Marine Warranty Surveying for Offshore Projects - Issues faced in the current market

• Author: Alex Harrison
• Position: BSc, CEng, MIMarEST. This paper was presented to the 2008 Annual Conference of the Maritime Law Association of Australia & New Zealand in November 2008
• Pages: 122-142

MARINE WARRANTY SURVEYING FOR OFFSHORE PROJECTS

AND ISSUES FACED IN THE CURRENT MARKET

Alex R Harrison∗

1 Introduction

Historically, the Marine Surveyor’s primary role was the inspection of ships and their approval for classification purposes, or

to meet flag state rules and regulations. As such Marine Surveyors traditionally worked for Classification Societies,

involved in the design stage, construction and commissioning of ships and periodic class inspections of vessels, or for

Marine authorities of nation states who play a continued key role in ensuring that national rules and regulations are complied

with in the prime interest of safety at sea.

The advent of the offshore industry, with the exploration and production of hydrocarbons, then broadened the scope of the

classification societies. Classification Societies continued to be involved in standard Class activities through the

classification of offshore installation vessels and mobile offshore drilling units, but were also empowered to act, generally on

behalf of Government bodies, to ensure that permanent offshore production facilities were also designed, constructed and

maintained to a proper standard and fit for the lo cation.

In addition it became apparent, that the marine aspects of the temporary phases of an offshore project involved complex

structures and floating facilities and had considerable additional potential risks over and above normal shipping operations.

As such these risks needed to covered under specific insurance policies which allowed coverage for operations such as the

load out, towage, installation and hook up work thereafter of the project materials. In order to protect their interests in these

policies, Underwriters saw the need for an additional specialist independent 3rd party role to review and approve these

marine operations on their behalf and thus saw the introduction of another type of Marine Surveyor, the Marine Warranty

Surveyor (MWS).

Class Societies initially performed this role too, but this new requirement also saw rise to specialist firms of Marine

Warranty Surveyors. These firms have over time gained the confidence of oil companies and offshore contractors as well as

underwriters, the interests of all of whom they protect, and they are now the major providers of this service in most parts of

the world.

The MWS’s primary function today remains to see that all reasonable steps are taken and appropriate criteria followed to

ensure the safety of the project cargo, structure, unit or vessel throughout the periods from initial load out to final installation

in the field or discharge at final destination.

The aim of this paper is to provide an outline description of the general principles behind Marine Warranty Surveying, the

process employed by a Warranty Surveyor to fulfil their primary function and some of the main issues they face in the

current Market Place.

(2009) 23 A&NZ Mar LJ

∗ BSc, CEng, MIMarEST. This paper was presented to the 2008 Annual Conference of the Maritime Law Association of Australia & New Zealand in

November 2008.

122

2 What Is Marine Warranty

Terms of reference

The term Marine Insurance Warranty, as used in marine insurance, is based on the UK Marine Insurance Act 1906 and is

according to the "Dictionary of Marine Insurance Terms and Clauses" by R.H. Brown 1989, defined as:

A marine insurance warranty is a promissory warranty by which the assured undertakes that some

particular thing shall or shall not be done, or that some condit ion shall be fulfilled, or whereby he affirms or

negatives the existence of a particular state of facts. The assured must comply literally with the terms of a

warranty. Compliance in spirit is not acceptable. If the assured fails to comply with the terms of the

warranty, the insurer is discharged from all liability under the policy as from the date of breach of warranty,

but without prejudice to insured losses occurring prior to such date. A warranty may be "express" or

"implied". An express warranty is set out in the policy conditions. An implied warranty does not appear in

the policy, but is implied to be therein by law.

These terms of reference are particularly relevant for the London Insurance Market, but are regulated according to local law

in the specific country in question. For example in Norway it is necessary to be able to show a direct causal connection

between the accident and the condition resulting in a breach of warranty in order to discharge the insurer from liability.

2.2 Basic Principles

During the construction and installation phases of offshore projects, a Construction All Risks (CAR) and/or Transit

insurance policies will be taken out by the Owner, Operator or their Contractor to cover against losses during construction,

transport, handling, installation and commissioning activities of the permanent materials. In most cases the terms of these

policies will include a “Marine Warranty Clause” within which the Underwriter(s) who are offering the Insurance will

require that an independent Marine Warranty Surveyor (MWS) be appointed to the project to act as marine experts on their

behalf. It is the responsibility of the “Assured” (the insured party) to engage the MWS provider either through existing

agreement or via commercial Tender. However, the Warranty Surveyor chosen must be acceptable to the Insurer and in

many cases only a few specialized Warranty companies will be listed in the policy as acceptable for the performance of the

work.

The role of the Marine Warranty Surveyor is to act on behalf of the Insurer and the Assured to ensure that specific project

marine operations are performed to recognized codes & standards and within acceptable risk levels. These risk levels being

tolerable to the Insurance interests, to the industry as well as to national and international regulatory bodies where

appropriate.

Marine operations are in general all activities pertaining to the sea, but in this context limited according to the definition of

designed, non-routine operations of limited duration carried out at sea. This covers the temporary phases in connection with

load transfer, transportation and or securing of units at sea, discharge operations and offshore installation activities. Typical

marine operations in which the Marine Warranty Surveyor will be asked to provide approval for are shown in Fig 2.1

below:-

• Load out, Float out, Float on/off.

• Towed and Self Propelled Transports.

• Launching, Upending, Positioning of Jackets.

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