Thursday, March 18, 2010

Important Stuff

Marine insurance is the oldest form of insurance on the planet. Lloyd's of London, where it all began, is still a major player. It began in a coffee house where shipowners gathered each day.

Used to be only a few companies wrote yacht policies, but now quite a few do. In my business I am surprised how often I now see yacht policies written by homeowner's insurers with an obvious lack of expertise, and I frequently run into adjusters for these companies who wouldn't know a seacock if it fell in their coffee. For my money, I would not buy a yacht policy except from a marine insurer.

Here's the problem. Yacht policies are subject to the same rules of construction as is the policy that insured the Exxon Valdez. That means the policy is strictly construed, word for word. There is, generally speaking, no attempt or ability on the part of courts to construe the policy in favor of the insured. This rule of construction is in contrast to the consumer-oriented construction courts give to all other consumer insurance policies (auto, home etc.)

To know what your coverage is, you really have to read the policy, and in particular the exclusions. (That's true of any policy - if you read nothing else of the policies you get in the mail read the declarations page and the exclusions.) For example, if your geographic limits exclusion covers your yacht only to 50 miles offshore, if you are outside that limit you have zero coverage. Same for layup dates and many other details. These new policies written by companies new to marine insurance sneak in exclusions and policy terms not seen in traditionally written policies and which tend to exclude many common casualties from coverage - beware.

Having said that, did you know that most policies will provide no coverage if your boat sinks due to a corroded seacock, or an old cracked engine hose that bursts, or other forms of "inherent vice"? It's true. Most policies contain the following language: "The perils generally excluded are wear and tear, gradual deterioration, or inherent vice, marine borers, vermin, loss caused by ice or freezing while afloat, loss to sails while racing, and petty theft or mysterious disappearance losses."

Beware. Ask your agent what these words mean and make sure you know the extent of your coverage. Some of these perils can be insured against, for additional premium.

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