from The Teaser, Fall 2008
by Capt. Skip Smith
"Hey Boss, we bumped bottom today and may have bent those new $30,000 props. It looked like there was plenty of water there, but unfortunately it was spread real thin. What's our deductible?"
The Boss answers, "First I have to find our policy. Well, let's see. We have a windstorm deductible, hull deductible and a crew deductible. What kind of deductible DON'T we have? It looks like we will never collect anything unless it's a total loss and then the company will still find a way out of paying for that too!"
We all hate paying for insurance, because it seems like you never collect and when you do have a claim the damages fall under the deductible or it is not covered. We all hate buying something that we cannot see and to do it every year? When a client calls to put in a "questionable" claim, most agents with any experience know better than to advise against it. (Whetherit may make it over the deductible or even be covered) Ask the agent to notify the company and after you get the estimates you will let them know if you wish to proceed. When you put in a claim, it could generate about a 20%+/- increase in your premium the following term. (If it's your first claim) You'll lose your "loss-free" credit and you'll receive a 10%+/- debit for having a loss. If the claim looks to be barely over your deductible, you might consider retracting your claim and paying for the damages yourself to avoid an increase in your future premium(s).
The yacht insurance companies do not let agents handle the claims. We are lucky to even be up-to-date on the present status of a claim. Your agent can help to determine where the coverages are in the policy or, even better yet, explain to you why your claim was declined. Just about everyone we insure says they have never had a claim and they don't plan on it. We just can't figure out where the 20 open claims we have today came from.
It seems that yacht coverage is not like your auto insurance where you can put in a claim or two and still find a company that will insure you. Most companies that insure yachts (including London facilities) are quick to non-renew you after a loss or two even when you think it's not yourfault. "My Captain did it", lightning strikes, hurricanes, groundings and crew injuries are the claims we see and hear the most. Claims that are out of a client's control . I have heard of the owner firing the Captain to show that he is trying to clean up the operation. We have even heard of people putting the vessel in their kid's name, because no one would insure them after numerous claims.
It's hard to believe that an underwriter would think that a yacht owner has bad luck or hires the wrong people! I always thought that if the owner can make enough money to buy a yacht, they must be doing something right and have some intelligence. There is no doubt that many owners enter into yachting without a clue. They hire their old retired buddy to operate the yacht, want to leave the boat unattended in the Bahamas during hurricane season and can't figure out why they can't get the same premium that their friend has. Then they find out that the boats cost more to maintain and operate than they budgeted for. Or they operate the yacht as a hobby and do not track the expenses like they would a business. That's another story!
U.S. Companies vs. LondonCompanies
Most U.S. companies that insure yachts(Travelers, Chubb, ACE, AIG, etc.) are the best companies with which to be insured. They all have reputable claims service and usually have the best rates. Remember, you are paying for a claim that you hope never happens, not the policy to sit in a drawer or to show the Mexican dockmaster in Cancun. If, for some reason, you have to be with a London carrier, this is usually due to either being in South Florida right now, (not many U.S. carriers want to write in South Florida unless the vessel is at least worth one million dollars with a full-time Captain) prior claims history, an old boat or some extended navigation.
Many times with a U.S company, they will pay before and during the repairs. With a London claim, it usually works a little differentas most are indemnification policies; meaning that they indemnify you after you pay for the claim. The scary part of this is you won't know what they will cover until the vessel is fixed and you put all the money out. Then they send you a check for a portion of the amount you spent along with the list of what is covered, what is not covered and what was depreciated. The easiest claims to deal with London are usually a total loss.
The most popular claims that can get ugly are the engine claims and crew injuries.
MAN, CAT and MTU/Detroit Diesel have had their problems and each company covered most of their own problems. Most engine manufacturers offer 3 to 5 year warranties so that helps.When you have an engine failure, the causes can be from piston failure, fuel injectors, water pumps, heat exchangers and exhaust manifolds to name a few. One could be failure and the other can be wear & tear. When an engine fails and it wasn't properly maintainedor just worn out, this is normally always excluded. The problem needs to be "sudden and accidental" and there must be a cause or part that they can say failed.
Crew injuries are covered under the Jones Act (506 pages of something you don't want to read), which means that the Captain or crew member can sue you personally, in a Federal court! They get to collect some kind of pay while they are injured and all their medical expenses. Some injuries are preexisting and you are still responsible for them. So you get the crew all the medical attention they deserve and now they hear that this attorney can "help" them. Suddenly they have a lingering pain and it's all your fault for those rough seas and tough conditions they had to work in; mostly carrying cases of beer and water from the golf cart to the boat.
What to do in the event of a claim!
All yacht insurance policies say that "you must take all reasonable steps to protect your yacht from further damage after an occurrence." The key word here is "reasonable" as far as how much money to spend or who to call. If you call your agent, they will probably repeat the above words after you sustain a loss. Ask the agent for advice. "What would you do?" (Please notice I said "would you" and not "should I")
A real claim! ... Common claims and their stories
- Lightning is the only real claim that you can not prepare for. Be prepared to test all electrical equipment as often as possible for amonth or so to make sure it wasn't affected. If you have a lightning strike and it only affected the navigational electronics then you may have a small or no deductible with some policies. But if you have a lightning strike and it affected those electronics along with other things then your hull deductible will apply. Whenever you have a claim that involves two deductibles, the claim will usually refer to the larger of the two. Most lightning claims affect the navigational electronics, motors, entertainment electronics, etc.
- Tornado or water spouts are also impossible to prepare for. That's why boats need to be tied-up properly when any storms maybe around. Not too common on the coasts or in the Islands, but ...you never know.
- Hurricanes! For a hurricane you have time to move the vessel and prepare. Lack of preparation, flying debris and other unprepared vessels cause most claims. Take down your Ison glass, outriggers and tape up your hatches and electronic covers. Most companies warrant a 2% to a 15% named windstorm deductible.
- Fire. Turbo fires, poor and old wiring and overloaded circuits are the cause of these problems.
- Engine failure. Some are covered and some are not. Depends on the policy and reason for failure.
- Hit something while running. This is one of the most wide-spread problems I encounter. The most common things hit are coral heads, sand bars, logs, etc. but these types of claims are usually reported as hitting a "mysterious submerged object." Don't forgot that these days you are responsible for the coral or sea grass damage too.
- Someone hit us. There's not much to do but; does the other boat have insurance? If not, you might have to make a claim against your own policy. Always get a police report. This document isusually written by a reliable source and shows which party was at fault.
- Crew injury. "What do you mean we don't have coverage for a paid crew? We only hired him to fish one day and to wash the boat." If you have hired a crew, even for one day, make sure youhave the proper crew coverage.
- Guest injury. Slips and falls can happen very easily on a vessel. These claims are usually covered under Medical Payments. If that limit is exhausted then any excess would be paid for by the P&I (liability) coverage in the policy.You can never have enough P&I insurance when it comes down to a liability claim. Most agents will (should) recommend that your P&I limit be equal to or greater than your hull value. This include seven if you have an umbrella policy. Umbrella policies almost always exclude any Workers Comp or Jones Act exposure and this would apply to a paid Captain or crew.
Wishing everyone lots of great fishing and safe boating.