Specialty Marine Insurance

Specialty marine insurance is a type of insurance that specifically covers boats and other watercraft. This type of insurance is designed to protect boat owners from financial loss due to accidents, theft, and other unexpected events that may occur while the boat is in use.

One of the key benefits of specialty marine insurance is that it provides a wide range of coverage options. This allows boat owners to customize their insurance policies to meet their specific needs. For example, some policies may provide coverage for damage to the boat itself, while others may provide coverage for personal injury or liability.

Another important aspect of specialty marine insurance is that it often includes coverage for towing and emergency assistance. This can be especially valuable in the event of an accident or breakdown, as it can help to minimize the financial impact of these unexpected events.

In addition to providing coverage for boats and watercraft, specialty marine insurance may also provide coverage for related equipment and accessories. For example, many policies will provide coverage for engines, trailers, and other equipment that is used in conjunction with the boat.

One of the main considerations when purchasing specialty marine insurance is the type of boat or watercraft that is being insured. Different types of boats and watercraft may require different levels of coverage, and some insurance companies may have specific policies that are designed for specific types of boats.

Another important consideration when purchasing specialty marine insurance is the location where the boat will be used. Some policies may provide coverage for boats that are used in freshwater, while others may provide coverage for boats that are used in saltwater. It is important to understand the specific coverage options that are available in the area where the boat will be used in order to make an informed decision.

Overall, specialty marine insurance is an essential type of insurance for boat owners. It provides a wide range of coverage options, including coverage for accidents, theft, and other unexpected events, as well as coverage for towing and emergency assistance. By understanding the specific needs and requirements of their boats and watercraft, boat owners can select the right policy to meet their needs and protect their investment.

Aquaculture operations or marine farming is similar to other farming operations, but it has some unique and unusual exposures. Flood and windstorm coverage is available through various insurance pools, while private insurers provide other property and liability coverage. Unique exposures include disease and contamination of fish, shellfish, and shrimp crops during cultivation.

Boat dealers sell new and used watercraft. The dealers may be land or water based. Policies designed for boat dealers cover stocks of boats, accessories, and supplies held for sale. Property and marine coverage is usually written on an "all risks" type basis. Coverages are similar to open lot automobile coverage and garagekeepers legal liability.

Boatyards work with their clients to repair and service their boats, haul them out of water in the fall, store them over the winter, and launch them in the spring. The general liability exposure is similar to that of an automobile repair operation with the added hazard of water-related activities. The storage and moorage exposure can be significant.

This is a special form of umbrella liability designed for marine accounts that operate vessels or use docks. It covers protection and indemnity, general average, collision, salvage charges, sue and labor, and all other legal and contractual liability. It also covers employers liability; liability under admiralty laws and the Longshore and Harbor Workers Compensation Act; automobile liability; and general liability.

Standard protection and indemnity coverage written in conjunction with small watercraft and boats hull insurance policies does not apply when a boat is hired or chartered to others. However, coverage is available for owners or operators of such vessels used to carry passengers for a fee for sightseeing, fishing, transportation, entertainment, or marine observation. Coverage is usually subject to a deductible. Liability exposures concern underwriters more than loss or damage to the hull.

Commercial fishing boats are subject to significant hazards. As a result, the market for them is quite limited. Protection and indemnity (P&I) exposures concern underwriters more than hull physical damage exposures. By far, the greatest hazard is crew coverage for employees who work on vessels. Employees who work on land also need coverage. Workers compensation, U.S. Longshore and Harbor Workers Compensation Act coverage, and Jones Act liability coverage must be coordinated to protect owners and operators against claims for injuries to all employees. Commercial general liability coverage for non-marine exposures is also required. Many specialty liability carriers refuse to insure the crew hazard.

The United States Customs Bureau requires that an importer secure a bond to guarantee that it will pay all duties on goods brought into the country. Shippers must secure open customs bonds that cover shipments on a continuous basis. Custom bonds are available for others on a single shipment basis that are written for amounts equal to the value of the goods and include applicable duties and fees. Related to customs bonds, Non-Vessel Owners Common Carrier (NVOCC) bonds and freight forwarders bonds for importers and exporters are required by the Federal Maritime Commission and protect exporters for their cargoes while being shipped.

Customs brokers and freight forwarders work with importers to ensure that their commodity shipments clear customs according to government guidelines and regulations. Customs brokers manage the paperwork on the import from the time it arrives at the port of entry. They also act as freight forwarders to deliver goods to the customer's inland location, regardless of the distance. Customs brokers errors and omissions coverage protects them against suits that arise from their negligence in arranging for clearance and forwarding imports on the importer's behalf.

Dredging contractors move dirt, sand, and accumulated debris from waterways (fresh and saltwater), primarily to redirect, clear, or establish new channels. Many dredging contracts involve coordination with the Army Corps of Engineers. Dredging equipment is usually on a barge that floats over the site.

Excess limits over primary marine liability limits are often needed. Marine employers' liability and commercial general liability limits on policies for marine businesses, such as boat builders and repairers, marine contractors, dredgers, and other vessel services, can be extended by using specialty markets that write excess marine liability limits. Excess liability coverages for marina operators, stevedores, charterers, wharfingers, and terminal operators can be written over self-insured retention (SIR) programs or over primary policies.

Employers liability for maritime risks usually falls under the jurisdiction of either the United States Longshore and Harbor Workers Compensation Act (USL&HWCA) or admiralty jurisdiction via the Jones Act. Coverage for workers involved in offshore oil drilling, marine diving or dredging, employed on fishing vessels, or serving as crew members on tugs, barges, ferries, scows, work boats, and pleasure yachts can be difficult to place because the work they perform is dangerous. Certain specialists well acquainted with maritime exposures provide excess maritime employers liability.

Bridges are not cost effective or possible in certain locales. In some cases, there are organizations that transport people, cargo and/or vehicles across the body of water. Ferries usually operate on lakes, bays, and rivers on a fixed schedule. Smaller ones may operate only during fixed seasons. Some ferries may also provide tourist cruises. Ocean marine hull coverage and protection and indemnity (P&I) coverage is needed for vessel and liability exposures. General Liability, property, and workers compensation coverages are needed for the pier and on-shore operations. Inland marine coverage may also be needed for mobile property that may be on land or on the ferry.

This coverage insures against food being rejected at its port of entry due to government actions such as arbitrary rejection or detention, or through a miscarriage of administrative food-safety determination. Meat and fish are two common examples of food products that may be rejected due to contamination by impurities, packing cartons, or other cargo. The premium for this insurance is substantial due to consumer attitudes about tainted food and strict federal government regulations.

Insurance on this class of business is written on broad form marine policies and covers business-owned vessels capable of attaining speeds of 100 miles per hour or more. Hull and liability coverage is available, including medical payments, personal effects, and uninsured boaters coverage. These policies are issued at agreed value with named operator warranties. Extended land transit coverage and transit and storage coverage options are available, as are extended navigation areas. Boats with either single or multi-hulls are eligible.

Insurance underwriters categorize houseboats and yachts in the same way. This results in correspondingly similar rates, insuring conditions, and coverages. The yacht coverage form or policy is used to write hull coverage and the protection and indemnity liability coverage for houseboats. The main differences between houseboats and yachts are that houseboats are more difficult to navigate, are less seaworthy in rough water, and are more unwieldy than yachts because of the way they are constructed. Single or twin inboard or outboard drive engines with up to 400 horsepower usually power houseboats. These policies are underwritten based on the owner's or pilot's experience, the vessel's use, operating season, and the rates for the operating area. Coverages provided include hull, boat equipment, personal effects, liability, medical payments, and uninsured boaters coverage and are usually subject to deductibles.

Marinas are important to yacht and pleasure boat owners. They provide these boat owners with mooring facilities, repair, alteration, maintenance, storage, fueling and many other services. Coverage under a marina package policy includes property, commercial general liability, marina operators' legal liability, and protection and indemnity insurance, along with coverage on piers, wharves, and docks. The marina operators' legal liability policy covers the marina operator's legal liability for loss of or damage to private pleasure boats while in its care, custody, or control. This policy closes the gap left by the "care, custody, and control" exclusion in the commercial general liability policy. Water sports' rental insurance is available for marinas that rent out personal watercraft, pleasure boats, kayaks, water skis, and wind surfers. Insurance can be arranged on operations such as parasailing and boat charters.

The open cargo policy is the most common cargo policy. It covers all shipments the insured makes on a continuous basis until coverage is cancelled. The only thing the insured must do is report the shipment being made and its destination. The policy is customized to meet the insured's special requirements but is written subject to average clauses that determine the extent to which losses are paid.

Marine hull insurance on seagoing vessels has been written since Lloyd's of London commenced operations. The major market in the United States is the American Hull Insurance Syndicate, a pool of major domestic underwriters that can provide large capacity on any one vessel. The policy protects the owner's investment in the vessel and its machinery and equipment. Coverage is usually written on a broad named perils basis and insures against contact with land or any conveyance, as well as negligence of the master, charterer, or pilot. Hull insurance is also written on many different types of commercial craft that operate on rivers, harbors, and other inland waterways.

Ocean marine underwriters place war exclusions on policies based on the anticipated routes traveled. Some underwriters are willing to remove those exclusions and accept the war risk exposure for a significant premium and subject to prescribed safety protocols.

Businesses that design yachts, pleasure craft, and commercial vessels, as well as marine surveyors, port and harbor managers, and other miscellaneous marine-related risks all have professional and/or errors and omissions liability exposures.

This coverage is called Protection and Indemnity (P&I) insurance. It applies to liability incurred by businesses that work on or engage in activities associated with ships, piers, and seagoing enterprises. Ship repairers, charterers, and stevedoring activities, as well as oil well drilling, exploration, and diving firms are eligible for this specialty coverage.

There is increasing undersea research activity conducted by commercial corporations or the United States and other governments as each attempts to discover resources that might be used to meet the increasing demands of growing world populations. Submarines and sea laboratories, platforms, and surface equipment used to service underwater vessels are just some of the types of vessels involved in oceanographic ventures. Hull and liability insurance coverage on this and other oceanographic equipment is needed. In order to properly underwrite an individual or joint oceanography risk, marine underwriters need information on the insured's background in undersea projects, a detailed list and description of equipment, the nature of the project, operating depths and geographical area, details on support vessels, means of communication, and previous loss experience. This is an extremely specialized and technical field.

Property coverage for this class of business is usually written on a named or specified perils basis. There are several different types of offshore rigs, including mobile offshore drilling units and ship-shape floaters, and rigs built on ship hulls. Rigs that are anchored into the seabed and rigs that have submersible oil drilling apparatus pose problems for property insurers. Offshore drilling operations also have significant liability and workers compensation exposures. Workers compensation requires United States Longshore and Harbor Workers Act and Jones Act coverage and must have sufficiently high limits to protect the owners, operators, and drilling contractors and their employees. The threat of water pollution from offshore oil drilling operations adds to an already difficult and complicated insurance coverage arrangement.

The water exposure is significant so these contractors must carry both land-based and ocean-based coverages. Coverages for injury to employees is especially difficult because the employer may be required to satisfy state workers compensation laws as well as federal laws such as the Jones Act and the Longshore and Harbor Workers Compensation Act. These contractors have significant general liability exposures but may also have protection and indemnity (P&I) exposures when they work on the water. In addition, many of them own watercraft from which they perform operations.

This coverage protects an insured vessel owner and operator for legal liability that arises from the Federal Water Pollution Control Act and its amendments. The original federal legislation that dealt with water pollution was the Water Quality Improvement Act of 1970. It imposed liability on vessel owners for cleanup of oil spills. The Federal Water Pollution Control Act of 1972 broadened the scope of the original legislation to also include liability for cleanup of discharges of hazardous substances as well as oil or petroleum products.

Protection and Indemnity (P&I) insurance covers the insured's liability for injury to both the public and the crew in addition to its liability for damage to the cargo and other property. On land-based risks, this same coverage requires issuing a commercial general liability policy for the bodily injury and property damage, a workers compensation policy to cover the master and crew, and a motor truck cargo carrier's legal liability policy for the cargo.

Special marine hull coverage forms are used to insure vessels that operate on rivers or in harbors. Such vessels include barges, car floats and ferryboats, dredges, and floating dry docks. River and harbor congestion and the special type of work that these vessels do require carefully underwriting each case.

Marine insurers write insurance on this class of business on combined hull and protection and indemnity (P&I) forms. P&I covers liability for injuries to both passengers and crew along with damages alleged by others. Only a few underwriters are willing to assume liability on boats that can carry as many as 1,500 passengers. Tricky navigation in shallow and crowded waters such as the Ohio and Mississippi Rivers and the liquor liability exposure make this class difficult to underwrite.

This coverage protects the party that charters a vessel against liability incurred for loss of or damage to that hired vessel. Liability is usually limited to damage caused by loading, unloading, or failure to provide a safe berth. Coverage may be written on an open basis with a flat premium charged for each voyage or based on insuring each voyage separately.

This coverage protects an individual ship repairer, marina, or boat yard operator for its legal liability to the vessel's owner for damage to the vessel being repaired. This "care, custody, or control" coverage applies to only property damage liability to the vessel being repaired. In addition, coverage may be extended to include the insured's legal liability if a vessel that is in for repair damages other property, such as during a test run.

Sport fishing boats are available for hire to parties who go deep sea fishing for game fish such as tuna, marlin, swordfish, or sharks. Property and liability insurance is needed for the hull, passengers, and the crew. Insurance carriers that specialize in marine insurance coverages provide such protection. Coverage is available in warm water areas, such as off the coasts of Mexico, Hawaii, the West Indies, the Bahamas, as well as off the Atlantic and Pacific coasts of the U.S. and the Gulf of Mexico.

This coverage protects stevedoring operations against claims for loss or damage to vessels or their cargo that arise out of loading or unloading operations. The coverage provided is usually limited to legal liability, as opposed to contractual liability. Premiums are usually a percentage of gross receipts or based on cargo tonnage moved.

Pollution caused by vessels, such as the Exxon Valdez incident in Prince William Sound in Alaska, can lead to extremely large losses. The vessel pollution coverage pays damages for leaks and spills of crude refined oil and other chemicals by ocean-going vessels that harm the environment. The United States Coast Guard (USCG) must approve any insurer that provides this coverage before coverage is placed with it. If an incident does occur, all clean-up must be conducted according to the Oil Pollution Act of 1990 and any subsequent revisions.

Water ski schools provide instruction for water skiing, wave boarding, tubing, barefoot water skiing, and other types of propelled water-related activities. Instruction is usually conducted in less hazardous water areas relatively free of other watercraft. Bodily injury and property damage liability coverage is available.

Renting watercraft is a popular alternative to ownership. The types of watercraft rented range from personal watercraft such as ski-doos to houseboats. The coverage provided is for the benefit of the rental unit's owner, not the renter. Hull damage, water sports liability, and other liability coverages are available. Underwriters require a written rental agreement that contains appropriate hold harmless language.

This coverage is also known as wharfkeepers legal liability or landing dock bailee liability insurance. It covers the insured's legal liability for loss or damage to vessels in the insured's care, custody, or control. Coverage is also provided for the insured's legal liability for loss or damage to other property that is caused by vessels in its care, custody, or control. This liability coverage is usually purchased by insureds that have vessels, watercraft, or other equipment moored on their premises. The rating is based on the number of days or hours a vessel is on the insured's premises. Underwriters usually charge a minimum deposit premium against which the rate per vessel day is adjusted. The coverage may be included in the general coverage for a marina operator where a combined policy covers ship repairers' legal liability, wharfingers liability, and liability to vessels stored.

Package-type policies are available for most types of power and sailing vessels. Property coverage is usually provided on an "all risks" type basis for physical damage (hull) coverage. Liability is provided under protection and indemnity type coverage. Passenger, water skiing liability and property coverage on equipment and trailers are optional coverages that are available. Coverage for boat trailers, personal effects, medical payments, and uninsured boaters are other important available options. Watercraft more than 25 years of age is usually written under separate antique and classic boat programs.

Following are some examples of Specialty Marine Insurance claims and the corresponding insurance coverages that can help pay for them:

1. Cargo Damage: A shipping company transporting high-value electronics encounters severe weather at sea, causing significant damage to the cargo. Specialty Marine Insurance can help in this situation by providing coverage for the damaged cargo. It would compensate the company for the value of the lost goods, helping to mitigate the financial loss and any subsequent lawsuits from clients for failed delivery or damage.

2. Pollution Liability: A tanker carrying crude oil may have an accident and spill its contents into the ocean. This can lead to a massive environmental disaster and potential lawsuits from environmental agencies or affected communities. In this case, the Specialty Marine Insurance could cover the cleanup costs and potential legal expenses associated with pollution liability, reducing the financial burden on the insured company.

3. Crew Injury or Loss: A crew member could be seriously injured or even lost at sea during a voyage. Lawsuits may arise from the crew member's family or representatives for compensation. Specialty Marine Insurance can help by providing coverage for crew injuries and fatalities, which includes the legal costs involved with such claims, therefore, helping the company manage the financial and legal fallout of such tragic incidents.

4. Hull and Machinery Damage: A commercial fishing boat may sustain damage to its hull or crucial machinery due to an accident or severe weather. The cost of repairs can be exorbitant, and any delay in operations could lead to lost income. A lawsuit may arise if the damaged vessel was under charter, and the charterer claims for loss of use. Specialty Marine Insurance would cover these repair costs and the lost income during the repair period, as well as the legal costs arising from any lawsuits related to the incident.

5. War and Strikes: In the event of a war or a strike in a port, a ship could be damaged or its cargo could be delayed or destroyed. Such incidents can result in significant financial loss and potential lawsuits from cargo owners or other involved parties. A Specialty Marine Insurance policy with a War and Strikes clause would cover the losses incurred due to such events, including the legal costs associated with any resultant lawsuits.

6. Piracy: Piracy remains a significant risk for vessels, especially in certain parts of the world. A pirate attack can result in damage to the ship, theft of cargo, or even kidnapping of crew members. Lawsuits could arise from cargo owners for the loss of their goods or from crew members for trauma or injury. Specialty Marine Insurance can cover the losses from such an attack, ransom payments if required, and the legal costs of any lawsuits resulting from the incident.