Lloyd's Open Form and Side Agreements

The Lloyd‘s Open Form (LOF) salvage agreement is a well recognised and well established emergency response contract.

The use of LOF is widely accepted in the industry and the Club will always support Members signing LOF in emergency situations.  For about 20 years the Special Compensation P&I Clause (SCOPIC) has been used in conjunction with LOF.  The use of SCOPIC is supported by all International Group Clubs.

There is an increasing trend for Owners and their hull and machinery (H&M) underwriters to enter into arrangements (known variously as “side letters”, “pre-settlement agreements” and “side agreements”) which run parallel to LOF and SCOPIC, with a view to managing the H&M underwriters and Owner’s exposure to LOF Article 13 costs.  In certain cases, these side-agreements have either direct or indirect effects on the operation of the SCOPIC clause and, therefore, have a bearing on P&I insurance.

Members should always have contracts which may affect P&I liability approved by the Managers.  Members are also reminded that whilst the Club supports incorporation of the SCOPIC clause, they should consult the Club whenever an LOF side agreement is being proposed.  The Club will be able to assess the implications of the side-agreement upon SCOPIC and explain to Members whether it includes anything that might affect P&I cover. Members are encouraged to contact the Club as soon as discussions regarding side-agreements are raised in order that the Club may give its input at an early stage.

If you would like advice on anything contained in this article, contact Matthew Moore on +44 191 232 5221 or email.