Responsibilities and Liabilities of Marine Surveyors
surveyors are greatly relied upon by the marine community to perform a wide
range of tasks including:
advising purchasers, underwriters and lending institutions on the
condition and valuation of vessels[i];
advising vessel owners on how to recover or salvage a vessel in
monitoring the salvage of vessels in distress for the benefit of
acting as the eyes and ears of underwriters with respect to the cause,
nature and effect of losses;
supervising the repair of vessels which have been damaged; and
providing expert opinions to be tendered in court on matters within
their field of expertise.
One of the unfortunate side effects of
this broad reliance which is placed upon marine surveyors, is that as soon as
something goes wrong, they are often the first to be blamed.
The purpose of this paper is to review the
legal principals underlying the legal liability of marine surveyors and provide
some examples of how these principles have been or could be applied to the
different functions performed by surveyors.
Liability in Contract and Negligence
Generally speaking, marine surveyors are exposed to
liability under both the law of contract and the law of negligence.
The exposure of a marine surveyor to liability under the law of contract
will vary depending upon the terms of the individual contract between the
surveyor and his customer. However,
courts will generally be prepared to imply a term into the contract that the
survey will be conducted by the surveyor with the degree of skill and competence
which is generally exercised by marine surveyors doing the type of survey which
Since marine surveyors for the most part act in an
advisory capacity, the law of negligence as it is applied to marine surveyors is
generally based upon the law with respect to negligent statements.
This additional basis of liability is significant because it exposes
marine surveyors to liability to persons other than the persons who retain them.
In order to impose liability for a negligent statement, there are five
1. there must be a duty of care based on a ‘special relationship’
between the representor (surveyor) and the representee;
2. the representation in question must be untrue, inaccurate, or
3. the representor must have acted negligently in making the
4. the representee must have relied, in a reasonable manner, on the
negligent misrepresentation; and
the reliance must have been detrimental to the representee in the sense
that damages resulted.
The exposure of marine surveyors to liability in
both contract and tort, varies depending upon the function which they are
1. Condition and Valuation Surveys
By far, the function which most exposes marine
surveyors to liability is the performance of condition and valuation surveys.
A review of the decided cases involving these types of surveys
illustrates the application of the principles of the law contract and negligent
Cases Where Liability Imposed
The clearest example of liability being imposed upon a
marine surveyor is the case of the “Pacific
decided by the British Columbia Supreme Court in 1978.
In this case the purchaser entered into a contract to purchase a 40-foot,
wooden, West Coast fishing boat which had been converted to pleasure use.
Since the purchaser was not knowledgeable about wooden boats, he put a
clause into the purchase contract, providing that the purchase was subject to a
satisfactory marine survey. By way
of telephone call, he then retained a surveyor who was held out to be competent
for the survey of wooden boats. After the survey was prepared, the purchaser met
the surveyor and went over the survey report with him. Neither the surveyor nor his report made any mention of the
existence of dry rot on the boat. Shortly
after purchasing the boat, a shipwright doing some work on the boat easily
noticed some dry rot. An
independent surveyor, who was retained without being alerted to the dry rot
problem, also easily discovered the dry rot.
It was later discovered that the original surveyor had very little
previous experience with wooden boats.
With respect to the
law of negligence, based upon the evidence of both the shipwright and the second
marine surveyor, the court found that the surveyor was negligent in not
discovering the dry rot. Although
the survey was a “condition and valuation” survey performed primarily for
insurance purposes, the surveyor knew that the purchaser was going to be relying
upon his survey for the purpose of deciding whether or not to purchase the boat.
Accordingly, there was a sufficient relationship between the purchaser
and surveyor to impose liability for negligence.
With respect to the law
of contract, the court found an implied term in the contract that “the
survey would be conducted with that degree of skill which is generally exercised
by marine surveyors advising an intending purchaser”[v].
It is also noteworthy
that the court also declined to enforce a clause in the survey report which
purported to exclude liability for negligence because, among other things, the
purchaser did not become aware of it until he reviewed the report, which was
after the contract had been formed during the initial telephone call.
A second case where
liability was imposed upon a marine surveyor is the case of the “Triton”[vi],
decided by the British Columbia Court of Appeal in 1984.
This case involved a survey of a 37-foot
aluminium houseboat while it was undergoing a refit on dry land.
The survey was ordered by the owner for the purpose of obtaining
insurance, although the owner testified that the survey was also obtained for
the purpose of having a professional tell him what was needed for the vessel.
Subsequent to the refit, the boat capsized.
Although the cause of the capsizing was not immediately apparent, the
most likely cause was reverse siphoning of the sump discharge lines after
loading caused them to be submerged. Based
upon the evidence of another marine surveyor that he would have recommended that
the sump hose be elevated, the Court of Appeal concluded that the surveyor who
performed the original survey was negligent.
In this case, the court
does not specifically address the issue of whether a survey prepared for
insurance purposes should be relied upon by the owner of the boat.
However, it would appear that the court must have concluded that it was
reasonable for the surveyor to have anticipated that the owner of the boat would
be relying upon his insurance survey for the purpose of ensuring that his boat
was safe and seaworthy. This assumption is reflected in the trial judge’s
comments as adopted by the Court of Appeal:
do not think it really matters whether the survey was intended to be a Condition
and Detail survey or a Valuation survey or something in between.
If the location of the through hull fittings or the overboard discharge
system created an unusual risk then that risk should have been disclosed in the
survey report whatever the type of survey.[vii]
court’s decision in the “Triton” is also noteworthy for the
fact that it imposes liability for negligence above and beyond merely inspecting
a vessel for deterioration in its hull and original fittings.
In this case, the surveyor was held negligent for failing to note what
could be categorized as a weakness in design.
Given the fact that most marine surveyors are not naval architects, I
would suggest that this may be too high a standard of expertise to expect from
marine surveyors. The result
in this case can perhaps be explained by the fact that the surveyor who gave the
evidence that he would have recommended remedial action to raise the sump
discharge line was the defendant’s own witness.[viii]
Cases Where No Liability Imposed
clear cut example of an unsuccessful attempt to impose liability upon a marine
surveyor is the case of the “Con Brio”[ix],
decided by the Supreme Court of British Columbia in 1986.
This case involved a pre-purchase survey of a sailboat, which was ordered
as a requirement of a bank which was providing financing for the purchase.
The survey report noted that the forward and aft end of the keel section
of the fibreglass hull contained fractures which were being repaired by a
reputable fibreglass repairer. A
short time after the repairs were completed and the boat was delivered, the new
purchaser discovered that the keel damage was merely patched, and not properly
repaired. In an action against both
the sellers and the marine surveyor, the court dismissed the case against the
marine surveyor and imposed liability upon the sellers.
In dismissing the case against the surveyor, the court said that the
failure of the surveyor to describe the seriousness of the damage to the
prospective purchaser was not fatal because of his statement that the repairs
were being performed by someone whom he knew to be knowledgeable, competent and
honest. As an aside, the court did,
however, suggest that it would have been prudent for the surveyor to suggest
that a marine surveyor supervise the work.
good example of a case where a court refuses to extend liability beyond the
original scope of a survey is the “Hiyu”[x].
In this case, the purchaser of a vessel required a satisfactory
survey as a pre-condition to purchasing the vessel.
At the suggestion of the vendor, a surveyor of the vendor’s choice was
retained by the vendor to perform a survey of the vessel, with the cost be split
between the vendor and purchaser. At
the time the surveyor was retained, he was advised that the survey was required
for a bank loan, but was not told of the proposed sale of the vessel or that his
fee was to be partially paid by the proposed purchaser.
Despite the fact that his survey failed to detect considerable dry rot in
the vessel, no liability to the purchaser was imposed.
In its reasons for judgement, the court said, “[l]iability for
negligent advice is owed normally only to those persons the advisor knows, or
should reasonably know, will rely upon his opinion.”[xi]
. This approach has more recently been endorsed by the British
Columbia of in a case involving engineers[xii]
and by the Supreme Court of Canada in a land mark ruling with respect to the
liability of auditors of public companies.[xiii]
A recent example of an unsuccessful case against a
marine surveyor is the “Key Largo”[xiv]
decided by the Provincial Court of British Columbia (Small Claims Division)
in June of 1998.
This case involved a pre-purchase survey of a 38-foot motor cruiser
which recommended the boat as being suitable for cruising the “protected
waters” of the Pacific Northwest. Approximately
seven months after the boat was purchased, it encountered unusually rough seas
in English Bay and suffered damage to its hull including a cracked plank and two
broken ribs. A second marine
surveyor, who was initially hired by the owner’s insurance underwriter, gave
the opinion that the weakness of the hull should have been discovered during the
original survey. He also
recommended that in addition to repairing the cracked hull and broken ribs,
repairs were required to strengthen the hull so as to make it seaworthy.
Although an action was commenced by the boat owner
against both the seller and the marine surveyor, the action against the seller
was settled for an undisclosed amount. As
a result of the refusal of the marine surveyor to settle, the action proceeded
to trial against him. At trial,
evidence was led to show that while the second marine surveyor had the benefit
of inspecting the boat after it had been stripped to perform the repairs, the
first marine surveyor had very limited access to the bilge area to inspect the
hull. Given the first surveyor’s
limited access and the fact that the scope of the original survey was limited to
examination of the hull by “means of visual alignment, sounding and probing at
random”, the court found that it was
“unable to conclude that . . . [the surveyor’s] . . . failure to note any
weaknesses in the component of the vessel amounted to a guarantee to . . . [the
purchaser] . . . that the hull would be free of defects”.
With respect to the surveyor’s opinion that the boat was suitable for
cruising in protected waters, the court concluded that the seas encountered in
English bay, though a “freak occurrence . . . were the equivalent of
unprotected waters or open sea.” Accordingly, it did not award any damages against the
2. Salvage and
Vessels in Distress
Although surveyors are often only retained to
act for underwriters at the scene of a vessel in distress, it is not
uncommon for vessel owners to seek advice from the underwriter’s surveyor and
rely upon that advice. Accordingly,
there is a significant exposure to liability to the vessel owners in the event
that the surveyor’s advice turns out to be negligent. Given the fact that advice often has to be given quickly
under difficult conditions, it is possible that a court would not impose too
high a standard of care upon the advising surveyor.
With respect to the relationship between
the surveyor and the underwriter, the surveyor’s duties, as set out in the
A.M.U.B.C. Guidelines (see Schedule One) include the following:
estimating salvage and repair costs to assist in determining whether or
not to declare the vessel a constructive total loss;
encouraging the owner to provide a course of action and providing
comments regarding the same; and
reviewing bids from potential salvers and providing comments to the
vessel owner on the same.
noted in the A.M.U.B.C. Guidelines, unless specifically instructed by the
underwriter, the surveyor should not authorize the salvage or repair of
the vessel or in any other way confirm coverage.
3. Loss Surveys
As set out in the A.M.U.B.C. Guidelines, the
role of the marine surveyor when acting for an underwriter regarding a loss is
to determine the cause, nature and extent of the loss.
With respect to determining the cause of
the loss, surveyors should be aware of the limits of their expertise and
recommend retaining an outside expert when appropriate.
One function, which is often appreciated, is providing advice on whom
would be the most appropriate expert to retain for a particular problem.
Since expert opinion on the cause of the
loss is often contentious, it is useful to try to keep this opinion confidential
by having the report prepared for the underwriter’s lawyers so as to claim the
benefit of solicitor client privilege. While
this does not guarantee that a claim of privilege will be upheld, it adds
support for the contention that litigation was anticipated at the time the
report was ordered.[xv]
Another issue to consider is the
preservation of evidence. If the
evidence is destroyed before the vessel owner has an opportunity to have it
reviewed by his or her own expert, the underwriter’s surveyor may have to
disclose his notes and photographs.
With respect to advising on the extent of the
loss, the A.M.U.B.C. Guidelines suggest that surveyors should draw up repair
specifications for the vessels. Although
I am aware of no case on point, if a vessel owner is relying upon a surveyor to
draw up a complete list of required repairs, and he fails to do so.
There could be some exposure to liability if a required repair is not
discovered until after a release is signed in favour of the underwriter.[xvi]
If a marine surveyor is acting as agent
of the underwriter, any suggestions that the loss will be covered, could be
interpreted by the courts as an admission of liability.
Accordingly, the A.M.U.B.C. Guidelines caution against making any
comments which could be interpreted as confirming coverage.
Since the surveyor is not generally aware of the terms of the individual
policy, or the breaches of any warranties in the policy, he is in no position to
comment on coverage.
Since underwriters only wish to pay bona
fide claims, the surveyor should avoid taking any actions which could be
interpreted as assuming responsibility for paying for the repairs on behalf of
underwriters. Accordingly the A.M.U.B.C. Guidelines caution against
directing the vessel owner to a specific shipyard or otherwise taking control of
Surveyors should be careful to avoid directly
instructing the shipyard, particularly with respect to extras which were not
included in the original work estimate. Since
a vessel owner is not liable for repairs he does not authorize,[xvii]
if a shipyard proceeds to perform extra work on the basis of instructions from a
surveyor, it could be unable to collect for that work if the surveyor was not
authorized by the vessel owner to order that work. In such case, the shipyard could have a cause of action
against the surveyor for breach of warranty of authority.[xviii]
B. General Comments
1. Exclusion Clauses
While a summary of the law on the use and
enforceability of exclusion clauses is beyond the scope of this paper,
a few brief comments are warranted.
The extent to which marine surveyors use
exclusion clauses varies significantly from surveyor to surveyor.
Some surveyors purport to exclude liability for all of the advice which
they give, including negligent advice, while others merely attempt to limit the
scope of their surveys to the inspection of those items which can be viewed with
non destructive testing techniques. Whatever
the scope of the exclusion clause, as was pointed out in “Pacific
Crown”, unless the customer is aware of the exclusion clause at the time
the contract was entered into, it may not be enforceable.
This may not be a problem for surveyors who do
repeat work for underwriters who are aware, through course of conduct, of
exclusion clauses routinely placed in their surveys. However, this often creates
a problem for purchase surveys where the advice is often given orally before the
written survey is prepared. Probably the best way to avoid this problem is to
follow the practise taken by most shipyards of having the customer sign a
written work order containing an exclusion clause, prior to the commencement of
Although exclusion clauses may protect
marine surveyors from liability to the party who retains him, except in very
limited circumstances, they can have no application to persons who were not a
party to the contract. For example
in the case of an action by a vessel owner for advice given by a surveyor while
acting for an underwriter in a salvage operation, the surveyor would have no
protection. Another example would
be an action by an underwriter against a marine surveyor for negligently
preparing a condition and valuation survey requested by the vessel owner. [xix]
2. Defence Costs
It is not unheard of for surveyors to be
separately named in actions by vessel owners against their insurers.
In this type of situation, surveyors can be put to great expense if it is
necessary for them to retain their own counsel.
In order reduce exposure to this kind of liability, surveyors might try
to negotiate ahead of time an agreement with underwriters to cover their defence
costs, subject to it being established in a court of law that they were
negligent in their duty to the underwriter.
Expected Standard of Care of a Marine Surveyor
Surveyors in British Columbia have diverse
backgrounds. Ideally a marine
surveyor would have prior experience as a shipwright, marine engineer, naval
architect, and master mariner. In
addition, it would be desirable if there existed a widely recognised
organization for the training and certification of marine surveyors. Unfortunately, most surveyors do not have this broad
background and we do not have a widely recognised certification process.
As a result, it can be problematic determining just what level of skill
and competence is acceptable.
As a general rule, the courts assume that
members of a profession are loath to appear in court and give evidence against
each other. Accordingly, if one
marine surveyor is prepared to appear in court and give evidence against
another, a court will give this evidence quite a lot of weight. However, when
reviewing this type of evidence, it is always important to look beyond the
opinions of the surveyors involved and scrutinize what qualifications they have
to give their opinions. On the one
hand, if one is relying upon the report of a marine surveyor one should ensure
that he has the necessary background to give the opinion.
On the other hand, if one is relying upon the report to sue another
marine surveyor, one should insure that the surveyor presenting the report is
not imposing an unacceptably high standard based upon his unique background
experience. For example, on a basic purchase survey, one should not expect a
level of expertise on the engine components that only a marine engineer could
provide or a level of expertise on the design components that only a naval
architect could provide. On the
other hand, as was pointed out in the case of the “Pacific Crown” a surveyor should not be taking on a job which he
does not have the necessary qualifications to perform.
If he does so, he may be found liable for his customer’s losses.
4. Errors and Omissions Insurance Considerations
When considering bringing a subrogated action
against a marine surveyor, it is always prudent to consider the prospects of
collecting in the event that one is successful in obtaining a judgement. Given
the lack of affordable errors and omissions insurance for marine surveyors doing
purchase surveys, many marine surveyors in British Columbia to not have errors
and omissions insurance. Accordingly,
collection against marine surveyors can be a significant problem.
As a result of the wide range of functions performed by marine surveyors, they are exposed to a wide range of liabilities to a wide range of persons. Since by their nature, they are expected to be “jacks of all trades”, they run the risk of liability because they are often “masters of none.” Marine surveyors have benefited from a recent decision of the Supreme Court of Canada which has implicitly confirmed earlier court decisions which have limited the liability of marine surveyors to those persons who the surveyor knows or might reasonably know will be relying upon his report.
earlier version of this paper was presented to the Association of Marine
Underwriters on May 26, 1999. Brad
M. Caldwell is a Vancouver based lawyer whose practise is primarily devoted to
 “Key Largo” supra note 13, p. 8.
[i] In the trial level decision of Armac Diving Services Ltd. v. Meadows Marine Surveyors Ltd. (the “Triton”) (4 Feb. 83), (Victoria Registry No. 1066/80) (B.C.S.C.), the court described these type of surveys as follows: “The least detailed would be a Condition and Detail survey for insurance purposes – concerned primarily with the risk to underwriters. A more comprehensive type is a Valuation survey – of interest, for example, to a lending institution. The most comprehensive would be a Purchaser’s survey.”
[ii] Campbell v. Image et al. (the “Pacific Crown)  2 W.W.R. 663 (B.C. Co. Ct.)
[iii] See Queen v. Cognos  1 S.C.R. 87 as discussed in Allen M. Linden, Canadian Tort Law (6 ed.) p. 429.
[iv] Campbell v. Image, supra note 2.
[v] Campbell v. Image, supra note 2, p. 3.
[vi] Armac Diving Services Ltd. v. Meadows Marine Surveyors Ltd. (the “Triton”) BCJ 1754 (B.C.C.A.).
[vii] “Triton” supra, note 6, p. 2.
[viii] Armac Diving Services Ltd. v. Meadows Marine Surveyors Ltd. supra note 6, p. 13.
[ix] Clark v. Advance Yachts Ltd. et al. (the “Con Brio”) (10 Sept. 1986) (Vancouver Reg. No. C805188) (B.C.S.C.)
[x] Beebe v. Robb and Davis (the “Hiyu”) (21 Oct. 1977) (B.C.S.C.)
[xi] Beebe v. Robb supra note 7, p. 4-5.
[xii] 327973 British Columbia Ltd. v. HBT Agra Ltd. (1994) 100 B.C.L.R. (2d) 149;160-1.
[xiii] Hercules Management Ltd. v. Ernst & Young [1997 2 S.C.R. 165 (S.C.C.). For a good summary of this case see Kristin Schmitz, “Supreme Court Limits Auditors’ Liability” Lawyers Weekly (13 June 1997 p. 1)
[xiv] Rowe v. De Groot Marine Surveyors Inc. (the “Key Largo”) (16 June 1998) (North Vancouver Prov. Ct. Registry No. 957738) (Small Claims Ct.).
[xv] See Shaughnessy Golf & Country Club v. Uniguard Services Ltd. et al. (1986) 1 B.C.L.R. 309 (B.C.C.A.).
[xvi] This type of problem can often be solved by the underwriter paying the additional claim upon receiving proof that the repair was related to the original fortuity.
[xvii] See Goldsmith on Building Contracts p. 4-13.
[xviii] See Terrace H&H Builders Ltd. v. Broecker 30 Nov. 1987 (Terrace Reg. No. 87.83) (Co. Ct.) for a non marine case where a court awarded damages for breach of warranty of authority against the occupier of a building who ordered repairs without the authorization of the owner; for the general principals of this cause of action see also 32262 B.C. Ltd. v. Wilke (26 March 1996) (Van Reg. No. A953478) (B.C.S.C.).
[xix] For an example of this type of fact situation see Kalke v. Fireman’s Fund Insurance Co. (the “El Primero”) (26 April 1990) (No. 1053) (B.C.C.A.). It is not know whether or not this case involved an exclusion clause defence, however, it does illustrate the fact situtation where a vessel owner sues an underwriter for non coverage and the underwriter joins the surveyor as a third party for alleged negligence in the preparation of the survey.