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ACQ 2016-1

Real Case 7: Claims Rejected by the Clubs

We have handled several cases in which the P&I Clubs have rejected claims on account of the vessel’s condition, and the members’ breaking of the defects warranty contained in the terms of entry. One of these memorable cases involved a vessel, owned by a Korean Owner, which encountered heavy weather whilst on a laden voyage, whose shell plating parted with the inevitable demise of the vessel and her cargo. Fortunately the crew were all saved.

The Owners’ claimed reimbursement from the P&I Club in respect of crew shipwreck unemployment, repatriation expenses and liability for the total loss of cargo. There was a defects warranty contained in the terms of entry, as to there were several recommendations noted by the P&I Club’s surveyor during the condition survey. Furthermore there were also several outstanding Class recommendations which related to the hull. The P&I Club surveyor who attended and interviewed the crew after the vessel’s demise concluded that the poor condition of the vessel as the cause of the vessel’s demise. The P&I club rejected all claims submitted by owners. There was only one possibility of proving a claim under the P&I cover, and that is to show the cause of the shell plating was not attributable to any of the outstanding recommendations. We investigated the nature of the outstanding recommendations stated by class and in the P&I condition survey report, and from our experience and knowledge in ship structures, we considered that the cause of the shell plating parting was not related to the recommendations. As we were satisfied there was a good case to pursue, we needed an independent third party expert opinion to determine whether the recommendations were a cause of the vessel’s loss before preparing our submissions to the P&I Club. We communicated with the professors of Ship Structure and Naval Architecture at the University of Newcastle Upon Tyne where Mr. John Liu and Mr. Andrew Liu graduated and discussed this case with them. The professor is a well renowned international authority and the strength of ship structures agreed with our opinion but had to support this with technical evidence, and he agreed to carry out an investigation.

After we received his report and expert opinion, we started to prepare our lengthy submissions to the P&I Club which encompassed both legal and technical arguments countering the opinions of the P&I surveyor and concluding the owners’ P&I Claim under the cover was valid and payable.

We also reserved the owners’ rights, that in the event the claim was still rejected to resolve this matter in London arbitration proceedings as provided under the club rules.

The P&I Club acknowledged the strong argument we put forwarded, and the claim was later settled amicably to the satisfaction of the owners.