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Due diligence, SMS & insurance claims

The DC Merwestone made headlines in 2016 for court’s decision that when an insured employs a fraudulent device to advance an otherwise good claim, they do not forfeit their right to the entire claim. However, what many may have overlooked was the lower court’s decision in 2013 rejecting insurer’s contention that there was want of due diligence on owner's part as they did not have cold weather procedures & checklists, i.e. SMS was lacking, and this led to the crew failing to drain the sea water line and subsequently the water froze leading to cracks and ingress of sea-water into B/T room, and from there on into E/Rm through duct keel, causing extensive damage to ME' (costs $3.2 m).

The court found that there is no statutory or Class requirement for owners to have procedures for such and more importantly draining the system in freezing conditions was basic seamanship for which procedures are not needed. The owners had DOC and the vessel had SMC, and therefore ISM code requirements were complied with. Insurers failed to establish there was a universal practice amongst owners to have written procedures and checklists for cold wx. In any event, the owners had sent a mail to the vessel to remind them of cold weather precautions and this was deemed sufficient.

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