Are You Covered? Understanding Your Boat’s Policy

By Mark Johnston

There is a lot to think about when it comes to buying a good marine insurance policy, especially a policy that fits the complexity of needs involved in the sportfishing world. Having the proper marine insurance coverage is crucial. Unfortunately, sometimes our policies are incomplete and often misunderstood. How much do you know about your current insurance policy? I wonder if I was at a major billfish tournament and asked owners specific questions about their marine insurance, how many could comfortably answer those questions? Here’s an example: Your boat is cruising at night in the Florida Keys. The vessel somehow ends up on a reef in the National Marine Sanctuary. The reef is damaged and your boat is leaking diesel fuel. What do you know about your reef coverage or fuel spill (pollution) coverage? Do you understand the fines that could be involved?

What if I asked the captains some questions? Do you know which countries might be excluded from the insurance policies? What policies can allow you to fuel in countries that are excluded? Do you have “Held Covered Clause” coverage in the event of an emergency when traveling past excluded countries? Can you honestly help answer questions or concerns your mates might have before going on a trip?

What about the crew? Let’s say your sailfishing in Isla Mujeres. You’re the first mate riding in a golf cart going down the street to go buy some fresh orange juice. Boom! You get smacked by a truck and end up in a hospital in Cancun. Are you covered? What if you are a part time second mate also riding in the golf cart and you get hurt? Do you know if the owner has crew coverage with the correct number of crew on it?

In the sportfishing industry there are obviously many important situations to consider when purchasing a marine insurance policy and you want a policy that fits your particular needs and interests. Making a list of concerns and reviewing your current policy may be extremely beneficial in the long run.

Not being an expert on marine insurance myself, I interviewed three marine insurance specialists, Beth Davis with Rick Carroll Insurance Agency in Jensen Beach, FL., Tom Byrne, President of J. Byrne Insurance in Wildwood, N.J. and John Furman of Furman Yacht Insurance in N.H. I presented them with a typical scenario and asked a few basic questions.

Scenario: I am the owner of a high end sportfishing yacht with plans to fish the major billfish tournaments along the eastern Atlantic, Bahamas, Caribbean and possibly Pacific Central America. I have both a full-time captain and first mate on salary, and I usually hire a second mate part-time for tournaments.

What are the most important things I should consider when buying marine insurance?

Beth Davis:

Making sure you have an agent who specializes in marine insurance and understands the scenario you mentioned, and is willing to negotiate the quote with several different insurance companies. Make sure your agent has explained each different policy quoted to you. Each company writes their own policy. Therefore you need to be aware of what is covered and what is not covered. The actual quotes may all look the same, but the part of the policy that most people don’t read is what may be different. The time to find this out is NOT when you have a claim. Are the coverage limits going to properly protect you in the event of a claim? What is the rating of the carrier? How is the company’s claim service?

Tom Byrne:

A buyer of insurance must look at both price and value considerations. Obviously the price is extremely important, but don’t forget the value part. Policies can vary widely on coverages like coral reef coverage, hurricane haul out coverage, removal or wreck, towing, etc. I feel the most important item a buyer should evaluate when purchasing insurance coverage is the value that the agent can provide in helping with claims, getting adjusters to the loss quickly, and helping with the loss (whether it be helping get in a certain yard, or recommending certain vendors). In other words, buy from an agent that has knowledge in the industry to get properly protected. There are plenty such agents out there, so use their knowledge to your benefit. Other items to evaluate when arriving at a decision to purchase your insurance product would include financial strength of the carrier and the quality of the coverage. The financial strength of the carrier can be determined by looking at their AM Best Rating which is an organization that rates the financial strength of insurance carriers

John Furman:

Select an independent insurance agent who represents all the major yacht insurance carriers and has many years experience specializing in writing yacht insurance. Stick with an A or better rated Domestic Carrier’s Yacht Policy for better claims service and superior coverage.

What would you consider to be the very best coverage that not only covers the boat but also covers the owner/captain/crew/guests in event of onboard injury or illness?

Beth Davis:

Protection & Indemnity is the part of the policy that covers the liability of the owner. It is extremely important to make sure there is “crew” coverage added to the policy to cover any injuries the captain or crew may sustain. The crew coverage is added according to the number of crew members on board at any one time. Another important aspect is to make sure that the limit of protection and indemnity is adequate. When a crew member is employed by the boat, the owner is responsible for that crew member. It is also important when traveling out of the country. The boat/owner is responsible for the crew whether they are injured in the “line of duty,” or are injured during the “off” time when in a foreign country, regardless of liability. The guy who gets into a bar fight in Mexico could actually claim coverage under the crew portion of the protection & indemnity on the yacht policy!

Tom Byrne:

Most policies have basically the same coverage parts, but each insurance company tailors their policy to have specific benefits to different types of vessels. It really boils down to finding the right combination of coverage and price for each client. With that being said, there are various sections of the policy that provide coverage for injury to crew, owners, guests and third parties. Below are the types of coverage that might respond to different situations: Crew coverage – covers work related accidents for members of your crew. Yacht insurance policies will normally not cover illness unrelated to the work on the boat. Crew medical insurance is required for that type of illness. Protection and Indemnity – Pays for damages, other than punitive or exemplary damages for bodily injury and/or property damage for which an insured person becomes legally responsible because of an accident arising out of the ownership, maintenance or use of a boat. When the customer is legally required, liability coverage also pays for the raising, removal or destruction of wreckage of a covered watercraft. Hull coverage would cover the boat itself. Most policies for this type of vessel will be of an “agreed value” form, but that should be verified with your agent.

John Furman:

The most valuable coverage in a yacht policy that covers boat owner, guest and crew is Protection & Indemnity. Protection and Indemnity insurance is a major form of marine liability insurance. This insurance protects insured against liability for specified types of bodily injury or property damage. The principal liabilities that could be covered are those for: loss of life, personal injury, third parties, and damage to other vessels, crew injuries, passenger injuries, damage to docks and other fixed objects. The minimum amount of Protection & Indemnity yacht owners should consider would be no less than the hull value. ($5,000,000 yacht = $5,000,000 P&I). The Limitations of Liability Act dates back to the early nineteenth century and allows a vessel owner to limit its liability to the value of its interest in the vessel. The Act provides a shelter for vessel owners, eliminating risk of unlimited liability, unless the owners own actions contributed to cause of the disaster or loss. Owners should always cover the proper number of paid crew and if occasionally chartering, make sure coverage is added. In addition, owners should never trust their umbrella policy for this valuable coverage as the majority of all umbrella policies exclude large watercraft and paid employees.

What are important points for a captain to know when providing his/her resume to an insurance company? Can they be denied if they are considered to have too little experience to run a multi-million dollar vessel?

Beth Davis:

A captain’s resume needs to be as detailed as possible showing their actual duties on board the vessels they have worked on. The companies will be looking for experience on vessels in the same size range as the vessel they are trying to insure, and the length of experience the captain has in the same position. The companies will also be looking to see if the captain has had any claims while operating vessels. A captain can be denied with too little experience. The relationship between the agent and the company can help with this. I had a captain denied due to his age, but had the experience. It took awhile, but I was able to fight for this captain and get coverage placed.

Tom Byrne:

Most underwriters are looking at two primary factors in determining if a captain is a good risk. One is the experience of a captain operating a vessel of a specific length. For instance, if he is jumping from 40 footer to 68 footer, the underwriter will probably not look favorably on that. Likewise, if the itinerary of the boat is to go to Venezuela, St Thomas and the Dominican Republic, but the captain’s resume indicates he has not been there before, this would also probably be questioned by the underwriter. I have seen captains denied only a couple of times. Usually the owner has done the screening process quite well already.

John Furman:

Captains should always take their time and make sure their resume looks as professional as possible. List all licenses, courses completed, size and type of boats operated, where navigated, duration, date of birth and nationality. Captain’s loss history is also very important, advise of all losses and if no losses, state none. Provide the agent with front and back copies of all licenses, certificates of completed courses along with a resume.

What countries are not covered by major insurance policies?

Beth Davis:

Each company has their own exclusions for specific countries. Most of them will exclude: Cuba, Haiti, Guatemala, Colombia, El Salvador and Nicaragua. Some will exclude Panama and Venezuela. If a vessel is traveling to the Panama Canal, coverage for San Andreas Island can sometimes be added for fueling purposes. The companies are concerned about the safety of each of these countries for a few reasons. The first would be the safety of the crew and passengers on board the vessel. The second would be the relationship between the US government and the country involved in the event of a claim. The company wants the salvage rights for any vessel they insure, but may not be able to work this out with specific countries. Depending on the situation, the company may agree to include a specifically excluded country for a short period of time. I currently have vessels traveling to Guatemala for tournaments in October/November. I have been able to get this added to the policy for the time period required.

Tom Byrne:

Basically domestic carriers will not insure places like Nicaragua, Honduras, El Salvador, Guatemala and Colombia. But it always pays to ask because some places within these countries might be approved by certain insurers. For instance, Mike Terrier, a senior underwriter at AIG has considered coverage for stays on the Caribbean side of Honduras at places like the Bay Islands. That is not even excluded on their standard forms. No doubt certain places will be harder to find coverage for than others, but if you go to the London markets, they are much more liberal in their underwriting territory, and will basically insure a boat anywhere in the world for the right price. The only places that might truly be uninsurable would be a territory that was currently a war risk.

John Furman:

Owners and captains should always check the Navigation limits on their yacht policy to make sure there is proper coverage for the geographical area they plan to navigate in. Also check the windstorm deductible and period of lay up to make sure there aren’t any restrictions. Panama Canal Crossings are not covered, but can be added to policy prior to trip. Most major domestic yacht carriers exclude: Colombia, Cuba, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Nicaragua and Venezuela. Some carriers will endorse navigation on the policy to include the excluded country. Reasons why carriers exclude navigation may vary from carrier to carrier. The obvious reasons would be the country is not considered a safe port, vessels would be difficult to repair or salvage, and trade embargo.

Many of us live and fish in serious hurricane country. What would be your best advice to a captain when it comes to his insurance coverage when there is a hurricane headed their way?

Beth Davis:

My advice would be to have a plan and stick to it! Each company has a different idea of what the “safest” plan of action for a vessel is. Some companies want the boats hauled and blocked while others want the boats moved out of harm’s way. In Florida, this can be an issue if you live on the East coast. We can’t always depend on Lake Okeechobee to be navigable for a boat that draws too much water. Where would the boat run to in the event of an unpredictable storm? Most companies will require a “hurricane storm plan” in writing on the larger vessels prior to insuring, giving the captain and owner a set plan to follow.

Tom Byrne:

Make sure to take down bridge enclosures, lower antennas and anything else that could easily sustain damage. Having a well thought out written plan is important. Also, always make sure the premium is paid, and check with your agent to make sure your navigation warranty on the policy permits you to be where you are going at that particular time of year. It is always a good idea to review your coverage with your agent before you go on a trip. Your insurance agent will be able to make sure your coverage is sufficient to meet your needs.

John Furman:

Owners and captains should review the amount of their hurricane deductible and the navigation restrictions. Hurricane deductibles could be as high as 10% of the yacht value or you may find you have no coverage at all. Your Hurricane Plan should look professional, providing plans for when the vessel will be hauled to a marina, secured at private dock and always have an evacuation plan moving vessel out of harm’s way to safe predetermined location. The better the plan, the easier to negotiate lower premiums, haul out coverage and windstorm deductibles. Provide a check list of things that will be removed such as canvas, antennas, electronics, etc. Keep an additional file off the boat with all important boat papers and your insurance policy in safe place. Always prepare for the storm early and move the vessel out of harm’s way, if possible.

I heard a lot of horror stories while preparing this article, but rather than focus on misfortunes, I’d rather focus on solutions so you never get burned. A suggested strategy is to sit down as a team and make a list detailing all the plans you have with your boat. Then review your current policy to make sure your coverage matches your plans. While I’m sure there are plenty of good insurance agents out there, I personally think a marine insurance specialist is invaluable. They know the sportfishing business and have the expertise of the coverage you need. In closing, I have one final question for the reader: Do you have any questions about a marine insurance policy that may pertain to you?

Article courtesy of InTheBite, The Professionals’ Sportfishing Magazine. Please visit www.inthebite.com