Reprinted with permission of
TowBoatUS Tarpon Springs, FL
TowBoatUS Pensacola, FL
"The thin veneer we call
civilization can disappear where a shipwreck is concerned."
Richard Loran, Shipwrecks of Great Britain and Ireland
Understanding the difference between towing and
salvage can save boaters money and aggravation. Historically and legally,
salvage is any voluntary and successful rescue of a boat., its cargo
and/or its passengers from a peril at sea.
The distinction between
towing and salvage is reflected in the different types of programs
available to boaters. The far more expensive salvage claims are covered
only by yacht insurance policies.
If the salvor wants to do
the job but does not know what the cost will be but will make claim
afterwards, the final amount will be decided one of three ways --
negotiation with your insurance company; binding arbitration or, rarely,
through litigation in federal admiralty courts.
All boaters should review
their marine insurance coverage with their agent. The best protection
against a salvage bill is adequate insurance. Boaters should make sure the
policy provides for salvage up to the full value of the boat, not a
percentage of its value, and that there is no deductible for salvage
The Difference Between Towing and Salvage
What To Know If You Think
It's Just A Tow:
As millions of
recreational boat owners get ready to launch their vessels this season,
knowing the difference between towing and salvage could save them
boatloads of money should they need help on the water.
and legally, salvage is any voluntary and successful rescue of a boat, its
cargo and/or its passengers from a peril at sea. Salvage often results in
a "demand" for a percentage of the boat's post-casualty value - sometimes
a considerable amount of money. Towing costs much less and is billed by
distinction between towing and salvage is reflected in the different types
of programs available to boaters.
Since the same
marine assistance company often provides both towing and salvage services,
it is essential that the boat owner reach an understanding with the marine
assistance provider before action is taken.
companies should inform the captain of a boat before beginning any work if
the procedure is salvage, not towing. If this isn't possible due to wind
and sea conditions, the towing company should tell the captain as soon as
boaters should not assume they will always be told. Boaters should always
ask whether the job is towing or salvage before they accept a tow.
If the answer
is "salvage," the boater should ask if the company - or "salvor" - will
give a fixed price or one based on time and materials before beginning the
job. If so, get the price in writing or, if an oral agreement, try to have
someone witness it.
If the salvor
wants to do the job first and says he does not know what the cost will be
but will make a salvage claim afterwards, the final charge will be decided
one of three ways: negotiation with the boater's insurance company;
binding arbitration or - rarely - through litigation in federal admiralty
If the salvor
does not give a price before doing the job, the boater should ask the
salvor if he uses or will agree to use the BoatU.S. Open Form Yacht
Salvage Contract or LLoyds open contract, which assures any claim can go
to binding arbitration if negotiation fails.
As long as the
situation is not dangerous and not deteriorating, boaters should feel free
to look for another company by radio.
Towing is any
operation not involving immediate danger to the boat or to a legally
protected marine environment. It requires just one towing vessel with
lines attached to a grounded boat to refloat it or to the disabled boat to
tow it. If a grounded boat can rest without peril until the tide returns
to float her free, or a boat is drifting in calm conditions after losing
power, it almost always calls for towing, not salvage.
the other hand, involves imminent peril to a grounded, sinking or stranded
boat or to a protected marine environment, or the use of more than one
towing vessel and/or special salvage equipment such as air bags or high
should review their boat insurance coverage. The best protection against a
salvage bill is adequate insurance. Boaters should make sure their policy
provides for salvage up to the full value of the boat, not a percentage of
its value, and that there is no deductible for salvage costs.
Lloyds Open Form
commerce has been the backbone of all of great societies. Even though the
modes of transportation have changed dramatically, what hasn't changed are
the risks associated with the sea.
the only chance of survival for a vessel in peril was the willingness of
another ship nearby to render assistance. Countless lives and millions of
dollars in cargo were saved because another vessel was willing to go out
of her way to respond to a call for help. To reward these acts of heroism,
the vessel was generously awarded an amount that reflected a percentage of
the value of what was saved.
As is often
the case, there were disagreements as to what was a proper reward for the
efforts of the rescue vessel. And to complicate matters even further, the
rescued vessel and the rescuer were often from two different countries.
Disputes were common as to what country's laws applied, and how the matter
would be settled.
only thing the vessels had in common was that they were insured through
Lloyd's of London. So Lloyd's developed a "Standard Open Form Salvage
Contract" which set to paper the criteria on which the salvage award would
be based, and where and how any disputes would be settled. This program
was very successful and continues to this day, being utilized by Lloyds
underwriters for both commercial vessel and yachts. The Lloyds contract is
still the recognized standard for salvage contracts in the international
for recreational boats in the United States which did need to be "rescued"
the Lloyds Contract has proven to be a difficult and disadvantageous route
to dispute resolution. First of all, the Lloyd's Open Form Salvage
Contract is hard to read, -with a lot of thee's and thou's- and even
harder to understand. Ever more daunting was the requirement that any
dispute be arbitrated in London England. This meant that a dispute
involving two Americans and a salvage in American waters had to go to
London, hire English barristers (lawyers) and pay substantial amounts of
money to prepare a case to be heard by the Lloyd's Arbitration Committee.
matters even more expensive, the Lloyd's system was based on English law,
which includes the provision that the loser pays both sides' attorneys'
fees. Salvage claims are almost always a matter of negotiation, since the
price is usually not established before the work is done. So if the boat
owner's offer to settle a salvage claim was further away from the award
than the demand of the salvor (and it often was), the boat owner would
also be responsible for the salvor's legal fees as well. Concern over
becoming responsible for the salvor's barrister fees adds pressure to the
boat owner (or his insurance company) to settle the salvage claim at a
higher amount than they would other wise think is reasonable. Of course
this pressure exists for the salvor as well.
judicial system recognized the inequities in this approach, and ruled that
if both parties (the boat owner and the salvor) were U.S. citizens, they
could not be forced into arbitration in a foreign country. What remained
was how to give both the salvor and the boat owner the same protections
provided in the Lloyd's Open Form Salvage Contract. BoatU.S. drafted a
model " Open Form
Salvage Contract" in 1989, which provided the needed protections and
required domestic arbitration of any dispute.
arbitration refers to United States arbitration forums, including one
available through BoatU.S. , The Boat Owners Association of The United
States' Salvage Arbitration Plan, created at the same time as the Open
Form Salvage Agreement. The Society of Maritime Arbitrators (SMA) in New
York and Miami Maritime Arbitration in Florida also have salvage
Q: What does the term "Open Form" mean?
A: When the
price or reward for the salvage effort is left open in the agreement, to
be decided later when the boat is safe and the two parties can calmly
discuss the matter, that agreement is referred to as an "open form salvage
Q: What if I don't sign a contract before my boat is
salvaged? Can the salvor still make a claim?
A: It is
important to understand that a contract is not necessary in order for a
salvor to make a salvage claim. The salvor only needs to demonstrate that
the effort was voluntary (he had no pre-existing obligation to come to the
rescue), that he was successful and that the vessel rescued was in peril.
This type of salvage claim is often referred to as "pure salvage".
Q: So what if you find yourself in the predicament
of needing a salvor to save your boat, you allow him to do it and now he
wants you to sign a contract. Do you have to sign any contract just
because the salvor puts it in front of you?
A: NO. The
salvor still has a pure salvage claim against your boat. He must have your
permission to render assistance if you are on board (you can not be forced
into anything), but the absence of a signed agreement may mean that there
will be some convincing necessary to get the salvor to resolve any dispute
by arbitration as opposed to litigation. There is always litigation in
Federal Court and, while not the most economical method of resolving the
value of a boats "rescue", it is tried and true.
Q: What if a salvor insists that you sign a Lloyd's
Open Form Salvage Contract?
recommends that you refuse. Offer as an alternative the attached BoatU.S.
Open Form Salvage Contract, or simply suggest that the salvor does not
need a contract at all. You can always refuse his services and call for
other commercial assistance.
vessel to the forces of nature, or worse, through navigational error, is
traumatic and disheartening.
will almost certainly discover a new low point when you first receive the
salvor's bill for salvage work or wreck removal. The phrase "sticker
shock" comes to mind, but understates the case. The salvors expectations
are created by 200 years of Admiralty Court decisions - including recent
ones - where judicious minds felt that significant "rewards" were
necessary to encourage people to invest their capital and risk their lives
to save others in peril on the sea.
PAYING FOR WRECK REMOVAL
popular myth, you cannot abandon a vessel at sea or on a reef, collect
your insurance and forget about it. The Owner of a vessel remains liable
for subsequent problems associated with that vessel.
problem will be immediately visited upon you - somewhat akin to Scrooge's
experience with the Ghost from Christmas Future. If your boat went down
in, or near a navigable channel, the U.S. Coast Guard will require its
removal. If the Owner fails to respond, the Coast Guard will remove it for
them and expect the Owner to pay the bill (large bill) along with a
This can all
be avoided with a marine insurance "protection and indemnity" policy that
specifically provides coverage for removal of wreck. Boaters should
confirm with their agents that:
insurance company's claims department is experienced at raising sunken
boats and removing wrecks from reefs, beaches and other places they don't
belong. Such a company's marine insurance claims specialist would help you
locate the right type of assistance, and very importantly handle all
negotiations, arbitration or litigation associated with a wreck removal
2. Their boat insurance policy specifically includes a removal of wreck
feature in their liability (protection and indemnity section) equivalent
to the normal limit of liability ($300,000 recommended) which would pay
the bill and the cost of litigation.
3. There is no deductible or other adjustment to the cost of removing the