Sue and Labor

The lead story at WiredNews today starts as such:

The article is about companies today suing their insurance carriers for Y2K remediation costs under the same clause: money spent fixing the problem now saves a lot more later on recovering from catastrophic systems failure (to which the insurance carriers reply “dumbass COBOL programmers in the sixties do not constitute an act of God”). It would be a non-story if it was just corporate ambulance chasers, but one company that’s suing is Xerox, for $183 million.

When I mentioned this to my brother, he asked me “what’s to stop a sea captain from sailing with nothing in his hold, or offloading it ten miles from the shore onto another ship, then claiming he jettisoned it to save the ship during a storm?”

Does anyone know about specific instances of this clause? Was the fraud mentioned above a problem? While the principle of the clause is sound, insurance investigators in the 19th century must have had no end of trouble establishing that there actually was a storm, and that the ship nearly went down.

the captain would be committing a fraud, and shippers are always very concerned about fraud.

the idea of a paper trail is not new - the captain would have to produce the bill of lading, showing that the goods had in fact been loaded on the ship.

as well, when goods are offloaded, there is further documentation. the captain could try to get the various port authorities in on the scam, and the shippers, but with each additional person in the scam, the greater the chance of being caught.

similarly, I would bet that the insurance contract would have a clause saying that the capitain and the crew would have to co-operate fully with any investigation that the insurance company thinks is necessary - so the adjusters would have the contractual right to interview every member of the crew, if they wanted to. If the captain and crew did not co-operate, they would be in breach of the contract of insurance, and the compnay could refuse to pay up. The captain would have to get every single member of the crew in on the scam - not impossible, but the chances of detection grow with each person added to the conspiracy.

I would have to agree… insurance adjusters make it difficult even when the cause of loss is something clear-cut. I work for a shipping company. One of our ships caught fire (this was a year or two ago), damaging the ship as well as cargo which had not yet been unloaded. Despite the fact that this happened in port, in front of 100s of witnesses, and despite the fact that the cause was determined almost before the fire was put out, there was still an investigation and more paperwork than would be needed for the second coming! Cargo is occasionally jettisoned during storms. We then have to document the location of the equipment (containers usually), which would show the vulnerability to high winds etc. Usually the containers go overboard without our consent - but we have insurance for that, and we have so far been able to provide the documentation.


The reason gentlemen prefer blondes is that there are not enough redheads to go around.

Thanks for referring us to the article, first of all. Sue and Labor clauses in most property policies, huh? Where? It’s a common Maritime policy clause, but not so common on most property policies, as the article suggests. I guess any port in a storm when looking for some money to pay for a potential Y2K disaster when you forgot to look at the calendar, though, huh?

As far as the fictitious captain “jettisoning” his fictitious cargo, as both Sassy and jti noted, there is quite a paper trail when it comes to “dumb cargo” (so-called as once it leaves the shipper’s hands, it is incapable of caring for itself and relies on others until it reaches its final destination). The shipper generates documents, which include purchase and quantity information, as well as a good description of what was sent (to protect the shipper). The trucker who picks up the goods generates more paperwork, describing what it is he’s picking up, where he picked it up, what it is, how much it weighs, and where he’s taking it (along with a log that shows his route). The next person to lay hands on the merchandise is a stevedore, unless it goes into a warehouse (yep, more paperwork…more identification), who generates the same type of information the trucker has generated. Oh, and all parties note the condition of the goods…if there’s been damage, this is why the paper trail is necessary…whodunit.

When the stevedore loads the goods (now called “cargo”) on the ship, another paper trail is generated, including placement of the load on the vessel. While this may seem unnecessary to some, it is vital if the ship runs into any sort of trouble, including the mentioned storms, as well as the possibility of trouble with the vessel (sinking, stranding, etc.), or barratry of the master (the ship’s crew hasn’t been paid by the shipowners and decides to hold the cargo hostage…don’t laugh; it’s happened).

Placement of the cargo belowdecks is logically the safest place for the cargo because it won’t be exposed to winds, rains, or high seas. Of course, if the ship starts to sink, this isn’t necessarily the best place to have the cargo stowed, but that’s a rarity nowadays.

Now, if a storm suddenly erupts, and, in order to save the ship and the cargo belowdecks, the safest course of action is to get rid of the top-heavy cargo on deck, be assured all onboard who did not drown are as glad to get rid of it as the insurance companies (note the plural…all the companies insuring the vessel and the various items of cargo get together and share in the cost to get rid of AND replace the tossed cargo).

As far as saying cargo was loaded and lost when it was, in fact, never loaded, do you see now how impossible it would be to accomplish this fete? If not, keep in mind that most seamen are paid really low salaries. Just about any insurance investigator with a $100 bill…or even a good, rare steak…can get the truth out of these guys.


“There will always be somebody who’s never read a book who’ll know twice what you know.” - D.Duchovny

And, of course, my cynical view of life is immediately piqued by the fact that the company in question in the OP has notably mishandled their own business for several years and could probably use any sort of cash infusion, just now, Y2K or not.


Tom~