Marine Industry Liability – What to look out for
By Ray Park – Marine Insure
Marine Liabilities in many ways, are no different from other Liabilities. Put simply, when a company or business is involved in the Boat & Marine Industry, whether it be Boat Building, Repairing, Painting and so on, they are all exposed to liability risks just as much as any other business is. Marinas are also particularly exposed, as potentially, they have millions of dollars’ worth of boats in their care, custody and control. It only takes a fire to break out on one vessel, which can soon spread to a dozen or more vessels, and if the marina is found legally liable in some way, a multi-million dollar claim can result.
On the other hand, Marine Liabilities do have some unique aspects, in that Admiralty and Maritime Law can raise its complicated head. Then we all have to go running to the Maritime Lawyers for assistance.
With regard to marine insurance, many marine insurers have entered into the marine liability insurance market with low insurance premiums, and now after 3 or 4 years have passed, we are seeing some insurers start exiting the market, after incurring large claim losses. When it involves boats, nothing is cheap. I can recall one instance with a marine industry client, where one timber block support that was rotten gave way, causing a vessel to fall over costing their insurer $600,000 for property damage to the damaged vessel.
Marine Industry Products Liability
One particular problem for Boat Builders is Products Liability insurance. You may be OK if you’re building, repairing or working on boats under 8 metres, as depending on the insurers’ policy wordings, cover may be provided under an insurer’s standard issue Public & Products Liability insurance policy. However, when you start moving into the larger watercraft, you could be left in ‘perilous straits’.
Your Builder’s Risk insurance will not help you once the vessel is delivered to the customer. If there were a loss to your customers’ watercraft, their Hull Insurer may respond initially to pay the claim for your customer, should the vessel come to grief. However, the Hull Insurer may in turn then seek recovery from the person responsible for the loss, such as yourself (the boat repairer, builder etc), if they believe the reason for the calamity, is as a result of a defect found to be caused by some faulty workmanship or error on the part of the boat builder or repairer.
Boat Builders’ Products Liability is a very specialised insurance policy and as such is not low cost. However, if you haven’t got such cover and a claim is made against you, your whole business is threatened. You don’t want to be realising, only when such a claim occurs, that you have inadequate insurance cover, or the wrong policy for the work you are carrying out.
Ship Repairer’s Liability
Ship Repairer’s Liability is always an interesting subject, and this type of insurance has gradually evolved over the years in the Australian market, moving from a very rigid old fashioned type of cover, to a more comprehensive modern form of insurance, with plain English wordings etc.
It was not that long ago, that ‘Discovery Periods’ were included in the wordings, starting with 6 months then extending to 12 months. Most policies today, have no such limitations, which, in my opinion, is a good thing. For example, there can be ‘latent’ (hidden) faults that may not raise their ugly heads for more than such periods, and an insured can be left with the repair bill, by not having a comprehensive Ship Repairer’s Liability policy, tailored to the client’s particular needs!
In my experience I have found that boat owners can be quick to fault the last contractor to have done some work on the vessel as soon as something goes wrong. They then approach this party requesting that they pay for the loss or damage the boat owner has incurred. The party involved (the last contractor), is then left to defend themselves, if they consider they had nothing to do with the problem concerned. With Ship Repairers’ Liability insurance, if indemnity has been granted by the insurer under the policy, the insurer can take over the legal defence, as these costs are usually covered under the policy.
The last point that I will address is ‘Faulty Workmanship’. Once again, this cover has been excluded under a large majority of standard Public/ Products Liability policies and some Ship Repairer Liability policies. Meaning only ‘resultant damage’ is covered, not the faulty workmanship itself. As a basic explanation, the costs involved in correcting the faulty workmanship are not covered, but any damage as a consequence of the same is covered, subject to any other terms and conditions of the policy. In more recent times, I have seen a gradual trend for insurers’ policy wordings being extended to include faulty workmanship, but always with a sub-limit applicable, e.g. $25,000 per occurrence and in the aggregate, in any one period of insurance.
Although this article has not dealt with all Marine Liabilities, it does highlight some of the more common aspects and the perils that a boat & marine industry business owner must take into account when selecting appropriate insurance for their needs.
Please contact Ray Park on 0421 881 325 or (07) 3217 9015 should you wish to discuss your specific Marine Insurance requirements.
Raymond Park is an Authorised Representative of Insurance Advisernet Australia Pty Ltd. Authorised Representative number – 282834
This information and any accompanying material does not consider your personal circumstances as it is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances and considering the specific Insurers Product Disclosure Statement.
The Partnership: The Trustee for Adam Lewis Family Trust and The Trustee for the Lewis Family Trust T/ as Lewis Insurance Services, Marine Insure and Insurance For My Business is a Corporate Authorised Representative of Insurance Advisernet Australia Pty Ltd. Advice on General Insurance products are provided by IAA. ABN: 15 003 886 687 | AFSL No: 240549 | CAR No: 430967