Should Owners Buy Separate Insurance to Cover General Average Expenditures in Containership Cases?

November 25, 2013

Although litigation growing out of the July 2012 explosion and fire onboard the M/V MSC Flaminia while in transit from Charleston, S.C. to Antwerp, Belgium is just beginning, it has already produced a significant decision involving security to be posted in favor of salvors and for general average (GA) expenditures. The salvage arbitrator ordered that security representing 65 percent of the value of the cargo be posted while the GA adjuster demanded 100 percent of that same value.

Cargo eventually agreed to post the amount ordered for the salvage, but resisted the GA adjuster’s claim. The court sided with Cargo, ordering that Cargo put up 100 percent of its value, 65 percent for salvors, 35 percent for GA. The result reflects that only 100 percent of value is available to satisfy claims from a sale realizing that, in all probability, the salvors’ lien would take precedence, and the salvors would get their 65 percent.

The Joint Hull Committee in London has recently floated a proposal whereby owners would buy separate insurance to cover what otherwise would be GA expenditures in these box ship cases. It remains to be seen whether the market will accept this proposal. (MSC Flaminia).

This article is from Montgomery McCracken’s Fall/Winter 2013 Maritime and Transportation Newsletter.

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