Hull and Machinery (H&M) and Ship Damage Fraud
Domain 4 examines hull and machinery claims: grounding, collision, fire, engine damage, and constructive total loss. The exam tests seaworthiness, class and ISM records, repair economics, and the indicators of an engineered or exaggerated casualty.
Core rules
- H&M cover responds to accidental physical loss or damage to the vessel, subject to exclusions such as wear and tear, ordinary leakage, and latent defect. The Inchmaree clause may cover crew negligence or latent defects in machinery, but not the excluded wear itself.
- Seaworthiness is a fundamental issue. Class surveys, statutory certificates, ISM audits, and maintenance records show whether the vessel was fit for the voyage.
- Constructive total loss depends on repair cost versus insured value, not merely on the master's opinion. Compare independent repair estimates and scrap value.
- Scuttling and arson indicators include over-insurance, near-end-of-life vessels, unexplained fire or flooding, calm-weather groundings, crew changes before the loss, missing logbooks, and repair invoices from newly formed or related yards.
- AIS, VDR, engine-room alarms, and port state records can contradict the claimed sequence of events.
Worked example
A bulk carrier grounds in calm weather and claims $1.5m for double-bottom damage. AIS shows the vessel loitering near the shoal for two hours, the engine-room alarm history was disabled, and the repair invoice comes from a yard incorporated weeks earlier. The physical damage may be real, but the evidence suggests an engineered grounding. Investigators should secure VDR data, class records, crew statements, and yard payment records before settling.
Traps
Do not assume class certification proves seaworthiness, and do not miss wear-and-tear exclusions. Do not accept a repair estimate without testing the yard's independence and the repair scope.