By Tom Gresh, Senior Client Advisor
Celedinas Insurance Group
A yacht insurance policy is a complex contract with many customizable details depending on the yacht owner’s needs. Many agents can 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 yacht owners exposed to unnecessary risks. Yacht policies demand different considerations than personal insurance lines and require specialized coverage for a broad number of risks, such as personal liability and liability extended to crew. A yacht insurance specialist has the expertise necessary when customizing and building a yacht policy that works for the owner’s individualized needs.
Liability should be considered the most important part of a yacht policy. While the value of a yacht is a known variable, yacht owner liabilities can be significantly larger than the value of the vessel. The potential liability arising from pollution or fuel spills can be large and is sometimes underestimated. In the event of a fuel spill, yacht owners are responsible for cleanup costs, fines, penalties, and anydamage caused to the natural habitat and property. These fines canbe extremely costly, especially if damage affects environmentally protected areas or sanctuaries.
Yacht crew are the owner’s employees and are protected under Maritime Law and the Jones Act. The Jones Act 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 recently asked to review a customer’s yacht policy, 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 such warranties are fully explained and also can negotiate with the insurance 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 not complied with, coverage can be denied. One of the most common yet overlooked conditions occurs when a yacht enters a shipyard and a contract is signed to include clauses, such as “hold harmless”, “waiver of subrogation”, and/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 onto the insurer without their consent. Breaching this condition of the policy can lead to denial of coverage. Before entering a shipyard or marina, the yacht owner’s insurance agent should be notified. In most cases, the agent will be able to negotiate with the insurance company to allow you to enter into a contract with the yard, or offer a specialized policy that will provide coverage for the yacht while it is under the yard contract.
Choose a yacht insurance specialist who has direct access to all 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 yacht owner with the expertise and guidance necessary for protection fromunforeseen scenarios.
This article originally appeared in FYBA.org's publication and Worth Magazine in Summer 2012.