Matt Marsh sent me a link to a concerning article over at Loose Cannon about a US Supreme Court decision.
Well worth your time (see Further Reading). For me the two big takeaways are:
#1 Irrelevant Defects
It’s possible that our insurance companies will deny a claim if anything on the boat is found to be non-compliant with the terms of the policy, even if the defect in question had nothing to do with the loss.
So, for example, if the policy required ABYC compliance and, say:
- We have installed lithium batteries that do not communicate before load dumping, we would be in contravention of ABYC E13.
- Or our batteries are not fused (article coming later this week), or even not fused to be perfectly compliant with ABYC E11.
Or maybe:
- We have not replaced standing rigging on the schedule required by the policy.
- We have not replaced the bellows on a sail drive after six years, as required by the manufacturer’s manual, even though that was not explicitly required in the policy.
Our insurer could (not saying they will) deny a claim for, say, running aground resulting in a total loss.
#2 Favourable Jurisdiction Shopping
I think the above has probably long been true, at least theoretically, but the ruling also allows insurance companies in the USA to pick the most favourable jurisdiction for them for litigation or arbitration, further skewing the balance of power to the underwriter.
Pick a Good Insurer
All that said, the only time I have ever made a marine insurance claim (damaged mast by a trucker) I was treated very fairly by the underwriters, Aviva.
And since the boat was new to me, and at the time had many defects, albeit disclosed on the survey, they could certainly have played games if they had wanted to.
Further, Aviva has been open to increasing coverage and upgrading to agreed value, instead of actual cash value, as we have upgraded the boat and fixed defects.
The point being that although marine insurance underwriters clearly prefer the business of receiving premiums, not paying claims, the reputable ones don’t want to get a reputation for being jerks either.
Something to think about when shopping for insurance and being tempted to go with the lowest bidder.
Be Professional
We have, both in this case and with our previous underwriters (German market through Pantaenius), worked really hard to comply with standards and keep the underwriter up to date with our efforts. And we didn’t bitch when our premium jumped substantially with the change to agreed value either.
Do I know for sure that building a good relationship with an underwriter will stand us in good stead if we have to claim? No.
But I’m pretty sure that not fixing all kinds of glaring defects on our boats and/or behaving confrontationally won’t help.
Hi John and all,
There are surveyors who specialize in pre-purchase and periodic insurance surveys and there are surveyors who do more accident and damage surveys: often carrying the survey right on through all the repairs to ensure they are done properly.
I know that a friend who was a surveyor told me a few decades ago now that he was required to report any transgressions and that having a gas engine stored below decks, even if run dry, would undermine a claim even if the claim had nothing to do the stored engine. I suspect he was required to report other found transgressions. He did not say that the ins co refused claims for these transgressions, but that was the implication.
It is hard to imagine a vessel, built before a decade ago, which meets present ABYC suggested guidelines with respect to fusing and over-current protection. I just had one of the periodic insurance surveys and I know that the surveyor paid no attention to the wiring/fusing.
It would be nice to hear from surveyors on this issue or those who might have had claims refused.
My best, Dick Stevenson, s/v Alchemy
Hi Dick,
In my experience most surveys are pretty useless. The surveyor who did the pre-purchase on the J/109, despite being highly recommended, and fully certified including ABYC never flagged that the batteries were not fused or any of the many other ABYC fails.
Bottom line, in my view, at least in North America, surveys are not worth the paper they are printed on, at least around the electrical system and rig, and we need to take ownership of compliance ourselves. That said, to be fair, said surveyor did a good job of checking the boat for moisture in core.
Hi John,
Boy, do I agree with this. Surveys I’ve had have little to do with what’s important and reducing risk. I only have them done to satisfy a marina or insurer requirement. It’s maddening to see imperious insurance companies relying solely on these weak surveys to make decisions. In many cases demanding them within 24 months.
ABYC is trying, but the surveyor certification system is not working. If I were an insurance company, I’d also want to have a discussion with owner-operators to determine their level of knowledge and conscientiousness to get a handle on the risk I’d be taking on.
Whitall
Hi Whitall,
I agree, for the most part the whole surveyor system, at least in North America is broken and stacked against the owner.
On insurance, back when I was with Pantaenius brokers and German market underwriters I was able to establish just the sort of relationship you advocate for and was not asked for a survey for over 20 years. Each year I sent in a detailed list of fixes and improvements to the broker for forwarding to the underwriter and they seemed happy. They also let me do some pretty aggressive stuff like short handed cruises to the East Coast of Greenland for very little added premium.
Sadly, I fear that those days of a more personal relationship between underwriter and client are gone.
Hi John,
It will depend on which country’s jurisdiction applies. For example, the New Zealand Insurance Law Reform Act 1977 section 11 states:
11Certain exclusions forbidden
Where—
(a) by the provisions of a contract of insurance the circumstances in which the insurer is bound to indemnify the insured against loss are so defined as to exclude or limit the liability of the insurer to indemnify the insured on the happening of certain events or on the existence of certain circumstances; and
(b) in the view of the court or arbitrator determining the claim of the insured the liability of the insurer has been so defined because the happening of such events or the existence of such circumstances was in the view of the insurer likely to increase the risk of such loss occurring,—
the insured shall not be disentitled to be indemnified by the insurer by reason only of such provisions of the contract of insurance if the insured proves on the balance of probability that the loss in respect of which the insured seeks to be indemnified was not caused or contributed to by the happening of such events or the existence of such circumstances.
Regards John
Hi John,
Very civilized, as is so often the case with law in my mother’s country of birth. Pity more countries don’t follow the example. As a general rule I’m a full throated capitalist, but I also believe that the function of government is to make as sure as possible that contracts don’t become predatory.
Love the graphic. Too real.
I believe that the position under an English Law policy is likely to be similar to that in NZ as a result of the Insurance Act 2015 which has mitigated the effect of the previous law on breach of warranty by the insured.
On the other hand some policy terms are egregious. The standard terms offered through my brokers include an absolute warranty of seaworthiness. This presumably normally goes unnoticed by insureds. When challenged the brokers said cheerfully that the insurers would not be likely to rely on this term but liked to have it in reserve in case of a dodgy claim. As a sceptic I have had this changed by negotiation to limit the obligation to one of reasonable care to keep the vessel seaworthy. That is still a high standard for the insured to meet and much more onerous that that applicable under 39 (5) of the Marine Insurance Act of 1906.
I have been with my current insurers for many years but other senseless provisions introduced connection with covid are provoking me to look elsewhere at the next renewal. I have noted your favourable experience with Pantaneius.
Life is too short to read all the standard terms which one accepts without demur but it is worth making an exception to read insurance policies.