Designers must limit potential exposure to liability

The specialist responsibility of naval architects is to ensure that a safe, economic and seaworthy design is produced for clients. As such, they face exposure to high levels of liability.

A case in point is the naval architect who was instructed to design a commercial passenger ship which could reach speeds of up to 20 knots in reasonable weather conditions. During sea trials in extremely unfavourable weather, the ship reached speeds far in excess of 20 knots. But, soon after the ship entered service, it suffered various cracks to its hull, which the owner alleged were caused by inadequate welding design, as opposed to inadequate welding. The naval architect, meanwhile, maintained that the cracks were caused by the ship being operated beyond its recommended parameters in unfavourable weather conditions.

The ship was repaired, but the cracks returned on a number of occasions. A replacement vessel had to be chartered in by the owner while the ship was being repaired. A further dispute arose concerning the quality of the repairs by the shipyard and whether the alleged poor standard of repair work had led to further cracks appearing in the hull. The owner brought a claim against the architect and the shipyard for the cost of repairs, loss of profits, loss of use of the ship, chartering costs and diminution of value of the ship. The claim was ultimately settled on the basis of the cost of repairs and the cost of hiring a replacement vessel only.

In another case, a naval architect was contracted by a company to design a yacht, which subsequently competed in a race and sailed over 10,000 miles without fault. However, when the yacht was lifted from the water, several cracks were noticed along the keel blade. Both the manufacturer and the naval architect were notified that the cracks had appeared.

The naval architect realised subsequently that an error had occurred when transposing the design specifications onto the blueprint drawings, which were then passed onto the manufacturer. This error meant that the keel did not meet the strict strength specifications for a racing yacht. The naval architect informed the company of the error. But a subsequent survey conducted by a third-party surveyor found that the cracks had been caused by incorrect manufacturing techniques.

The manufacturer offered to repair the keel but, if it had done so, the yacht would still have been unsuitable for racing due to the design error. It was agreed that a keel of the correct specification should be supplied, and the additional costs were met by insurance.

When a naval architect is appointed, irrespective of whether the appointment is made orally or in writing, a contract is deemed to be concluded. Any failure on the part of a naval architect to meet obligations contained in the contract will constitute a breach for which, in principle, damages will be payable. Naval architects are engaged as professional advisers and in that capacity must show reasonable care and skill in giving advice. That cannot be changed by any written terms and conditions, although the written terms and conditions may reinforce that obligation, and may even impose a higher standard of care.

Naval architects must seek to limit their exposure by including in their contracts a clause limiting liability to a specific amount relative to the fee being earned for the project. Choice of jurisdiction and governing law may also help reduce or limit potential exposure. Finally, an exclusion or limitation clause should be included to account for any alterations made after the initial design.

Sometimes, naval architects may even be asked to defend claims in cases where they have not been negligent. An architect in Australia, for example, was contracted to carry out the external design of a yacht newbuilding. After the yacht was completed and set sail, a guest fell down a small flight of internal stairs during the course of an onboard party, sustaining back and hip injuries as a result.

The guest sued, among others, the yacht owner, builder, surveyor and two naval architects. Legal counsel was appointed to defend the Australian naval architect. Despite the fact that any design fault involving the interior of the vessel bore no relation to the work carried out by the insured architect, the parties were jointly sued in the amount of Aus$1m. Lawyers spent over Aus$150,000 - and seven years - trying to obtain a judgment removing the architect from proceedings – a costly event for something that was not even the architect’s fault.

The moral of the story is that you don't have to make a mistake to be sued. In such cases, insurance can help.