On the 29 January 2026, the Lloyd’s Market Association (LMA) published a revised version of the Lloyd’s Open Form (LOF) Default Agreement, in collaboration with the International Chamber of Shipping (ICS). Originally published in 2024, The LOF Default Agreement was intended to promote the use of the LOF in salvage situations and to support prompt decision-making in emergencies. Using refined wording, and supported by an Accompanying Guidance Note, the LMA5654A has been produced with the aim of promoting consistent understanding across the market.
Changes of note:
Alteration to scope:
The Default Agreement now applies wherever “Salvage Assistance” is required, which is defined as “any salvage services rendered but does not include customary towage within a port and/or towage which is part of the ordinary trading of the ship”. This replaces previous application to “non-customary towage” and “salvage services”, eliminating the earlier circular definition of customary towage. This updated terminology is applied consistently throughout.
Notification (Clause 2):
Clause 2.1 features the insertion of the phrase “and may at the Owner’s option” be copied to the broker, which appears to remove any obligation to involve the broker in a salvage situation. However, the Guidance states expressly that the notification provision requires brokers to be copied – creating a lack of clarity between the clause wording and the accompanying commentary.
Circumstances where Clause 1 does not apply (Clause 3):
Clause 3.1 has seen the deletion of the wording “or all the circumstances happen to suggest that another contract may be more suitable for the situation”, reinforcing the LOF as the default position and reducing time spent negotiating the alternatives. Similarly, Clause 3.4 deletes the phrase “or any other Contract as considered appropriate without prior agreement of the Lead Insurer”, narrowing Owner/ Master discretion so that the LOF becomes the only emergency contract unless approval from the Lead is obtained – potentially slowing decision-making. Overall, these amendments increase the likelihood of the LOF being invoked at an earlier stage.
Other points of note relating to the accompanying guidance:
Reactions to the LOF Default Agreement 2024 were mixed, featuring concerns over whether it would be necessary to be able to contact the Lead Insurer around the clock, year-round, whether it was still necessary to go through the broker, and the issues that this might create. The Accompanying Guidance to support LMA5654A clarifies that, under Clause 1, Owner’s can and should proceed with the LOF immediately – so lack of ability to make contact is not an obstacle. The Guidance further suggests that under Clause 3, if an Owner has in good faith been unable to reach the Lead, they are able to proceed as considered appropriate after 48 hours. However, it remains unclear, as noted above, whether the assured must continue to copy in the broker or if they are no longer required at all.
There was additional criticism that the Default Agreement framework undermined the general principle that an assured should act as a prudent uninsured, since the requirement to consult the Lead Insurer in certain situations could be understood to encroach upon an Owner’s autonomy in managing their vessel. The Accompanying Guidance, however, asserts that the LOF Default Agreement does not provide an opportunity for insurers to control the choice of contract and claims handling; rather, it is intended to provided assurance to Owners that underwriters support the use of the LOF where immediate salvage assistance is needed and to allow Owners acting in good faith to proceed with another contract after 48 hours in non-urgent situations. Notwithstanding these statements, the substance of the clauses, particularly Clause 3, indicates that Insurers have increased influence in non-urgent cases.
Further uncertainty arises in relation to the role of P&I Clubs. The revised drafting provides neither an express nor an implied role for them, excluding them by omission from the salvage decision-making process. This isolates the dialogue to be solely between Owners and Lead Insurers, continuing to fail to acknowledge the practical reality that Clubs are typically closely involved in salvage matters.
Conclusion:
Taken together, the notable changes made in the revised LOF Default Agreement demonstrate a clear intention to strengthen reliance on the LOF and establish a more consistent understanding of the framework for emergency salvage situations across the market. However, the updated drafting and Accompanying Guidance leave open issues, and the potential for complications to assureds (and their P&I Clubs) looking to swiftly proceed with LOF agreements remains unresolved.
