WHEN A MARINE CLAIM RAISES QUESTIONS ABOUT CONDITION AND VALUE

Why the vessel’s pre-loss records can become some of the most important information in the file

By George Beck, MBA, ASA, NAMS-CMS

After a casualty, everyone starts looking for records.

What did the vessel look like before the loss? What equipment was aboard? When was the machinery last overhauled? Had there been recent repairs or improvements?

And eventually, someone may need to answer a much bigger question:

What was this vessel worth immediately before the casualty occurred?

Sometimes the file gives us a very good starting point.

Other times, we're left trying to reconstruct the vessel as she existed before the loss—after the casualty has already changed the very evidence we're trying to evaluate.

I've worked on enough marine assignments to know how much difference good documentation can make. A few records collected while everything is normal can become remarkably important after it isn't.

THE VESSEL IN THE FILE MAY NOT BE THE VESSEL AT THE DOCK

Commercial vessels change.

They accumulate engine hours. Machinery gets overhauled or replaced. Electronics are upgraded. Deck equipment comes and goes. Owners modify vessels as their operations change.

Repairs happen along the way, too.

That's why an older survey can still be useful without necessarily describing the vessel as she exists today.

Consider a vessel that was surveyed three years ago. Since then, the owner has overhauled an engine, installed new electronics, replaced a piece of deck machinery and completed significant steel work during a dry-docking.

Then a casualty occurs.

The insurance file still contains the three-year-old survey. It may even include photographs from that inspection. But if none of the subsequent work made its way into the file, we're no longer looking at a complete picture of the vessel immediately before the loss.

Now someone has to reconstruct what changed.

That can usually be done to some degree. Invoices can be located. Mechanics can be contacted. Owners and crew can provide information.

But every step takes time, and sometimes the evidence simply isn't there anymore.

The best time to document a vessel's pre-loss condition is before there is a loss.

PHOTOGRAPHS CAN ANSWER QUESTIONS NOBODY THOUGHT TO ASK

Photographs are probably one of the easiest things to keep current, yet their value is easy to underestimate.

I'm not talking about beauty shots taken from the dock.

Useful documentation shows the vessel as she actually exists: machinery spaces, engines and generators, wheelhouse electronics, deck machinery, working areas and major installed equipment. If significant repairs or modifications have recently been completed, photograph those too.

The photographs don't need to be elaborate. They do need to be clear, dated and organized well enough that someone can make sense of them later.

That's the part that matters.

After a casualty, a photograph may suddenly answer a question nobody knew would be important when the picture was taken.

Was that equipment aboard before the loss? Was there visible deterioration in that area? Had that machinery already been replaced? What was the configuration of the deck?

Sometimes one dated photograph answers the question better than pages of recollection months later.

WHEN THE MACHINERY STORY GETS FUZZY

Machinery deserves particular attention because it can represent a significant part of a commercial vessel's usefulness and value.

Engine hours matter. So does overhaul history.

A vessel with recently overhauled main engines may present very differently from an otherwise comparable vessel approaching major machinery work. But after a casualty, simply saying “the engine had been overhauled” may not tell us enough.

Consider a vessel that suffers a significant casualty two years after one of her main engines was reportedly overhauled.

The owner remembers the work clearly. The mechanic remembers doing it. There's even an invoice in the file.

The problem is that the invoice simply describes “engine work.”

It doesn't identify the scope of the overhaul. Nobody preserved photographs of the work. The engine hours at completion aren't readily available, and the most recent survey predates the repair.

Was substantial work performed?

Probably.

But exactly what was done—and how that work should factor into an analysis of the vessel immediately before the casualty—is harder to establish than it needed to be.

Before the loss, that missing information may not have seemed especially important.

After the loss, it can become very important.

A good machinery record doesn't need to be complicated. Major repair invoices, engine hours, overhaul details and a few photographs can tell a surprisingly complete story.

PRE-EXISTING CONDITION CAN MATTER, TOO

Documentation isn't only useful for proving improvements.

It can also help establish what was already there.

Not every deficiency discovered after a casualty resulted from the casualty. Corrosion may have existed beforehand. Machinery may already have been experiencing problems. Coatings may have deteriorated. Repairs may have been pending.

The opposite can be true as well.

A vessel may have been exceptionally well maintained immediately before a loss. Recent repairs may have corrected deficiencies identified during an earlier inspection. Machinery may have been operating well, with good maintenance records to support it.

Without a reasonable pre-loss record, both situations become harder to establish.

That's where recent surveys, inspection reports, maintenance records and photographs become valuable. No single document answers every question, but together they create a timeline.

And after a casualty, that timeline can matter.

THE PAPERWORK TELLS PART OF THE STORY

Physical condition is only one part of the vessel's pre-loss picture.

For a commercial vessel, operating and regulatory records may be important as well.

Certificates, Coast Guard documentation, inspection records, equipment inventories, dry-docking records and prior surveys can help establish what the vessel was—and what she was capable of doing—immediately before the casualty.

Major repair and capital-improvement invoices deserve a place in the file, too.

This doesn't mean every vessel needs an enormous archive. A small inland workboat and a large specialized offshore vessel obviously don't require identical documentation.

The goal isn't to collect paperwork for the sake of collecting paperwork.

The goal is to preserve the information someone may actually need later.

 

WHEN VALUE BECOMES PART OF THE CLAIM

This is where pre-loss documentation becomes particularly important from an appraiser's perspective.

If a casualty raises a valuation question, the appraiser may need to determine the vessel's value as of a specific date—often immediately before the event.

But what if the vessel has been substantially damaged?

What if major equipment was destroyed?

What if the vessel is no longer available for inspection at all?

Now we're dealing with a retrospective assignment. We need to understand the vessel as she existed at an earlier point in time.

The appraisal process can draw from many sources: prior surveys, photographs, repair records, machinery information, invoices, market data and interviews with people familiar with the vessel.

But the quality of the conclusion depends, in part, on the quality of the evidence available.

APPRAISAL INSIGHT

The more a casualty changes the vessel, the more valuable the pre-casualty record becomes.

If the physical evidence no longer exists, the records may be the best evidence we have.

YOU DON'T NEED TO UPDATE EVERYTHING EVERY YEAR

One concern I sometimes hear when talking about documentation is that keeping the file current sounds like a lot of work.

It doesn't have to be.

Rather than recreating the entire vessel file every year, update it when something meaningful changes.

If a main engine receives a major overhaul, preserve the details. If new deck machinery is installed, document it. If substantial steel work is completed during dry-docking, keep the invoices and photographs.

When a new survey or appraisal is performed, add it to the file. And every so often, take a fresh set of photographs showing the vessel's general condition and major equipment.

The result is a record that develops alongside the vessel.

That's much easier than trying to recreate several years of history after a casualty.

FIVE QUESTIONS I WOULD ASK TODAY

If you're responsible for an insured commercial vessel—or working with someone who is—pull the file and see whether you can answer these:

1. Could someone who has never seen the vessel understand what she looks like today?

2. Does the file identify her major machinery and equipment?

3. Are significant repairs, overhauls and improvements since the last survey documented?

4. Can you establish her current inspection and regulatory status?

5. If the vessel suffered a major casualty tomorrow, could someone reconstruct her pre-loss condition from what you have today?

That last question is the important one.

If the answer is yes, you're probably in pretty good shape.

If the answer is no, it's much easier to fix that now.

A SIMPLE RESOURCE TO KEEP WITH THE FILE

We've put together a one-page Pre-Loss Vessel Documentation Checklist to make this easier.

It covers the basic vessel photographs, machinery information, repair and maintenance records, regulatory documents and other information worth keeping current. It's designed to be something you can save with a vessel file or pass along when it would be useful.

Keep it with the vessel file, or share it with an insured, colleague or anyone responsible for maintaining vessel records.

Download your Pre-Loss Vessel Documentation Checklist PDF

FROM THE APPRAISER'S DESK

How much documentation is enough?

There isn't one answer for every vessel.

What matters is whether the file tells a reasonable story about the asset.

If I were trying to understand a vessel I've never seen, I'd want to know what she is, what major equipment she carries, what condition she was in, what significant work had been done and whether anything important had changed since the last survey or appraisal.

I'd rather have a handful of good, dated photographs and meaningful maintenance records than hundreds of pages that tell me very little about the vessel herself.

Document what matters. Keep it current. Make it easy to find.

That will go a long way.