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Tow or Salvage?

A simple tow involves one tow line and one tow boat. The above circumstances, however, with the stricken vessel's mast down, classify this as a salvage operation.

We've all heard the sea stories, the chronicles of sailors in trouble who end up being ripped off for merely allowing their boat to be towed. In fact, bring up the word salvage on the docks and you are likely to get an earful of these colorful, embellished tales. Unfortunately, most boat owners suffer from a lack of understanding regarding what constitutes salvage versus towing, and the majority have formed opinions based solely on what they've garnered from these horrific stories.

Knowledge is the key to dealing successfully with a towing or salvage company. Knowing in advance what's at stake and what your rights and obligations are remains at the heart of getting out of a tight spot with your skin intact, not to mention your boat. Part of this research involves understanding your individual insurance company and the way in which your policy defines the difference between towing and salvage.

Every boat owner should be aware that the rules surrounding towing and salvage situations fill many volumes of maritime law and span centuries of seafaring history and tradition. While this brief primer will offer you the basic concepts, keep in mind in mind that salvage can be a very complex issue, and it's always best to fully understand the specific coverage that applies to your vessel.

Towing    An important distinction applies when you're talking about towing, which is essentially that this service is usually defined as existing in the absence of peril. This may include running out of fuel, a soft grounding, dead batteries, or engine breakdown in which there is no immediate danger to the marine environment, the boat, or the persons on board. Towing implies that only one tow vessel and one towing line are necessary, and that the vessel owner is not in a situation requiring that he or she accept the first tow that arrives if the price seems out of line.

There are several major nationwide towing operations in the US, as well as smaller local businesses. Contact is usually made with them via VHF radio, and they normally offer quotes ranging from $100 to $150 per hour. As a general rule, the clock starts when they leave their dock and runs until they arrive back.

Immediate danger to crew, the environment, and the vessels involved are among the defining factors used to determine whether a situation is classified as a tow or a salvage job. When your problems reach the stage of the boat depicted here, you're in for the latter.
 Salvage    What we term a salvage operation begins when the vessel is hard aground, stranded, on fire, or sinking, and includes towing from the site. In the eyes of the law, if there is an immediate danger to other vessels, the marine environment, or the vessel in distress, the rescue ceases to be a simple tow and becomes a salvage operation. Also, where special equipment is used for floating or pumping the distressed vessel, or when the use of two towlines and/or two tow vessels is necessary, the operation is deemed to be a salvage job.

Historically, salvage has meant that a reward composed of a share of the cargo aboard the rescued vessel would be given to a rescuing vessel's operators for rendering assistance in dangerous circumstances. However, because one person's definition of sufficient reward differs from another's, disputes between the rescuing vessel and the rescued vessel often arose. To resolve these disputes in a fair and equitable manner, the insurance company, Lloyds of London, developed a form called the Standard Open Form Salvage Contract. It became the benchmark for a salvage claim and, based on English law, includes a provision that any dispute be arbitrated in London, England, and that the loser pay the legal fees of both sides. In other words, two US citizens involved in a dispute over salvage had to travel to the UK to resolve it. Now, under US laws, US citizens are protected from having to arbitrate such cases in England, but are given the same rights and protections of the ages-old maritime laws. BoatUS, The Society of Maritime Arbitrators, and Miami Maritime Arbitration have developed forms based on the Lloyds Open Form Salvage Contract for resolving domestic disputes in the US.

"To make a claim, a salvor only has to prove that the salvage was voluntary, successful, and the salvaged vessel, or the environment, was in danger."
An "open form salvage agreement" means that the value amount of the salvage is left undetermined in the salvage contract and is to be decided later. Always bear in mind that a signed agreement is not required for the rescuing vessel to make a claim—it is only required that the salvor prove that the salvage was voluntary, successful, and that the salvaged vessel, or the environment, was in imminent danger. This is referred to as "pure salvage," and under these terms, the salvage company retains its right to a salvage lien against the rescued vessel.

Pure salvage awards are based on a number of factors, including:

  • The value of the endangered vessel prior to the incident, less the cost of repairs incurred prior to and during the salvage, called "post-casualty."
  • The efforts by the salvor to prevent or minimize further damage to the environment.
  • The character and grade of danger involved.
  • The effort and success in rescuing property and life.
  • Time, expenses, and losses incurred by the salvage crew.
  • The liability and risk incurred by the salvage crew.
  • The availability and effectiveness of the salvage vessels and equipment used in the operation.

Inherent in the risks the salvage crew takes are the responsibility for environmental damage and negligence and, if the salvage is not successful, the crew is not paid for the time and effort already invested unless it can prove the environment was in imminent danger of further damage.

Thus the origins of many of the dock tales are born: Captain Jones is sailing his $200,000 yacht 15 miles off the coast when the boat strikes a large object at 2:00 a.m. The forward hull is cracked and the boat begins flooding. Within a few minutes, Captain Jones realizes that he, his vessel, and his three crew members are in trouble, so he calls for help. A competent salvage company arrives promptly in the middle of the night, puts large pumps aboard, locates the leak, and applies an underwater patch in the dark. It then tows the boat to a nearby yard, getting a travelift operator out of bed to haul the boat immediately. By daybreak, the boat is saved.

What's the bill? "$40,000," says the salver. Captain Jones comes unglued. "$40,000 for four hours of work—it's robbery on the high seas!" he screams at the salvers. But what were the alternatives? Four lives might have been at stake, the whole $200,000 investment could have been lost, and another huge bill for oil and fuel clean-up and wreck removal could have been issued.

Keep in mind that subsequent wreck removal and hazardous waste containment may cost you more than the total loss of the boat.

Salvage companies provide valuable services to recreational boaters and should be rewarded for the risks they face, along with their vessels, crews, and equipment during a salvage operation. They usually have a great knowledge of rescue operations garnered from years of experience. In the long run, a salvage operation can cost insurance companies and recreational boat owners less than the price of a wreck removal on top of the cost of the loss.

Your Options    As with most businesses, there are good and bad salvage companies, and it is the responsibility of the recreational boater to sort them out. Understanding the difference between towing and salvage can save boat owners and insurance companies big bucks. Unless there is towing coverage in your insurance policy, or a membership in which a yearly fee is paid for towing assistance, the cost of a tow will come directly out of your pocket. Salvage costs, however, will undoubtedly involve your insurance company, regardless of whether you agree to a fixed-fee salvage or an open agreement based on the risk involved to the rescuing vessel, crew, and equipment.

Before disaster strikes, it is imperative that you understand the terms of your insurance policy. Salvage charges may need to be negotiated under the terms of the policy. The insurance company may, or may not, see you through binding arbitration where a small panel arbitrates any dispute if you, the insurance company, and the salvage company can't agree on the claim. If arbitration fails, then litigation is pursued in the federal maritime courts. The historical precedent in these courts has been toward giving significant compensation to the rescuer due to the risk that is assumed.

"If you don't remove the boat, the Coast Guard will do it for you, sending you the bill and possibly a fine. And it won't be cheap."

Review your insurance policy and be sure that salvage coverage is included and that the coverage is for the full value of the vessel, not a percentage, and that there is no deductible. Also confirm that wreck removal is specifically included in the liability portion of the policy and that the full value of the removal is covered with no deductible. Always keep in mind that you cannot simply abandon a vessel. The owner is ultimately responsible for the vessel and any ensuing damage it does to the sea, any reef, or dock. If the boat sinks or otherwise obstructs navigable waterways, the Coast Guard will demand removal. If you don't remove it, the Coast Guard will do it for you, sending you the bill and possibly a fine. And it won't be cheap, so make sure you're covered.

If it's possible to research and select a tow or salvage company in your sailing area, do so in advance so that you'll know whom to call in case of an emergency. Before you commit to a company, ask for references and experience. An inexperienced salvage crew can cause more damage to a stricken vessel and the environment than the trauma itself. Ensure that the company has hazardous materials containment experience with certified personnel, and that they own the proper recovery equipment. As resolution to salvage claims takes time, be sure that the company is financially stable and can wait for a settlement.

As a boat owner, it's imperative that prior to handing a line to any tow vessel you ask: "Is this a tow or salvage?" You should never make the assumption one way or the other. Ask for a fixed price, get it in writing or as an oral agreement with a witness. Do not sign a Lloyds Open Form Salvage Contract. Get a copy of one of the three forms previously mentioned from your insurance company and present it as an alternative. If your form is refused, suggest that no contract is required. With no signed contract, it will be difficult to resolve any dispute by arbitration and will almost certainly lead to litigation. If you are unsure of an offered tow, you can always refuse its services and call for other commercial assistance if the situation permits.

Remember that the Coast Guard will not tow recreational vessels unless there is a life-threatening event on board. If you have a truly serious emergency, issue a Mayday call on VHF. When the Coast Guard responds to your call, follow their instructions. If they deem the situation requires commercial assistance, state your preference for the company that you pre-selected. By following these procedures, you can help alleviate heightened panic when a vessel and its crew are in distress.

Kathy Barron is offline  
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