Unfair Competition
There is an element of unfairness, however, in the way our transportation infrastructure functions. While the relationship between intermodal harbors and railroads is symbiotic—neither could survive without the other—the same is not true for the internal water transportation systems of rivers and barge canals.

The 234-mile Tennessee-Tombigbee Waterway between the Tennessee River just east of Corinth, Mississippi, connecting with the Tombigbee River near Demopolis, Alabama, to reach the Mobile Bay is maintained by the U.S. Army Corps of Engineers, but competes with at least four parallel railroad routes.

The railroads must maintain their own track, bridges, and right-of-ways, in addition to not only paying fuel tax for their expensive locomotives but also property taxes, while the barge lines using these and other federally maintained waterways pay only a few lock charges and fuel tax for their fairly economical tugs. The railroads must also build and operate the lift bridges that allow commercial navigation. 

Even in river systems that are navigable only for short distances, such as the Cuyahoga, Calumet, Sacramento, Piscataqua, or Patapsco, the Corps of Engineers keeps the rivers open for shipping at taxpayer (not user) cost.

Major harbors are constantly in need of dredging, again courtesy of the Army, and places such as Mobile, Tampa Bay, Miami, New Orleans, or the Potomac could not be used were it not for the silt being constantly removed. There is no insurance policy that covers silt build-up removal. The Coast Guard monitors shipping safety; the U.S. Merchant Marine Academy at Kings Point, New York, turns out the ship captains just as West Point turns out second lieutenants. Meanwhile, the railroads have to provide their own training to Federal Railroad Administration standards and maintain their own bridges and right-of-ways at their own expense. As with the airlines, few of which have ever been known to build their own airports or operate their own FAA, there seems to be some inequity here.

Ongoing Maintenance
If the key to risk control is loss prevention, then the key to loss prevention is constant maintenance. Canals, harbors and waterways require constant care. New silt is being continually deposited by the rivers that flow into the waterway. Locks and the mechanisms that operate them must be constantly monitored, repaired or replaced. As we watched a ship pass up the New York Barge Canal, the gates of the lock had to close with exact preciseness. Any leakage would quickly become a hole, and any hole a deluge that would render the lock useless. The principles of canal lock construction are ancient: Britain, Ireland and Europe have had canals for centuries, and the Chinese built the Grand Canal south of Beijing in the Fifth Century B.C.; it is the longest in the world. It, too, is still in use and therefore must undergo continual maintenance. 

Although most canal locks are stone, not all stone is created equal. Some limestone is strong and will resist the constant moisture of a canal; other stone will soon erode and collapse, requiring rebuilding, which is not easy in an active waterway. This is part of what doomed the Wabash & Erie Canal, along with the building of the Wabash Railroad. Sandstone is also used in many waterways, or as breakfronts for harbor protection. 

Rivers and waterways are used for a variety of purposes besides navigation and recreation; when the Ashland Oil tank on the tributary to the Monongahela River burst and oil began flowing down the Ohio River, cities all the way from Pittsburgh to Cairo had to monitor their water intake systems to check for pollution. The clean-up cost millions, the type of direct and indirect disaster that can easily happen on a waterway. As a former Clevelander, I tend to bristle when I hear jokes about how polluted the Cuyahoga River was—in fact so polluted that it had caught fire several times. Well, I checked. The Cleveland Fire Department maintains a fire boat just beyond what is called Collision Bend on the river, but as there are now fewer steel mills, refineries and chemical plants on the river, there is also less pollution. Some cities have smog, the combination of smoke and fog; Cleveland had smawl: a combination of smoke and smell—all those boat and railroad-delivered ores, chemicals, sulfur and coal that powered Cleveland's booming industries.

Maintaining the Ships
While state and federal governments maintain the barge canals, harbors, and waterways, the users of those systems must manage their own risks. There is a hill above the San Pedro ship terminal where one can park and watch as shiploads of containers are unloaded by cranes onto railroad flatcars of the Union Pacific and Burlington Northern Santa Fe (BNSF) railroads for their journeys east and north. It takes awhile to unload a ship, but several a day undergo unloading both there and at Long Beach, the docks in San Francisco Bay, Portland and Seattle (not to mention Vancouver and Prince Rupert in Canada). Similar scenes are found along Gulf Coast and Atlantic ports, but the container ships are joined by other types of vessels as well, including oil tankers, ore boats, cruise ships, coastal freighters—virtually every type of vessel that keeps American commerce strong. 

The loading and unloading of equipment for each type of cargo is different. To load or unload a tanker, often the tanker must remain outside the harbor, with long hoses or pipelines to transport the liquids. Whereas at other locations, they can dock right next to the massive tanks or elevators that hold whatever the product being shipped might be, which could be lumber, chemicals, grain, coal (metallurgical coal is one of the major exports shipped from Norfolk, for example), or some distilled product. 

As a youth I often watched trainloads of coal unloaded on a rack in Lorain, Ohio, where the car would roll out onto a curved track and, at a certain point, the vents at the bottom of the car would open with the coal flowing down a chute into the boat's hold; then the car would roll backwards and another would take its place. As one part of the boat's hold would fill, the boat would move forward or backward so that the coal would be evenly distributed. 

In the Great Lakes, cargo vessels are called “boats;” on the ocean, they are “ships.” Some Great Lakes boats were hundreds of feet long—and it was navigating the 360-degree elbow in the Cuyahoga that gave rise to the “Collision Bend” nickname—a name used by Les Roberts in one of his mystery novels about Cleveland. Iron ore was unloaded by what were known as “grasshopper cranes,” a giant scoop on a steel arm that bent about 90 degrees and could reach down into the hold of the boat and dig out the ore. All of this infrastructure required maintenance and, of course, risk management. 

An Enduring Mystique
The mystique of ships and boats, harbors, warehouses, and lighthouses is understandable. Like the old song, a ship represents 'faraway places with strange sounding names,' although in the 21st century most shipping involves a simple back and forth between one port, such as the Persian Gulf and another, such as Texas City, month after month. Cruise ships may vary their itineraries, but cargo tends to be market-controlled, with regularity. Deviation is hazardous, as the captain of the Costa Concordia that crashed on the rocks off an Italian island discovered a year ago, killing more than 30 passengers. How about that for a claim? A multi-million dollar vessel, lost income, injured and dead passengers, and hundreds of international maritime attorneys trying to figure it all out.

Perils of the Sea…
The 17th century Lloyd's policy covered a vessel and its cargo for the “adventures and perils … of the seas, fires, assailing thieves, pirates, rovers, jettisons, barratry of the Master and Mariners, and all other like losses….” The fear of sea monsters (other than submarines in time of war) may be less today, but pirates and assailing thieves, fires and storms are still very real causes of loss to ships. The historic loss series in Claims over the decades have told of the explosions of ships in Halifax and Texas City, the Sultana and of the Titanic, as well as fires that remain a threat at sea. Few major harbors are without their fire boats, and fire and explosion is as big a threat to small craft as any gale. 

Imagine receiving a claim like Concordia, a pirated oil tanker or a millionaire's yacht off Somalia. Where would an adjuster start? The marine policy on a sinking vessel may contain some of that 17th century wording, but it also contains both written and understood warrants (“warranted free” means “excluded”) and conditions that affect the hull, the freight and the P&I (Protection and Indemnity)—the third party liability. That bit about the captain “going down with the ship”? Well, perhaps Concordia's captain should have. It's part of the “sue and labor” condition: as long as the captain is aboard the salvors are not in control. A few insurers and their reinsurers—or ship owners—may be seeing red ink for 2012 as a result. 

Review of the policies and contracts must come first in the loss of a ship. Then the international maritime law must be reviewed. The investigation must be accurate and expedited. All that is required before the loss can be assessed. Average adjusters will assess the hull damage. The rest is routine investigation, evaluation and negotiation, as in any claim.

Water transportation is ancient, but it is also extremely modern, and claims adjusters need to be prepared to handle such claims, whether they involve a bass boat with an out-board motor or an oil tanker with a multi-million dollar cargo.

Ken Brownlee, CPCU, is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claim-adjusting textbooks.