Introduction

In the past, companies involved in the marine industry – whether vessel operators, riggers, longshoremen, ship builders, repairers or construction companies – were specialised, and most focused on one aspect of the industry. However, the industry has changed and there are now fewer companies in the market, with each company often working in multiple areas.

The efficiencies gained by service expansion have been good for both companies and their customers. Companies can move equipment, personnel and other assets to work on a multitude of projects and can operate multiple types of project using shared resources.

Issues to consider

These efficiencies have made the provision of marine services easier. However, as companies move beyond traditional business models and begin to provide services in other areas of the market, there are numerous pitfalls to avoid. Companies used to operating in a land-based environment may not think about the special issues relevant to companies that operates in the marine environment and vice versa. Although it is difficult to generalise the significant issues because each company's situation is so different, the concerns usually relate to staffing, insurance and security issues.

A land-based contractor that works on a project offshore or adjacent to the shore will often acquire or use water-based equipment such as tow boats, barges, launches and other work boats to complete the marine-based project. This equipment is acquired on an 'as needed' basis where the sole concern is equipment acquisition to get the project done and little time is spent analysing how the acquisition affects the company's method of operating.

A good example is a land-based dredging company that has experience in digging canals, building levees and moving dirt around on land-based projects. If this company gets an opportunity to work on a project that demands similar skills, but requires working on the water, it will often work the project in a similar fashion, with the only change being the equipment that is needed (eg, the tow boats or barges that it acquires to operate their equipment over water).

Staffing

With regard to staffing, operating vessels with an improper crew can expose the company to liability or invalidate certain insurance coverage. The courts have ruled that a vessel that is not manned by a competent master and crew is unseaworthy. Further, the insurer may exclude coverage by showing incompetency of the crew. Thus, if a company operates a vessel without a properly licensed crew and an accident occurs, it may be found liable and the insurer may decline to pay for any of the damage if it does not have the right crew on board.

Comprehensive discussion of manning requirements is beyond the scope of this update. By way of illustration, 46 USC §8904 states that a towing vessel of at least 26 feet in length must be operated by an individual licensed by the Coast Guard to operate that type of vessel in that particular geographic area. As such, each towing vessel must be operated by a captain who is licensed with the appropriate level licence. The statute also includes a provision that regulates the hours of service that the employee can work. These hours of service rules may not match up with the traditional work schedules of the work crews.

So, depending on the scope of the work being performed and the work boats being utilised, a company should analyse the operation to ensure that it has acquired the right employees to operate the equipment that it is utilising. A land-based equipment operator may have the ability to run the small push boat that a company acquired to move the barge around, but should it? Only a thorough examination of the rules specific to the situation can identify these potential issues.

Insurance

With regard to insurance, a land-based operator will be familiar with the workers' compensation system and will have obtained adequate insurance to protect employees and the company from the types of risk experienced by land-based operators. However, once these land-based operators move to the marine environment, insurance needs differ and these traditional insurance policies may not cover many of the risks inherent to operating in the marine environment. With regard to employees, a workers' compensation policy will not afford coverage to employees who are found to be Jones Act seamen or longshoremen under the Longshore Act. With regard to property insurance, adding a recently acquired boat to the company's schedule of equipment on an existing property policy may not provide the coverage that a company needs in the event that someone is hurt aboard the vessel or the vessel is involved in an accident that causes damage to someone else.

So, as a company ventures out beyond the scope of its usual method of doing business, it is important to sit down with an insurance broker to discuss the operational changes, identify potential risks and procure insurance policies that adequately protect the company from these risks.

Security

Depending on the location of a project, certain marine projects require security measures that are not present in most land-based jobs. For example, if a company is working on a project at a marine facility that is regulated by the Maritime Transportation Security Act, it may have to have its employees obtain a transportation worker identification credential (TWIC) from the Transportation Safety Administration (TSA).

Although it is not difficult to obtain a TWIC card, this takes time. Since a TWIC card is required for any employee who needs unescorted access to a covered facility, employees may not be allowed on site until they are properly certified. A little advance planning will help companies to avoid an embarrassing project shutdown or delay caused by having a workforce that has not been approved by the TSA.

Comment

Although expansion into new service areas provides an excellent opportunity for a company to grow its business, it also exposes the company to new risks that may not have been present in the past.

None of these potential risks should prevent a company from growing its business, as these issues can be easily mitigated by determining how the changes affect its risk profile. Once potential risks have been assessed, it can determine how the operation can be modified to manage these issues.

As such, planning on the front end can protect a company from future surprises.

For further information please contact Lawrence R DeMarcay at Fowler Rodriguez by telephone (+1 504 523 2600) or email (ldemarcay@frfirm.com). The Fowler Rodriguez website can be accessed at www.frfirm.com.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.