Insurance is a matter for the boss

There is an old saying that yacht owners love their yachts more than their wives; however when it comes to insurance it seems that they prefer to delegate this task to whoever stands close. The owner is only interested in the bottom price and assumes that the “small print” is sorted out by their captain, yacht broker, lawyer, secretary or by a professional yacht management company. This lack of interest in yacht insurance, however, could lead to an unpredictable exposure in liabilities for the owner himself. The priority of owners is often to protect their assets first (Hull insurance) and only later to think of the personal risks involved.  It is important to take a look at the liability side of this sport, as the financial risk can often be considerably higher than the value of the yacht.

For example, if a yacht has crew on board the owner can be held personally liable for the well being of his crew. In particular, for English flagged yachts (red ensign) it is compulsory to buy employers’ liability insurance with a minimum level of GBP 5 million sum insured per crew member. This even applies to seasonal workers and/or deck hands. However, this poses the question: At what point is somebody considered to be employed? A crew member does not always need to have a written contract of employment to fall under the requirement of employers’ liability. The situation is further complicated in that the owner must also be aware that the level of crew protection varies according to the nationality of the crew member. For US crew members the requirements are different again, in particular as compensation in the United States (Jones Act) can be considerably higher than that normally awarded in Europe. It is therefore very important to assess the risk properly, not only buying the right insurance but ensuring that you have the correct level of insurance, especially when it comes to crew liability. It is recommended that owners consult a professional yacht insurance provider, such as Pantaenius, to clarify such a complex topic.

In addition, yacht owners should take into account the request of third parties who want to be mentioned as co-assured on their yacht policy (e.g. a professional yacht management company or a marina). If we look at the example of a yacht manager, they have many good reasons why they should be mentioned on the policy as they could be seen as another ‘Captain’ ashore and therefore, be held liable for their actions in connection with the yacht.  Then again, as they are professional subcontractors they should normally have their own insurance, the costs of which should not be carried by the yacht owner. Lastly, the owner must make sure that mistakes of a professional yacht manager will not prejudice his/her insurance cover. This so called “Manager’s Non-Liability” clause is therefore a must have for the owner.

A further important point to consider is the issue of a “Waiver of subrogation”.  Yacht owners must be very careful if they sign one of these as they could lose their insurance cover if they do not inform their insurance partner about it.  So, what is a “Waiver of subrogation”? A waiver of subrogation is a means for the shipyard to transfer the shipyard’s liability to the client. In other words the shipyard does not take any responsibility for the yacht while it is kept at the yard (except in the case of gross negligence and/or wilful act by the shipyard).  Often the shipyard’s insurance is not adequate to cope with the high values of superyachts and therefore, the shipyard protects itself by requesting a waiver of subrogation. At Pantaenius this type of endorsement is calculated on an individual basis, depending on the length of stay, scope of refit work, professionalism of the shipyard and the scope of the waiver of subrogation itself.  The costs vary from being free to 0.1% of the sum insured. This tends to be a hidden cost which crops up after the refit deal has been signed; it is therefore recommended that the owner confirm all costs with their yacht insurance provider before starting a refit.  We also strongly recommend that you inform your insurance provider prior to signing a waiver of subrogation, as by signing such a document you take away the right of the underwriter to recourse against the shipyard.

Get a free quotation here