Salvage costs are the costs incurred to prevent or mitigate further damage during or after a loss event.
Mr. De Wit purchased a motor vessel at auction in June 2018. After the purchase, it was moored in a saltwater harbor. The next morning, to his horror, he received a call from the Department of Public Works: his freshly purchased pride was at the bottom of the harbor. De Wit immediately reported the damage to his insurance company, which sent a damage expert. That afternoon the boat had already been lifted and taken to a shipyard. The damage expert had things in motion when he arrived on the scene in the morning. The surveyor also discussed with the shipyard what needed to be done to the vessel to avert further damage: salvage work, in other words. The ship was full of salt water and the engine had to be flushed as soon as possible to prevent irreparable damage. The flushing of engine and fuel system would be commissioned by the shipyard. Eventually, over a year later, a claim payment was made to De Wit of €17,500. What the insurer did not pay, however, was an amount of €4,750 for the work done by the shipyard. De Wit had already paid this amount in advance! The damage expert had told De Wit that he would not get the yacht if he did not pay the shipyard’s invoice in advance.
paid in advance. De Wit thought this was strange, because surely these were costs to be borne by the insurer?
In desperation he paid and trusted that the insurer would reimburse him for these costs. Not so. Meanwhile, it turned out that the flushing of the engine and fuel system had not been done properly. The tank and pipes were still full of seawater, and so when the engine was restarted, corroding seawater re-entered it. The engine had to be flushed again; another €1,750.De Wit felt that, because the yard had not done the work properly, these additional costs were also the responsibility of the insurer. The insurer bent over backwards to avoid paying. The yacht yard’s invoice stated, among other things: ‘work performed, consisting of flushing the engine and fuel system’. This would not have been necessary work but repair/improvement to the vessel, according to the insurer.The court gave short shrift to this defense. The court found that the work performed by the shipyard qualified as salvage costs, which were therefore borne by the insurer. As for reimbursement of the invoice for the second flushing, the court did want to know who had commissioned the shipyard to perform the salvage work in the first place. Namely, if it turned out that the order was not given on behalf of the insurance company, then the costs of the second flushing would be borne by De Wit. De Wit had to prove who had thus been the client. The surveyor had been the first to assess the vessel and give all the orders. The insurer had previously acknowledged this, but later denied it again. The problem was that De Wit had paid the invoice in advance himself and his name was on the invoice. This allowed the insurer to cast doubt on who was thus to be regarded as the principal. However, it soon became clear from the witness examination that De Wit himself had never been in contact with the shipyard and that the surveyor was the only one who had been in contact with the shipyard. This established the liability of the insurer. Eventually all costs were reimbursed. De Wit did have to litigate for 2.5 years.
Tip: In case of damage, make sure you establish exactly what needs to be done and who gives the order for salvage or repair. Have quotes reviewed in advance by the insurer and do not be too quick to be fobbed off with the statement that certain costs are not salvage costs. Send the invoices directly to the insurer, without paying them yourself in advance. You will avoid a miserable discussion afterwards.
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