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The 2024 International Union of Marine Insurance (IUMI) "Stats Report" paints a promising picture of the global marine insurance market, with total premiums in 2023 hitting $38.9 billion—a 5.9% increase over the previous year. This growth cuts across all major lines, driven by strong global trade and rising vessel values. High oil prices have also spurred activity in the offshore energy sector. While this growth reflects a resilient market, it signals that we operate in an increasingly complex environment where adaptability and forward-thinking strategies are paramount.



Ocean hull insurance saw a notable rise, with premiums climbing by 7.6% to $9.2 billion. More activity on the water, an influx of new vessels, and increasing asset values have played key roles here. But with growth comes challenges; market capacity has been tighter, and inflation has started to push up repair costs, causing some deterioration in loss ratios. Fires on large vessels continue to be a concern as well. 


The cargo insurance segment also experienced solid growth, with premiums rising to $22.1 billion—a 6.2% uptick from the previous year. Loss ratios are the best since 2017, showing that our industry is making real progress in managing the risks of transporting goods.


Finally, the offshore energy sector reported $4.6 billion in premiums, a 4.6% rise tied to the rally in oil prices. While increased activity has yet to translate to a spike in claims, it's important to note that claims in this sector can take years to develop fully. 


Stability today doesn't mean we're off the hook for tomorrow's potential challenges. Looking ahead, marine insurance professionals must navigate complex challenges. Geopolitical tensions, severe weather events, and the push toward greener practices, to name a few. 


For marine insurance professionals, these insights underscore the importance of staying informed about industry trends and challenges. Engaging with organizations like LIG Marine Managers and participating in educational seminars like CMIP can provide valuable knowledge and networking opportunities. By proactively addressing emerging risks and adapting to market dynamics, agents and underwriters can better serve their clients and contribute to the resilience of the marine insurance sector.


Mark Greenway


Section 902(3)(C) of the LHWCA states that “individuals employed by a marina and who are not engaged in construction, replacement, or expansion of such marina” are excluded from coverage.

This exclusion may lead agents and marina operators to believe that Longshore coverage isn't beneficial for their marina operations, but that's not necessarily true. 

At the very minimum, marinas need Longshore coverage on an “IF ANY” basis so they're covered in the following situations:

 If marina employees ever do construction, replacement, or expansion work, they fall into an exception to the “marina” exclusion and, as such, would become Longshore.

When contractors come to the marina to work on the docks, jetties, storage buildings, racks, etc., they are Longshore. If their employer does not have Longshore coverage in force, that can pass directly back to the marina.

➡ In situations with vessel service/repair work, the marina exclusion only applies to employees directly employed by the marina. If a contractor/subcontractor comes into the marina and works on a commercial vessel (sea tow, city/state vessel, most charter boats, etc.), they can claim Longshore even though direct employees doing the same work cannot.
Learn more about it in the What is a Recreational Vessel? webinar.

➡ Any marina employee can bring a Longshore claim, and even if they are unsuccessful in getting those benefits, marina operators could incur a significant defense cost bill. No Longshore coverage = No defense costs.

Fortunately for most marinas, the additional premium cost to add “IF ANY” Longshore coverage is a few hundred dollars — a small price to pay for peace of mind and protection in these situations. 

If you have questions about your marina client’s coverage needs, contact our expert Longshore team at Ask@LIGMarine.com

 
Ian Greenway



Background of the Case

The dispute arose from a maritime insurance contract between Raiders Retreat Realty, a Pennsylvania-based company, and Great Lakes Insurance, headquartered in the United Kingdom. The insurance policy, which covered a boat owned by Raiders that later ran aground, included a choice-of-law provision designating New York law for any future disputes. When a claim was denied by Great Lakes, citing a breach of contract by Raiders, a legal battle ensued over which state's law should apply; Pennsylvania, where the lawsuit was filed, or New York, as specified in the contract.


The Ruling

The opinion of the Court underscored the primacy of federal maritime law in governing such disputes. The ruling unequivocally supports the presumption that choice-of-law provisions in maritime contracts are enforceable, offering clarity and predictability for parties involved in maritime commerce. This decision emphasizes the importance of respecting contractual agreements regarding jurisdictional law, thereby reinforcing the sanctity of contract law in maritime disputes.


Insurance Implications

As vessels tend to move about, the idea of determining appropriate jurisdictions would be difficult and costly in some cases. Allowing the clause to stand is going to remove a potential topic of debate when tough claims come in.

As of recent, we have found a general movement in the marketplace to a neutral choice-of-law state as opposed to variation as the home state of the insured.  This is likely to continue, and with insurers paying more attention to the topic, it might be an area of negotiation going forward.  Those negotiations would necessarily include at least considering the potential for which if any of the exceptions would apply to any decision made.

 

Narrow Exceptions to the Rule

1. Contravention of a Controlling Federal Statute
(see Knott v. Botany Mills, 179 U.S. 69, 77 (1900))

If applying the law chosen by the parties would contravene a controlling federal statute, the choice-of-law provision cannot be enforced. This means that even if a contract selects a particular jurisdiction's law, that choice cannot lead to outcomes explicitly forbidden by federal law.

2. Conflict with Established Federal Maritime Policy
(see The Kensington, 183 U.S. 263, 269–271 (1902))

The choice of law must also not conflict with established federal maritime policies. Federal maritime law aims to provide (and sometimes actually provides) uniformity and predictability across the nation's navigable waters. If enforcing a choice-of-law provision would undermine these fundamental goals—such as exempting a party from liability for negligence in a manner that federal maritime law prohibits—then the provision may not be enforceable. This exception aligns with the judiciary's role in maintaining a coherent and consistent maritime legal framework supporting national and international interests in maritime commerce. 

3. Absence of a Reasonable Basis for the Chosen Law
(see Cf. Carnival Cruise, 499 U. S., at 594–595; The Bremen, 407 U. S., at 10, 16–17.)

This exception is designed to prevent the arbitrary selection of a legal jurisdiction with no substantive connection to the parties or the contract. The rationale behind this exception is to ensure fairness and to avoid situations where the choice of law would significantly disadvantage one party over another without a legitimate reason. While the Court emphasizes deference to the parties' agreement, selecting a jurisdiction's law purely for its perceived advantages, without any rational connection to the dispute, could lead to unenforceability.

 

This post aims to provide a comprehensive overview of the Supreme Court's decision and its implications for the insurance industry. As always, parties involved in maritime contracts should consult with legal experts to fully understand how this ruling may impact their operations and legal strategies.

The United States District Court for the Eastern District of Louisiana delivered an intriguing ruling in the case of In re Aries Marine Corp. The decision by Judge Lance Africk focused on the complex intersection of subrogation and offset rights within the framework of the Longshore and Harbor Workers' Compensation Act (LHWCA). 

The court's verdict stipulated that a waiver of subrogation by an LHWCA carrier does not negate the carrier's right to claim an offset against future LHWCA liability. This legal intricacy arose from an accident involving a lift boat off the coast of Louisiana in the Gulf of Mexico.

Workers injured when the lift boat capsized received compensation under the LHWCA, and the carriers then sought subrogation claims to recover the benefits paid from the defendants. However, the defendants and plaintiffs contested this by invoking the waiver of subrogation clause in their contract.

Judge Africk delved into the complex nuances of the contract, ultimately concluding that the waiver applied to the owner of the rig and its "invitees." Here, the court applied Louisiana law, defining invitees as individuals who enter premises with the express or implied invitation of the occupant, usually for mutual benefit.

The carriers subsequently filed motions for reconsideration, and the court recognized that a dismissal of their claim for an offset would be a "legal error." As a result, Judge Africk amended the summary judgment to acknowledge the carriers' right to claim an offset pursuant to Section 33(f). 

This ruling underscores the importance of understanding the nuanced aspects of legal provisions, even in cases where subrogation is waived, and reaffirms that carriers can still seek an offset against future LHWCA liability, ensuring a balance of rights in complex maritime compensation cases.


Ian Greenway

The U.S. Department of Labor has proposed changes to the regulatory framework governing penalties assessed against employers and insurance providers for non-compliance with reporting obligations under the Longshore & Harbor Workers’ Compensation Act.

Under the Longshore & Harbor Workers’ Compensation Act (LHWCA), compensation, medical care, and vocational rehabilitation services are provided to employees incapacitated by job-related injuries on U.S. navigable waters or adjacent areas typically used for ship-related activities. The LHWCA also stipulates survivor benefits for dependents in cases where a work-related injury leads to an employee's death.

The LHWCA allows the Office of Workers’ Compensation Programs (OWCP) to impose civil penalties against employers failing to report workplace injuries or deaths promptly and accurately.

In an effort to bring more transparency to the process, the proposed modifications unveiled by OWCP on September 11, 2023, would alter the practice of assessing and imposing civil penalties. 

By implementing a system of graduated penalties based on violation history, increasing measures for clarification throughout the assessment process, and expanding opportunities for employer appeals, the OWCP aims to promote accountability and ensure fairness in the process.  

OWCP is accepting written comments regarding the proposed rulemaking through November 13, 2023. You may submit written comments, identified by RIN number 1240–AA17, via the Federal eRulemaking Portal.


Ian Greenway
 
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