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SHIPS BURNING & GENERAL AVERAGE
AgTC 31st Annual Meeting Keith Sanchez, Divisional Vice President June 13, 2019
2019 © Avalon Risk Management | www.avalonrisk.com General Average
2019 © Avalon Risk Management | www.avalonrisk.com General Average 2019
Already this year, there have been several notable fires cases most resulting in General Average.
Yantian Express Year Built 2002, 100,003 dwt Date of loss: 1/3/19 GA Declared: 1/25/19 202 containers are a total loss
APL Vancouver Year Built 2013, 115,060 dwt Date of loss: 1/31/19 GA Declared: 2/7/19 947 containers affected
E.R. Kobe Year Built 2001, 68,196 dwt Date of loss: 2/24/19 GA Declared: 3/12/19
2019 © Avalon Risk Management | www.avalonrisk.com General Average
• International Maritime Law dating back to AD530 • Ocean marine loss – Voluntary sacrifice to save cargo/vessel/life – Extraordinary expenses are incurred • Jettison of cargo • Extinguishing a fire • Towing • All cargo is seized. Amount of GA loss is determined • All parties contribute to the loss base on their cargo’s value whether their shipment was damaged or not. • Adjustment of GA based on York Antwerp Rules
2019 © Avalon Risk Management | www.avalonrisk.com Sample General Average calculation
Vessel and freight value $100 million Saved cargo value $100 million Contributing value (total) $200 million
• $40 million Sacrificed Cargo + Expenditures • The loss represents 20% of the contributing value • Cargo owners must contribute 20% of respective cargo values • A shipper with a $100,000 shipment must pay $20,000 • HOWEVER …… if insured, the insurance company puts up security and cargo is released. • GA claims take years to resolve.
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss – Yantian Express Timeline
• MV Yantian Express – Deck fire on January 3, 2019 – Crew was evacuated on January 5, No injuries. 4 tugs. – Hapag-Lloyd declared GA on Jan. 25 – Richards Hogg Lindley appointed as Average Adjuster – Vessel towed to Freeport Bahamas on Feb. 4 where average adjusters determined financial loss
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss-Yantian Express
Photos courtesy of Master Mariner
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss
Terminals are designed for throughput of container cargo. Not able to handle large quantities of damaged container cargo and have space constraints to handle the damaged containers.
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss
Not only expensive and complicated to handle in port; think of salvage at sea
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss
Damage can be extensive, almost dangerous to discharge from vessel
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss
Labor intensive to empty and repack
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss
Unloading standard containers is easy, however, unloading damaged containers is time consuming and requires ingenuity.
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss-Yantian Express
• 202 containers are a total loss and around 460 containers have yet to be surveyed. Salvage operations are ongoing.
• Salvage and General Average Securities Determined • Average Security: 28% • Salvage Security: 32.5% • 60.5% CASH DEPOSIT FOR UNINSURED CARGO
A cargo owner with a cargo worth $100,000 is has to pay $60,500 to get their goods!!!
2019 © Avalon Risk Management | www.avalonrisk.com General Average Loss
• Cargo will only be released upon provision of the required security.
• Richards Hogg Lindley requires the following forms: – Salvage Security (32.5% Cash Deposit or Insurer’s Guarantee) – Average Bond form (promise to pay future adjustments) – General Average Security (28% Cash Deposit or Insurer’s Guarantee) – A copy of the cargo invoice
2019 © Avalon Risk Management | www.avalonrisk.com General Average
• MV Yantian Express – General Average Guarantee – General Average Bond
2019 © Avalon Risk Management | www.avalonrisk.com Yantian Express Updates
• May 21st 2019 – Yantian Express arrived at Halifx. The discharge of the remaining 3,200 containers will take weeks • No room at port so surveys need to be done at destination. • Securities still have not been posted for about 1/3 of the containers that survived the fire.
2019 © Avalon Risk Management | www.avalonrisk.com General Average Exposures
• Will the uninsured shipper pay $60,500 to get their $100,000 container? Maybe Not…
– Option to abandon the cargo with written notice to carrier and copy to average adjuster. – Who will pay for the demurrage, storage, disposal? – Who is the Shipper on the Master Bill of Lading? – Do you have Extra Expense Coverage? – Concern with LCL Freight
2019 © Avalon Risk Management | www.avalonrisk.com Major Fire Cases Since 2012
2019 © Avalon Risk Management | www.avalonrisk.com M/V MSC Flaminia
• Vessel fire occurred in July 2012 while on route to Antwerp, Belgium.
• There were hazardous chemicals on the vessel which caused the explosion.
• Heat sensitive chemicals sat out in New Orleans heat for 10 days in July
• Three crew members died and the aggregate claims totaled over $280 million.
• Court determined that NVOCC was partially liable (45%) for explosion as it did not exercise appropriate care when it exercised its duties.
2019 © Avalon Risk Management | www.avalonrisk.com Questions?
2019 © Avalon Risk Management | www.avalonrisk.com For more information, contact:
Keith E. Sanchez, Divisional Vice President Office: 310-337-7050 | Cell: 310-337-7050 Email: [email protected]
April 21, 2019 © Avalon Risk Management | www.avalonrisk.com 2016