Why naval architects need indemnity insurance

MAY 15, 2015 — Naval architects need to be aware of the need to protect themselves against their exposure to liability for damages resulting from errors in design work, says a leading provider of professional indemnity insurance to the marine sector.

International Transport Intermediaries Club (ITIC) cites recent claims experience that includes a case involving the operator of a passenger and RO/RO ferry service which appointed a naval architect to design a landing craft ferry. The design was to be based on that of an existing vessel operated by the company. Prior to beginning the design work, the parties entered into a design agreement under which the naval architect's liability was limited to approximately $750,000. 

Shortly after the vessel was launched, the operator noticed various issues relating to its performance, including vibration, lack of maneuverability and stopping capability. The vehicle loading ramp was also at an excessive angle in certain conditions, making the loading of vehicles difficult and, in some cases, impossible. The operators took the view that urgent rectification work was required so that improvements could be made before the approaching summer season. 

The vessel was drydocked and third-party experts were engaged to provide a report detailing the extent of the problems and their potential causes. Based on the findings of the report, the operators brought a claim for $3.5 million against the naval architect, alleging that the performance issues were attributable to design errors. The operators subsequently acknowledged that the naval architect's liability was limited to $750,000.

ITIC appointed an expert naval architect to inspect the vessel and comment on the extent to which the apparent performance issues could be attributed to design errors. The expert found that the naval architect was at fault, but that the claimant had incurred significantly more costly and extensive rectification work than was necessary. ITIC entered into negotiations with the operators in order to resolve the matter, and the claim was settled for slightly less than the limit of liability under the contract. 

In another case reported by ITIC, a naval architect entered into a contract with a shipyard to design the structure and access arrangements for new lifeboats and their davits to be fitted to a specific vessel. The naval architect undertook the design analysis, using data received from the manufacturer of the lifeboats, and produced design drawings. 

It was understood that the shipyard was to seek classification society approval of these designs before starting the build work under the terms of the yard's contract with the shipowner. However, due to time restraints and pressure from the shipowner, the yard decided to start building prior to obtaining class approval. 

The lifeboat support structure was manufactured and installed by the yard according to the naval architect's design. The yard subsequently noticed that the davits were flexing under operation, even without the lifeboats. An internal investigation within the naval architect's office determined that an error had occurred. Information from the lifeboat manufacturer had not been converted correctly by the naval architect's computer program, with the result that the calculations were out by a factor of 1,000. This error was not identified during the naval architect's quality assurance process and, as a result, the structural platform, as designed and built, was not fit for purpose. 

The yard raised a formal complaint advising the naval architect that the work on the davit support structure had to be rectified because of the error. A few months later it claimed that rectification had cost £347,254. ITIC assessed the claim and was also able to raise arguments that the contract terms excluded some components of the claim and that the yard should not have started construction before the classification society had approved the designs. A settlement was eventually agreed at £255,000.

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