Surveyor Liable despite properly performing contractual duty

A case recently reported by the Transport Intermediaries Club illustrates how a marine surveyor can be held liable for substantial damages even when properly performing his contractual duties.

In its latest Claims Review, ITIC reports on a dispute involving one of its surveyor members who was appointed by a bank to confirm the value of a vessel under construction and to certify that additional funds could be drawn down during the construction period.

The bank confirmed that the role of the surveyor was not to monitor the standard or quality control of the ship’s construction, nor its conformity with design. But when defects were found in the ship after construction, the owners sued the shipbuilder, the surveyor attending to the quality control of the build, and also ITIC’s member, who was only acting on behalf of the bank.

Legal proceedings against all the parties took two and a half years to conclude. In order to finalise this matter, ITIC agreed to contribute Euros 35,000 towards the total settlement of over Euros 300,000 which was negotiated at mediation. A further Euros 30,000 was incurred in legal costs.

ITIC says, “This is an unfortunate example of where a surveyor can end up contributing to a settlement even though his instructions and responsibilities were clear from the very beginning.”

Elsewhere in its Claims Review, ITIC reports how one of its naval architect members designed two vessels to be built to US Coastguard rules for work in the Gulf of Mexico. Shortly before completion of the first vessel, the naval architect advised ITIC that it had made an error, as a result of which the vessel would not meet the strict stability criteria.

As the delivery date was fast approaching, a solution to the problem was agreed between the naval architect and the shipbuilder. This involved the fitting of two new bulkheads. But shortly after the rectification work started, it transpired that there was nothing wrong with the original design.

The cause of the apparent failure to meet the stability criteria was the use of different versions of software. The hull model was generated on a new version of the software, while the analysis was generated on an older edition. Rectification work ceased immediately and the vessel was restored with some minor modifications to the original design. The shipyard made a claim of $95,000 for the unnecessary work carried out, and was subsequently indemnified in that sum by ITIC.

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com.

28th March 2008
ITIC Press Release PR0208