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Marine Loss Prevention Circular No

Marine Loss Prevention Circular No. 03-00

SHIP TYPE:

Bulk Carrier (85,000 dwt)

YEAR OF BUILD:

1979

   

EVENT: Main Engine Damage Due to Contaminated Lubrication Oil

Course of Events
The above-mentioned vessel operated for more than 1 year with the main engine lubrication (lube) oil contaminated by fresh water. During the same period the lube oil purifiers were not operated on a regular basis. Occasionally the vessel used the diesel oil purifier for cleaning the lube oil.

The lube oil sump was cleaned on at least two occasions and several thousand litres of lube oil were fully or partly replaced. On one occasion the engine room was flooded with sandy water outside a river reef barrier where water entered the engine sump through the thrust bearing.

Lube oil sampling during that year showed a wide variation of results. Sometimes it was within acceptable limits. At other times, the lube oil was contaminated with up to 30% water making the texture similar to "whole milk" and "creamy and mud like".

At all times the vessel was in close contact with the shore operation. Requests for spares for purifiers and replacements for lube oil were frequently made. The shore superintendents did not appreciate the lube oil problem for the vessel. Therefore, requests from the vessel were not taken seriously. This led to delays in delivery and/or in insufficient quantities of critical spare parts. Few actions or initiatives were taken to correct the situation.

Except for the flooding incident, no conclusion was made as to the source of the continuous contamination of fresh water in the lube oil. However, possible sources were condensation, lube oil coolers and/or the purifiers. In addition, the vessel was mainly employed in a fresh water river trade.

Finally the shipoperator's technical advisors requested the attendance of a service engineer from the engine maker and extensive damage to the engine was revealed.

Extent of the Damage
Excessive wear was discovered to all engine main, crankpin, crosshead and camshaft bearings, plus damage and wear to other lubricated parts of the engine. The vessel stayed off-hire for 125 days for the repairs that resulted in a Loss of Hire (LOH) claim of USD $5,000,000. The Particular Average claim to the hull & machinery (H&M) underwriters is not known to us, but is estimated to be approximately USD $2,000,000.

Probable Cause
The lube oil purifiers had been out of order during operation. When in operation, they were acting more as transfer pumps instead of purifiers due to incorrect operation that included: (1) a lack of parts in the disc stack, (2) incorrect gravity discs, and (3) a low operation temperature.

The lube oil sump had only been partly replaced. With 15,000 litres of contaminated oil, it is not sufficient to replace 10,000 litres to eliminate the contamination. The remaining 5,000 contaminated the new oil.

Water had entered the crankcase through the thrust bearing on at least one occasion when the vessel suffered a partial engine room flooding. It was reported that the lube oil in the sump was replaced on this occasion, but it is unclear to whether the piping and engine internals were sufficiently cleaned.

A lack of proper control and follow-up from vessel operators who used personnel without the proper qualifications and knowledge to take the necessary actions in ensuring the proper maintenance and operation of the vessel despite being continuously kept informed of the lube oil system problems. Even after the top management had been made aware of the problem with the main engine, they forced the vessel to continue service for several weeks.

Technical & management lessons to be learned
The lessons to be learned from this incident are among the following:

–

Oil sampling must be taken at frequent intervals and recorded as best recommended practice.

–

It is very important of correct and continuous operation of the lube oil purifiers. The gravity disc must be selected to obtain the optimum oil-water interface at a maximum temperature close to 90 deg C depending on specifications.

–

The lube oil feed system to the purifiers should be evaluated in order to ensure the optimum flow rate between the purifier’s capacity and feed pump. Older lube oil feed system designs use a direct drive pump that has too high capacity with respect to the recommended flow through the purifiers.

–

If heavy contamination of water is present in the system: (1) the lube oil in the sump tank must be transferred to a settling tank, (2) the sump tank should be cleaned, and (3) fresh oil filled to the minimum level recommended by the engine maker.

The contaminated lube oil can be drained and circulated through the purifiers and the future use of the oil can be assessed after analysis.

–

If it has been determined that solid particles are present, you should also consider cleaning of the piping system and flushing the entire engine.

This incident also shows the importance of responsible and qualified shore management. In this case, the person at the management office in direct contact with the vessel did not have the proper qualifications required to effectively assist the vessel or take the necessary actions in case of an emergency situation. There was little understanding of the continuous request for spare parts or of the seriousness of running the main engine with contaminated lube oil.

Impact on vessel’s LOH and H&M policies
Insurance conditions
The vessel’s H&M insurance was subject to Institute Time Clauses Hulls (ITCH) Port Risks including Limited Navigation (20.7.87). The ITC Perils Clause includes, inter alia, the following wording:

"This insurance covers loss of or damage to the subject matter insured caused by negligence of master, officers, crew and pilots...provided such loss or damage has not resulted from want of due diligence by the assured, owners or managers."

Furthermore, the vessel was insured for LOH, and the policy was based on the SP 40B Loss of Charter Hire Form (August 1961), amended to cover loss or damage caused by a peril insured against under the ITCH Port Risks including Limited Navigation (20.7.87). Consequently, the above perils clause would also govern the LOH policy.

Cause allegation
The assured maintained that the damage was proximately caused by an act or acts of negligence by vessel’s engineers in failing to ensure that the main engine lube oil was properly purified. Therefore, this would be a "prima facie" claim under the above stated perils clause.

Coverage issues
Whilst it might appear difficult to disregard the assured’s allegation, it seems clear that the lack of proper supervision/supply of spares etc. by shore based personnel significantly influenced the damage.

With reference to the perils clause quoted above, it should be noted that the cover of loss or damage caused by negligence of the master, officers, crew and pilots is subject to a proviso that the loss or damage has not resulted from want of due diligence by the assured, owners or managers.

Therefore, the crucial questions to consider in this type of case are:

(a)

Whether the lack of proper supervision/actions by shore personnel amounts to "want of due diligence", and if so,

(b)

Whether the loss/damage was a result of the want of due diligence, and

(c)

Whether those who could be blamed for want of due diligence could be identified with "the assured, owners or managers".

If the answers to all questions are affirmative, there is no claim. The ITCH Port Risks are subject to English law and practice. However, the numbers of English cases that have considered the wording of the due diligence proviso have been rather limited.

We propose however the following comments to the questions above:

(a)

There appears to be little doubt that the lack of proper supervision/actions by shore personnel amounts to "want of due diligence".

(b)

There is no doubt that the want of due diligence by shore personnel has been an important factor in the development of the damage. On the other hand, one can easily argue that the vessel’s engineers have committed several acts of negligence have also contributed to the damage.

(c)

The position under English law have been described by Arnould (the leading English Authority) in general terms as follows:

 

"The failure to exercise due diligence must be the personal failure of the Assured, Owners or Managers, or of their alter ego in the case of corporate bodies, rather than a failure by subordinate employees."

Evidently, it is not possible to give a definite consideration to all cases from such a general statement, however, it is suggested that the insurer has to demonstrate lack of due diligence on a fairly high level in the assured’s organisation to be able to defend a claim.

In this case, it appears reasonably clear that the insurers could demonstrate lack of due diligence on a high level management of the vessel.

Conclusion
The parties eventually reached a compromise whereby the payment to the assured was considerably reduced due to breach of the due diligence proviso in the insurance conditions.

Coverage/policy lessons to be learned
The insurance aspects put even more weight to the importance of responsible and qualified shore management. The described failures to follow up the vessel by the management may eventually amount to want of due diligence in terms of the insurance conditions, and the result may become financially disastrous (in addition to the detrimental effect on business relationships etc. in case the vessel goes off-hire for an extended period of time).

Whilst in this particular case the vessel’s shore management was apparently fully aware of the situation on board and did not take adequate actions to remedy the situation, it may also be added that the "due diligence proviso" also may become applicable in case the management is "turning a blind eye" to an inadequate situation on board.