CHAPTER 7 – WATERCRAFT INSURANCE

1. watercraft is covered only for a limited number of named perils. Risks of Direct Loss (All-Risks) Coverage are not available.

2. theft of watercraft, trailers, furnishings, equipment and outboard motors away from the residence is excluded.

3. coverage on watercraft including trailers, furnishings and equipment is limited to a maximum of $1,000.

4. Direct Loss to watercraft, trailers, furnishings, equipment and outboard motors from windstorm or hail is covered only if the property is inside a fully enclosed building

Obviously, boat owners will wish to insure their boats under other insurance policies since these limitations exist. A need for more comprehensive protection against a Direct Physical Damage or theft loss is required.

PHYSICAL DAMAGE COVERAGE UNDER THE PERSONAL AUTO POLICY

Under the Personal Auto Policy, only a boat trailer can be insured for Physical Damage Loss. The trailer must be described in the declaration.

LIABILITY LOSS EXPOSURES

Owners and operators of watercraft face numerous Liability Loss Exposures ‑ a few Examples:

»  A boat operator forgets to give a child a life preserver and the child falls overboard and drowns.

»  A speedboat creates a huge wave and causes another boat to overturn.

»  A boat collides with another boat and several occupants are critically injured.

» A water skier is injured due to a high rate of speed.

»  A boat runs into and injures several swimmers. Due to the various limitations under the Homeowners Policy, boat owners desire more Comprehensive Coverage.  Insurance companies have developed streamlined contracts for boat owners.

These contracts include:

»  Outboard Motor and Boat Insurance

»  Special Watercraft Policies

»  Personal Yacht Insurance

OUTBOARD MOTOR AND BOAT INSURANCE ‑ This coverage is basically designed for those boat owners who already have adequate Liability Insurance and desire to broaden the Physical Damage Coverage on the boat. The coverage is usually provided by an Inland Marine Floater. There are many Inland Floaters but there are common features such as Covered Property, Covered Perils and Exclusions.

Covered Property ‑ the Floater can be written to cover the hull, motor, boat equipment and its accessories, boat carrier and trailer. The coverage is written on an Actual Cash Value Basis and usually contains deductibles ranging from $25 to $250 or more.

Covered Perils ‑ the Floater in this area is extremely flexible as it can be written to cover Named Perils or Risk of Direct Loss (better known as AAll‑Risks@ Coverage). The majority of floaters are written on an AAll‑Risks@ Basis and will cover all Direct Physical Losses except those that are excluded.

The coverage will not include Liability Insurance for bodily injury, loss of life, or illness. It is always assumed that the insured will have adequate Personal Liability Insurance to cover third‑party claims. The Floater may be used to provide Collision Damage Liability Insurance that will protect the insured from a claim for property damage from the owner of another boat if the insured's boat collided with another boat while afloat.

Exclusions ‑ The Exclusions for this type of insurance will vary according to the insurer. We have listed 3 common exclusions:

1.   Business Pursuits ‑ there is no coverage if the boat is used as a public vessel for carrying passengers for compensation. Also, there would be no coverage if the boat is rented to others or if the covered property is being operated in any official race or speed contest. The Policy is meant to cover the boat for pleasure purposes and obviously not for business purposes.

2.   Repair or Services ‑ Loss or damage from refinishing, renovating, or repair is not covered. The person repairing the boat or equipment should be responsible for any damage.

3.   General Risks of Direct Loss ‑ there is no coverage for loss or damage from wear and tear, gradual deterioration, vermin and marine life, rust and corrosion, inherent vice, latent defect, mechanical breakdown and extremes of temperature.

WATERCRAFT PACKAGE POLICIES ‑ Insurers have developed a unique Boat Owner Package Policy that combines Physical Damage, Liability and Medical Payments Coverage in an All‑In‑One Policy. Once again, these policies are not uniform throughout the industry but do share some common features.

Physical Damage Coverage ‑ most Boat Owners Package Policies are written on an AAll‑Risks@ Basis. Under the Physical Damage Insuring Agreement, the insurer agrees to pay for a Direct Physical Loss to Covered Property. All losses are covered except those that are excluded. The Physical Damage Insurance covers the boat, equipment, accessories, motor and trailer. So, if the boat collides with another boat there is coverage. Also, if the boat is stolen there would be coverage.

Liability Coverage ‑ the Boat Owners Package Policy also includes Liability Coverage that covers the insured for Bodily Injury and Property Damage Liability that occurs from the ownership or operation of the boat. Example:if the operator of the boat accidentally damages another boat or injures some swimmers, there would be protection.

Medical Payments Coverage ‑ this coverage is quite similar to the Medical Payments Coverage in the Personal Auto Policy. Medical Payments Coverage pays the necessary medical expenses incurred or medically attributable within 1‑3 years from the date of a watercraft accident that causes bodily injury to a covered person. A covered person is defined as the insured or a family member, or any person occupying the covered boat. Medical expenses are the reasonable charges for medical, surgical, x‑ray, dentist, ambulance, hospital, professional nursing and funeral services. Prosthetic devices would also be covered. Example:  if occupants in a covered boat are injured in a collision with another boat, the medical expenses are paid up to the Medical Payments limits of the policy.

Other Coverages ‑ that may be found in the Boat Owners Package Policy would include the cost of removing a wrecked or sunken vessel following a loss; life salvage, which is compensation to other people who act to save human life because of an accident on the water, and Uninsured Boaters Coverage.

Exclusions ‑ The following Exclusions are common to the Boat Owners Package Policy:

»      Portable electronic photographic or water sports equipment, or fishing gear. Remember cameras, fuel, portable radios and sports equipment would not be covered.

»       Using the covered property in any official race or speed test. (Sailboats would not be included in this exclusion.)

»      All‑Risks@ Exclusions for wear and tear, inherent vice, latent defect, mechanical breakdown, war and nuclear hazard.

»      Damage caused by any repair or restoration process

»      carrying persons or property for a fee, or renting Covered Property to others.

»      infidelity of persons to whom the Covered Property is entrusted (except carriers for hire)

Concerning Liability and Medical Expense Coverages, the following Exclusions are commonly found:

»    using watercraft in any official race or speed test

»    intentional injury or damage

»    losses covered by Workers Compensation or similar law or by a Nuclear Energy Liability Policy

»    Contractual Liability

»    renting the watercraft to others or carrying persons or property for a fee

»     injury to an employee when their work involves operation or maintenance of the watercraft

PERSONAL YACHT INSURANCE

Personal Yacht Insurance refers to larger boats such as yachts, inboard motorboats, cabin cruisers and sailboats more than 26 feet in length. The following Coverages are available:

Hull Insurance ‑ this refers to Physical Damage Insurance on the boat. This coverage applies to the boat, sails, tackle, machinery, furniture and other equipment. This coverage may be written on a Named Perils Basis or an AAll‑Risks@ Basis. A deductible will apply to all Physical Damage Losses.

Protection and Indemnity Coverage ‑ This coverage is a form of Marine Liability Insurance. The owner of the boat is covered for Bodily Injury and Property Damage on an Indemnity Basis. Example: if the boat owner falls asleep at the wheel and negligently crashes into a marina and injures a number of people, the loss to the dock and any Bodily Injury Claims would be covered.

Optional Coverages ‑ There are several optional coverages that are available that can be added to the Personal Yacht Policy:

»     Boat Trailer Insurance

»     Water Skiing Clause that provides Liability Protection if the boat is used for water skiing

»     Land Transportation Insurance that extends the insurance to cover the insured vessel while being transported by land conveyance.

»     Medical Payments Insurance for covered persons

»     possible liability of the insured to maritime workers injured in the course of employment who are covered under the United States Longshore and Harbors Workers Compensation Act.

WARRANTIES

Personal Yacht Insurance contains several warranties (better known as promises). If a warranty is violated, higher premiums will be charged or the coverages will not apply. The major warranties are:

 »  Lay‑Up Warranty ‑ the insured promises when the vessel will not be in operation during certain periods, such as winter months.

 »  Navigational Limits ‑ the vessel will be used only in the territorial waters described in the declarations.

 
»  Seaworthiness ‑ insured warrants that the vessel is in seaworthy condition.

» Private Pleasure Warranty ‑ the insured promises that the vessel will be used only for Private Pleasure   purposes and will not be hired or chartered unless the insurance company approves.

UNINSURED BOATERS COVERAGE

 Uninsured Boaters Coverage is quite similar to the Uninsured Motorists Coverage in the Personal Auto Policy. The insurer agrees to pay the damages that a covered person is legally entitled to recover from an uninsured boat owner or operator because of bodily injury the covered person sustained on a boating accident. However, the Uninsured Owner or AOperators Liability@ for the damage must arise out of the ownership, maintenance or use of a watercraft.

The Uninsured Boaters Coverage contains several exclusions. Bodily injuries from the following are excluded:

»  using or occupying watercraft without reasonable belief that one is entitled to do so

»  if the Bodily Injury Claim is settled without the insurer's consent

»  while occupying or struck by a watercraft owned by the insured or by any family member not insured under the policy

»  when occupying a covered watercraft when it is being used to carry persons or property for a fee or is rented to others. There is an arbitration provision. If there is disagreement about whether a covered person is legally entitled to recover damages from the uninsured boat owner or on the amount of damages, then arbitration is used. Each party selects an arbitrator.  If they cannot agree within 30 days, a Judge in a Court of Law appoints the arbitrator. A decision by any 2 of the 3 parties is binding on all.

CHAPTER 7 QUESTIONS

1.   Recreational watercraft would include?

a.         canoes

b.         rowboats

c.         dinghies

d.         all of the above

2.   The Homeowners Policy does have coverage for _______ damage for watercrafts or trailers:

a.         Liability

b.         Cargo

c.         Physical

d.         Hull

3.   The Personal Auto Policy will cover a boat trailer for _________ damage:

a.         Liability

b.         Cargo

c.         Physical

d.         Hull

4.   This coverage is designed for boat owners who already have adequate Liability Insurance?

a.         Outboard Motor & Boat Insurance

b.         Hull Insurance

c.         Cargo Insurance

d.         All of the above

5.   These policies combine Physical Damage Liability and Medical Payments Coverage in an All‑In‑One Policy:

a.         Personal Yacht Policy

b.         Hull Insurance

c.         Protection & Indemnity Policies

d.         Watercraft Package Policy