Key takeaways
London Market LOF default clause
This was intended to be inserted into hull and machinery policies as of January 2025.
Update to LOF agreement
This was issued on 29 January 2026, together with a guidance note.
The revisions
These do not change the core position that default authority to sign LOF turns on immediacy.
In August 2024, we published our thoughts on the proposed London Market LOF default clause to be inserted into hull and machinery policies as of January 2025 – see Salvage Agreements: LOF 2024 Update | Hill Dickinson.
In that article, we highlighted the concern that the proposed wording required an 'immediate' danger for the owner or master to sign the LOF, noting that this could create issues and hesitation in borderline cases.
Following market feedback, on 29 January 2026, the Lloyd’s Market Association issued LMA5654A, updating the LOF Default Agreement and publishing an accompanying guidance note. Below we set out our views on the key changes.
What has actually changed?
Most of the changes are cosmetic in nature. By way of example, 'Salvage Services' has been replaced by 'Salvage Assistance'. The two material changes are as follows:
Clause 2 - Casualty Notification
The requirement for the owner to copy in the broker is now optional. In practice, we suspect most owners will still involve brokers, but the amendments no longer make it obligatory.
Clause 3 – Circumstances where Clause 1 does not apply
Clauses 3.1 and 3.4 no longer contain a reference to more 'suitable' and 'appropriate' alternative contracts. This presumably removes any doubt that owners need to consider further alternative contracts in circumstances where no agreement is reached between owners and insurers within the 48 hours outlined in clause 3.3.
What has not changed?
The default authority to sign LOF still turns on immediacy. Masters and owners must decide, in real time, whether the circumstances require immediate salvage assistance. That judgement call remains the pressure point that can slow decisions in borderline scenarios such as a vessel that has suffered an engine failure but is not at an imminent risk of grounding, or soft groundings where a tidal window makes hours critical.
Final thoughts
The revisions improve presentation and tidy the process, but they do not change the core position. The immediacy test remains the gatekeeper for the default use of LOF. Owners are therefore still left to make the same difficult call, and many will continue to consult as a defensive step, which in turn increases the risk of delay. Of course, these considerations only apply if the LOF Default Clause has been implemented into the hull and machinery policy, and this is something owners may wish to discuss with their brokers.
