Collisions between merchant and fishing vessels have occurred from time to time in Chinese coastal waters, especially in the last 10 years, undermining the overall positive navigation environment. Due to the significant difference in sizes, such collisions often have serious consequences where sinking of fishing vessels, heavy casualties of crews, shipwrecks and pollution are highly probable. Laws and regulations in relation to waterway transport safety, marine fishing or aquafarming may also come into play, adding to the uncertainties in subsequent handling of such claims for P&I Clubs.

I. Case Study

An entered ship of the Association departed for a port in Vietnam in early 2021 after discharge of cargoes at the port of Weifang, Shandong, and collided with a fishing vessel when sailing through the waters off Weihai. The fishing vessel capsized with all five crewmembers falling overboard, leaving two dead and one missing. An investigation report for the maritime accident was provided by local administration:

1. The fishing vessel was not carrying out fishing operations at the time of the collision and should be regarded as a power driven vessel underway, for which the COLREG 72 shall apply.
2. The two ships collided in open waters with good condition of visibility, and both failed to determine the risk of collision as required by the COLREG 72 or to take effective action to avoid collision in ample time.
3. The fishing vessel failed to maintain a proper look-out and to take early and substantial action as the give-way vessel when the two ships were crossing. Instead, the fishing vessel turned to its port side substantially and caused the risk of collision to be imminent.
4. The merchant vessel did not take early action to avoid collision by her maneuver when the fishing vessel was not taking appropriate action. Instead, the merchant vessel was on automatic steering making small turns to starboard until it became too late to get out of the way.
5. Considering the extent of fault of both ships in the accident, the fishing vessel shall be primarily liable for the collision.

 II. Insured risks

The Association provides in Section 7, Rule 3 of its Rules that it covers four fourths of the liabilities arising out of the collision for or relating to:

1. an escape or discharge (other than from the entered ship), of oil or any other substance, or the threat thereof, but excluding damage to other ships with which the entered ship is in collision and property on such other ships,
2. any real or personal property or any thing whatsoever except other ships or property on other ships,
3. removal or disposal of obstructions, wrecks, cargoes or any other thing whatsoever,
4. the cargo or other property on the entered ship, or general average contributions, special charges or salvage paid by the owners of that cargo or property,
5. loss of life, personal injury, illness, repatriation or substitute expenses,
6. remuneration paid, pursuant to the Special Compensation P&I Club (SCOPIC) Clause, or any revision thereof, in respect of the salvage of a ship with which the entered ship is in collision.

Clearly, the above accident may involve cover under the Association’s P&I policy for claims in respect of person, wreck removal and potentially, oil pollution during salvage. As there was no oil spill during the collision or the later salvage, the case involved mainly liabilities for personal injury and wreck removal.

More importantly, even if a liability is covered by the P&I Club, it should not naturally be regarded as covered by the Club unless it is the owner’s legal responsibility under the law. That is, the shipowner should first be liable for the collision and then the apportioned liability shall be covered according to the Rules of the Association.

III. Claim handling

1. Claims for loss of life and personal injury

Compensation for death of the three fishermen was the main claim involved in this case, totalling upwards of RMB6 million. The bereaved families have all filed charges to the local maritime court shortly after the accident, demanding compensation from owners of the fishing vessel and the merchant vessel.

As provided in the Chinese Maritime Code, if the ships in fault have caused loss of life or personal injury to a third party, they shall be jointly and severally liable therefor. If a ship has paid an amount of compensation in excess of the appropriate proportion, it shall have the right of recourse against the other ship in fault. Although the law has provided the right to demand payment of the excess amount by a certain party, the amount is not necessarily recoverable in practice. Most owners of fishing vessels are self-employed with inadequate solvency and insurance arrangement, which in the event of an accident, can be a threat for the other owners if they hope to collect the excess amount of compensation that they have previously paid. For this reason, the Association has proactively involved fishing vessel owners and fishery mutual insurance associations in negotiations towards a settlement between three parties.

2. Removal of wrecks

Are the recovery costs of a sunken ship arising from a collision naturally covered under P&I policies as wreck removal costs? The answer depends as it may also be covered by hull insurers as salvage. How exactly such operation is defined can be contentious in most maritime claims and many factors are to be taken into account such as whether it is compulsory salvage, whether it is feasible, how much it costs, what is the salvage value, the costs of repairing, and even how to balance the interests of different insurers. In terms of the above case, the salvage was required by the maritime administration. The wreck was a second-hand fishing vessel that was purchased at the price of approximately RMB650,000 and the salvage cost was around RMB1.2 million. Our prediction in this case was that the operation was more likely to be determined as wreck removal. Given that owner of the fishing vessel who is also primarily responsible for the collision should be the first person responsible for wreck removal, we recommended that the Member should insist on not paying first and avoid, as far as possible, entering into a salvage contract or paying for expenses to recover the sunken ship, unless it is a tripartite agreement reflecting the proportion of responsibility of both ships.

3. Case closed

Following several lengthy negotiations with all parties involved, the case was settled with us taking less than 50% of the personal claims for the three fishermen and reaching an agreement with the owner of the fishing vessel for a rather low amount in respect of the costs for wreck removal. Overall, the Association covered approximately 39% of the settlement without undertaking any risks of non-recoverable payment and without appealing to lawsuits.

IV. Advice to Members

1. Early notification to the Association

Timely response and proper actions taken at early stages of a maritime incident is very important and may even affect the follow-up. Therefore, in the event of a maritime accident, Members should notify the Association at the earliest opportunity so that we can provide advice where necessary and assist arrangement of correspondents, surveyors, lawyers, or experts.

2. Careful preservation of evidence

A ship’s master should remind the crew to properly maintain a record and preserve evidence (including VDR data) in the event of an accident. Notify the shipowner in a timely manner as required by the company’s documentation. The crew members should also be careful in using social media, not to post comments, photos, or videos that may render shipowners any disadvantages.

3. Prudent disclosure of information

The master and crew members should cooperate with officers investigating the incident. Do not just acknowledge any misconduct and be careful with signing documents. The shipowner or the Association should be consulted first where necessary. Any third party attending the board for investigation, including experts or the charterer’s surveyor, should be accompanied by the crew the entire time. Be careful when being asked to provide any information or document.

4. Optimized safety management

To mitigate risks, it is always of vital importance to improve safety management system with sound training program and established contingency planning. With safety management well supported by rules and regulations, some of the incidents that should not occur in the first place may be effectively prevented.

For more information, please contact Managers of the Association.