Professional Indemnity Insurance and the Hydrographer

Over the course of the last few years the trend has been for former governmental hydrographic organisations to become privately owned companies, joining the existing privately owned companies in the oil & gas and ports & harbours sectors. As this process continues it will become increasingly likely that third parties and contractual partners will attempt to hold such hydrographic service providers liable for losses they may have suffered whilst relying on the service provided.

The world is becoming ever more litigious and ITIC has seen an ever-increasing volume of professional indemnity claims made against its members, which include maritime professionals such as marine surveyors, naval architects, class societies and a number of hydrographers, over the corresponding period.

WHAT IS A PROFESSIONAL INDEMNITY CLAIM?

It is a claim against the provider of a professional service by someone to whom that provider owes a duty of care, either contractually or by the tort of negligence, and who has relied on the advice provided and has suffered a loss because of that reliance. As charts are now generally available to many members of the public, particularly following the introduction of the Electronic Navigational Chart and the increase of new companies which market and distribute hydrographic information, the potential number of people that rely on the information provided by the hydrographer, and therefore to whom the hydrographer owes a duty of care, will have significantly increased.

If a contract exists between a provider of a service and the consumer of that service, there will be a contractual duty of care. If the service is not correctly performed, this is known as a 'breach of contract' and the party who has suffered the breach will be able to issue a claim against the party in breach. However, if there is no contract (which in the majority of hydrographic charting cases there will not be) you can still owe a duty of care to another party. In the case of Donoghue v Stevenson [1932] Lord Aitken described what a duty of care is and to whom it is owed:

"The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer’s question, 'who is my neighbour?' receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably forsee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question."

Therefore, the hydrographer will owe a duty of care to any person or company that could reasonably be expected to rely on their service i.e. any ship owner or operator.

ITIC is aware of two claims brought against hydrographic charting service providers, each with a different result. First, the good news: in an unreported first instance case in the United States it was held that the then US Hydrographic Office was not negligent in causing the passenger liner, Queen

Elizabeth 2, to ground between Nantucket and Martha’s Vineyard after Cunard Line claimed that a reef had been negligently charted. Firstly, the Court held that the error on the chart was not as a result of any negligence by the US Hydrographic Office since the survey was conducted in accordance with 'state-of-the-art' techniques at the time the survey was conducted in 1939. It also held that there was no pressing need for NOAA to perform a new survey. Secondly, it was also held that the vessel did not actually rely on the defective chart when fixing its course. Therefore, even if the chart was defective, it did not cause the loss. The US Court of Appeal confirmed the second point, but the first was not mentioned in the judgement.

More worrying is the Swedish Supreme Court decision in the 'TSESIS'. In this case a Russian tanker struck a rock, which was incorrectly marked on the chart. The Supreme Court held that the Swedish Hydrographic Office was liable for the consequences. This included the damage to the ship. Even worse, the Court also held that as the chart was defective, this was a defence for the owner to any claim for the cleanup costs of the spillage and any pollution claims.

WHAT CAN HYDROGRAPHERS DO TO LIMIT THEIR POTENTIAL EXPOSURE TO LIABILITIES (AND SUBSTANTIAL LEGAL FEES)?

You will undoubtedly expect an article written by an insurance company to include a recommendation to insure with a reputable insurer and, of course, that is what we do recommend. However, although it is a useful and comforting safety net, insurance is only ever the first part of the answer because, even if you have professional indemnity insurance, you still have your professional reputation and your clients to maintain.

Secondly, then, you should devise a 'best working practice' guideline, which should be issued to, and followed by, all staff to minimise the chance of claims occurring in the first place.

Thirdly, if you are entering into a new contract, certain clauses should be either inserted at an early stage, or implemented into your existing standard trading terms and conditions.

For example:

• a clause excluding liability (an exclusion clause) - however, if this is not acceptable
• a clause limiting liability (a limitation clause) to a certain figure is quite usual

- this can be a specified sum or a multiple (certainly no more than ten times and, usually, five) of your fee

• choice of jurisdiction and governing law may also help reduce or limit potential exposure - based on the decision in the TSESIS do not agree to Swedish law if you have the choice

Finally, if a new report is being prepared or a new chart is being drawn, it is good practice to insert an exclusion or limitation clause on the actual document.

This article has focused on the charting sector of the hydrographic profession although parallels can be drawn within the other sectors. It would be impossible to detail each type of claim that you may be faced with during your professional life, or all of the risk avoidance strategies that may be available to help you, here.

However, if you require more information or advice please do not hesitate to call Charlotte Kirk on +44 (0)20 7338 0150 or email itic@thomasmiller.com

This article first appeared in Soundings, the newsletter of the Hydrographic Society UK.