by Dave Ferrell
With all of the hurricane destruction in 2016, photos of destroyed, damaged, sunken or otherwise battered boats are floating across the internet. What becomes of these boats? How does salvage work and what about insurance coverage? The following is Dave Ferrell’s breakdown of the process. Whether a boat owner, captain or crew, this information is a must-know for anyone involved in boating. – ITB
On August 24, 1867, the Blackwell, a British ship docked in San Francisco Harbor caught fire around 4 a.m. When the crew was unable to contain the blaze, it was forced to abandon ship. As the fire raged, a tug boat docked nearby named the Goliath raced over to the vessel and tied up alongside. With the help of local firemen and two fire engines that they had put onboard, the Goliath fought the blaze. After about a half hour, their combined efforts put out the fire, saving the ship and some of its cargo.
Consequently, the owners of the Goliath sued the owners of the Blackwell in the San Francisco District Court for a salvage reward, winning a judgement for $10,000. (The U.S. Constitution grants federal courts original jurisdiction in “all cases of admiralty and maritime jurisdiction, including salvage cases). That ruling was upheld by an appellate court, but the Blackwell’s owners appealed again, bringing the case to the United States Supreme Court.
Ultimately the Blackwell’s owners gained a minor victory when the judges determined that the firefighters’ efforts made up half of the salvage operation and thereby awarded the Goliath’s owners $5,000 or half the amount due. It wasn’t, however, the monetary award that made this ruling so compelling. Rather it was the Court’s creation of the elements that must be considered when determining a salvage reward. These are now known as “the Blackwell Factors.”
Salvage Rules, Sort Of
In the Blackwell decision, the courts set six factors that should go into determining the “reward” that a salvage company can claim. They set the main details in determining the amount of the reward for “a salvage service:
(1) The labor expended by the salvors in rendering the salvage service.
(2) The promptitude, skill, and energy displayed in rendering the service and saving the property.
(3) The value of the property employed by the salvors in rendering the service, and the danger to which such property was exposed.
(4) The risk incurred by the salvors in securing the property from the impending peril.
(5) The value of the property saved.
(6) The degree of danger from which the property was rescued.”
Unfortunately, these factors don’t provide any formula as to how these different elements would be weighted in determining the amount awarded, however, all of these factors must be considered when setting the value of the reward due to the salvors. In 1989, the salvage industry came together to create an international standard for all salvage operations. This standard added several additional factors, including promptness of the services rendered; the availability and use of vessels or other equipment intended for salvage operations, and; the state of readiness of the salvors’ equipment.
These regulations are known as the SALCON 89 agreement. It also goes on to detail the responsibilities of both the salvor and the boat being salvaged. But again, there are no guidelines on how much weight each of the factors should play in determining the reward, except that the reward cannot be more than the value of the vessel and cargo itself.
Boat Salvage in Practice
According to Chuck Hansen of Fast Response Marine Towing and Salvage in Miami, most salvors base their fees on either a percentage of the value of the vessel or a per-foot fee. “There are two types of salvage,” says Hansen, “contract salvage, where you write up a contract and come up with a price up front; and pure salvage or ‘no cure no pay.’”
Pure salvage occurs when services are rendered voluntarily in the absence of a contract. To keep salvors from plucking up unattended boats there are three elements that have to come into play for a pure salvage to be valid, (a) a marine peril; (b) service voluntarily rendered when not required as an existing duty or from a special contract; and (c) success in whole or in part, or a contribution to such success. So if a salvor tries and fails to save the vessel, no matter how hard he tries or how much danger he put himself in, he gets nothing if the cargo and/or ship is lost.
“The standard per-foot rate for a sunk or sinking boat is around $175 to $200 a foot,” says Hansen, “or a percentage of the vessel’s worth…commonly 20-percent at the highest. You are allowed to bill up to 30-percent if it’s incredibly dangerous, at night etc. If you have a 30-foot Bayliner, I’m probably going to charge you by the foot. If you have a 45-footer worth a million dollars I’m going for the percentage. And that percentage will fluctuate depending on the Blackwell factors. You also have low order salvage that is usually between four and six percent. To get that 20-percent it really has to be a salvage performed under some pretty risky conditions. Any unmanned vessel that’s adrift is also a salvage, and even certain tows can be considered salvage as well. If you get inside the swim buoy or up on the beach, I can consider it a salvage if I so choose…so make sure you have a good anchor!”
Hurricane Damage, Vessel Owner’s Liability
With all of the hurricanes hitting the US this year the salvors are enjoying a bit of a business boom, but it’s not easy work. “About half of the boats will have good insurance and will be taken care of pretty quickly,” says Hansen.
“An owner or insurance company will contact us, and we will come and try to refloat the boat and get it to a haul out facility. But getting the boats from Irma has been very challenging. Most of our refloats have to do with a bad fitting or a failed pump, something that’s easily fixed to get the boat floating again. A lot of the boats we’ve dealt with from Irma had bottoms that looked like Swiss cheese. They don’t want to float, so we have to either make extensive repairs and patches or tow them submerged. Once we make it to a haul out, we will put it on a transport and let the insurance company make the call on whether it will be repaired or deemed a disposal,” the salvor continues.
One thing you see a lot of in South Florida are seemingly abandoned sail boats and old power boats on moorings. Are boat owners responsible for damage done by a boat set adrift during a storm? According to Hansen, probably not. “I’ve talked to a couple of lawyers and they said that hurricanes are an act of God. Just like if a neighbor’s shingle comes flying off his roof and breaks something, your neighbor is not responsible,” he says.
At the same time, if your vessel is leaking fuel or damaging the environment you can be fined heavily if you don’t respond to the Coast Guard in a timely manner. “Let’s say your boat sinks and it’s spewing fuel, and you cannot afford a salvage fee. If you can’t get someone there to take care of the problem in short order, the Coast Guard will federalize the vessel. They will pay a government contractor to salvage the vessel, usually at a huge price, and then go after the owner for the money. A lot of folks just don’t understand the kind of liability they can face when their bargain basement 30-year old trawler sinks at the dock. That great deal can come back and haunt them,” says Hansen.
All of the leaking boats from Irma created a huge natural disaster. In response, the Coast Guard made a nationwide call after the storm to get as many port teams as possible into the South Florida area as soon as possible. They are tasked with finding possible environmental hazards and getting the folks who own the boats to take care of them. If you do not respond in a timely manner, you will be fined into submission.
During normal times, when there’s no hurricane boats to salvage, Hansen and his crew will go on patrol looking for sunken boats or vessels in distress and try to locate the owner. “I can get a name and address from the FL numbers. I’ll often look up the names on Sunbiz because most owners of nice boats have some sort of business. A lot of the folks don’t even know that their boat is sunk,” says Hansen.
Hansen also works with the city to take care of some of the derelict boats littering the bays and canals around the City of Miami Beach. “They have a great program that gets rid of these boats quickly. They put the job up for bid and once you win the job you have 24-hours to remove the vessel. On a larger scale, sometimes a municipality or government body will contract a single salvage operator to take care of all the derelict boats in an area. They will bring in a barge and haul out 50 boats at time. That’s what’s going to happen to most all of these hurricane boats here in South Florida…the state’s going to have to do something.”
If You Run Aground
There are no hard and fast rules about what to do when you’ve grounded a vessel but there are some things you need to consider before you jump into a life raft and float away. Once you leave the vessel, it is considered unmanned and it is now fair game for the first salvager that appears on scene.
“You probably want to try to get pulled off first,” says Hansen. “Of course, that depends on what kind of bottom you are stuck on, rocks versus sand, and the configuration of the boat. An outboard or an I/O will probably come off just fine, but if you have inboards and shafts, you can do a lot of damage trying to pull it off. Even if the boat is in calm water and it looks super simple, the way salvage is if you are on the ocean, it’s an automatic salvage.”
The price you end up paying for a salvage can take months or even years to make its way through lawyers, insurance companies and adjusters. “The higher the reward the longer it takes,” says Hansen, “and you rarely have someone pay the bill that you give them. Since the adjuster has to make himself look good, they will fight every bill, no matter how fair. It’s customary to overbill, since we know that they are going to refuse to pay on the first go around. I’ll have to tack on an extra $500 or so just so the adjuster can cut it and show that he’s looking out for the insurance company. It’s a pretty crappy business in that respect.”