In the wake of the recent U.S. Supreme Court's ruling on marine insurance policies, yacht owners face a litany of new legal considerations. Fortunately, Lockton is here to help navigate these changes and ensure coverage remains effective.
THE DISPUTE
The situation began after the owner of a yacht submitted a claim for damages incurred when the vessel ran aground off the coast of Florida. The insurance carrier denied the claim, stating that the yacht’s fire suppression system was out of compliance with the terms of its policy. Here’s the kicker: There was no fire onboard the yacht.
It’s not uncommon to find situations where an insurer cites “breach of warranty” to deny a claim when there is an unrelated failure by a policyholder to comply with the terms of a policy. However, that was not how this case was argued.
The issue here was “choice-of-forum,” regarding whether or not the carrier can specify where a lawsuit can be adjudicated. This includes states with a history of legal rulings favoring breach of warranty denials.
The Supreme Court ruled that choice-of-forum provisions have been consistently upheld under maritime law since the late 1950s and ruled in favor of the insurance carrier.
The ruling actually safeguards maritime law, as it gives both insurers and insureds predictability regarding how the terms and conditions of a policy will be interpreted. This is especially important given the inherent mobility of the insured vessel.
So, what’s the problem? Marine insurers typically request New York as their preferred venue for trial. Why? Although the state does not allow carriers to deny claims for unrelated breach of warranty issues, it has a specific clause stating that this law does not apply to marine insurance policies.
RESOURCES FOR OWNERS
As a yacht owner, your best bet is to seek guidance from an insurance broker with deep experience dealing with intricate marine policies. When you work with Lockton, we start by meticulously examining existing insurance contracts to identify potential gaps or areas of concern.
After our analysis, we may recommend designing new insurance contracts or modifying existing ones to better align with your needs and preferences. By leveraging our longstanding carrier relationships, Lockton can often negotiate favorable terms to ensure you have appropriate coverage should you need it.
STEPS YOU CAN TAKE
While the review is being conducted, you can take this time to proactively minimize your potential exposures. This may include investing in safety measures, conducting regular maintenance checks, and adhering to relevant maritime regulations and best practices.
Most importantly, you’ll want to maintain accurate records of correspondence and policy documentation. A paper trail can prove invaluable in the event of a dispute, helping defend claims and facilitating the resolution process.
DISTINCTLY LOCKTON
By leveraging Lockton’s professional guidance and implementing comprehensive risk management strategies, together we can build a winning strategy that safeguards your yacht and gives you peace of mind as you travel the open seas.
To learn more about how Lockton can support owners of motorboats, sail boats, yachts, and mega yachts, visit our website (opens a new window) today.
For additional information regarding the legal implications of this ruling, view Lockton’s article, “Supreme Court’s marine choice-of-law ruling is a win for insurers, with a silver lining for policyholders (opens a new window).”
The information provided in this article is for educational purposes only and should not be considered professional advice. Please consult with a Lockton representative for information regarding specific insurance products and services.