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Salvage or Tow? What You Need to Know

April 1, 2012

Salvage or Tow? What You Need to Know

Disclaimer:

The following is a review of Salvage, presented as an educational seminar at the 2012 Maine Boatbuilder’s Show by Leonard W. Langer, Esq. The information contained herein is not a complete synopsis of the presentation, nor is it a complete review of the topic of salvage. The discussion herein may not apply to any particular set of facts, and should not be relied on or construed as legal advice, which can only be obtained from an attorney. Readers are advised to seek legal advise from an admiralty attorney in the event they have a salvage situation, or need advice with a salvage question.

Introduction to Salvage

Any boater could one day need help on the water. Mechanical breakdowns, groundings, collisions, and other unwelcome occurrences are, unfortunately, part of boating. Regardless of the reason, chances are you’ll call for help if you feel you are unable to get back home safely on your own. This article is about what you need to know if and when the help that you call arrives.

There was a time not so long ago when the US Coast Guard accepted responsibility for the safety of both life and property. Back then, if a damaged vessel was within reach, the Coast Guard would attempt to prevent loss of a vessel after first rendering assistance to those in peril. Those days are no more. Today the Coast Guard considers its responsibility limited to preserving life. Once its mission has been accomplished, it will assist in helping a vessel’s owner contact a professional tow or salvage service, but not necessarily make efforts to protect a vessel from further damage. As a result of the Coast Guard’s position, the role and number of professional tow and salvage operators has greatly increased.

Professionals like TowBoat US and Sea Tow now provide most boat towing services in the US. If you have a contract with one of these companies, and the tow operator feels that the your boat needs more than just a tow, AND if there is time to talk, the operator will probably inform you of your legal rights before any action is taken with regard to salvaging the vessel. This is not so with other forms of help.

The difference between a tow and salvage

A tow is just a tow. It doesn’t involve extricating a boat that is aground on rocks, or exerting unusual effort pulling a grounded boat away from a beach during a worsening storm on a falling tide. If the effort needed to bring a vessel home involves saving it from peril then you are probably involved in what is called salvage.

The act of preserving a ship, its cargo, or other property on the water is referred to as salvage. The federal government has historically encouraged boaters to come to the aid of vessels in peril by allowing monetary rewards to be granted in court. Salvage claims are often significant amounts of money designed as a reward based on the monetary value of the service, and may or may not be paid in full by an owner’s boat insurance.

In order for a salvage claim to exist there must be:

  • Marine peril, or a reasonable expectation of marine peril
    • A real danger to the vessel must exist or be reasonably expected
    • If simply waiting for a higher tide would fix the problem then there is no peril
    • Rocks are generally associated with peril
    • A volunteer performing the salvage
      • No party who has a responsibility to assist a vessel can claim salvage rights
      • Because the Coast Guard no longer has a responsibility for protecting property at sea, if the CG goes “above and beyond what they have to do” and saves property, the CG may be awarded salvage rights as would any other volunteer
      • A Successful saving of a vessel, or other property
        • The salvor has a duty of reasonable care when performing salvage.  The cost of any damage that was caused by unreasonable behavior can be deducted from a final award
        • Consent by the owner/pilot of the vessel
          • Otherwise the salvor may be considered an “officious intermeddler”

What Determines Rewards?

Admiralty attorneys acting on behalf of a vessel’s owner often argue that a salvage award should be “an amount equal to a reasonable fee for a tow”. This, however, is not often a winning argument.  The main determinants of the size of salvage awards include:

  • Time and labor expended during salvage
  • Speed of arrival
  • Skill and efforts of salvor
  • Value of salvor’s property put in jeopardy to perform the salvage
    • I.e.: Someone who used a rowboat and a line to save a vessel will recover less than another person who saved the same vessel using a professional salvage boat and crew
    • Value of after-salvage saved property
      • Percentage awards are based on this value
      • Time used to perform the salvage operation
      • Expenses and any property loss of salvor
      • The state of readiness of the salvor’s equipment
        • Courts reward professional salvors by recognizing and reimbursing them for their costs associated with being “ready”
        • The Salvage Act allows “equitable uplift” of an award (up to 10% more) for having salvage equipment ready to respond
        • An award may be significantly increased if an environmental danger is prevented
        • What is fair and equitable

Examples of Salvage Rewards

When vessels valued at over $100,000 are involved, it is typical for courts to award between ten and twenty percent of a vessel’s post-salvage value to the salvor. As an example, if a vessel’s value were $100,000, then a major salvage claim would be expected to be in the range of $20,000. For a $600,000 vessel this amount would increase to around $100,000. When vessels under $100,000 are involved then awards of between thirty to forty percent are common.

What you need to Know

An owner’s consent is required before any salvage operation begins. Be certain before assistance is rendered that you and the person coming to your aid agree to the rules.

If you are thrown a line, and tie it to your boat, you have probably consented to salvage.  Instead, before any lines are attached ask, “What’s the deal?” Often there is time to simply say, “Can you tow me in?” Create a contract if you have the time. If possible have an on-board witness confirm the arrangement.

A vessel’s owner is often asked to agree to a salvage operation in writing. This agreement may be presented as a one-page contract, the U.S. Open Form Salvage Agreement  (“MARSALV Agreement”) presented to the owner by the salvor.

  • The fee should be noted in writing as either a fixed % of the vessel’s value if no damage occurs, or as an hourly rate
  • The agreement should state “no cure, no pay”

Most attorneys recommend NOT signing a salvage agreement. A signed contract for salvage may limit your rights against the salvor’s claims, and limit your ability to collect from your insurance company.

50% of owners sign a contract AFTER the salvage is performed. This is discouraged by admiralty attorneys, as the agreement will probably be upheld in court, and contains provisions that limit your rights. The most onerous provisions include:

  • An arbitration clause that prevents your defense from being heard in court, and prevents you from appealing a final award in court
  • Your consent to a salvage lien on the vessel
  • Your consent to pay interest fees and other costs
  • Your consent to pay the salvor’s attorneys fees

Seek Advise and Set a Price Up Front

If time permits contact your insurance broker for advice. Ask if the situation warrants a salvage claim and, if so, how to proceed. If you are simply advised to act as “a reasonable uninsured” then ask to speak with an underwriter (who represents your insurance company). The simple act of asking for advice may help your case later in court.

  • If your insurance company does not recommend a specific action plan, then at least DO NOT sign a salvage contract. If you do not sign an agreement, then the salvager must go to court to make a claim against your boat.
  • Certainly do not sign a contract after the fact (once the salvage operation has been completed). If for some reason you do sign a salvage contract then:
  • READ IT and
    • Cross out any arbitration clause, references to attorney fees, other costs, etc. (see above)
    • Set a fixed dollar amount to get the boat back to the dock safely, with the fewest “open-ended” provisions as possible
    • Once back at a dock, try to keep the vessel in the water, as it will be much more difficult to move it from land once a salvor’s attorney is involved

Summary

Don’t be afraid to ask for assistance on the water. If you think you need a tow then ask for a tow. If the person offering to help does not make it clear that a tow is what has been agreed to then, time and conditions permitting, STOP. Ask if person planning to help you intends to claim salvage, and if so make an attempt to contact your insurance broker.

If your vessel’s insurance is with BoatUS, they have a phone App that puts you in touch with a broker in seconds. Follow the broker’s advise, if possible. If no clear advise is forthcoming, then attempt to make a verbal arrangement for the salvage, ideally for a fixed amount in return for a safe, undamaged return to port.

Make every effort NOT to sign a salvage agreement. If an agreement is demanded before necessary service are rendered, then READ it and cross out those parts that should not apply.

NEVER sign a salvage agreement after the salvage operation has been completed.

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2 Comments leave one →
  1. John Brundage permalink
    April 1, 2012 13:16

    Congrats on your new format. When my time to sail off to the Bahamas draws closer, I’ll probably become a blogger as well. :-)

  2. Abhijeet Oundhakar permalink
    June 2, 2012 03:13

    Excellent post. legal loops seem to await the unwary just everywhere to catch him in their bight, don’t they?

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