The International Transport Intermediaries Club (ITIC), a leading mutual insurer specializing in professional indemnity (PI) cover for transport intermediaries, has issued a stark warning to the offshore sector about the substantial financial risks associated with incorrect equipment procurement.
The caution comes in the wake of ITIC’s latest Claims Review, revealing a concerning case involving an offshore surveying company engaged in geophysical surveys across gas fields for a major oil player. The project faced extensive delays, totaling approximately 300 days, attributed to a myriad of issues including alleged faulty work, equipment malfunctions, and unmet obligations.
A pivotal point raised by the oil company was the surveyor’s negligence in ensuring the correct equipment onboard the surveying vessels, a lapse that significantly contributed to the prolonged delay. Seeking liquidated damages, the oil company initiated a claims process pursuing damages of US$ 3 million across three contracts, each capped at a liability of US$ 1 million. Ultimately, ITIC settled the claims at US$ 1.5 million for all three contracts.
Mark Brattman, Claims Director at ITIC, emphasized the case’s significance, underlining the critical need for meticulous risk assessment. Brattman stressed the importance of understanding contractual terms, especially regarding equipment suitability during offshore surveys. He recommended incorporating a limitation of liability clause in contracts and highlighted the instrumental role of ITIC insurance in mitigating risks for stakeholders actively engaged in the offshore sector.
In the contemporary landscape of offshore oil, gas, and renewable projects, precise survey work is pivotal for success. Errors in equipment selection during this phase can lead to cost overruns, schedule delays, and compromised data quality, impacting project effectiveness. ITIC’s warning underscores the imperative for the industry to prioritize a nuanced approach to risk management, contractual intricacies, and the deployment of correct equipment.
Source: ITIC
