United States: Classification Societies - Their Liability An American Lawyer's Point Of View In Light Of Recent Judgments

Vessel owners balked at carrying out permanent repairs and arranged for temporary repairs to be done. Mr. Ducat's subsequent survey resulted in new recommendations permitting the vessel to sail and requiring further inspection and repair at the earliest opportunity after cargo discharge but prior to loading any other cargo and not later than 30 May. In the meanwhile, Mr. Ducat recommended that the vessel be retained in class subject to this condition. The day after the "Nicholas H" resumed her voyage the temporary repairs failed. On 9 March after rescue of her crew, the "Nicholas H" with her cargo finally sank in the Atlantic Ocean. On these facts, Lord Steyn concluded for the majority that recognition of a duty of care would be unfair, unjust and unreasonable as against shipowners, classification societies and cargo interests.

Thus ended a series of decisions followed as closely in the United States as in the United Kingdom. In the Queen’s Bench Division (Commercial Court), [1992] 2 Lloyd’s Rep. 481, Mr. Justice Hirst had held that NKK did owe a duty of care to cargo owners. Lord Justices Balcombe, Mann, and Saville reversed in the Court of Appeal, [1994] 1 Lloyd’s Rep. 492. The House of Lords affirmed on somewhat different reasoning. Only Lord Lloyd of Berwick dissented in an exhaustive analysis and rebuttal of the Judgments of the Court of Appeal and of his colleagues.

At a time when port states, flag states, the IMO, vessel owners and their clients, marine underwriters, and the classification societies themselves--upon whom all such maritime interests ultimately rely--struggle to establish a consistent, reliable and effective worldwide system of vessel inspection and certification, the reasoning of the House of Lords could not be more disappointing or anachronistic. It is, however, consistent with the earlier decision of the United States District Court in Sundance Cruises v. American Bureau of Shipping, 799 F. Supp. 363 (S.D.N.Y. 1992), its affirmance by the Second Circuit Court of Appeals, 7 F.3d 1077 (1993) (The "Sundancer"), and the Second Circuit's further elaboration of its reasoning in International Ore & Fertilizer Corp. v. SGS Control Services, Inc., 38 F.3d 1279 (1994), cert. den., 115 S.Ct. 2276, 132 LEd 2d 280 (1995). The House of Lords cites The Sundancer approvingly and now, as if the logic of the United States' judgments weren't infectious enough, The Nicholas H has been cited by the District Court in Carbotrade SpA v. Bureau Veritas, (The "Star of Alexandria") 92 Civ. 1459 (JGK) (S.D.N.Y. 19 October 1995), appeal filed, as authority to deny cargo interests' recovery from Bureau Veritas.

The reasoning of the House of Lords majority judgment in The Nicholas H more fully articulates issues relevant to classification society liabilities than the recent judgments of United States' courts. Because of that and the judicial weight a House of Lords judgment carries in the maritime world and because the judgment of Mr. Justice Hirst, in the view of many maritime attorneys, had at last achieved the right result for the right reasons, it is important to consider the assumptions underlying Lord Steyn's majority judgment to appreciate better the significance of the final result.

The first factor which Lord Steyn found weighed significantly against imposing a duty of care to cargo interests was the potential for subverting established regimes of liability. It appears from the decisions that cargo interests had negotiated a settlement with the owners of the "Nicholas H" for about $500,000 and sought recovery for the balance of their loss--some $5.7 million--against NKK. The Judgment of Mr. Justice Hirst suggests that the settlement was based on the package or customary freight unit limitation in the Hague Rules which governed the relevant bill of lading. In the Court of Appeal, Lord Justice Saville acknowledged that recognizing a duty of care by NKK would be useful for cargo owners by providing another defendant. However, he could see no justice or good reason for adding to or altering the balance of rights and duties between cargo-owners and shipowners already established by internationally recognized codes like the Hague Rules and limitation of liability conventions, which place primary responsibility for care of cargo upon shipowners. Imposing on a classification society a like duty, but without any of the checks and balances or limitations existing in the present regime, would be unfair.

Lord Steyn extended this argument to the cost of insuring those liabilities, reasoning that recognition of a duty of care would have a substantial impact by exposing classification societies to large cargo claims, leading to an increase in insurance costs for the societies, and resulting in efforts to pass those higher costs or the liabilities back to owners. Thus cargo insurers could disturb the balance created by the Hague Rules and tonnage limitation provisions by enabling tort recovery against a peripheral party to the prejudice of the protection of the shipowners under the existing system.

This line of argument is questionable. If the Nicholas H was unseaworthy when she departed from Puerto Rico and if it was established that her owners were privy to such unseaworthiness, then her owners' entitlement to limit would have been lost and cargo interests would have been entitled to recover (either in full or, at least, the customary freight unit limitation in the Hague Rules). But if there were no other assets besides the vessel, then the P&I Club rule requiring its members to pay first to be indemnified also means--contrary to the liability policies of the statutory regime--that risk of loss does in reality fall on cargo underwriters. And also, if the owners sent the vessel on her voyage privy to her unseaworthiness, then owners' P&I underwriters would have a defense to their liability under the Club rules--also contrary to the liability scheme under the limitation of liability convention.

Cargo underwriters have the least control over classification society neglect. To protect their interests in circumstances like these, cargo underwriters must either engage their own surveyors to inspect and certify the vessels their assureds employ or increase the premiums to cargo owners. Thus far cargo underwriters have not taken the first and more inefficient course. It would be impractical for most underwriters to establish their own survey regimes because of the many underwriters concerned, the diverse vessels involved and the time constraints of cargo assureds' commercial arrangements. This option seems more suited, however, to those segments of the industry trading in single or related commodities, like the petroleum majors who, for some years, have vetted their tonnage to rigorous and comprehensive standards. The example of petroleum majors might also serve for underwriters of other bulk commodities. Underwriters of general cargoes, however, raise the premiums to their assureds who add that cost to the price of the product. While the risk gets distributed efficiently, the level of risk remains wholly unaffected. Such is the effect of the House of Lords’ decision.

As Lord Lloyd concluded, it makes nonsense of the law to premise a tort duty of a classification society to cargo on the existence or absence of a contract between shipowners and cargo. Beyond that legal principle, the analysis of the majority argument rests on two misconceptions: the first concerning the role of classification societies and the second concerning tort law policies. Surely the recognition of duty of care to cargo interests by a classification society does not imply that such a duty must also be coextensive with the shipowners’ or with the duties of others who issue negotiable bills of lading or are otherwise bound by contract to cargo! Classification societies do not operate vessels. Neither do they charter them or issue bills of lading. But the services they provide enable such activities to be carried on in a safer and more reliable manner. Moreover, lists of reasons for cargo damage which do not concern class are already to be found in the Hague Rules and the U.S. Carriage of Goods by Sea Act exceptions.

The maritime industry knows the nature of services provided by class: everything ranging from the promulgation of standards for materials incorporated into a vessel's construction, specifications for vessel strength requirements and pre- and post-delivery survey guidelines, to a host of technical services including, most recently, quality control audits of vessel management. Vessel surveys and certifications are just two of a multitude of services. Although, without the myriad certificates which flag states and other national authorities have authorized class to issue on their behalves under applicable international conventions and without the periodic in-service inspections necessary to maintain class, no ocean-going commercial vessels could operate. Period. Without qualification. In addition, no such vessel could obtain hull or P&I insurance and many of the same consequences might follow for lack of insurance as well. In short, no owner or operator could employ its vessel without the involvement of classification societies, even self-insured owners.

Courts seem unwilling to consider the uniqueness of classification societies in the marine industry compared, for example, to the offshore industry or to regulatory agencies in the aviation industry. There is no reference in these recent decisions to Lloyd’s Register’s evidence to the House of Lords Select Committee on Science and Technology or to that Committee’s Report, "Safety Aspects of Ship Design and Technology" (1992), or to the Commission of the European Communities’ publications, "On Common Rules and Standards for Ship Inspection and Survey Organizations"(1993) and "A Common Policy on Safe Seas"(1993), or to Lord Donaldson’s inquiry into the prevention of pollution from merchant shipping, "Safer Ships, Cleaner Seas" (1994), all public documents highlighting the unique status and role of classification societies.

Nor do some courts appear to realize that commercial vessels are not the relatively simple conveyances they were when classification societies came into being. Long past are the days when the master of a Dutch sailing vessel, stove-in by heavy seas, is entitled to rely upon the opinions of other vessel captains and agents of English and American underwriters in determining whether to repair or to sell his vessel at a port of refuge. In such a case the U.S. Supreme Court confidently stated: "No persons could be more competent to advise, or from the nature of their employment, better acquainted with the structure of vessels, and the cost of repairing them. . . .[W]hat course so proper . . . as to obtain the advice ‘of that body of men who, by the usage of the trade, have been immemorially resorted to on such occasions?’" Fitz v. The Galiot Amelie, 73 U.S. (6 Wall.) 18 (1868).

Nowadays, even if vessel damage is obvious no master would or could be expected to know what type of steel should be used to replace wasted structure, how the cracks in plating should be permanently repaired, or the manner and method of welding to be used. And while surveyors within the owners’ employ may be competent on these matters, the extent and method of repairs like those on the "Nicholas H" are, by the rules of all classification societies, subject to approval by class surveyors. The underlying principle is obvious: certification is meaningless unless class is kept apprised of vessel conditions about which it issues certificates.

So class is hardly a peripheral party, nor does it merely permit vessel owners to take advantage of insurance rates available to classed vessels. The only insurance rates relevant are for classed vessels! Neither is class comparable to a motor vehicle inspection station in regard to automobile operation. Yet, the Sundance, Nicholas H, and Star of Alexandria judgments all rely on these characterizations.

Rather than persist in minimizing the role of class or in conflating the duties of owners and class, why not allow class its real role according to actual industry practice? Unquestionably class is as important a participant as any other. Indeed, the majority of owners and operators simply cannot afford to employ persons on their private staffs having the same expertise as classification societies and it would be unreasonable and uneconomic to expect owners and operators to do so. In any event, class would be the first to object since the societies compete with each other--sometimes to an inefficient degree--to offer new and more technologically advanced services which owners are encouraged to utilize and to rely upon.

Secondly, Lord Steyn’s reasoning makes sense only if it is assumed that the risk of loss or damage in the circumstances cannot be reduced. Citing the notion of the shipowner’s "traditional, primary" liability is another way of articulating that assumption. But this confuses tort law policy with the efficacy of insurance. No one quarrels with the proposition that insurance is the best method of distributing marine risks. Classification societies, being the significant parties they are in the field today, are insured for liabilities to others, just as owners, charterers, cargo interests, shipyards, naval architects and marine engineers are insured. The cost of such insurance is already included in the fees charged by class for its services. No doubt if a duty of care had been recognized, NKK's premiums would have increased and also the cost of its services. But that is how insurance distributes losses.

Yet, the common law of tort, similar in fundamentals in both the U.K. and the U.S., exists to encourage conduct that does not cause harm, and to deter conduct that does. One tort law policy which accomplishes these goals is to place the risk of liability for negligent conduct on the party who is best able to minimize the risk of harm. The real reason for litigation against class is that the industry believes the risk of loss can be reduced in matters for which class is responsible. If Mr. Ducat had not changed--or not been persuaded to change, as Lord Lloyd remarks--his recommendation, the vessel would not have sailed until she was permanently repaired. This was Mr. Justice Hirst’s conclusion concerning "proximity." [1992] 2 Lloyd’s Rep. at 499. It follows plainly that had the vessel not sailed until permanent repairs were made, the risk to cargo, to say nothing of the risks to crew and to vessel, would have been reduced. And if a duty of care to cargo in these circumstances had ultimately been affirmed, can anyone doubt that classification societies would be encouraged to improve their internal procedures aimed at preventing vessels from sailing in similar circumstances without a more thorough condition assessment or to devise procedures to ensure immediate support and authority to beleaguered, on-site surveyors?

If the obligations of owners and class towards other participants in a maritime venture are not identical, there is no reason that liabilities should be identical either. When classification societies’ obligations in the industry are considered realistically, it will be apparent that imposing a duty of care on class would have tangible effects in reducing casualties.

Lord Steyn also thought the fact that NKK acted for the collective welfare was a significant matter. He quoted authorities describing classification societies as occupying a public and, in performing their statutory duties, a quasi-judicial position, acting as impartial critics and arbiters, and generally promoting the safety of lives and ships at sea. In their absence, he noted, these roles would have to be fulfilled by states. These considerations led him to conclude that if class were subject to liability to cargo interests, there must be an apprehension that class would adopt, to the detriment of their traditional role, a more defensive position.

There was a time, of course, when class was employed directly by the parties bearing the ultimate risk of financial loss--the marine underwriters. But that hasn’t been the case for many decades, during which time technology has transformed ship design, construction, safety, maintenance and operation. The truth today is that the employers of class are the very segment of the industry which class was originally established to assess. All but the courts acknowledge the conflict of interest. Industry publications are full of articles by all parties, among whom the debate fairly rages, about whether class is, any longer, objective and impartial. Underwriters have gone so far as to insist that surveys once entrusted only to class now be carried out by other, more reliable organizations or by teams of surveyors formed and employed directly by underwriters. Despite the proliferation of survey and inspection regimes and despite the fact that a classification society's role today encompasses far more than assessment, the courts rule as if the industry functioned as it did one hundred fifty years ago.

One can hardly blame class for objecting to the undermining of its industry authority which accompanies some of these efforts. More significant is the effect of multiplying vessel inspection regimes and so risking less consistent and even conflicting results. There are problems enough with flag state and port states regimes of inspections. Another regime only burdens an already burdened system. But neither can underwriters be blamed for taking such drastic steps: they are the ones, after all, who pay for marine casualties.

Also misplaced is Lord Steyn’s argument that class is entitled to some judicially developed immunity because its functions would need to be carried out by states if class did not exist. Functions internationally assigned to states under the Load Line, SOLAS, and MARPOL conventions--all concerned with promoting the safety of lives and ships at sea--and under international and state tonnage regulations already have been delegated wholesale to classification societies. Only a handful of flag and port states retain more than superficial involvement in necessary surveys and certificates. The reason is simple: states do not have the resources or expertise to perform these functions, but classification societies do.

It is instructive to consider the agreement among the nations adopting the SOLAS conventions, beginning with the first in 1929 and continuing to date. Signatory nations undertake to give effect to the provisions of the convention and to promulgate all necessary laws to ensure that ships and their equipment will, through the mandated inspections, remain in all respects satisfactory, and they undertake to guarantee the completeness and efficiency of the inspection and survey. The guarantee is right there in SOLAS.

As one U.S. delegate to many of the international safety conferences in the last twenty-five years wrote to me in connection with these undertakings: if there is no legal accountability for issuance of public safety certificates, then we have truly wasted the years since 1929 in offering false promises to each person who has bought or will buy a ticket on a ship and who then takes comfort in the safety certificate on the bulkhead by the bridge or the captain’s office and similarly with the loadline and MARPOL certificates which tell each nation and person in the world that a ship may be allowed into port because it has been inspected and found safe.

If the concern for a more "defensive" role means that classification surveyors will not permit vessels like the "Nicholas H" to sail, then "defensive" appears to be exactly what the industry wants. If the concern is for some chilling effect on the development of new design and technology, the common law of tort has long utilized notions like "state of the art" and "industry custom" against which to assess the provision of services.

Finally, among the additional "policy" factors the House of Lords cites is the favorite of all defendants: the liability floodgates scenario. Here, it goes that if a duty is recognized in the case of a damage survey, there is no reason why it should not extend to annual, docking, intermediate, special, boiler, and every other type of survey, which, for NKK alone, number on average some 14,500 per year. No doubt the same argument has been raised on every occasion when the duty of care of a tortfeasor has been judicially considered. The argument must be older than class itself. But surely neither NKK nor the House of Lords majority would have us believe that a significant number of the surveys performed each year by NKK, or by any other classification society, would lead to the assertion of claims.

The further arguments that an extra layer of insurance will become involved and that the settlement process will be complicated if a duty of care is recognized hardly outweigh the incoherence the reasoning of these judgments introduces into maritime tort law. Moreover, that class might be unwilling to survey the vessels most urgently requiring independent examination is exactly what the industry as a whole hopes to accomplish. The real-world effect will be the scrapping of those vessels because they no longer can be operated.

I suggest that if the role of class is objectively assessed under the circumstances of the loss or casualty, it should be possible to establish general principles of liability entirely in keeping with tort law. For example, in an early United States case, Steamship Mutual Underwriting Assoc. Ltd. v. Bureau Veritas, 380 F.Supp 482 (E.D.La. 1973), an owner’s P&I Club sought indemnity from Bureau Veritas for sums paid in settlement of cargo and other claims arising out of a vessel's sinking. The Club alleged negligence on the part of BV's surveyor in conducting a special survey one month before the vessel sank due to flooding of her forward cargo holds. An element of each of the four separate counts of negligence was the surveyor's failure to comply with BV's own rules. The Court fully considered each count and found rule violations as to two of them. As to those counts, the Court concluded that the survey was negligently conducted. The Club's indemnity claim failed against BV, however, because the Club could not prove that either rule violation resulted in a condition that caused the flooding that sank the ship. Nothing in the judgment suggests the court believed any principle or consideration other than those of common law negligence were relevant. As Lord Lloyd reassured his colleagues in The Nicholas H: "[t]he question in every case must surely be . . . whether the negligence . . . caused the damage." As a general principle of tort law, neglect is a cause if it is a substantial factor in bringing about the loss.

Facts which appear to cause United States courts the most conceptual difficulty involve allegations that a classification society surveyor has failed to detect or having detected then failed to report or otherwise to act upon a defect or deficiency which on some later occasion causes or contributes to loss or damage. In Great American Ins. Co. v. Bureau Veritas, 338 F.Supp. 999 (S.D.N.Y. 1972), aff'd, 478 F.2d 235 (2d Cir. 1973), another sinking case, the trial court held that subrogated underwriters of a vessel's owner and charterer had failed to establish causation. Significantly, however, the court also found that both the owner and charterer were fully informed of all defects in the vessel, notwithstanding any neglect of the class surveyor. "With knowledge and the opportunity to remedy the defects [they] elected to do nothing; '[they] took a calculated risk, and lost.'" 338 F.Supp at 1011.

This finding of fact as to equivalent knowledge prompted a lengthy discussion of other considerations which the District Court suggested ought to bar recovery against class. While the entire discussion is dictum, it articulated for the first time in a United States case involving a classification society, notions of the shipowner's traditional, non-delegable duty to cargo interests to maintain a seaworthy vessel and class's lack of "control" over the vessels it surveys. In particular, the court explained how class's services rarely, if ever, create hazards or defects and that class is functionally incapable of repairing or rectifying defects, so that imposing liability would be tantamount to making class a guarantor of any vessel it surveys. 338 F.Supp. 1011-15.

These arguments have been adopted in the reasoning of recent United States judgments and were advanced by counsel for NKK before Mr. Justice Hirst in The Nicholas H, [1992] 2 Lloyd’s Rep. at 495, with no attempt to distinguish (1) circumstances in which it is the owner who claims it relied on class from (2) circumstances in which parties other than owners have suffered loss. No tort law principle entitles a party who is as knowledgeable about defects or deficiencies as another to recover from the other party for losses later caused by those very defects or deficiencies. Put another way: absent evidence of "reasonable reliance" and "causation," tort law will not permit an owner's recovery from class. Yet, rather than assessing whether circumstances satisfy these requirements, courts lump all third parties together with owners and treat all owners as if they are as knowledgeable as classification societies.

While it is true that not every inspection or survey of a vessel requires a degree of expertise or training which is beyond the resources of a reasonably prudent owner, the judgment of Mr. Justice Clarke in The Toledo, [1995] 1 Lloyd’s Rep. 40 (Q.B.), considers in some detail what a prudent bulk carrier’s owner ought to have observed when inspecting its vessel. Even if the owner could not be expected to know that fatigue fractures would be the consequence, distortion of frames and brackets in the cargo holds was both sufficiently apparent and significant that the owner should have brought the damage to attention of class. That the owner did not was because the owner had failed to establish a proper system for inspection, maintenance and repair and because the owner had come to tolerate a level of distortion of structure in the cargo holds which, in fact, was unacceptable. Having failed to bring these conditions to the classification society's attention, the owner could not establish its exercise of due diligence to make its vessel seaworthy vis-a-vis cargo interests on the basis of "clean" classification certificates. In such a case it may be meaningful to say that the owner bears "primary" responsibility to cargo. Indeed, in such a case it is apparent the classification society was not negligent at all in connection with the performance of its services.

But Mr. Justice Clarke’s expectation of what would have happened had the owner been diligent is especially instructive for its realism. He wrote: "[W]hen serious damage was observed class would have been called in and asked to inspect the particular damage. In my judgment if class had been called in to inspect particular damage it is likely that the [owners] would have repaired the frames and brackets as necessary, just as they did in the case of [two other vessels]." [1955] 1 Lloyd’s Rep. at 93. I submit that this succinctly summarizes the general expectation of the maritime industry, as well: if class becomes involved such that its services are properly performed, then, as a consequence, the risk of loss or damage likely will have been diminished. Accepting that premise, the contrary must also be true: if class's services are performed negligently there must also be circumstances when the risk of loss or damage has been increased by such neglect.

This is precisely the assumption of Mr. Justice Hirst at first instance and of Lord Lloyd in his dissent in The Nicholas H. Can there really be any quarrel with the proposition that various interests participate in maritime ventures on the assumption that the vessels they utilize are reasonably safe because of the role played by classification societies in today's maritime world?

Where the services provided by class involve a degree of expertise or training such that owners reasonably rely upon such services (including situations where owners have no choice but to rely) and third parties, in turn, rely upon owners, recognizing a duty of care by class merely acknowledges industry functioning. In Somarelf v. American Bureau of Shipping, 704 F.Supp 59 (D.N.J. 1988) and 720 F. Supp 441 (D.N.J. 1989), the United States District Court of New Jersey considered these very issues in connection with erroneous Suez Canal Tonnage Certificates issued by ABS. In that case time charterers, relying on certificates which understated Suez Canal tonnage because of a calculation error by ABS and on tonnage warranties by the owner in the charter, charged voyage charterers less than the full amount of the Suez Canal differential their voyage charter agreements entitled them to receive.

After owners settled the charter warranty claims, they sought indemnity from ABS, which the court granted. The court noted that the basic purpose of tort indemnity was to shift the burden of compensating the victim of a tort to the party who is principally, if not solely, responsible for the tort’s occurrence. The court found that the tort there consisted of negligent misrepresentation of the tonnage. The elements of that tort, all established at the trial, were: that ABS in the course of its profession, supplied false information for the time charterer’s guidance in a business transaction; that ABS failed to exercise reasonable care in gathering the information; that the time charterer relied on the false information in a transaction that ABS knew the information would influence; and that the time charterer suffered pecuniary loss. The court recognized that on the subject of tonnage computation, ABS had held itself out to the industry as an expert and that the industry reasonably relied on ABS for that purpose.

As to the requirement that ABS "knew" the information would influence a particular commercial transaction, the court applied a common sense approach: "[w]hat was required was proof that ABS, through its relevant employees, had knowledge and understanding of the importance of its . . . tonnage certificates . . . to the maritime industry and, specifically, that ABS, when issuing [its] certificates with no disclaimer and not specifically addressed to any single party, understood that parties such as time charterers and voyage charterers, as well as owners, would properly and forseeably rely on the . . . tonnage certificates issued by American Bureau of Shipping." 720 F.Supp. at 453. In short, the duty of care extended to all who would properly and forseeably rely on the certificate. Very much similar to Justice Hirst’s and Lord Lloyd’s analysis of "proximity" in connection with the "Nicholas H."

The recent Star of Alexandria judgment merits some comment in these regards. As mentioned, appeal has been filed with the United States Court of Appeals for the Second Circuit. I understand that the appeal will challenge certain of the District Court’s factual premises. Until a definitive statement of relevant facts is available, it is inappropriate to consider them in detail save to mention the following: the vessel, a British flag bulk carrier registered in Gibraltar, broke in two and sank during April 1989 while carrying a cargo of cement across the Atlantic. The plaintiff in the suit against Bureau Veritas ("BV"), the vessel’s classification society, is the head charterer suing on its own behalf and as assignee of the subcharterer and cargo owner, with whom the head charterer settled the claim for loss of cargo. The head charterer commenced arbitration against the vessel owner in London under the charter and succeeded in obtaining an award and default judgment. However, the judgment has not been satisfied and the owners’ underwriters declined cover because of alleged violations of Gibraltar’s manning requirements.

The plaintiff alleges that BV breached a duty of care which it owed to plaintiff by permitting the vessel to remain in class even though the vessel was unseaworthy. In particular, it is alleged that had the class certificate not been extended by BV, based on surveys carried out immediately before the voyage, the vessel would not have been allowed to sail with the cargo on board.

Worth noting are some of the premises underlying the Court’s legal analysis based on United States general maritime law. First, as to reliance on the class certificate, the Court cites well-known New York case law concerning accountants and bean counters and cites, as well, The Nicholas H (Slip. Op. at p. 23n7), to find:

Although B.V. may have been aware that its . . . certificates are shown to third parties, in this case this possibility was ‘merely one possiblity among many’ not ‘the end and aim of the transaction.’ . . . Because B.V. did not survey the [vessel] primarily for the benefit of [the charterers] it does not owe these parties a duty of care. Slip. Op. at 27.

Once again these legal conclusions concerning the primary beneficiary of class services and the indeterminate parties who ultimately rely on such services do not reflect actual maritime industry practice.

Further, concerning the purpose of the classification certificate, the Court cites The Sundancer: "the purpose . . . is not to guarantee safety, but merely to permit [the shipowner] to take advantage of the insurance rates available to a classed vessel." Slip Op. at 27. And, again citing The Sundancer: "a contrary rule that allocated all risk of loss to the classification society would make it impossible for the ship classification industry to continue to exist." This now predictable--almost boilerplate--judicial language bears little resemblance to the real maritime world. It will be interesting to see if the Second Circuit, on appeal, is willing to correct misunderstandings and misstatements about classification societies.

I submit that where matters of judgment or discretion are involved in the interpretation or application of class rules and standards, or where the issue is whether class's rules and standards were properly established in the first instance, no reason exists why common and maritime law negligence principles cannot yield reasonable and practical solutions. As Judge Learned Hand stated for United States courts: ". . . in most cases reasonable prudence is in fact common prudence; but strictly it is never its measure; a whole calling may have unduly lagged in the adoption of new and available devices. It never may set its own tests, however persuasive be its usages. Courts must in the end say what is required . . .." The T.J. Hooper, 60 F.2d 737, 740 (2d Cir. 1932). Reasoning by the District Court in The Amoco Cadiz, 1986 A.M.C. 1945, 54-55 (N.D. Ill. 1986), in denying ABS’s motion for summary judgment as to Amoco's tort contribution claim for pollution damage liability is noteworthy in this regard.

. . . Amoco, however, alleges more than just that American Bureau of Shipping failed to detect preexisting dangerous conditions. With respect to the design of the Amoco Cadiz, Amoco contends that American Bureau of Shipping approved the design, suggesting an amount of control over the design of the ship which goes beyond merely inspecting plans already existing. Because questions of fact are present regarding the nature of ABS’s involvement and role in the design and construction of the Amoco Cadiz, ABS is not entitled to summary judgment. . . . This court has already found, though not binding on ABS, that Amoco lacked the necessary expertise and personnel to ensure compliance with appropriate principles of construction so it looked to ABS to ensure proper construction . . ..

With respect to the surveys by ABS, this court notes that ABS will not be held liable for failing to disclose those defects and problems with the Amoco Cadiz about which Amoco knew. With respect to those problems, it cannot be said that Amoco relied upon ABS’s undertaking. Moreover, to hold ABS liable in that situation would be contrary to public policy. A shipowner who has knowledge of problems with its vessel cannot escape liability for failing to correct those problems on the basis that a classification society hired to survey the ship did not detect those defects.

ABS next contends that Amoco cannot recover in contribution from ABS because Amoco’s negligence in not repairing and maintaining the Amoco Cadiz was a superseding cause of the damage ultimately caused by the unseaworthy condition of the vessel. It cannot be said at this point, however, that Amoco’s failure to perform certain maintenance on the Amoco Cadiz and to rectify those problems about which it had knowledge superseded the other factors which this court found proximately caused the damage, especially those problems concerning the design of the Amoco Cadiz. Consequently, ABS is not entitled to summary judgment on this basis. 1986 AMC at 1954-55.

Nowhere here is there the simplistic analysis, the imagined notions and catastrophic liability scenarios which characterize The Sundancer, The Nicholas H, and The Star of Alexandria judgments. The line of responsibility is just not so hard to draw. "All or nothing" need not be the only result. Where the service is such that the owner reasonably relies upon class and so would be afforded a remedy if those services were negligently performed, then a third party injured by that same negligence should also be afforded a remedy. And further, where class is negligent in applying its own Rules and established procedures and so permits a condition to continue which its Rules and procedures were intended to correct or to eliminate, and such a condition is the cause of loss or damage to a third party, then the classification society should be treated just like any other tortfeasor.

The courts need do no more than they normally do in evaluating the liability of any provider of services to a particular industry. The trend of recent cases, however, reflects as much on the judiciary's irresponsibility as it does on the apparent helplessness of the maritime industry to resolve its paralyzing conflicts of interests and move forward. Until such time as all segments of the industry--classification societies and their underwriters, included--are willing to correct the courts' misunderstandings, The Sundancer, The Nicholas H and now The Star of Alexandria judgments exemplify nothing so much as the wreck of common sense. The reasoning of these judgments serves only to increase the level of adventure in maritime ventures at a time when the industry struggles in the opposite direction.