Lloyd’s Open Form Default Clause to be Introduced

Arabella Ramage
Legal Director
LMA

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 clause will be discussed at an event in the Old Library in the Lloyd’s Building on Wednesday 11 September when a panel representing underwriters, claims adjusters, owners and P&I Clubs will explain 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 International Chamber of Shipping (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 available to their members a clause 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. We also wanted to set out a clear procedure for dealing with emergency circumstances where there is no immediate danger.

The clause 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 hope 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 consider use of the clause will be a positive step forward in ensuring safety of vessels and crews and increasing collaboration between owners and their underwriters. Both parties hope that this clause in the Hull policy, together with the other recent improvements to the LOF, will 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.

It is anticipated that the clause will be made available shortly after the launch event on 11/9.