action.