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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 new Lloyd’s Open Form Default Clause has been launched and discussed at an event in the Old Library in the Lloyd’s Building on Wednesday 11th September when a panel representing Lloyd’s, underwriters, claims adjusters, the International Chamber of Shipping (ICS) for owners, P&I Clubs, and the Secretary of State’s Representative for Maritime Salvage and Intervention explained its advantages and the modifications that have been made to the clause during the course of the consultation.

The shipping community as a whole has recognised 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. The LMA has worked with the ICS 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 LMA and ICS wanted to make a clause available to their members, 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;
the LMA and ICS also wanted to set out a clear procedure for dealing with emergency circumstances where there is no immediate danger;
the clause also sets 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 objective is that this will encourage dialogue between owners and their underwriters and ensure all parties are satisfied with the option selected.

The LMA and ICS jointly hope that this 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 emphasises that in a situation of danger for the ship, the LOF is the right and appropriate contract for the salvage response”.

Early and clear communication between shipowners and insurers, as facilitated helps to foster greater collaboration between parties, reducing the potential for disputes and improving the overall effectiveness of the salvage process.

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

ICS