Potential pitfalls when insureds appoint, pay for Marine Warranty Surveyors: legal analysis

There are some pitfalls to be avoided in drafting marine warranty survey clauses and matters can be complicated by the fact that the marine warranty surveyor (MWS), despite being a requirement of the marine insurance underwriter, is often chosen, employed and paid by the assured, according to an article in the latest edition of the Risk Management Solutions’ Reactions.

A legal analysis in Reactions by Nigel Chapman and Simon Jackson of Clyde & Co LLP note that marine and energy underwriters are commonly asked to underwrite projects with a high degree of technical sophistication and complexity.

“To protect their interests, underwriters will stipulate that the insured project is subject to review by a marine warranty surveyor (MWS), whom they expect to provide comfort that work is being carried out to objectively acceptable standards and so ensure that the risk of an insurance loss is being managed appropriately,” they write.

At the same time, however, the insured often appoints and pays for the MWS. This can present the appearance of a conflict between the interests of the insured and the interests of the insurer.

“The relationship between the assured and the MWS can be a positive and valuable one if the MWS commands the respect of the assured for his expertise and competence,” the authors write. “However, the practice of allowing the assured to appoint the MWS who they then pay for does not necessarily encourage the selection of the best qualified MWS as cost and perceived ‘interference’ with the project may form part of the decision making process.”

To maintain the integrity of the MWS, various organizations are now printing draft clauses and codes of practice for the appointment of the MWS, as well as the scope of the works that are to form part of the survey, the authors note.

The full article can be found at:

http://www.reactionsnet.com/Article/3073121/Legal-Analysis-Marine-warranty-surveys.html