In recent months, there has been an increase in incidents involving vessels impacting port berths, fender systems, cargo handling equipment, and other terminal infrastructure. Such collisions can result in significant physical damage and business interruption, with complex liability and recovery implications.
To safeguard recoverable losses, port authorities and terminal operators must act promptly and systematically. This note outlines key steps to protect interests and enhance the prospects of successful recovery under applicable liability and insurance frameworks.
- Immediate Post-Incident Actions
Upon occurrence of a collision, the port should:
- Document the incident thoroughly (photos, CCTV, logbooks, witness statements);
- Notify the vessel’s master, owner, manager, and charterer without delay;
- Issue a formal notice of damage, preserving all rights of recovery.
It is critical to recognize that many vessels are owned by single-purpose entities, increasing the risk of asset stripping or deregistration post-incident. Early engagement with the responsible party’s insurer is therefore essential.
- Securing Financial Guarantee
The primary objective is to obtain a letter of undertaking (LOU) from the vessel’s Protection & Indemnity (P&I) Club. A properly worded LOU constitutes a direct commitment by the P&I insurer to meet quantifiable liabilities arising from the incident, including:
- Cost of repairs to damaged infrastructure;
- Reasonable business interruption losses directly resulting from the damage.
An LOU ensures that recovery remains viable even if the vessel is sold or withdrawn from service. If the P&I Club declines or delays issuing an LOU, consider whether maritime lien or statutory grounds exist to support vessel arrest within the jurisdiction. Legal advice should be obtained without delay.
- Notification to Insurers and Loss Assessment
The port’s insurer or broker must be notified immediately, providing full details of the incident. Concurrently, initiate internal assessment of:
- Physical damage: Engage qualified engineers to inspect and quantify structural or equipment damage;
- Business interruption: Estimate lost revenue or increased costs due to reduced operational capacity during repair periods.
Where losses exceed the policy deductible, the port’s insurer will typically assume conduct of the claim. Where below deductible, the port may pursue recovery directly, supported by appropriate documentation.
- Repair Process and Survey Coordination
For material damage, the port’s insurer will appoint a marine or civil surveyor. The vessel’s P&I Club may also appoint its own representative. Cooperation between parties promotes transparency and reduces disputes later in the claims process.
Repairs should be tendered competitively, with at least two independent quotations obtained. The final selection should be made in consultation with the surveyors and insurers. The port remains the contracting party and bears responsibility for project management and quality assurance.
Approved invoices, once verified by the appointed surveyor(s), form the basis for reimbursement from the insurer (for retained loss) or recovery from the P&I Club (for indemnified amounts).
Note: Recovery is limited to reinstatement of the pre-loss condition. No compensation will be allowed for enhancements, modernizations, or non-damage-related capital improvements.
- Recovery and Settlement
Following completion of repairs, formalize the claim with the P&I Club, supported by:
- Incident report;
- Damage assessment;
- Repair invoices;
- Business interruption analysis.
If liability is admitted and an LOU is in place, settlement is typically efficient. In contested cases, further negotiation or expert determination may be required. Legal action may become necessary—particularly where guarantees are absent or liability is denied.
Upon agreement, the port should execute a full and final release, confirming discharge of all claims against the vessel and her owners. The original LOU should be returned to the P&I Club.
Conclusion
Timely action, thorough documentation, and early engagement with insurers and legal counsel are fundamental to effective claims recovery. While each incident presents unique circumstances, adherence to established procedures significantly strengthens the port’s position in recovering legitimate losses.
The Power Front Ship Owner Mutual Insurance Association
Marine Risk & Claims Department
