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ACQ 2016-1

Real Case 5: Total Loss Claim

Real Life Situation: A vessel was insured for P&I insurance through us. Unfortunately, during rough weather, the vessel sank with a laden cargo for logs. 12 crew perished from this incident. The master and officers were Korean and the crew were Filipino.

The Problem: Apart from the usual problems to be expected in such a case, various other problems had to be addressed including: (1) The Owners did not have sufficient funds to settle the crew claims under the “pay to be paid” rule; (2) Korean crew death claims were known to be very difficult to handle; (3) The Filipino crew death claims were recently revised so that the Owner was liable for a much higher limit of compensation;

Korean crew, by custom, expected to receive a higher amount of compensation than that provided under the Korean crew contract; This was the largest claim the Club had ever encountered.

The Claim: The estimate total claim, including cargo and crew claims, amounted to approximately USD 45,000,000. This was the largest claim in the Club’s history.

Action Taken: All claims and correspondence from the Owner were handled by Andrew Liu & Co. Ltd. We acted on behalf of the Owners vis a vis the Club. Numerous discussions were held with the Directors of the Club in order to obtain their consideration to assist members to settle the crew claims in the first instance despite the “pay to be paid” rule.

Settlement: Eventually, through our perseverance, the Club agreed to settle the full amount of the crew claims in the first instance, and monies were remitted by the Club. In addition, we also negotiated with the Club Directors to settle the increased ex gratia settlement to the Korean crew, even though the Club was not liable to settle this under the terms of cover. We succeeded in obtaining the Club’s agreement to reimburse the Owners this increased ex gratia settlement. The cargo claims were also resolved and amicable settlement was concluded with the cargo claimant lawyers.

All of the crew and cargo claims arising form this incident were concluded smoothly and settled swiftly within 2 months from the date of disaster.