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Insurance key to full protection for port risks
20 July 2009
In these difficult financial times, it is worth remembering that
full insurance cover is essential if liability for these risks is
to be fully covered.
In the case of Esso Petroleum Co. Ltd v. Hall Russell & Co a
defective coupling in the hydraulic system of a tug caused a fire
and a failure of a winch during the berthing of an oil tanker.
There was a subsequent loss of control of the tanker, which caused
damage to the tanker itself and the jetty. There was also a loss of
oil. On what was clearly a bad day all round, the booms deployed to
contain the oil failed and the oil escaped polluting the coastline
and causing damage to the local crofting industry.
The tanker owners began an action against the builders of the
tug alleging that the builders should have done more to prevent the
accident happening knowing the use to which the tug would be put,
in particular it's winches. The builders joined 4 other parties to
the action, being the manufacturers of the winches, the tug
operators and the tug owners and also the harbour authority
alleging negligence on the part of the pilot on the bridge of the
tanker.
The matter proceeded to a full hearing. The court found that the
inevitable consequence of the tug being incapacitated was the
withdrawal of its control over the tanker and hence the damage to
the tanker itself, the jetty and the subsequent damage to the
environment and the crofters livelihoods as a result of the oil
leak were all natural and direct consequences of the tug being put
out of action.
So who was to be liable for paying for the damage caused? The
court found that it was the tug builders and that the tug operators
and owners did not have that liability. The builders of the tug
were primarily liable. A huge sigh of relief then for the tug owner
and operators.
This was inevitably complex litigation involving a number of
parties. The original incident took place in 1977 so leaving aside
the natural human concerns of being involved in litigation of this
type, the cost in terms of management time to the company would
have been substantial and there would be considerable legal fees
involved. Hopefully the tug owners and operators were covered for
legal expenses. If they weren't or cover was not sufficient
substantial legal fees would have been incurred. As a result of the
court's findings, costs would have been awarded to the tug owners
and operators but that would be subject to an assessment where
usually a reduction follows. Increasingly as well, costs are not
always awarded to the successful party. Especially if pre-action
protocols have not been followed.
Checking insurance policies to ensure that full and proper
insurance for legal expenses is in place is therefore essential.
Costs will be incurred in any litigation process even if ultimately
no liability is established. An FD and D entry with a P & I
Club is always to be recommended.
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