International Transport Intermediaries Club (ITIC)—a mutual insurer that provides professional indemnity (PI) cover for transport intermediaries operating in the marine, offshore, renewable and aviation industries—has warned of the need for extra vigilance when it comes to the dangers of ordering equipment and the resulting financial implications for the offshore sector when getting it wrong.
ITIC highlighted the issue as part of its latest Claims Review, which detailed a case involving an offshore surveying company specializing in geophysical surveys that was contracted to conduct comprehensive geophysical and geotechnical surveys across offshore gas fields for a major oil player.
In this incident, many issues led to delays of approximately 300 days, including alleged faulty work, faulty equipment and vessels and other unfulfilled obligations. One specific issue the oil company raised was the surveyor’s negligent failure to ensure there was correct equipment onboard the surveying vessels which significantly contributed to the total delay. The oil company sought liquidated damages as a result.
During the claims process, the oil company sought damages of US$ 3 million under three contracts, with a limitation of liability of US$ 1 million per contract. However, ITIC ultimately reached a settlement of US$ 1.5 million for all three claims.
“Cases like these highlight the importance of thorough risk assessment, and it is important to have a nuanced understanding of contractual terms, particularly when it comes to ensuring that the equipment used during an offshore survey is correct for the job at hand. The legal and contractual intricacies can play a significant role in shaping the outcomes of such situations. Having a limitation of liability in a contract is always recommended. Insurance with ITIC also plays a major part in helping to mitigate these risks and offer a safety net for stakeholders that are actively involved in the offshore sector,” said Mark Brattman, Claims Director at ITIC.
Modern offshore oil and gas and renewable projects rely heavily on detailed and planned survey work to ensure the project runs smoothly and is ultimately successful. Equipment errors during this aspect of an offshore project can lead to cost overruns, schedule delays and poor quality of collected data that can impact the effectiveness of the offshore project.
