American Club Circular No. 33/16 1 SEPTEMBER 15, 2016 CIRCULAR NO. 33/16 TO MEMBERS OF THE ASSOCIATION Dear Member: LOSS PREVENTION: MACHINERY DAMAGE Your Managers are pleased to announce a new initiative aimed at preventing claims resulting from machinery damage. Such damage has a wide range of potential consequences which may impact hull & machinery, cargo and P&I interests alike. A greater awareness of the types of machinery damage that can occur, and the implementation of effective measures to prevent them, are key to reducing both their frequency and the severity of their consequences. The first two case studies are as attached. Members are recommended to refer to the Club’s new website section on machinery damage at: http://www.american-club.com/page/machinery-damages This section of the Club’s website will be periodically updated with new case studies and other relevant information taking into account best practices in the prevention of shipboard machinery failures. Members will henceforward be advised of such updates by way of Member Alert. Yours faithfully, Joseph E.M. Hughes, Chairman & CEO Shipowners Claims Bureau, Inc., Managers for THE AMERICAN CLUB American Club Loss Prevention : Machinery Failures 1 Machinery failures: Tales of the Unexpected? As marine casualty investigators the work of our surveyors frequently involves investigation into machinery breakdowns; quite often main and auxiliary engines. Occasionally the alleged cause of damage can be so far-fetched that it must be true! Mostly however the failure will occur through a few common causes. In spite of major improvements in design and quality control over the years, significant failures still occur. Why? Statistically around 40% of claims on H&M Underwriters are for machinery damages with corresponding monetary values much higher as a proportion. Consequential claims on P&I insurance can also be even more costly and then ensuing long debates on “seaworthiness” can create huge legal expenses. Through quality control measures, latent defects 1 in components whilst not totally eradicated have become very much less prevalent. Similarly, as investigation into cases has shown, whilst marine engines are still largely hand built, quality assurance procedures have virtually eradicated errors in construction. But against such progress, man’s inhumanity towards machine continues virtually unabated and when taking a fresh look at this and past research into failures and causation, some of which is now decades old, the one common denominator that still prevails today is the human element. In spite of the major advances in design and materials made, investigation into failures of the nature of that highlighted in our alerts will show that in particular the level of competency and the knowledge base of engineers at sea has fallen and fallen significantly. Where Do We Go From Here The industry collectively faces a conundrum; no amount of design excellence and material selection in the construction of sophisticated marine machinery will amount to actual progress with reliability when faced with the downward trend of the level of engineering ability at sea. 1 A ‘latent defect’ is a material defect that is not discoverable by “normal” i.e. manual / visual means. Such material defects, because of the early days and standards of machinery manufacture and construction have been a constant named insured peril in marine insurance policies. American Club Loss Prevention : Machinery Failu