A single technical error by an uninsured subcontractor has resulted in a US$70,000 settlement and prompted International Transport Intermediaries Club (ITIC) to warn ship surveyors of the financial exposure they face when relying on third-party data without contractual protection.
The dispute arose after a marine surveyor was appointed by a prospective buyer to confirm that a commercial fishing vessel met the requirements of the relevant maritime safety authority. As part of the survey, the surveyor instructed a third-party naval architect to provide technical information needed to calculate the ship’s freeboard. The data supplied was wrong, which led the surveyor to report the wrong freeboard and conclude that the vessel’s recorded lightweight in the existing stability book was inaccurate.
Mark Brattman, Claims Director at ITIC, said: “Surveyors rely on a wide range of technical data and much of it comes from third-party specialists who work on a subcontracted basis. When that information is wrong, the surveyor may be left carrying the liability, particularly where the subcontractor has no insurance of their own. This case shows how quickly a simple error can escalate into a claim that includes indirect losses.”
As a result of the incorrect information, the surveyor advised the buyer that the vessel required a full re-survey before it could enter service. In reality, the stability documentation was accurate. The buyer subsequently incurred the cost of the unnecessary second survey and missed three fishing trips while awaiting clearance, leading to claims for both the survey expense and the loss of income during the delay.
ITIC assessed whether earnings from those missed trips could be claimed and considered the possibility that a court might decide the surveyor was responsible for profit loss that could have been anticipated.
The situation was made more difficult by the fact that the naval architect responsible for the incorrect data had no insurance and no formal contract with the surveyor, leaving little chance of recovering any contribution. The claim was eventually settled for US$70,000, covering the cost of the second survey and an agreed amount of the lost income.
“Many standard trading conditions exclude liability for consequential losses, such as loss of profits, but in this case, the surveyor was not operating under any such terms. Surveyors should check the credentials and insurance position of any subcontractors they work with and ensure their own terms include a limit on liability, an exclusion for consequential losses, and potentially an exclusion that states the surveyor is not responsible for inaccuracies in third-party information they have reasonably relied upon, all of which should be agreed in writing. It is also important to take care when advising buyers about follow-up surveys and the operational impact of those recommendations. Clear documentation and robust contracts remain central to reducing the risk of costly disputes,” Brattman added.
ITIC has recently updated its recommended standard trading conditions for surveyors and consultants and can assist members in incorporating these into their contractual arrangements.
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