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The Association shall cover sums legally due to third parties by reason of the fact that they have saved or attempted to save the life of any person on or from the Ship, but only if, and to the extent that, such payments are not recoverable under the Hull Policies or from cargo owners or underwriters.
(A) Life salvage (Rule 33)
The laws of most countries provide that if a person voluntarily saves property from danger at sea, he is legally entitled to claim a financial reward from the owners of that property which is commensurate to his success, i.e. salvage. Salvage remuneration is not usually payable for the saving of life at sea in circumstances where no property is salved, but if life is saved together with property this will usually serve to increase the remuneration that is payable by the owners of the properties salved. However, even when life is saved together with property the persons rescued would rarely – if ever – be held personally liable to make payment to their rescuer,1 who must therefore, enforce his right to remuneration against the owners and underwriters of any property that has been salved, e.g. the Ship and cargo. Nevertheless, different statutory rights of compensation may exist in some countries.2
(B) The Association shall cover…but only to the extent that such payments are not recoverable under the Hull Policies or from cargo owners or their insurers. (Rule 32)
Cover is available for the Member’s liabilities to third parties who have saved or attempted to save the life of any person on or from the Ship, provided that payments made in this regard are not recoverable from either the hull underwriters or from the cargo owners or their insurers. Some countries, such as England, draw a distinction between, on the one hand, life salvage at common law in which case the whole of the salvage award is payable by the hull insurers or the insurers of cargo or any other property saved even though the value of the award made against such property has been increased by the saving of life, and, on the other hand, statutory life salvage in which case the statutory life salvage element is recoverable from P&I insurers.
So long as the Member is legally liable to pay the third party, cover is available regardless of the identity or function of the person who has been saved, e.g. they may be Crew members and their relatives, passengers, pilots and even stowaways, and regardless of whether the person saved was on board at the time of rescue. Therefore, cover is available in the case of persons who have abandoned the Ship and are rescued from lifeboats or rafts and even if persons are rescued a considerable period of time after the incident which necessitates the rescue.
Cover is not available if the payments which are legally due from the Member to third parties are recoverable under the Hull Policies or from cargo owners or their underwriters. However, even if payments are not in fact recovered from such other interests they are deemed to be recoverable for the purposes of Rule 33 if they are recoverable in principle but cannot be recovered in fact due to the inability of the Member to enforce payment, e.g. due to the bankruptcy of such interests. Similarly, payments are deemed to be recoverable under the Hull Policies for the purposes of Rule 33 if they would have been recoverable if the Ship had been fully insured on standard terms.3
1 See Article 16.1 of the International Convention on Salvage 1989.
2 For example, under English law, if the value of the property saved is not sufficient as remuneration for the saving of life from a UK flagged ship, or a ship in UK waters regardless of its flag, the UK government will pay such remuneration.
3 See the Guidance to Rule 71.