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“Salvage” in cargo insurance
There are different meanings of “salvage” in different classes of insurance. In property insurance, “salvage” usually means salvaged goods. In marine insurance, “salvage” defines specifically services awarded to a third party to save maritime property from peril at sea.
Take the case of M/V Hyundai Fortune that was severely damaged after an explosion. Salvage service was employed and the hull was towed to the nearest port of refuge, Oman. Of course, salvage charges were incurred. There are two types of salvage – Contract Salvage and Pure Salvage. In short, Contract Salvage involves a contract stating the fixed amount of salvage charges before the commencement of the salvage service. By contrast, Pure Salvage means that salvage is undertaken without making any contract or agreement. Both parties agreed to decide the salvage charges at a later date.
No matter which kind of salvage services were employed, the vessel owner and all cargo owners needed to contribute to the huge salvage charges. Cargo owners had already suffered a financial loss due to the loss of or damage to goods, which contributed to these extra charges and made the situation even worse. Fortunately, these charges could be covered by marine cargo insurance in addition to the loss which, once again, showed the importance of taking out a marine cargo insurance policy.