Surveyors sued for loss of evidence

A firm of surveyors was appointed by an insurance company to investigate the cause of a fire at a factory in America. The cause of the fire was alleged to be a faulty forklift truck.

Following a joint inspection of the factory premises, the surveyors took control of the forklift and other artefacts and made arrangements to store them elsewhere. The forklift remained at these premises for several months. No clear arrangements had been made about who would pay for this storage. The storage invoices were not paid and eventually the company who was housing the forklift sold it for scrap.

The owners of the factory claimed significant insured losses and additional uninsured losses in excess of the policy limits. They believed that they could recover the losses above their insurance limits from the forklift suppliers due to the fact they alleged that the fire was caused by the forklift.

The factory owners contended that the forklift’s destruction prevented them from pursuing their claim for the uninsured losses against the forklift suppliers. They held the insurance company responsible who in turn sought to hold the surveyors liable.

The insurance company settled the factory owner’s uninsured loses claim for USD 1m. The insurance company then commenced an action against the surveyors for recovery of this sum.

A US lawyer was appointed by ITIC to provide advice on liability and protect the surveyor’s interests. The lawyer advised that the surveyors would definitely have an exposure, although there were arguments that could be used to reduce their liability. Issues included who had actually had responsibility to pay the storage company and whether the member should be responsible for the storage company’s possibly unlawful action in selling the forklift.

A major concern for both parties was the legal costs which are not recoverable by the winning party in the USA. These would have been very large if the matter went to trial. Therefore, negotiations were entered into and the matter was settled for 25% of the original claim against the member.

Not all insurance policies cover claims brought in the USA. ITIC’s cover has no jurisdictional limits and therefore defended a European surveyor who had a claim made against them in the USA.