Towing	VS	Salvage
TowBoatUS Old Saybrook		TowBoatUSCity Island, NY

Maritime commerce has been the backbone of all of great societies, and certainly was essential to the survival of the original 13 colonies. Even though the modes of transportation have changed dramatically, what hasn't changed are the risks associated with the sea.

Historically, 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.

Often, the 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 maritime community.

Unfortunately, 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. It would not be unreasonable for the owner of a boat worth $35,000 to spend half that just to have the case decided.

To make 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.

The American 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. BoatUS drafted a model " Open Form Salvage Contract" in 1989, which provided the needed protections and required domestic arbitration of any dispute.

Domestic arbitration refers to United States arbitration forums, including one available through BoatUS , 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 arbitration forums.

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 agreement".

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?

A: BoatUS recommends that you refuse. Offer as an alternative the attached BoatUS 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.

Q: If I'm insured with BoatUS, how can you help me if I'm in need of salvage assistance?

A: If you're insured in the BoatUS Insurance Program, call our 24 hr dispatch and we'll get you the assistance you need right away. We'll also take care of the negotiation with the salvor. Your BoatUS insurance policy also covers the full amount of the award, up to the boat's insured value.

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Towing v Salvage on World of Boating Radio (MP3 File)