Ballard says one of the confusions is over crew sick pay, with managers and owners often being advised to cover sick pay for crewmembers for a minimum of 16 weeks:
“It is a requirement to pay crew salary in the event they are unable to work due to sickness or accident as per clause A4.3 of the MLC. However, in the same way that, by UK law office workers receive Statutory Sick Pay (SSP) from their employer, there is no requirement that this is insured. Therefore, we have been explaining the requirements to our clients and the benefits of insuring such an eventuality but as with general land based employment they do not need to insure the risk but can cover their own liability. Frequently, for example a UK employer don’t actually insure sick pay – they’d just pay it. I do not believe this has always been put across this way to owners.” Packages offering unpaid wages in the event of abandonment are also redundant, he said, because the section of the MLC relating to abandonment was never included in the 2006 ratification. “It’s a recommendation but not a requirement, so shipowners are not yet liable to pay abandonment wages.”
The comments surrounding MLC-specific insurance reflects a general sense of confusion over what is required, with brokers fielding requests for greater coverage than is necessary. “We had a shore-based manager come to us, trying to get us to give this enormous great insurance policy to the owner, but half of it was unnecessary,” said Keith Shepherd at Yachtsman Insurance Services. “He was trying it to get it to cover his back and make sure he complies with the conventions, but he’s read them slightly incorrectly. A lot of people misinterpret it and [might end up paying more], but you only need to comply with convention.”
Shepherd said the obfuscation has led to his company to launch a dedicated advisory service, geared to explaining what insurance is needed under the MLC. “There’s not many companies advising people – we wanted people to come to us and say ‘we’re a bit stuck, can you help us out?’ You may be insured with a policy that’s already insured – double insurance. If one company is insuring repatriation and another is too, which one pays?” However, others say advice and literature relating to MLC is only ‘marginally misleading’.
Burr Taylor at Sturge Taylor, agreed that some marketing might be confusing, but that there was a need for some MLC-specific products. “We’ve done standalone medical expenses and personal accident for years for crew, before there wasn’t any obligation to do it – the people [new to this area] are doing a bit of marketing and saying these insurances cover your MLC obligations, which isn’t strictly accurate as it only covers them to a certain extent and only through the P&I structure…the marketing is marginally misleading.”
Sturge Taylor recently launched a product to meet the requirements of the MLC for commercially registered vessels under 35m, which Taylor explains is a necessity under MLC. “The P&I insurers are covering most of the obligations regarding health and disability that arise under MLC so there’s not a particular problem on that front. But below a certain size yachts tend not to be insured in the P&I market and there will often be a third party liability insurance associated with the yacht policy…If you’re employing two or three crew on board, how do you deal with your obligations to those crew?”
Taylor also added that cover for payment of wages in the event of abandonment was a “useful tool for managers”: "There’s an obligation [under the MLC] to pay wages to crew, and if the registered owner of the vessel has gone bust they would still look to recover that through other entities who are involved in the operation of the vessel, or the supply of the crew. It's pretty inexpensive [as cover] and a useful tool for managers looking after quite large fleets – [otherwise] they could be looking at a heavy obligation. It can be useful regardless of whether it’s an MLC requirement."
The contradictions in opinions canvassed here, show there are many different opinions on how the MLC should be incorporated into an insurance plan. Some believe this could have been avoided if the insurance sector had mobilised earlier. Ballard feels "the insurance industry should’ve got together and be[en] singing from same hymn sheet." But there is room for error and the potential to overpay on insurance packages with a plethora of contrasting opinions on what is needed. And in the main, owners and managers should be wary of policies that simplify requirements for this complex legislation and should, instead, seek detailed consultation.