It’s the time of year when many yachts and luxury sailboats are ready to end their summer season. It’s the perfect time to look them over and determine whether any repairs are needed before moving them to dry dock for the winter.
In some areas, yachting season never ends and neither does the need for ongoing maintenance.
Preparing your vessel for minor repairs or a complete overhaul involves extensive planning. You may think your work is done after deciding the scope of work, who will perform it, and where it will be completed. The reality is, each of these decisions can impact - or even nullify - insurance coverage for both you and your vessel.
SCOPE OF WORK
Q: Will the project include “hot work” (welding, griding or work that creates a spark)?
A: Many watercraft insurance policies specifically exclude hot work because of the increased risk of fire. A minor welding project gone awry can result in a total loss of the craft and the insurer could deny the claim. This can be avoided by having prior written authorization from the carrier or by temporarily moving coverage to a builder’s risk policy.
Your best bet is to contact your insurance advisor prior to signing repair agreements that require this type of work. Be sure to provide a description of the work to be done, estimated cost, and project duration. Also include details of available safety and fire prevention plans. If you fail to confirm that the necessary work has been approved by your carrier, your coverage could be in jeopardy.
WHO WILL BE DOING THE WORK?
Q: Will freelance or part-time workers be employed on your project?
A: Day workers are commonly used during busy periods to augment the permanent team of marine repair professionals or crew members doing the work. They tend to be a lower-cost solution for completing less specialized tasks such as sanding, painting, and clean-up. Whether or not your insurance policy will cover any injuries they sustain depends on the carrier’s interpretation of “crew” and Jones Act (opens a new window) coverage.
In advance of your project’s start date, you’ll want to ensure your policy includes coverage for day workers. If not, all work will need to be performed by full-time employees or licensed contractors with sufficient general liability coverage to meet shipyard requirements. A severe incident may not be covered and could put your balance sheet at risk.
THE YARD CONTRACT
Q: Does the project’s contract include a waiver of liability (or subrogation)?
A: It is becoming increasingly common for shipyards to transfer risk to owners for any damage their vessel sustains at the yard. These contracts and dockage agreements include language that waives your rights to subrogate and hold the responsible party accountable. Owners and captains often sign these contracts without realizing the financial liability they are assuming.
Before signing, ask your risk advisor to review the contract for language that could waive important rights that affect you and your carrier. Otherwise, you may be prevented from recovering very expensive damages.
Q. Does the yard offer you liability coverage?
A. Your preferred shipyard likely limits the amount of coverage from their liability policy for each vessel. It’s important to know that limit and whether there are options to supplement it.
Make sure you understand the circumstances under which the shipyard’s policy would apply and if it’s possible to increase coverage amounts. If higher limits are available, you’ll definitely want to evaluate the additional cost to you against the extra protection it provides.
WHAT NEXT?
When you are considering moving your vessel onto dry land for any sort of repair work, it pays to be proactive as well as extremely cautious. Since insurance is one of the least fun things about owning a luxury sailboat or yacht, let Lockton step in to provide you with peace of mind.
We offer a team of risk professionals who focus on the intricacies of watercraft coverage and continually monitor evolving maritime law decisions. We can review your policies to make sure you’re appropriately covered for the lifestyle you lead, and can provide you with recommendations on project-based contracts to ensure you don’t face any unpleasant surprises.
For more information about how Lockton can help you made decisions about your watercraft, visit our website (opens a new window) today!
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.