New Builds, New Risks: Protecting the Marine Insurance Surveyor During Handover Surveys

There’s a common assumption in the marine industry that new vessel builds are essentially problem-free. After all, everything is fresh from the shipyard, constructed to modern standards, and backed by warranties. But experienced marine surveyors know better, which is why they always make sure they are as well-insured as the captain taking the boat onto the open waters. Having the right insurance for marine surveyor work is a critical safeguard against liability when new builds don’t perform as expected.

Why New Builds Create Liability Risks for Marine Surveyors

Even brand-new vessels can harbor hidden defects. For instance, surveyors occasionally encounter boats outfitted with a temporary shackle instead of a permanent one. Small construction flaws or shortcuts taken during the building process can lead to catastrophic failures. So can a missing gasket, an improperly torqued fitting, or a substituted component that doesn’t meet required specifications.

The stakes are particularly high because both vessel owners and their insurers place tremendous weight on the surveyor’s report at handover. This document often serves as the definitive assessment of the vessel’s condition and seaworthiness. When an owner makes a significant investment in a new build — sometimes millions of dollars — they expect the surveyor to catch defects before they take delivery.

Yes, a handover inspection is a professional opinion based on visual and non-destructive observations within accessible areas. It’s not a guarantee that every latent or hidden defect will be discovered. However, when defects are missed, surveyors may face lawsuits alleging negligence, professional oversight, or breach of duty. Even if it turns out that the surveyor conducted a thorough inspection and isn’t liable, the legal defense costs can be substantial.

Coverage Agents Should Recommend

As an insurance agent working with marine surveyor clients, your role is critical in making sure they have the protection they need. Here are the essential coverages every marine surveyor should carry:

• Professional liability: Also known as errors and omissions (E&O) insurance, professional liability coverage protects against claims of negligence, errors, or oversight in the surveyor’s professional work and typically includes legal defense costs.
• General liability insurance: This coverage protects against claims of property damage or bodily injury during vessel inspections.
• Equipment floater: Marine surveyors often lug around expensive equipment — moisture meters, ultrasonic thickness gauges, thermal imaging cameras, and specialized testing devices. This coverage protects these investments against damage, theft, or loss.
• Protection and indemnity (P&I): This coverage applies when surveyors operate their own vessels or carry crew to job sites, covering maritime liabilities not addressed by general liability.

Risk-Management Strategies

Beyond recommending the right policies, guide your surveyor clients toward effective risk management.

• Encourage clear documentation of survey scope and limitations. Every survey agreement should explicitly state what is and isn’t included in the inspection. If the surveyor cannot access certain areas or if destructive testing is outside the scope, this must be documented clearly.
• Advise clients to reference applicable standards in their reports when relevant. Referring to ABYC, U.S. Coast Guard, and other standards helps demonstrate adherence to recognized industry benchmarks.
• Stress the importance of disclaimers to avoid unreasonable client expectations. Survey reports should include appropriate disclaimers that explain the limitations of visual inspections and clarify that surveys cannot guarantee the discovery of every possible defect. This helps manage client expectations and provides some legal protection.
• Encourage contracts to include limitation-of-liability clauses aligned with the surveyor’s E&O policy limits. Advise them to retain legal counsel for contract reviews.
• Recommend reviewing coverage limits as vessel technology and complexity increase. As vessels incorporate more sophisticated systems and higher values, surveyors’ potential liability increases accordingly. Regular policy reviews ensure coverage limits keep pace with these evolving risks.

A Parting Thought

New doesn’t mean risk-free. Construction defects, specification deviations, and installation errors can all create claims scenarios that threaten a surveyor’s business and financial security.

In short, the marine surveyor watches their customers’ backs; you watch theirs.

FAQ About Insurance for Marine Surveyors

What insurance does a marine surveyor need?

Professional liability (E&O) insurance is essential to protect against claims of errors, omissions, or negligence in their survey work. General liability insurance covers bodily injury and property damage that might occur during inspections. An equipment floater (inland marine) policy protects their specialized portable tools and diagnostic equipment from loss, theft, or damage while in transit or on the job.

Can a marine insurance surveyor be held liable for missed defects on a new build?

Yes, absolutely. Depending on the inspection scope and contract terms, surveyors can be held liable for defects they fail to identify during new build inspections, even if the defect was difficult to detect.

How can agents reduce liability risks for their marine surveyor clients?

First, ensure surveyors have adequate coverage limits. Second, educate clients about risk-management best practices, including thorough documentation and clear scope-of-work agreements. Third, recommend regular policy reviews so that coverage evolves with the surveyor’s business and the industry. Finally, connect surveyors with resources about professional standards and continuing education to help them maintain the highest level of competence in their work.

About Merrimac Marine Insurance

At Merrimac Marine, we are dedicated to providing insurance for the marine industry to protect your clients’ businesses and assets. For more information about our products and programs, contact our specialists today at (800) 681-1998.