When
to file a boat insurance claim
While
brain-storming with our assistant, Ms. Anna Rosvall, on subject
matter for a newsletter, she suggested this subject. As we
have been assisting with marine insurance claims for over
two decades, she thought we could write something that would
be informative, helpful and interesting. Well, two out of
three is not bad.
Along
with every insurance policy issued is a declarations page.
The declarations page identifies the insured, the vessel,
the inception date (most policies are annual), the policy
number and the various details of coverage and policy limits.
The policy which follows the declarations details the various
coverage provided and is very useful if battling insomnia.
Compared to an insurance policy this article is a “thriller”.
Review
of a declarations page from a major player in the boat insurance
market revealed nine separate coverage areas. They include:
property, liability, pollution, medical, tender, personal
effects/sport equipment, towing, uninsured boaters and longshoremen/harbor
workers. Most policies will not include all of these options
and a review of your policy may reveal an unexpected exposure.
An understanding of the coverage will allow you to utilize
your policy better.
The
appropriate time to file an insurance policy varies depending
on the policy, coverage and the event details. Some decisions
are easy: IF - your boat burns, sinks or is involved in an
accident, THEN - you file a claim. If a guest falls and is
seriously injured; file a claim. But, what if your engine
fails?
The
most often used portion of boat insurance policies is the
property damage coverage. It provides coverage for damage
to the boat itself. The property damage portion of the policy
includes a deductible. Deductibles vary and are often a percentage
of the boat’s value and are the amount the insured will
pay toward any covered loss, prior to the insurance company’s
contribution. If the property damage loss is less than or
equal to the deductible, there is no benefit to filing a claim.
If in doubt get a repair estimate prior to filing a claim.
Damage
to a boat’s engine is addressed under the property damage
section of the policy. It is an area of coverage that is often
misunderstood. Most recreational vessel insurance policies
are “all risk”, versus “named peril”
as is the case for many commercial policies. An “all
risk” policy provides coverage for virtually any cause
of loss, except those causes which are specifically excluded.
Thus, many insurance claims on engine failures are covered.
While there are policies which exclude mechanical break down,
filing a claim for an expensive engine repair is generally
worth the potential, limited downside. We are continually
amazed at what is covered with respect to engine claims.
For
a most interesting conversation ask your dock buddies if the
damage to your boat or engine is covered by insurance. This
subject is second only to corrosion for the prevalence of
misinformation.
Another
benefit of a boat insurance policy is the ability to shift
responsibility for primary payment and recovery if your boat
is damaged by a third party. A classic example is when a vessel
is damaged in transit on a truck or a ship. While the shipping
company may be liable for the damage, pursuing and obtaining
payment is often difficult. By filing a claim with your own
insurance carrier, they will assume the responsibility for
payment of the repair invoice and recovery from the responsible
party (called subrogation in the industry).
Another
area with surprising benefits is undiscovered or latent defects
in the vessel. A latent defect is: a flaw or other imperfection
in any article which is discovered after delivery; usually,
latent defects are inherent weaknesses which normally are
not detected by examination or routine tests, but which are
present at time of manufacture and are aggravated by use.
(McGraw-Hill Science & Technology Dictionary)
While
some policies will exclude latent defects and the damage resulting
from the defects, others will provide coverage for resulting
damage, which is often the most significant cost of the repair.
As
a general rule of thumb the property damage portion of the
policy covers sudden, accidental and fortuitous events and
excludes normal wear and tear.
The
liability coverage on your policy protects you from exposure
from claims filed by others arising out of the ownership,
operation and maintenance of your vessel. Basically this coverage
requires negligence on your part and financial damages arising
from personal injury or properly damage to an uninsured party,
but may also cover such things as loss of income or loss of
use suffered by a third party. This is the coverage in the
policy which will pay for your legal expenses for defense
and any judgment, up to the limit of your policy. We strongly
encourage you to exercise this benefit rather than face any
potential law suit personally. It reduces stress and in the
unfortunate, but far too common event of a law suit, it is
why you paid your premium.
The
medical coverage or “med pay” portion of your
policy does not require negligence on your part. It provides
payment for cost for medical care arising from almost any
injury aboard your vessel. Virtually all policies cover your
guests though some exclude the owners specifically and most
exclude paid professionals. It has been our experience that
adjusters are very liberal in disbursing funds from the “med
pay” portion of the policy, as it is an easy way to
prevent personal injury lawsuits. In most cases it should
be offered up with no hesitation, though the limit is low
it establishes “good will” quickly.
Paid
professionals are generally expected to carry their own insurance
and are often covered under the Jones Act, a marine equivalent
to worker’s compensation. If you wish to cover professionals
on your vessel you may purchase longshoremen and harbor workers
coverage, referred to as LS & H.
Pollution
is an ever growing area of coverage on boat insurance policies.
While some policies may exclude the cost to clean up the pollution
and the fines related to it, others will provide specific
coverage, separate from the liability protections. Not only
is it a good idea to keep oil in the engine, discharged oil
is bad for the environment and your bank account.
The
property damage portion of your boat insurance policy generally
covers property that is normally aboard the vessel and used
for the operation and maintenance of the vessel exclusively.
It does not cover personal effects such as jewelry, laptops
and sporting equipment. While this type of property may be
adequately covered by your homeowners insurance, it is wise
to discuss any components of value which are brought aboard
the vessel with your agent. High value art work aboard mega
yachts is often covered by specific riders for that piece
of art.
Small
boats, including trailer boats and tenders, often have separate
coverage and thus opportunities for claims, which are different
from larger yachts. Outboard engines are often covered separately,
with their own deductible. Trailers are almost always covered
separately, though a skilled negotiator may persuade the adjuster
to buy the trailer along with the “totaled boat”.
Every spring we see several claims resulting from small boats
filling from winter rain water. Many of these are covered
losses. A tender on a larger boat usually has a much smaller
deductible and thus filing a claim for a smaller amount may
still provide relatively significant benefit.
Uninsured
boaters coverage is an option offered by many underwriters.
While some carriers use this coverage only for excess medical
expenses, others may allow this coverage to waive your deductible
for property damage caused by an uninsured boater. If you
have this coverage, don’t forget to request its benefits,
which may be overlooked by your busy adjuster.
There
is very little downside to filing an insurance claim. The
worst outcome is generally a denial. Being told “no”
and not receiving compensation for the financial exposure
is generally worth any loss of your “no claim discount”.
Many policies provide a “no claim discount” upon
issuance of a policy; some provide a similar discount upon
renewal. The loss of this credit is miniscule compared to
the amount of the average claim. Multiple claims, however,
can result in difficulty in obtaining insurance and cancellation
of a policy.
Stay
tuned for an exciting follow up, “How to file and manage
a boat insurance claim”.
