The legal threats that arise during casualty management: Do you/your Emergency Response Team know how to recognize and mitigate against those threats?

A self-audit checklist to address and mitigate against the common litigation risks that arise in the context of a shipping casualty.

This month's newsletter is a re-write of an article I published three years ago. In it, we identify a number of the common litigation risks that arise in a casualty and suggests how to manage those risks in parallel with managing the casualty itself. Actions taken or missed in the first few hours or days of a casualty have the potential to damage or assist you should the matter litigate at a future date irrespective of the factual strength of the case.

Introduction

Leadership of the emergency response team (ERT) requires (a) effective decision making to eliminate, or mitigate against, the immediate threats; and (b) the development of a plan that anticipates and puts actions/procedures in place to either eliminate or mitigate against the developing risks arising from the casualty. Some of these procedures will already be documented and available while others will evolve as dictated by the nature of the emergency. No two emergencies are ever the same. Clearly, there is benefit in having procedures in place "ready to go" where risks can be anticipated.

The primary objective of the ERT will be the safety of personnel, protection of the environment and minimizing damage to property. Often, understandably, little thought is given to the litigation risk that may arise as a consequence of the casualty, especially given such litigation may be years in the future. Yet, as will be shown below, ERT decisions made in the first hours or days of a casualty may have a major positive, or negative, impact on future litigation, irrespective of whether the owner is advancing or defending against claims.

While pro-active management of the litigation risk is not necessarily a function of the ERT, it is essential that all members of the ERT and others involved in the management of, or decision makers surrounding, the casualty understand (a) what the litigation risks are; (b) why the risks exist; and (c) how to manage the risks.

It is also important that they, and others in the company, do not add to these risks by the decisions they make, the instructions they give, and what they, (or what they require others), to communicate and record in writing.

Casualty Management - not a "Day Job"

Management problems are solved, "wrongs" are prevented and risk minimized on a day to day basis as a consequence, in large part, of the experience of those making the decisions. A technical director, having worked his or her way up from chief engineer through superintendent, technical manager etc., will make decisions daily in the context of thousands and thousands of hours of experience. Such experience enables professionals to develop "mastery" in their role. It is use of this previous experience, (mostly sub-consciously), that increases the probability of decisions that result in a smooth and error-free operation.

In a typical owner's or manager's office, no one undertakes casualty management as their "day job". The technical director who leads the ERT will have experienced a few drills a year from which lessons will undoubtedly have been learnt, and he or she may even have attended courses to assist with command and control of a casualty. That said, however much experience is brought to the ERT by any individual from their day job, he or she will never have the same mastery of the ERT role as they have in that day job.

In most companies, it is unlikely that those in the ERT will have dealt with a major casualty previously. It is even rarer that anyone in the ERT will have experienced a casualty that goes through to litigation and have witnessed at first hand the impact in court of errors and omissions made in the first hours and days of the casualty.

While this lack of continuity of casualty experience is good news when it comes to negotiating insurance premiums, the issue it raises is that where a risk is not known and understood, that risk cannot be managed. Much of our professional competence comes from experiencing errors, seeing near misses or understanding how others have faced similar challenges. A lack of understanding by individuals who have no awareness of the risk presented by their own actions is the worst of all risk management worlds.

A lack of understanding by individuals who have no awareness of the risk presented by their own actions is the worst of all risk management worlds.

The challenge then is to enhance awareness of the litigation risk in both the ERT and the organisation more generally.

The Gatekeeper Role

A strategy for dealing with this lack of continuity of experience, and by extension the lack of awareness of risk, is to identify those risks in advance, appointing gatekeepers to pro-actively manage specific risks and ensure procedures are in place and preventative behaviours fostered. Such an individual should ensure that best practice is followed and prejudicial events avoided, while also being responsible for briefing and educating others in the company.?Examples of the gatekeeper's role are given below.

Pervasive Challenges - Mitigation, Causation and Leakage

Before turning to the checklist, there are two pervasive litigation risks to consider, (a) premature speculation about causation; and (b) leakage of documents.

The role of the ERT is to mitigate the impact of the casualty, not to address cause. However, human nature dictates that there is often a desire for knowledge and understanding about the cause of a casualty. We all want to know "why" something went wrong.

It is rare indeed for an early explanation of cause to survive a forensically robust investigation.

It is likely that in the first hours and days following the incident, there will be inaccurate information and conclusions wrongly made about why the casualty occurred. The true picture will only emerge after witnesses have been interviewed, the voyage data recorder and other electronic evidence has been analysed and other evidence has been captured and cross-referenced. Inevitably, evidential conflicts will arise that need to be identified and resolved. It is rare indeed for an early explanation of cause to survive a forensically robust investigation.

Commonly, it will be the cause of the casualty, in the context of contractual provisions and/or statutory requirements, that will determine where the liability lies for loss and damage. Other than direct exchanges with the lawyers to obtain legal advice, or reports/messages which have the dominant purpose of being for litigation, (a surveyor sent on board to determine the origin of a fire for example to prepare to defend against cargo claimants), it is likely that any document or communication created following a casualty that refers to cause would have to be notified and made available to opponents for inspection in due course. This obligation is named "disclosure".

...discussing, noting, minuting or exchanging communications about the cause of a casualty should be avoided in the early stages until a thorough investigation has been completed and evidential conflicts eliminated.

The obligation to disclose would apply equally to factually incorrect documents created at an early stage. Documents cannot be withheld because they are "wrong" or harmful to a case. Although these documents can be redrafted, an opponent would still be entitled to disclosure of the original versions and then be at liberty to argue in court that the original should be relied upon as the "correct" version and/or to seek to undermine any witnesses in cross-examination where their evidence deviates from that original version. Moreover, factually incorrect documents can undermine a negotiating position. For this reason, discussing, noting, minuting or exchanging communications about the cause of a casualty should be avoided in the early stages until a thorough investigation has been completed and evidential conflicts eliminated.

The requirement to disclose documents to an opponent may not occur for up to two to five years in a major casualty. During this period, a settlement may be negotiated. Leakage occurs when documents that have the potential to harm the negotiating position, or that open up lines of inquiry (say a question over the reliability of an item of equipment) are accidentally released before the court requires that document's disclosure. This could be as little as a master providing a copy of the crew list to an opponent surveyor, making it easier for opponents to obtain a court order to prevent crew from leaving the jurisdiction and requiring them to give evidence on oath, or where self-drafted crew statements are provided to a charterer's agent in port when there is no requirement to do so, and these are then passed on to the charterer. It is important to ensure that documents that in any way address or relate to the incident are only released outside of the immediate owner/manager and club/legal advisor team, when it has been positively confirmed that it is tactically appropriate to do so.

It is important to ensure that documents that in any way address or relate to the incident are only released outside of the immediate owner/manager and club/legal advisor team, when it has been positively confirmed that it is tactically appropriate to do so.

Finally, it is important to understand that the ERT records themselves are likely to be disclosable. ERT logs and checklists should be confined to the ERT's mitigation efforts and avoid reference to cause. The obligation to disclose extends to recordings, so where there is a microphone in the conference room used by the ERT, great care should be taken in what is discussed. Opponents will probably, in due course, be entitled to listen to these recordings. Some companies prefer to disconnect this microphone.

The Checklist

The following check list can be used as a self-audit to ensure that the primary risks are identified and managed.

Managing the Risks

The above risks are now addressed in turn in more detail.

1 - External Communications

An example arises in communicating with counter parties such as charterers following a casualty. Although there may be a long and effective commercial relationship, it is possible that a grounding may, for example, evolve into a high value unsafe port dispute.

It is likely that the Master and/or operations team will face requests from counter parties to explain what occurred (or indeed why it occurred) and that in making these requests, those counter parties will have one eye on a future claim against the owner. The counter party would be free to use all communications relating to the incident in litigation, including those headed "confidential." While bearing the commercial relationship in mind, the role of the external communication gatekeeper is vital to control what is said to those outside of the organisation other than to the club/legal advisor.

The gatekeeper does not necessarily have to be the person making the communications. There may be good reasons why this should be someone else, for example the Master, especially if that individual is the usual correspondent for such communications. However the wording of outbound messages should be approved and signed off. If the gatekeeper is not experienced in managing the legal disputes that arise from casualties, or is unfamiliar with, say, the contractual terms of a charter party and how these may impact on a claim for loss and damage, then the in-house insurance/claims teams or club/legal advisors should be used by the gatekeeper as a resource to advise on avoiding prejudicial message content.

Others within the organisation remote from the ERT should also be aware of the threat and the need to exercise care in communications. It may be that a counter party regularly speaks on the phone with members of the in-house operations team. The members of that team need to be aware of the limits on the information that they should provide following a major casualty.

...change does not effectively occur as a consequence of an email instruction or a line in a procedures manual.

The "mindset shift" this involves should not be underestimated. We are asking team members who spend their professional life facilitating communication between the owner and contractual partners to completely change their communication style. Such a change does not effectively occur as a consequence of an email instruction or a line in a procedures manual. There is no substitute for practical experience. There may be value during a drill, of having someone telephone an individual in say the operations team or crewing department, pretending to be the cargo interest or a relative of someone on the vessel, trying to get information. Errors made in the safe environment of a drill will be invaluable experience and assist in providing the necessary self-confidence should a casualty occur and such phone calls be received.

2 - Managing the recommendations from club/legal advisor

There is value in having an identified individual to manage the legal side of the casualty, who has the task of making sure actions/recommendations from the club/legal advisor are followed through. Ideally this should be someone with line management authority over the technical, personnel and loss prevention/quality assurance functions.

3 - Preservation of evidence

A lawyer's causation report will invariably contain a list of evidence which should be preserved in case of litigation. This report will be reviewed by senior management. It is likely that all will agree in the owners/manager's office that it is important to preserve the listed evidence, though it can be, on occasion, that no one will see it as their task to ensure this. When approaching trial four or five years later, it may be discovered that documents are lost or misplaced possibly because the ship has been scrapped or sold. By having an evidence gatekeeper from the outset, who takes advice from the club/legal advisor on what to preserve and ensures that this is done, (and handed over should he or she move jobs or retire), the potentially disastrous result of loss of evidence can be avoided.

A particular issue arises with the Safety Management System, (SMS). As a consequence of the requirement for continuous improvement, the SMS is a living document, always evolving. Opponents will be entitled to disclosure of the SMS documentation (which will include manuals, circulars, directives, standing orders etc) as they existed at the time of the casualty in so far as the contents of those documents are relevant to the casualty. A copy set should be preserved as it was at the date of the incident by a nominated individual.?

4 - Controlling access to vessel

A master will be faced with large numbers of individuals seeking access to his vessel following a casualty. Naturally local authorities and flag state representatives are entitled to board. Others such as class, hull and machinery and general average surveyors will need to attend to commence the process of preparing the vessel's return to commercial operation and collect evidence relating to the adjustment.

Charterers and cargo interests may wish to have their own surveyors attend the vessel. The extent to which an owner is required to permit counter party surveyors access will depend upon the procedural law of the jurisdiction where the vessel is located, the law of the jurisdiction that governs the contract of carriage, or other commercial agreement, and the terms of those contracts themselves. It is usual for counter party surveyors to be permitted to examine and record the extent of the damage before remedial work is commenced, and where appropriate to take samples, typically jointly with an owner's own surveyor, but not, in the absence of a statutory or contractual requirement, to investigate cause. Consequently, in the absence of a contractual or legal obligation, it would not be usual for a counter party surveyor to speak to the crew about cause or to to examine log books/other records. Generally access to vessel plans would be permitted.

Advice should be taken from the club/legal advisors on the nature and extent of such permitted surveys and a written agreement reached with the counter party setting out the parameters of the survey prior to attendance. When the survey takes place, an opponent surveyor should be accompanied to ensure the survey does not stray outside those agreed parameters.

Owners/managers should consider providing the master with a “white list” of those permitted to board the vessel, requiring the master to contact the office for specific authority in the event that anyone not on the list seeks access. This list is likely to evolve throughout the casualty.

5 - Production of self-drafted statements / protests etc.

This issue addressed in greater detail?here.

By way of summary, when a casualty is sufficiently large for the club to send legal assistance to the vessel, where possible the production of statements of facts and drafting of witness statements should wait until that assistance is on hand. Often there is a misguided attempt by crew drafting their own statements and protests, in a genuine attempt to assist in defending the owner, to explain the cause of the casualty. These explanations often have the opposite effect and may prejudice the owner when self-drafted statements are disclosed.

6 - Production of internal documentation addressing causation

The obligation to disclose documents is continuous. This means that the obligation continues up until final judgement. The consequence of this is that non-privileged documents created post incident that are relevant to either party’s case will have to be disclosed and made available for inspection.

This would include internal emails, memos, meeting minutes and the accident investigation report mandated by s. 9 of the ISM Code. In addition, there is a requirement under the ISM Code to (a) conduct safety meetings on the vessel, (b) conduct safety meetings in the office, (c) conduct management meetings in the office, (d) review the system on the vessel, with a view to recommending improvements and (e) carry out a management review by the office with a view to improvement of the system. All of these activities have to be recorded and it is highly possible that, where there has been a major incident, this will be addressed during these meetings.

While managers and owners should continue to comply with their ISM obligations, care should be taken that inaccurate information about cause is not included in such internal documents, and their contents should be reviewed for prejudicial language that may provide an opposing litigant with a tactical advantage. This may mean, where possible, a delay until all are satisfied that cause has been properly determined and, if prejudicial to the owner, consideration has been given on how to best express this in writing.

In following the philosophy of continuous improvement, many owners and managers will use major incidents as the basis for in-house training. This may involve a “warts and all” overview of the incident and an analysis of “what went wrong” as a learning exercise. While there is great training value in such exercises, those creating documents for them should liaise with the club/legal advisors beforehand.

7 - External incident reports

Following a casualty, charterers, oil majors in particular (and this can include those not chartering the vessel at the time) will generally look to the owner/operator to provide them with a detailed report of the incident tracking the cause and contributory factors as well as measures that are being put in place to mitigate against the risk of such an incident occurring again. If this report is not forthcoming, or fails to satisfy the oil majors, the consequences can be severe i.e. not only the withdrawal of chartering approval for the vessel involved in the incident, but also approval for all vessels under the same management. Clearly the charterer is interested in "cause."

The owner/manager should take the guidance of the club/legal advisor in the production of such reports. The goal is to produce a report which fully meets all the requirements of the oil major, but minimizes the risk of presenting a tactical litigation advantage to opponents. By way of example, the words ‘incompetent’ and ‘negligent’ may be treated as interchangeable by a superintendent drafting the report, but in the context of disputes relating to carriage of goods by sea, the two words are viewed very differently when it comes to allocation of liability for loss and damage. (We explore this in more detail here.) Everyday use of language can risk creating the wrong impression when considered in the context of litigation.

8 - Press/shareholder releases

While it is helpful to have a press release ready to go if necessary, if the casualty is not attracting major coverage, it may be preferable to wait rather than unilaterally raising the profile of the incident. There is value in working with media specialists to draft the text of a press release, although the final wording should always be approved by the Club, so it is in place ready to release if other media coverage warrants it. It is important to bear in mind that the majority of publications will print the press release word for word. Consideration should also be given to how widely to disseminate the press release. Not all cases necessarily warrant a worldwide distribution. There may be circumstances where only local publications in the language of that country are targeted.

Where a company is listed, there may be a requirement for a shareholder announcement following the requirements of the listing jurisdiction and that market. Clearly the input of internal general counsel and/or a corporate lawyer who practices in that jurisdiction may be required, but as with press releases, ideally the Club should be involved in the drafting of the wording as the release will be a public document.

9 - Management and monitoring of crew movements

With respect to crew on the vessel, it is not unusual for a lawyer to arrive onboard to find that key witnesses have been repatriated as a consequence of a scheduled relief being due or a decision to relieve them on the basis they will have “nothing useful” to say to an investigator. The decision to relieve the crew member may have been taken in the crewing department without the knowledge of those involved in the casualty. The owner/manager should liaise with the club/legal advisors to ensure availability of witnesses until they are no longer required for initial interview.

Witnesses may also be needed for further witness interviews, to sign witness statements or to attend Court to give evidence.

In addition, it may be that as a matter of local law, witnesses can be compelled to give evidence which may become available to opponents. In many jurisdictions, a crew member will be free to depart until such time as there is a court order prohibiting him. If there is a risk that there may be an order to give evidence, it may be possible to remove that crew member from the jurisdiction before such an order is made. Local advice via the club/legal advisor will be necessary.

The crewman can then be interviewed later, with the testimony cross-referenced to the documents, electronic evidence and other witness statements. Conflicts can then be identified and corrected, and a final witness statement drawn up. If that witness is eventually relied upon in court, opponents will have the opportunity to cross-examine at trial.

10 - Communications with the average adjuster and review of the adjustment

Cooperation with the adjuster is paramount. However the adjuster is concerned with those items of expenditure and sacrifice that occur after the casualty. The surveyor employed by the average adjuster is there to make a record of the damage, sacrifice and expenditure. Other than the broadest of background facts, causation is irrelevant to the adjustment, though some surveyors believe that they are being helpful by analyzing cause. If possible at the outset, it should be made clear that the surveyor should not address causation and there should be an agreement that the club will see the report in draft form before it is finalized.

A gatekeeper should be appointed to be the point of contact with the adjusters and all document requests shall be channeled through him or her. Causation should not feature in any great detail and, where the adjuster has referred to documents provided to him, these should also be reviewed for prejudicial content before the adjustment is released.

11 - Communications with Flag

All communications with the flag state should be channeled through a gatekeeper. In a major casualty, there is likely to be a "no-blame" investigation by flag pursuant to the IMO's Casualty Investigation Code, (Resolution MSC.255(84)).

The purpose of the investigation is to make recommendations to prevent recurrence of the casualty. The purpose is not to apportion blame. Usually the report cannot be relied upon in court. However, opponents will be entitled to see the report and the contents of the report will impact on the strategy adopted by opponents during the litigation process and inform their line of questioning during the cross-examination of witnesses.

Owners will be given the opportunity to review the report while it is in draft form. There will be a relatively short period of time to undertake this exercise. This opportunity should be used to correct any misunderstandings or factual inaccuracies. (See here for more details about investigations following a casualty.)

12 - Leakage

Leakage has been discussed above. It is however a risk in its own right and controls should be in place to prevent proprietary documents from leaving the control of the owner/manager other than to the club/legal advisors until such time as disclosure is ordered by the court.

Footnotes and Other Articles

• Carriage - Is a certificate of competency sufficient to prove competence? (An introduction to carriage of goods by sea law and when negligence is a defence).
• In Class, STCW compliant, all certificates valid, yet still unseaworthy. Why?
• The master's statement of facts, what should be included, and more importantly, excluded.
• Accident Investigations - What is the purpose, who investigates, and must you answer questions?

All the major P&I Clubs have active loss prevention teams. They have a programme of regular newsletters which can be monitored here on LinkedIn by "following" them. There is certainly value in having a regular and ongoing dialogue with these loss prevention specialists. They have the advantage of dealing with the risk that give rise to the losses P&I coverage is in place to protect against on a daily basis. It is their day job.

I would invite you to re-post this article if you think your contacts may be interested in the content.

If you would like to publish this article in your own newsletter / circular etc., please do so, there is no need to write to me and ask, but please do let me know you have done this. In addition, please credit Hill Dickinson LLP and myself in the re-published article, and provide a link to this newsletter:

Litigation Risk Management Newsletter from Ian MacLean - Hill Dickinson

Find our more about Hill Dickinson's?Marine, Trade and Energy Team?and our?Casualty Team.

As always, the advice in the article is in the context of English law and offers only a generic overview. Exceptions and conditions apply to the statements of law which given the space available are very generalized. You should always seek assistance and guidance from the vessel's P&I Club/your legal advisor based on the fact-specific issues.

For those looking expand their legal knowledge, I can strongly recommend the?Solent University?one year distance learning?Post Graduate Diploma in International Trade and Maritime Law?led by?Susan Hawker. Details of the course and the entry requirements, (which recognize professional seafarer qualification as having academic value - a refreshing approach), are?here.

Fair winds, calm seas and, as always, it is to be hoped that the above is only ever of academic interest.

Ian MacLean - Hill Dickinson - 5 March 2023