A US$70,000 settlement arising from an error by an uninsured subcontractor has prompted the International Transport Intermediaries Club (ITIC) to caution ship surveyors about the potential financial risks they face when depending on third-party data without adequate contractual safeguards.
The incident occurred when a marine surveyor, enlisted by a prospective buyer, was tasked with verifying if a commercial fishing vessel adhered to the standards set by the relevant maritime safety authorities. As part of the survey, the surveyor engaged a third-party naval architect to supply technical details required for assessing the ship's freeboard. Unfortunately, incorrect data was provided, leading the surveyor to misjudge the freeboard and erroneously conclude discrepancies in the vessel’s stability documentation.
Wide range of technical data
Brattman highlighted the risks in relying on diverse technical data often sourced from third-party subcontractors
Mark Brattman, Claims Director at ITIC, highlighted the risks in relying on diverse technical data often sourced from third-party subcontractors.
He stated, "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."
Cost of the unnecessary second survey
The inaccurate information led the surveyor to advise a complete re-survey before the vessel could be operational.
While the initial stability records were, in fact, accurate, the buyer nevertheless bore the expense of the second survey and faced missed fishing opportunities while awaiting re-approval. Consequently, the buyer filed claims for the cost of the survey and lost income due to the delay.
Naval architect responsible for the incorrect data
ITIC examined whether the buyer could claim earnings from missed trips and considered that the court might hold
ITIC examined whether the buyer could claim earnings from missed trips and considered the court might hold the surveyor liable for any reasonably foreseeable profit loss.
Complicating matters was the absence of insurance or a formal contract with the naval architect accountable for the erroneous data, which eliminated chances of obtaining any monetary contribution from them.
The settlement ultimately covered both the expense of the unnecessary survey and a portion of the buyer's lost income, totalling US$70,000.
Operational impact of those recommendations
Brattman emphasised the importance of clear terms, stating, "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."
Regarding recommendations for follow-up surveys
He also advised careful consideration regarding recommendations for follow-up surveys and their operational impact. "Clear documentation and robust contracts remain central to reducing the risk of costly disputes," Brattman added.
ITIC recently updated its recommended standard trading conditions for surveyors and consultants and is available to assist members in integrating these guidelines into contractual agreements.
