A yacht insurance policy is a complex contract with many customizable details, depending on the owner’s needs.
Many agents are able to write yacht policies for their clients, though they may not fully understand essential details contained in the policy, including the conditions and warranties that may leave owners exposed to unnecessary risks.
Yacht policies demand different considerations than personal lines insurance and require specialized coverages to respond to a broad number of risks such as personal liability and liability extended to crew. A yacht insurance specialist has the expertise necessary to customize and build a yacht policy that works for the owner’s individualized needs.
Liability should be considered the most important part of a yacht policy. Unlike the investment in the hull, which is a known variable, the liabilities for a yacht owner can be significantly larger than the value of the craft. Potential liability rising from pollution or fuel spills is a large exposure that is sometimes underestimated. In the event of a fuel spill, yacht owners are responsible for cleanup costs, fines, penalties and any damage caused to the natural habitat and property.
The liabilities for a yacht owner can be significantly larger than the value of the craft.
These fines can be extremely costly, especially if damage affects environmentally protected areas or sanctuaries. Yacht crew members are the owner’s employees and are thereby protected under maritime law and the Jones Act, which provides generous amounts of protection not normally provided to land-based employees. Provisions extended to crew can include maintenance and cure, protection and indemnity damages, and loss of wages.
When we were recently asked to review a customer’s yacht policy, we found that some of the warranties pertaining to the crew were not being met and could result in the exclusion of the crew liability coverage. The warranty required “private health insurance policies to be in place for crew members at all times” or no coverage would be provided. The owner and yacht manager were quite surprised, as they were unaware of the warranty and no health policies were in place for the crew. A yacht specialist can certify that warranties such as this one are fully explained or even negotiated with the insurance com company to amend the coverage to fit the owner’s requirements.
Conditions or warranties can apply to almost any part of a yacht policy, and if they are not complied with, coverage can be denied. One of the most common and overlooked conditions occurs when a yacht enters a shipyard and a contract is signed that includes clauses such as “hold harmless,” “waiver of subrogation” or “limit of liability.” Most yards do this to limit their own liability and lower their insurance costs. Yacht insurance policies prohibit the policyholder from assigning additional liability on to the insurer without consent.
Breaching this condition of the policy can lead to denial of coverage. Before entering a shipyard or marina, yacht owners should notify their agent to avoid any potential conflict. In most cases, the agent will be able to negotiate with the insurance company to allow you to enter into contract with the yard or will offer a specialized policy that will provide coverage for the yacht while it is entered into the yard contract.
When choosing a yacht insurance specialist, consider if the agent has direct access to all the markets, in-depth knowledge of policy details and a well-trained support staff. Not all policies are created equal; working with a yacht specialist provides the owner with the expertise and guidance necessary to protect against unforeseen scenarios.
This article was originally published in the February–April 2017 issue of Worth.