Negligence claim against ship managers

A Member was appointed as technical ship manager of a cruise ship for a period of 2 1/2 years and thereafter was only responsible for placing the hull and P&I insurances and handling claims.

A few months after the manager's main technical responsibilities ceased, the ship suffered a breakdown of both main engines due to contaminated lube oil.  Hull insurers rejected the claim for approximately US$ 3 million stating that the damage was due to poor maintenance and on-board procedures.  There were allegations of earlier problems with the lube oil filters.

The owner issued a summons against the insurers and the manager.  The claim against the manager alleged breach of contract for failure properly to discharge his duties as technical ship manager and breach of fiduciary duty as regards the placing of the insurances of the ship.

The manager's liability was dependent, to a large extent, on the outcome of the main lawsuit between owner and insurers but as the trial date approached, the Judge convened a settlement conference which all parties attended.  By this time, the claim with interest amounted to nearly US$ 5 million.  At the conference, the insurers and the manager were advised that the actions against both of them might well be proved but the owner was also advised that there was a possibility that their actions might fail completely. 

The outcome was that the owner was persuaded to reduce his claim substantially and the agreed settlement plus defence costs were shared equally by the insurers and the manager. The total cost of the claim to the defendants was nearly US$ 2,000,000.

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