Towage claims are on the rise

05 February 2018

Dealing with a particularly complex towage claim in the United Arab Emirates last August led to The Shipowners’ P&I Club’s Offshore team identifying some key trends in its claims data.

The incident is one of many in recent years to involve tugs and barges, as the number of towage claims has risen. This is despite the frequency of overall marine claims remaining broadly steady, according to figures from the club.

In addition, although overall claims have remained static, the cost of claims had increased by 15% by the half-year point in 2017. This is partly because the claims faced by the club have become more complex, with more parties involved, heavily amended contracts and costs such as legal fees rising.

Helping to combat this cost inflation, the club launched CTRL Marine Solutions Ltd in 2015. This company, which is wholly owned by The Shipowners’ Club, offers a range of services to members including legal advice authorised by the UK’s Solicitors Regulation Authority. This has allowed the club to begin to actually reduce the cost of legal spend by both itself and its members.

However, the club is still faced with an increase in the number of towage claims for the year 2017, with figures to the end of November showing a projected 30% increase on figures from the year before. The issue is even more acute in the Middle East, with the club’s Offshore syndicate seeing towage claims more than double over the past four years.

“There’s a lot more happening in the Middle East, certainly construction-wise. There are a lot more tugs and barges carrying building aggregates, stone or cement, as well as towing construction materials such as pipes; so there seems to be a lot more towage activity generally,” says Alex McCooke, Claims Syndicate Manager – Offshore, The Shipowners’ Club.

Although the increase in towage claims is a trend the club is monitoring, the opposite trend has been witnessed in the related area of fixed or floating objects (FFO) claims.

FFO Claims

FFO claims followed a similar path to towage claims in recent years with their frequency rising gradually from 2014 to 2016 across the club as a whole. In the same period, the Offshore syndicate saw FFO claims rise by 29%. However, a careful focus on these claims appears to have paid dividends, with FFO claims in both the club as a whole and the Offshore syndicate expected to fall back markedly in 2017.

Research by The Shipowners’ Club, which has tracked the cause of every towage claim over the past two years, has shown that 53% were the result of human error.

McCooke explains: “Often with claims you find they are caused by the weather, a pre-existing defect with cargo, equipment failure, the actions of a third party/the authorities or some other source beyond members’ control. Sickness claims, for example, make up one of the largest categories of claims the club pays and these are generally unavoidable.

“In summary, there are lots of reasons why things happen but, on towage claims, 53% of all the claims over a two-year period were caused by an end cause of human error. These were people making mistakes, not properly operating the tug, going too fast, not following the correct manoeuvring procedures, poorly planning their passages, etc. - all factors that could have been avoided. These claims have spurred us on to take further action on this subject.”

The club’s loss prevention department has issued a dedicated guide for tug and tow operations. This comprehensive guide aims to help assist operators mitigate against such avoidable incidents and has been widely taken up by the club’s members around the world.

Case Study

A USD 1.6 million claim involving an anchor handling tug supply (AHTS) vessel showed how serious the consequences are for failing to adequately compensate for prevailing conditions.

The AHTS was towing an accommodation barge down a channel when the master on board alleged that the steering had malfunctioned and was not responding to starboard helm commands.

The current caused the vessel to drift off the channel towards an offshore installation, known as a jacket, on her port side.

The master managed to use the engines on the AHTS to avoid vessel contact with the jacket. However, the tow wire came into contact with the jacket legs. As the barge was carried away, the tow wire pulled the jacket over to one side and misaligned it from the vertical.

The AHTS had to pay out more of her towline and alter her course to eventually clear the towline and the barge off the jacket.

The investigation that followed revealed no equipment failures and checks on the steering system showed nothing wrong. It did find that the towline had been too long for the navigable water available and was also under tension while no attempt was made to use the bow thruster.

The investigation concluded that the influence of the current and the tow wire under tension were considered as the two factors that hampered the vessel's turn.

The incident highlighted the severity of the consequences for failing to adequately compensate for prevailing conditions and the importance of proper tug handling, including an initial and ongoing assessment of the length of tow being used.

The club has also published a range of case studies relating to the effects and consequences of mistakes, and how the club is handling claims arising from towage operations. The club has aimed to keep these publications concise, and easy to read and digest, using plain, simple language and clear guidance.

McCooke says: “Sometimes we hear that the on-board procedures can become so extensive that fully complying with them becomes a difficult task for the crew. In some claims, the crew have commented that a tug might have a whole bank of lever arch fi les on the bridge which are always being added to. If they reviewed everything each time, they feel they might never get the job done.”

He continues: “The risk is that some captains or crew find it too much and make up their own shorthand procedures for operating the vessel. With our guidance, we are trying to bring it back to basics. We don’t want the fundamental points to get lost. So our guidance is user-friendly and anyone can pick it up, regardless of their level of prior understanding. We have had good feedback, with tug masters telling us that they and their crew are reviewing the materials and even keeping some on the bridge or using it in training.”

Although the Shipowners’ Club has taken a lead in producing measures to help reduce towage claims, it is quick to recognise that all parts of the insurance industry have a role to play in making sure clients have the correct loss prevention information and right insurance coverage.

McCooke explains: “Brokers can help in at least two ways. The first thing is they can pass on or highlight all the club's relevant advice, based on a member’s operation. Brokers receive regular communications containing loss prevention advice, including case studies from claims on recent incidents and how the club has dealt with them and how members may avoid them, etc."

Because towage is such a complex area, it is vital that the myriad liabilities have been assessed correctly. What is being towed? Who owns it? Who is doing the towing? What are the contractual issues?

McCooke identifies: “The key thing is that people have the right cover in place with the right limits, the right exclusions, the right deductibles. And because it is so complicated, that’s where a broker can help because they are dealing with policies for different members, so they build up that knowledge bank. They know what is normal and what is required.” 

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For further information please contact Sean Woollerson, Senior Partner on +44 20 7558 3864 or email sean_woollerson@jltgroup.com