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X. Salvage Awards

We turn next to the determination of the amount of the salvage award. Computation of the salvage award has traditionally followed the long standing guidance provided by the Supreme Court more than a century ago.

In The BLACKWALL , Justice Clifford set out the six factors to be considered in determining the amount of the salvage award. The Second Circuit has arranged them in descending order of importance as follows:

1. The degree of danger from which the vessel was rescued;

2. The post-casualty value of the property saved;

3. The risk incurred in saving the property from impending peril;

4. The promptitude, skill and energy displayed in rendering the service and salving the property;

5. The value of the property employed by the salvors and the danger to which it was exposed;

6. The costs in terms of labor and materials expended by the salvors in rendering the salvage service.

In considering its award, the court must not only consider the peril immediately faced by the vessel but the dangers presented by the situation that might have forseeably developed but for the actions of the salvors.

The value of a vessel to her owner is what he can obtain for her in an arm's length, negotiated sale in the open market. Thus, the value of the benefit bestowed by salvors on the vessel owner is a vessel's market value after the salvage service but before repair compared to what her market value would have been had the salvors not intervened to relieve her from her peril. However, the amount of a salvage award is not based on a precise or exact valuation of the salved property particularly when that value is high.

Counsel for vessel owners and their insurers sometimes argue that had the vessel sunk, she would have lost as much as one-third of her market value as "damaged goods" not because of the physical damage to the vessel but as the result of the damage to the vessel's reputation. Thus, they argue, a lesser salvage award should be made for preventing the vessel from sinking because the vessel would have been worth less had she sunk.

However, care must be taken with such arguments. A savvy salvor's counsel will argue in return that, as a result of the salvor's efforts, the vessel owner was able to substantially avoid any significant loss of market value from the stigma of becoming known as "damaged goods". Accordingly, the successful efforts of the salvor saved the vessel's owner a loss of market valued above and beyond the cost of additional repairs and damage prevented by its actions and the award should be even greater.

The salved value is the post-casualty value of the property, in her damaged state, at the time of the salvage or after the vessel is brought into safe harbor. Deducting the actual cost of repairs from the value of the vessel after repairs is an acceptable measure of the vessel's value after salvage or salved value.

Another area of frequent dispute is the interplay between promptness and labor in determining the salvage award. It will often be argued that since the salvors had the fire out or the flooding under control in a relatively short time, that the salvage award should be reduced accordingly because no significant labor was involved. This is, of course, ridiculous. Salvors should not be encouraged to prolong their labors to enhance their award anymore than they should be penalized because the damage to the vessel was minimal. Any diminution of the salvage award based on such factors would be contrary to public policy inasmuch as they would encourage salvors to take their time and to allow further damage to the vessel.

Indeed, in cases of fire or flooding, rapid action is far more important than the amount of labor expended since the expenditure of too much time in such situations will only serve to worsen the damage. When time is of the essence, the shortness of time spent in rescuing the vessel does not lessen the merit of the service. For example, in the seminal salvage case of The BLACKWALL , the fire-fighting services rendered took less than one hour.

In considering the size of the salvage award to which the salvor is entitled, it is important to remember that the amount of the salvage award is not based on work and labor performed on an hourly or fixed rate basis, but is given as a reward to ensure safety of property and life at sea. There is a strong public policy in favor of encouraging salvors to save and restore property to its owners and to encourage others to venture out and save distressed property. Public policy is that salvage awards should be liberal in the form of a "reward", not quantum meruit.

Public policy dictates that a salvor's award should be such as to encourage others to aid vessels in distress. "Public policy requires that such a promise of reward should be held out, in case of success, that all those in a situation and competent to render relief, shall be eager to do so from the mere hope of gain." The salvage award should be neither too much nor too little. It must be sufficiently liberal to encourage salvors but not so high as to discourage vessel owners from seeking assistance.

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