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Marine Salvage & Recreational Boaters: Modern Concepts & Misconceptions

I. Introduction

Over the past several decades, the number of registered recreational vessels has steadily grown. The number of marinas has burgeoned to meet the almost insatiable demand for pleasure boat berths. During the same time period, the U.S. merchant marine continued its decline and, in many parts of the country, wharves, piers and commercial port facilities fell into disuse. As a result, the recreational boating industry has matured into a major component of the maritime economy of the United States.

With over $10 billion in annual recreational vessel sales, including related goods and services and over ten million registered pleasure boats, recreational boating has begun to exercise a major influence over many traditional spheres of maritime endeavor including admiralty and maritime law. Recreational vessels generate hundreds of millions of dollars of revenue in areas ranging from ship mortgages to marine insurance. Transactions involving recreational vessels and the tens of millions of American pleasure boaters who buy, sell, insure, mortgage, register, repair, collide, damage, salvage and operate these vessels have increasingly become a major source of revenue not only for maritime attorneys but for bankers and marine insurance brokers as well. The emerging concept of the "mega-yacht" has put some "recreational" vessels into a range of size, value, complexity and technological sophistication which equals or exceeds that of many large commercial vessels.

These changes have not occurred without controversy. One of the most difficult areas has been the handling of "traditional" admiralty claims when recreational vessels are involved. In many cases, the attorneys and adjusters who have been called upon to handle insurance claims involving recreational vessels have found themselves as uninformed as much of the boating public with regard to the differences between motor vessels and motor vehicles. This springs from several causes. First, historically, the recreational vessel was a small sailboat or outboard kept in the backyard, financed by the local savings and loan and insured under homeowner's policy through a local agent with the same carrier who insured the family dwelling. Thus, neither the agent nor the adjuster thought of the family boat as anything other than a type of vehicle just like the family car.

Second, there has been a growing trend, even among traditional marine insurers, to replace experienced marine insurance adjusters with individuals with a property and casualty background. While some carriers make the effort to educate and train the adjuster in the unique aspects of marine claims, most let the adjuster learn on the job. Thus, admiralty attorneys can no longer assume that the adjusters are familiar with all the unique substantive and procedural aspects of an admiralty claim.

Too often this is the case with opposing counsel as well, inasmuch as the carriers on homeowner policies which also happen to include a boat tend to assign defense of maritime claims to the same attorneys who defend their property and casualty or automobile cases. While this may sometimes work to the advantage of experienced admiralty counsel procedurally (automobile lawyers tend to overlook things like filing petitions for limitation of liability), it can be difficult to conduct meaningful settlement negotiations with an attorney who does not understand just how much of a liability exposure his client has because he does not know the applicable law himself.

One of the areas of traditional admiralty law receiving alot of attention lately in regard to the manner it is applied to recreational vessels is salvage. Until recently, salvage did not arise frequently in a recreational boating context because a recreational boater disabled, aground or in distress merely had to call the U.S. Coast Guard, which would render whatever salvage assistance might be necessary. This has all changed due to a major policy decision by the Coast Guard. Because of budget and manpower shortages, the press of other missions and other policy considerations, the Coast Guard decided several years ago that it would no longer provide "non-emergency" assistance when a source of commercial assistance is reasonably available. In essence, when the situation does not present an appreciable threat to the safety of persons on board the disabled vessel, the Coast Guard will not provide assistance but will only monitor the case if a source of commercial assistance is reasonably available.

As a result of the Coast Guard decision, a large number of small salvage companies have sprung up across the country with the objective of being a readily available source of commercial assistance for the recreational boater. Many of these companies work full time at recreational salvage and have made a significant investment in equipping well found vessels, manned by competent and experienced salvage personnel, with sufficient horsepower and all the proper salvage equipment that maybe required. Other enterprises, however, work on a seasonal or part-time, weekends-only, basis and/or consist of little more than an outboard with a length of rope.

Other than requiring that towing vessels be operated by licensed operators, the Coast guard does not regulate small commercial towing and salvage companies with regard to minimum equipment requirements, minimum competency in the seamanship of towing and salvage techniques, or anything else.1 While there have been some attempts by professional organizations such as the Committee for Private Offshore Rescue and Towing ("C-PORT") to establish minimum standards of competence and equipment requirements, these efforts are voluntary and the enforcement mechanism largely ineffective. Only one organization of salvors, Florida Marine Towers & Salvors, appears to provide ethical guidelines in the form of a mandatory code of conduct. As a result, the quality of towing and salvage services to which the public is subjected varies wildly and there is great potential for abuse.

Indeed, abuse has occurred in some cases. some towers and salvors have taken advantage of the ignorance and marginal seamanship of the boating public to grossly overcharge. However, sometimes the situation is greatly exacerbated by some insurance adjusters who, unfamiliar with the most rudimentary concepts of marine salvage, assume that any salvor who asks for more than what the adjuster considers to be a "reasonable charge" for services rendered is a thief or a pirate or worse and will not hesitate to say so. While this maybe true in some cases, such comments do not sit well with the majority of salvors who are both competent and honest. Even routine insurance company practices such as long, drawn out settlement negotiations followed by even longer periods before a draft is issued can cause difficulties to small "mom and pop" salvage companies whose cash flow does not allow them the luxury of waiting months to receive payment after settlement.

As a result of these and other problems, the relationship between the insurance industry and the small boat towing and salvage industry has been a rocky one. Accusations and recriminations have flown thick and fast. All too often, the boating public has been caught in the middle. Some adjusters, and even some lawyers, are laboring under fundamental misconceptions regarding salvage of recreational vessels. Some salvors also have inflated ideas as to both the value of the services and their "rights" with regard to savaged vessels.

This article will attempt to set the record straight on a number of common misconceptions regarding salvage of recreational vessels under which both insurance companies and salvors have labored. Some recent developments regarding salvage arbitration under the Lloyd's Open Form, compensation of salvors for protecting the environment and direct liability of insurers for salvage awards will also be discussed. First, however, it is important to understand the background and development of the "traditional" admiralty concept of salvage in order to understand its modern application to recreational vessels.

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