The origin of insurance itself is water-bound. Maritime insurance is considered one of the earliest well-developed forms of insurance, with its origins in the Greek and Roman maritime loans of the 18th Century. Today, In Australia, marine insurance policy contracts are governed by the Marine Insurance Act 1909 (MIA).
Marine ‘adventures’ and ‘perils’
Under MIA, contracts of marine insurance are limited to marine losses which are incidental to a ‘marine adventure’. As defined in MIA, a marine adventure occurs when any ship, goods or movables are exposed to maritime perils i.e. perils consequent on, or incidental to, the navigation of the sea. MIA provides an non-exhaustive list of what can be considered a marine peril, which includes ‘perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind, or which may be designated by the policy’.
In laymen’s terms, maritime insurance contracts can cover a variety of incidences, goods and damage depending on the policy. Given the varied uses of watercraft, there really is no ‘one size fits all policy’ when it comes to marine insurance. Therefore, it is important to consider what policy will best safeguard your needs in the event of the unexpected, such as, loss, theft, damage (malicious or accidental) and the potential effect of rough weather.
Choosing the right policy for you and your vessel
You may need to shop for different policies and negotiate with your insurer to get a policy which covers your needs and boating activities. Depending on what policy you choose, insurable property may include goods, movables, freight, profits, commissions, disbursements, wages and third party liability. You may want to consider getting additional cover for tools, fishing gear and water ski or diving equipment. Some contracts protect mixed sea and land risks, and provide cover for non-marine risks and subject matter which are incidental to sea voyage.
It is vital to ensure that you operate your boat within the terms of your policy, for instance, not using a watercraft which is insured as a pleasure craft for commercial benefit. Most policies impose speed limits, so check to see if your policy covers you in the event that you are speeding or driving an overpowered vessel. It is common for policies to have geographical limits, so if you are taking your boat beyond such limits you may require additional cover. Your policy can also be affected if you make modifications to your boat, so if you plan to do so, notify your insurer as soon as possible. Remember to keep your boat well maintained and in good condition. Loss or damage caused by lack of maintenance, repairs or unseaworthiness are not generally covered. You may need to take out an optional extension to suit your individual boating needs such as additional cover for yacht racing, legal liability cover for water skiers being towed by your boat, accidental loss or damage to fishing, diving and water sport equipment.
Getting the valuation right
When weighing up ‘agreed value’ and ‘market value’ polices factor in the value of your vessel. Have a think about depreciation, the financial climate, cost of additions and improvements, gear and equipment and the boats condition and also the amount of potential damage. If your vessel is relatively new, some insurers will allow owners to insure it for the cost of a new replacement, so it may be worth considering this option and discussing it with your insurance provider. In times of financial hardship, it may be tempting ‘undervalue’ your boat to reduce premiums and payments. Remember that if you don’t get the valuation correct and have a marine mortgage, you could be placed in negative equity if there is loss or damage to your boat. On the other end of the spectrum, insuring a boat for more than what it is worth without alerting the insurer may lead to the insurance provider refusing the pay the full policy value if it can be shown that you have intentionally inflated the valuation. Determining a boat’s value can be hard, and if you find it particularly difficult you may want to consider going for an agreed fixed value policy to avoid potential disputes over the policy value when settling a claim. An agreed value policy also can usually cover you at a fixed and higher amount.
Let’s consider a scenario where a cyclone, powerful east-coast low or a suitably powerful storm rolls in and literally rips boats from their moorings and drives them into one another or forces them onto the land. In circumstances such as this, the question arises of who bears the cost of paying for any damage; the boat owner, the insurer or the provider of the mooring?
One major area of risk minimisation amongst maritime insurance providers is the refusal of some boating insurance providers to cover damage to or caused by moored vessels; some major insurance providers will only cover damage to a boat caused when it is actually in use. Given that mooring failure is a frequent cause of loss, it is important to consider the amount of potential loss which could be caused to and by your vessel while it is moored. If you require insurance for your moored vessel, it is important to make appropriate enquiries and checks when choosing your policy and ensure that your policy will cover a failure of a mooring through no fault of the owner. Insurance policies which cover moored vessels often require that the mooring be well maintained, serviced by a professional mooring contractor at least once a year and that the mooring is designed and suited to the particular type of boat. A certificate and letter from the mooring company which confirms that the mooring is appropriate and has been serviced regularly is generally required to cover the boat owner. This adds to the importance of keeping mooring within standards, keeping proper records and ensuring that the correct mooring has been installed.
‘Out of the water claims’
Be aware that most maritime insurance providers do not cover your boat while it is out of the water. For instance, when it is transit and being towed by your personal automobile. You may want to consider your automobiles policy for this reason. Listing your boat from the dock for repair is another area which might not be covered, if this is the case, be especially weary of waivers which may state that the operator or broker accepts no responsibility for damage to the boat, and/or damage caused by the boat to third party property, while they are on it.
Damage or loss caused by the work of others
If a fire starts on board due to fault installation of an engine by a third party, causing further loss and damage, will you be covered? The answer depends on the worker’s and your insurance coverage. When paying professionals to carry out repairs on your boat, consider whether your policy covers third party liability in the event of a workman’s accident or negligence.
If you are employing contractors to engage in repairs on your boat, they may not be insured. So, before you allow a contractor to complete work it is prudent ask to see their insurance coverage certificate which will inform you on the limits of their policy. Also bear in mind that if an uninsured tradesman on your boat damages someone else’s vessel, the owner of that vessel or their insurer will be taking aim at everyone in sight to recover costs, which will include you.
A unique feature of maritime insurance compared to other forms of insurance is differing thresholds of causation which may be defined in a marine insurance contract. While the ‘proximate’ cause test is well established in general insurance law, in maritime insurance law, depending on the insurance policy and wording, a different scope of causation can be adopted. Often maritime insurance policies require that an insured event is the major cause if the damage, or will assert that an exception to the coverage applies. Because of the scope of causation can vary amongst policies, it is once again, vital to be aware of what the terms of your insurance policy are.
The Bottom Line
Enjoying the great outdoors on your boat should be plain sailing. But where a mixture of boating and nature is involved, you should always factor in the unanticipated. While no one likes to think that a boating or watercraft accident could happen to them, the reality is that there are thousands of insurance claims made for boating accidents and damage every year.