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            MARK C. MANNING, P.C.

 

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Newsletter for the Alaska
Maritime Community
Number 4

MARINE INSURANCE RISK

Marine insurance is so important to commercial vessel operations that admiralty precedent treats it as a "necessary," akin to fuel, repairs, and line handling. A financially unsound insurer can cause every bit as much financial harm to a vessel operator as any other defective necessary. One of the latest in a long line of financially unsound insurers to harm Alaskan interests is the Australian insurer, HIH Group.

The outside accountant auditor should be a bulwark of protection against continued unsuspecting reliance on an insurer whose ability to pay claims has come into serious question. Unfortunately, HIHís auditor was the Arthur Andersen firm, of Enron fame. Andersen also audited another insurer, FAI, which HIH acquired in 1998. FAI turned out to be in deep financial trouble, and may have been insolvent at the time HIH acquired it.

Subsequent investigations found Andersen auditors appeared not to have followed generally accepted auditing standards, and to have had too cozy a relationship with HIH personnel. Obviously, the present public policy debate over accountancy standards and regulation is of direct interest to the maritime community.

Neither HIH nor FAI was an "admitted insurer" in Alaska. If they had been, the Alaska Insurance Guarantee Association may have stepped in to protect insureds from the consequences of the insolvencies, effectively providing back-up insurance. These insolvencies highlight the risk operators take when they insure against Alaska risks with "surplus lines" insurers.

SUPREME COURT SAYS OSHA REGULATIONS APPLY TO UNINSPECTED VESSELS

The Supreme Court has held that OSHA workplace regulations apply to uninspected commercial vessels operating in state waters, settling a long-running debate.

The Occupational Safety and Health Act of 1970 does not apply to working conditions with respect to which federal agencies other than OSHA exercise statutory authority over standards or regulations affecting occupational safety and health. It had been contended that, since the Coast Guard does impose by regulation some safety-related equipment and procedure requirements on uninspected vessels, all OSHA regulation was precluded. But the Court rejected this blanket exclusion. It held instead that OSHA regulation of a particular working condition will apply unless the Coast Guard has either affirmatively undertaken to regulate that working condition, or has asserted comprehensive regulatory jurisdiction over working conditions on uninspected vessels.

The Coast Guard regulates little in the way of specific working conditions on uninspected vessels, and has not asserted comprehensive jurisdiction over them. Uninspected commercial vessels operating in near-shore waters now appear to be subject to the vast panoply of OSHA workplace regulations.

Resource limitations have seemed to limit routine visits by OSHA inspectors and administrative prosecutions for non-compliance in Alaska. Going forward, OSHA plans to increase its inspections significantly. Regardless of the risk of administrative enforcement, however, if and when a seaman injury occurs, non-compliance with OSHA standards could drastically increase owner liability for that injury.

SECRETS OF MARITIME LIENS REVEALED

Answers to a lengthy set of maritime lien faqís have been posted at www.AlaskaMarineLaw.com. This posting joins an earlier posting of information about the foreclosure of maritime liens in Alaska. Suggestions for additional questions for inclusion are welcome.

INATTENTIVENESS TO POLICY REQUIREMENTS VOIDS COVERAGE

The U.S. Court of Appeals having jurisdiction over Alaska recently affirmed the trial courtís finding of no coverage for a vessel loss where a Hawaiian operator had failed to comply with its policyís "captain warranty." The policy provided that it would be suspended if the captain named in the policy were replaced, unless the insurer approved of a replacement captain in advance.

When the insuredís vessel was lost, the captain who had been operating it had not been named in the policy and had not been otherwise approved by the insurer. The owner claimed it had left a message with its broker that the captain named in the policy had been replaced. The court held that a message to the broker did not constitute approval by the insurer, and upheld the trial courtís finding that there was no coverage for the loss because the change in captains had not been approved.

The moral of the story, of course, is that care should be taken to note and to assure compliance with policy requirements. A new policy should be promptly provided to the insured, which often does not occur. A new policy should not been thrown unread into a drawer upon receipt and forgotten by the insured.

Copies of court decisions available upon request 

  

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