Features July 15, 2000 Issue

Tow or Salvage?

If your disabled boat requires assistance, you’d better know the difference, because the consequences can cost you big bucks.

When Dr. Edward Murray sailed Eagle Light to Block Island, arriving after sunset, he strayed out of the channel, running aground about 200 yards from the harbor. When he couldn’t power his 33-foot Freedom sloop off the shoal, he called for a tow.

Since Sea Tow, stationed on the mainland, would take several hours to arrive, Dr. Murray called Safe/Sea, a nearby Boat/U.S. towing franchise which had a vessel docked minutes away.

You're aground and you call a
tower for assistance. Despite
your urgency, take time to read
any document offered before you
sign because you may agree to a
salvage effort when a contract
for simple towing could be had.
(Photo: U.S. Coast Guard)

Based on prices Safe/Sea had quoted to other mariners on the radio in the past, Dr. Murray assumed his bad luck would cost him the usual $127 for a short tow to a mooring. He was right on one count: The tow was short.

For pushing Eagle Light off the shoal, a federal court in 1997 granted Safe/Sea a $9,000 salvage award, about 20% the value of Dr. Murray’s boat.

As illustrated by the Eagle Light incident, the distinction between salvage work and a traditional tow is, as Mark Twain said, as great as that between lightning and the lightning bug. But how do you know when assistance from a towing company, a professional salvor or a passing Good Samaritan is one or the other?

In the classic tow scenario, a boat owner plagued by engine trouble or equipment problems calls a towing company who meets him at sea and brings him back to port. Typical towing fees run between $75 and $150 per hour. In contrast, salvage assist is when there is peril and they operate on the concept of “no cure, no pay.” This means they can work for days and, if unsuccessful, receive nothing for their efforts.

A salvor who succeeds is entitled to a percentage of the value of a rescued vessel, usually between 10% and 20%. Salvors collect their awards from your insurance company after an arbitration hearing or a lawsuit, or if you do not have insurance, directly from you or through a preferred maritime lien on your yacht.

Anybody, including professional towers, passing boaters, passengers and professional salvors can make a salvage claim if they satisfy the legal criteria below.

The Elements of Pure Salvage
Three essential elements make a particular situation pure salvage rather than just a tow. All three elements must be satisfied. First, your boat must be “in peril.” Peril is any situation that might expose her to loss or destruction. Second, the salvor’s actions must be voluntary and he must not be under any preexisting obligation to help. Third, the salvors must be successful in saving some or all of the property at risk. If your boat is lost, salvors are not entitled to compensation.

Courts have found the first element of maritime peril wherever destruction appears imminent or inevitable. Classic examples of peril include when:

• The vessel is at the mercy of the sea and winds as a result of collision or lack of power.
• There is widespread fire aboard a ship.
• Explosions are likely.
• The vessel is leaking with the possibility of sinking.
• The vessel is listing with a shifting cargo.
• The vessel is stranded or aground and being pounded by waves.
• The vessel is moored to a buoy that is blown adrift or is a vessel in tow that breaks loose during a storm.
• The vessel is docked but close to a raging fire.
• The vessel is on course at sea but with a crew stricken with disease or without water.
• The vessel is on course but the crew is without water and delirious.
• The vessel is about to fall into the hands of pirates.

Yet not every case is perilous. Several situations where salvage awards were denied demonstrate the distinction:

For instance, salvors John Fine and Rick Trout were not entitled to a $38,000 salvage award they sought for patching an underwater hole on the powerboat Lion’s Whelp after it was towed into the Ocean Reef Club in Florida in 1995. By the time they were hired to help, the boat was in no danger of further harm. The court noted that when the divers patched the hole, the weather was clear, the seas were calm, the vessel was secured to the dock, and emergency personnel were present.

Yet there was peril for a charter sailboat that needed a little push off a Texas Gulf Coast oyster bed. In a very broad decision, a federal court granted Clear Lake Rescue, a Texas salvage company, an award for pulling a chartered sailboat off an oyster bed in Galveston Bay in March, 1997. In the case, the only testimony of “peril” was the salvage company’s statement that oyster shells are “not good for the bottom paint” and could damage the vessel.

Likewise, in Dr. Murray’s case, the court found “a degree of peril” as there were nearby rocks, even though the court noted the passengers were in no danger, there was a rising tide, the waters were calm, the wind moderate, and the boat was sheltered on the leeward side of the island.

Generally, running aground alone is not enough for a finding of “peril” unless there is a high probability of serious damage from surf, rocks, coral, tides or impending weather conditions.

The second element of a salvage claim is that the salvor’s actions must be voluntary. Your local fire department, for example, would not be eligible for a salvage claim. Nor would the U.S. Coast Guard, as their job is to provide assistance. Yet the U.S. Navy is an eligible salvor. In addition, if you subscribe to a Sea Tow or BOAT/U.S. towing plan, they will not be eligible for salvage awards.

A formal contract is not required, however. A prior relationship or oral understanding has the same legal effect. When a Sea Tow franchise, Flagship Marine, filed a $125,000 salvage claim against a barge it had a prior relationship with, the court rejected the claim, because Sea Tow usually worked on a flat running-rate basis with the barge.

The contract exception for salvage is best memorialized in a 1858 case, The Triumph, named for a schooner off Cape Cod that struck another ship in the night and started to sink. When it was clear the vessel was doomed, all hands rushed on board the ship they hit except the cook, who was sound asleep below deck.

“Being roused by the crash, [the cook] ran on deck, found no one there, hailed the other vessel, and begged that he might not be deserted.” But for reasons unclear in the record, the master of the other ship refused to turn back.

After the professional seamen fled cowering, this clever cook rigged a pump, found the leak, patched it up as well as he could with the cotton from mattresses, and managed to save the schooner, navigating after a fashion for many hours until he reached Harwich, Massachusetts.

The courage of the cook was matched only by the chutzpah of The Triumph’s owner, who was loath to give him money for his efforts, believing that a seaman cannot be a salvor of his own vessel as it is his duty. It was an argument the court rejected, ruling that whatever duty the cook may have had to save the vessel was discharged when the crew abandoned him with the ship. The cook’s salvage award? $300, 6% of the value of the vessel.

The third element of a salvage claim is that the salvor’s efforts must be successful in saving all or at least a substantial part of a vessel and cargo.

This is a foggy area for boat owners, as courts often seem to uphold sketchy salvage awards. The most boater-friendly standard, imposed by some courts, is that the boat and its cargo be saved intact, without damage that materially affects its value. Other courts apply a liberal standard, granting awards as a percentage of anything that is saved from destruction, even if what is saved is a small fraction of the original value. Unfortunately, there is no rule as to when courts will use liberal standards and when they make more boater-friendly decisions. Much of it will depend on the skill of the attorneys on both sides of the dispute and how well each applies the facts of a particular salvage incident.

Ancient Maritime Legal Doctrine
Despite occasional grumblings by boat owners facing exorbitant awards, the legal doctrine of salvage is ancient, well-settled and little-changed since it was first recorded, probably in the maritime code of the island of Rhodes around 900 BC.

The Rhodian law, later adopted by the Romans, is thought to have provided that “if a ship be surprised at sea with whirlwinds, or be shipwrecked, any person saving anything of the wreck, shall have one-fifth of what he saves.” Similarly, “if the ropes break, and the boat goes adrift, and if any person finds the boat, and preserves it safe, he shall restore everything as he found it, and receive one-fifth part as a reward.”

Perhaps the most significant reason this particular doctrine has survived for almost 3,000 years is that it is efficient, rewarding people when they preserve property, promote commerce and save lives. As Chief Justice John Marshall wrote in one of the earliest U.S. salvage cases, “When property on land exposed to grave peril is saved by a volunteer, no remuneration is given, [but] let precisely the same service, at precisely the same hazard, be rendered at sea, and a very ample reward will be bestowed in the courts of justice.” The “ample compensation for those services…is intended as an inducement to render them.”

Another judge wrote that salvage awards are generous to “encourage the hardy and adventurous mariner to engage in these laborious and sometimes dangerous enterprises, and with a view to withdraw from him every temptation to embezzlement and dishonesty, the law allows him, in case he is successful, a liberal compensation.”

This liberal compensation prompted one journalist (and no small number of boat owners) to ask whether salvors are princes or pirates? The answer probably depends upon whether you ask a captain whose yacht is in peril or one whose boat is safely tied to the dock.

When In Doubt, Don’t Sign Anything
Assuming there is no peril, as in the case of Dr. Murray, be wary of any proposed contracts. Our advice is to sign nothing because you do not need a contract for a tow, only enough cash to cover the fee or, alternatively, your membership number if you are covered by a towing plan.

Even if the company asks you to sign a receipt at the end of a tow, be sure to read through it carefully (front and back) and look for language like, “no cure, no pay,” “salvage,” “percentage” and “arbitration,” typical salvage buzzwords. In Dr. Murray’s case, he signed a salvage contract in the dark of night without reading it, thinking the document merely obliged him to pay Safe/Sea’s hourly rates.

In addition, when you discuss rates with the tow/salvage boat or “tower,” remember that most have standard printed prices, $75 to $150 per hour in most places. A particularly hard grounding may sometimes carry an additional premium of $5 to $10 per foot depending on the size of your vessel. Nor is it uncommon to face surcharges of $20 to $50 for adverse sea and weather conditions, or for work at night.

If a tower hassles you about signing forms before commencing work, we suggest a variety of reasonable excuses to defer paperwork to a time when you can properly review it: pitching decks, for instance, are not an appropriate place for reading forms; it is tough to concentrate when you are distracted by maintenance problems or equipment failures; if it is a night tow, light conditions are not satisfactory to read a contract.

Don’t forget, however, that oral agreements are binding too. For example, if the tower never agrees to a price but instead suggests a payment arrangement whereby you “pay nothing unless he is successful,” reject it. That can be tantamount to a salvage agreement. Likewise, never agree to “work out” or “worry about price later.”

If a salvor indicates to you that all you need is a tow and then files a salvage claim anyway, you are probably entitled to recover punitive damages. Also, if there is any theft of property from your vessel during a salvage, the salvor is not entitled to any recovery.

If nothing is said between you and a tower to suggest a salvage contract, and a dispute arises anyway, a court will usually infer that in the absence of evidence of peril you and the tower had a contract for which he was supposed to charge a reasonable price, usually determined by applying his standard rates.

Avoid Lloyds Forms, Even Outside U.S. Waters
Even if your situation is desperate and salvage is your only meaningful alternative, never sign a “Lloyds Open Contract” (LOC). While signing anything may seem reasonable when your floorboards are floating and freeboard is falling, what you probably don’t know is a LOC obligates you to foreign arbitration. Lloyd’s is Lloyds of London, and if you sign on the dotted line you can expect a costly and protracted legal battle an ocean away.

Drafted in the 1890s, LOCs were intended for the salvage of commercial, not recreational vessels. However, some salvors still use them, probably because arbitration in the U.K. significantly raises the cost for you to defend against their claim.

Like most salvage contracts, LOCs entitle a salvor to payment for the time and cost of a salvage and/or a percentage of the vessel’s value (an average of 10% to 20%, but as much as 90%). A provision of the contract requires that the salvage be a “no cure, no pay” effort where the salvor can claim a reward only if the salvage is successful and voluntary. Disputes over rewards or fees are settled by a Lloyd’s arbitration panel in London.

The good news is that LOCs were recently held unenforceable when the salvor and boat owner are both U.S. citizens, and the salvage incident took place in U.S. waters. That was the rule imposed after Sea Tow of Freeport, New York, asked a boat owner to sign a LOC in the dark of night, without his reading glasses and when Sea Tow assured him that his insurance company, BOAT/U.S., “was familiar” with the contract. To sweeten the deal, Sea Tow wouldn’t let him call his lawyer and said that if he didn’t sign, the company would strand him on the beach.

Even if you are cruising in foreign waters, if salvage is your only meaningful alternative and the salvor will not work without a LOC, our advice is to cross off Lloyds and write in BOAT/U.S., which offers its own arbitration process here in the US.

Communicating With Your Insurance Company
A salvage claim is a textbook example of a loss you should be completely insured against. Insurance policies vary in their coverage. Most will cover the entire loss, including any court, arbitration or settlement proceedings between you and a salvor. Other policies require you to pay an award first, followed by a request for reimbursement. Still others may require the policy holder to pay up to 50% of the claim. We recommend the first type of coverage and advise you to check your insurance policy if you don’t know what coverage you currently have.

Also, when you purchase insurance be sure your answers to the insurance company’s written questions are accurate, keep your policy current, and keep the provider apprised of any significant developments. If you don’t, they may not cover your salvage claim, even ones that come after years of paying premiums.

The owner of a custom steel-hulled 50’ sailboat, Pipestrelle, learned this the hard way when Continental Insurance Company refused to pay a $25,000 salvage claim resulting from a hard hit on the rocks off the coast of Block Island, Rhode Island.

Damage Caused By The Salvor
A salvor is also responsible for any damage he causes to your vessel. In a case that reads like a dime novel, an employee at a Fort Lauderdale, Florida yacht brokerage stole a new 39-foot Mariner sloop, sailed it into the Gulfstream and hanged himself from the mast. The boat then drifted hundreds of miles before its course crossed that of the Polaris nuclear submarine U.S.S. Woodrow Wilson off Cape Canaveral. In salvaging the yacht, the submarine’s crew scratched and gouged the hull, causing $37,000 in damage. The damage was offset by the salvage and neither side recovered.

Nevertheless, as Luis P. Diaz and Blaise H. Coco, Jr., of Philadelphia, Pennsylvania, found out, proving that damage done to your boat during the course of salvage was the salvor’s fault—and not Mother Nature’s or your own—can be difficult. When their Hinckley Sou’Wester 50, Alegria, struck a reef in the Virgin Islands and started to take on water, the boat’s captain called for a salvor when he was unable to free the yawl himself.

Although the parties’ accounts differ, a few things are certain: After the “salvage,” Alegria was no longer grounded—she was sunk. In the process, the salvor, Immel’s Marine, yanked off the boat’s windlass and dragged the boat backwards across the reef. After she was towed to deeper water, the salvor’s pumps couldn’t keep up with the ocean. The next day the salvor had to raise the boat before towing it in. Yet Alegria’s owners could not recover damages for negligence and in the end had to pay the salvor $32,000 for his efforts.

Other Interesting Cases
The largest salvage award in history was handed down in 1998, after the 688-foot oil tanker Cherry Valley saved the vessel, crew, and cargo aboard the barge Poseidon and her escort J.A. Orgeron. The Orgeron lost both her engines to fire and gear box failures eight miles off the coast of Fort Pierce, Florida.

The barge was caught in the clutches of tropical storm Gordon, drifting quickly towards shoal waters that could have destroyed the vessels and their precious cargo: an external fuel tank for NASA’s space shuttle worth $53 million.

Because of the storm’s ferocity, the Coast Guard was unable to help. The only other ship in the area was Cherry Valley, which in spite of the storm, heavy surge, and shoal waters ahead, made haste to help Orgeron. After a few failed attempts, the tanker towed the Orgeron and its cargo to safety, but only after the ships had drifted within a mile of shore.

According to federal appeals Judge E. Grady Jolly, the risk involved, the perilous weather conditions, the value of the property at stake and the “exemplary seamanship” of Cherry Valley’s captain (fittingly named Capt. Strong) entitled Cherry Valley’s owner to an award of $4.125 million.

In Debt of Honor, Tom Clancy dreamed up an even larger salvage award when an ocean-going tug saved the U.S.S. Enterprise after a Japanese submarine torpedoed her propellers. The tug boat captain smiled the entire way across the Pacific, imagining a 10% share of the $3 billion, nuclear-powered aircraft carrier.

 

Also With This Article
Click here to view "Factors in Determining Awards."

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