A Florida jury has awarded Norwegian Cruise Line $159m in
punitive and compensatory damages as a result of a long-running dispute between
the cruise line and ABB stemming from the failure of Azipod propulsion units on
four of Norwegian Cruise Line’s 18 cruise ships.
The defendants, ABB Inc and ABB OY, said that they would
challenge the decision, including a potential appeal to a state appellate
court.
A failure of the propulsion system aboard the cruise
line’s Norwegian Star (IMO 9195157) in 2017 left the ship stranded at
sea. There were subsequent failures aboard three other cruise ships operated by
Norwegian Cruise Line, which alleged in court that the failures resulted in
cancelled cruises, expenses related to compensating passengers, repairs to the
ships, and lost revenues.
The case filed was filed in Miami Dade Circuit Court in
January 2020. The plaintiff alleged that ABB was aware of problems in the
propulsion system, but that it failed to disclose it to Norwegian. Abb was also
accused of making misleading statements to Norwegian after the first system
failure.
According to the complaint ABB misrepresented the
reliability and safety of the propulsion system.
The case involved the VO2300 model of Azipods, some of
the earliest produced models. Court papers said the model was deployed on 16
cruise ships, including the Norwegian Star, which was built in 2001, as well as
the Norwegian Gem (IMO 9355733), Norwegian Jade (IMO 9304057), and Norwegian Pearl (IMO 9342281), which were introduced in 2006 and
2007.
After a month-long trial, the jury found for Norwegian.
It agreed that ABB made fraudulent and negligent misrepresentations after the
2017 failure on the Norwegian Star. The jury agreed that ABB had a duty to
disclose information and had made omissions in its disclosures. In a case
before Miami-Dade Circuit Judge Alan Fine, The jury awarded $31.75m in
compensatory damages, based largely on Norwegian’s out-of-pocket expenses
compensating passengers. In addition, the jury awarded $127m in punitive
damages.
Eike Christian Meuter, Senior Media Relations Manager for
ABB Asea Brown Boveri said that “we strongly disagree with the outcome and will
challenge the decision, including a possible appeal to a higher state court.”
Azipod propulsion, first installed on cruise ships in the
late 1990s, is a gearless steerable propulsion system where the electric drive
motor is housed within a pod outside the ship hull. According to ABB, the
advantage offered for cruise ships is that the units, which can rotate 360
degrees, increasing manoeuvrability and operating efficiency, while cutting
fuel consumption.
Norwegian asserted in its filing that ABB was aware of
cracks appearing in the sheathing for the exciter element of the units, leaving
wiring exposed as a result. They contend that ABB knew that the exciters in the
VO model were likely to fail due to these cracks, but that ABB kept this information
from Norwegian and instead told management that failures were extremely rare.
During the trial, Norwegian’s lawyers pointed to a 2012 report in which
ABB-affiliated field engineers and technicians began observing visible cracks
on the Azipods’ exciter stators.
Alex M Gonzalez, Partner at Holland & Knight and the
lead litigation attorney on the case, said that “NCL’s claims were based on
fraudulent and negligent misrepresentations and omissions based on ABB
misrepresenting (and omitting material information) about the reliability of
the exciters in Azipods. NCL believed its exciters were reliable and not in
danger of failing”.
The Norwegian Star experienced the first failure on
December 11th 2016 in its starboard Azipod. ABB installed an emergency exciter
kit adapting the Azipod for operation so that the ship could continue to sail
and did not need to enter dry dock for repairs. However, on January 24th 2017
the portside Azipod also failed. Before repairs could be made, on February 9th
the starboard Azipod again failed, thus leaving the vessel without propulsion
power at sea, with 2,113 passengers and 1,017 crew on board. The cruise ship
had to be towed 75 miles to Melbourne, Australia (IMN, January 30th 2017, February 13th 2017)
After the failure, Norwegian was working with ABB. In
March 2017 NCL instructed that the exciters be inspected on the other vessels.
The crews aboard the Norwegian Gem, Jade, and Pearl each reported that they had
discovered cracks on the exciters. Norwegian alleged that ABB recommended
repairs but that it “omitted critical information that any repairs would not
rectify any damage already done.”
The Norwegian Gem suffered an exciter-related starboard
Azipod propulsion failure in November 2017, which Norwegian alleges was
identical to the prior two incidents aboard the Norwegian Star. A year later,
in November 2018, the Norwegian Jade’s starboard Azipod also failed due to the
exciter. In July 2019 the exciter failed in one of the Norwegian Pearl’s
Azipods.
The jury found for ABB in agreeing that ABB did not have
a “duty to disclose” prior to the failures on the Norwegian Star. They also
found for ABB on the issue of fraudulent or negligent omission of information
before the two failures on the Norwegian Star.
The four cruise ships all continue to be active parts of
Norwegian’s fleet. Despite the dispute Norwegian retains an ongoing business
relationship with ABB, employing its Azipod units for its subsequent newbuilds.
2001-built, Bahamas-flagged, 91,740 gt Norwegian Star is
owned by Norwegian Star ltd care of manager NCL (Bahamas) Ltd of Miami,
Florida, USA. It is entered with UK Club on behalf of NCL (Bahamas) Ltd.
