The Field

Local correspondents - an integral part of the claims handling process

1 August 2017

In this issue of The Field, we look at one of the key components of the service provided by the P&I Clubs, the local correspondent.

In addition to looking at their history and role in our operation, the CEO of Spica Services, Dughall Aitken, one of our correspondents, shares some of their experiences and how the local correspondent's unique, local knowledge can be of assistance.

What is a correspondent?

The genesis of correspondents

The global nature of both the shipping and offshore industries means that a club's assureds can find themselves in difficulty off almost any coastline. While clubs all now have a number of branch offices, which was not always the case, it is impossible to have an office in every port around the world. How, then, do we provide support and assistance to owners who find themselves in difficulty at a port where we do not have a base?

The solution of using correspondents was arrived at relatively early in the history of P&I insurance, with records suggesting the first one was appointed by a club around 1875. Nowadays, each club has its own worldwide network of correspondents, each of whom can be contacted by the club and masters of vessels alike to provide local advice and knowledge when ships get into difficulty within their jurisdiction.

What is a correspondent?

Despite sometimes being characterised as "Agents", in strict legal terms the relationship between clubs and their correspondents is far less formal than that. Typically, no continuing contract of any sort, far less one of agency, exists. Correspondents are instructed by the club as and when necessary, and are typically paid in relation to the services provided as any other contractor would be. They are, however, vetted, scrutinised and trusted advisors upon whom clubs and their assureds can count to provide prompt, proper advice on a variety of different matters.

Nowadays, there are a number of firms of professional 'correspondents', who do work for several clubs, or in some cases all the IG clubs and more. However, that is not exclusively the case, with the correspondent role being performed by businesses as diverse as ships' surveyors and lawyers. While some lawyers also act as general correspondents, historically there were also a number of legal correspondents who provided only legal correspondent services. However, with the increase in the number of club branch offices, these have declined.

What do correspondents do?

The correspondent's main role is to assist an assured with any claim or issue that arise. This can range from organising a surveyor to attend a vessel or liaising with the authorities in relation to requests for security to arranging for medical attention for or the repatriation of sick or injured crew. In fact, correspondents will routinely be involved in the full range of P&I matters.

It is very important to note, however, that while correspondents are authorised to instruct surveyors and medical experts, or to make repatriation plans as necessary, they do not have authority to issue security without the express authorisation of the club. They are also not an authorised party upon whom legal proceedings can be served. Best practice dictates that, when an issue arises in circumstances where the correspondent is contacted directly by the master of the vessel, they must contact the club as soon as practicable and thereafter work closely with the claims handler.

The geographic proximity of south east Asian countries and the many historical, cultural, ethnic, religious and socio-economic similarities between them mean that there are undoubted similarities in the myriad issues encountered by owners and operators in the region. It would therefore be easy to think that the role of the correspondent would be identical across the region. However, the functions and personnel of the numerous government agencies dealing with maritime, offshore and insurance matters, the differences in both International and local legislation, its' implementation, and the nature and extent of the authorities' involvement means it is anything but.

Multi-jurisdictional casualties

By way of example, a multi-jurisdictional casualty such as a collision, sinking or pollution event in the Singapore Straits sees a situation where the three littoral states all have different territorial claims and are all signatories to different pollution compensation regimes and wreck removal and limitation conventions. In situations such as these, the need for strategic regional oversight combined with local experience and expertise is paramount.

From an offshore perspective, in addition to the typical grounding and collision liabilities vessels face off Indonesia and Singapore, they can also be operating off the Gulf of Thailand, the Nam Con Son and Cuu Long Basins offshore Vietnam, Brunei and Miri off Borneo through to more recent fields offshore Myanmar. All of these fields have different issues, and governing bodies to interact with so for successful resolution of matters, it is extremely important to know who they are and how they operate. Navigating these interactions and overlaps can be fraught with difficulty for anyone, not to mention a foreign master or shipowner who are in the midst of a difficult and new situation, so local knowledge is essential in avoiding jurisdictional pitfalls and, where unavoidable, dealing with the appropriate Authority.

Pollution events

Taking a pollution event as a further example, the Maritime and Port Authority in Singapore is a proactive, capable and well-resourced primary responder, and is assisted by the presence of numerous Oil Spill Response Organisations. However, resources and responsibilities in other parts of the region are perhaps not so clearly defined, sometimes leading to delayed or more disparate responses. This, combined with the proximity of maritime borders, can lead to the necessity for multi-jurisdictional, multi responder oil spill response plans which, without knowledge of available resources and responsibilities, complicated by local current and climatic conditions, could lead to a disjointed response, in waters where any delay in response could develop serious consequences rapidly.

Wreck removal situations

Finally, when looking at a wreck removal situation, the regional differences again become manifest. While there has been some recent alignment with Singapore and Malaysia both adopting the LLMC 1996 Protocol and the implementation in each of the Nairobi Convention, differences in the region remain. For example, in Indonesia, the Limitation Convention is not in force meaning that local regulations apply. The manner in which these conventions are enforced also differs: Singapore universally demands full wreck removal; historically, Malaysia has been amenable to negotiating reduction and partial removal operations; and, in Indonesia where, amongst other factors, the depths and expanses of water being such that negotiating wrecks being left in situ remains an option.

Fortunately, the types of casualties envisaged above do not happen regularly. However, they are far from unprecedented and occur, on average, a few times each year, resulting in most of the issues detailed above arising. It is therefore imperative that when these situations arise, or indeed less serious issues, that club, correspondents and assured work together as a team. From experience, the strategic oversight and claims management provided by the club and the correspondent's local knowledge and advice represents an extremely valuable resource for owners and typically results in a positive resolution to matters.

Spica Services is an International Group Correspondent, headquartered in Singapore and operating 10 offices in South East Asia.