New LOF Clause Boosts Transparency Around Tug Services

The outcome of over a year’s consultation with underwriters, owners, Lloyd’s and other interested parties including P&I Clubs, brokers and salvors is a new clause for incorporation in marine hull policies.  

The shipping community has recognized the necessity of maintaining Lloyd’s Open Form (LOF) as a contract with pre-agreed terms that can be easily used in the event of an emergency, said the Lloyd’s Market Association (LMA) and the International Chamber of Shipping (ICS). The organizations worked together to produce a clause designed to give clarity around the process for contracting for emergency and non-standard tug services. The clause emerged from the working party set up to consider challenges to LOF and how to encourage its use.

The new LOF Default Clause is designed to:

• ensure that in the event of an emergency, it is clear that the master and / or owners can proceed to use LOF to obtain salvage services without delay;

• set out a clear procedure for dealing with emergency circumstances where there is no immediate danger;

• set out a process for owners to notify hull underwriters and take their views as to the appropriate contract to be used in such circumstances (whether LOF or some other contract).

The overall objective is to encourage dialogue between owners and their underwriters and ensure all parties are satisfied with the option selected.

The LMA and ICS hope that the clause in the Hull policy, with the other recent improvements to the LOF, will also address the concerns that have led to the decline in the LOF’s use and restore confidence in this vital contract, ensuring that it remains a cornerstone of maritime safety for years to come.

Arabella Ramage, Legal Director for the LMA, said: “We consider use of the clause will be a positive step forward in ensuring the safety of vessels and crews and increasing communication and understanding between owners and their underwriters.”

Kiran Khosla, Principal Director, Legal, at ICS, supports the clause: “The LOF is about saving lives, the environment and property. For over a century, the LOF has been pivotal in ensuring maritime safety, enabling swift and effective responses to situations where the ship is in danger. The clause emphasizes that in a situation of danger for the ship, the LOF is the right and appropriate contract for the salvage response.”

It is anticipated that the new clause will be made available shortly as an LMA clause.