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Who pays the salvor before the insurer does?
Short answer
A salvage firm wants money or a written undertaking before the crane moves, and at that hour nobody has seen the boat or put a figure on the damage. What bridges that gap is a question to settle in advance, not on the pontoon at midnight.
There is a gap between the incident and the settlement that nobody mentions at the boat show. A salvage contractor does not work on a promise from an owner standing on the pontoon. The firm wants money on account, a bank guarantee or a written undertaking from someone with a balance sheet, and it wants that before the airbags go under the hull. At that hour nothing has been surveyed and no figure exists, so the question on the quay is not what the damage is worth but who is willing to stand behind the bill.
Two routes are used in practice, and they behave quite differently. Under a Lloyd's Open Form the salvor works on no cure, no pay, and security is put up afterwards, usually through the Lloyd's Salvage Arbitration Branch, with hull and liability interests each providing their share. Under a fixed price or day rate contract the money falls due on ordinary commercial terms, and somebody has to produce it. Insurance law in many European countries obliges an insurer to fund reasonable steps taken to prevent or reduce a loss, and in several countries that duty extends to paying on account when asked. The detail differs by jurisdiction and by wording, so the sentence that counts is the one in the policy in the boat file.
The point that actually decides the night is printed in no wording at all. Ask three things before the season starts: is there a number that is answered out of hours (ours is +49 3375 29 28 95), will an undertaking be given to a salvage contractor directly, and will the contractor be paid from the claim or the owner reimbursed afterwards. The answers vary widely and almost none of them appear in a brochure. Then keep the order straight on the day: report first, agree what is to be done, and only then sign. A scope agreed with the insurer on the line is far easier to pay than one awarded alone at two in the morning, and a salvage form is worth reading before the signature goes on it.
Worth remembering
Tonight
is when the salvor wants security
Weeks later
is when a survey produces a figure
The gap between those two dates is where owners who never asked the question end up standing.
Questions
What owners ask us about this
Can I ask for money up front?
In many jurisdictions yes, for reasonable steps taken to prevent or reduce the loss. The right is easier to use when it was discussed at renewal rather than discovered during a salvage job.
What do I do first at the scene?
Report the incident before placing the order, then agree what the contractor is to do. A scope settled with the insurer on the line is far easier to pay than one awarded alone.
Should I sign a Lloyd's Open Form?
When a vessel is in real danger it is often the sensible form, because payment follows the result and security is sorted out afterwards. Read what is on the paper and report it at once.
Who deals with the salvor, me or the insurer?
That is exactly the question to settle in advance, because practice differs from one market to the next. Ask whether an undertaking can go to the contractor directly and who negotiates the award.
Related
Not sure whether you qualify?
Whether it is “Who pays the salvor before the insurer does?” or another question: send us your residence and the flag your boat flies. You will get a straight answer in one email; including a no, if that is the answer.
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