Marine Insurance Law

Marine insurance is insurance that indemnifies the insured for the physical loss of or damage to boats and ships. Typically, people who own boats for personal use purchase marine insurance for their pleasure crafts, such as yachts and speed boats. Marine insurance covers physical damage to boats caused by collisions, extraordinary storms, collisions with rocks or icebergs, vandalism, stranding, and fire. Marine insurance can also cover the theft of vessels.

Marine insurance is also purchased to cover physical loss of or damage to ships that carry commercial cargo. Insurance will also cover the terminals where cargo is stored and any transport that involves cargo or through which cargo is acquired or stored between its point of origin and its final destination.

Cargo insurance is another type of marine insurance. Marine insurance can often include coverage of property that is exposed both onshore and offshore, such as:

• At container terminals;
• Ports;
• On oil platforms;
• Pipelines
• Hulls;
• Marine casualties;
• Other marine liability.

What Does Marine Insurance Entail?

Basically, marine insurance works almost the same as car or home insurance. A person or company seeking to insure vessels or cargo, as detailed above, contacts a marine insurance company or insurance broker and explains the risks for which they want to be insured.

The insurance company or broker offers policies with the desired coverage in the desired monetary amounts. The insured selects the policy they prefer and agrees to pay a premium. The insurer agrees to indemnify the insured in cases of loss or damage from certain causes. The coverage may be quite broad in the case of marine coverage for ordinary boats, covering not only the vessel but also any boat trailers, outboard motors, and other related machinery or equipment.

In the case of commercial shippers, the policy language would be especially important and would define the exact terms of the coverage that the marine insurance provides.

What Is Not Covered by Marine Insurance?

As is the case with any policy of insurance, the policy may contain exclusions. Exclusions are risks that the policy does not cover. For example, in homeowners’ insurance for a residential dwelling, flood damage is excluded from the standard homeowner’s insurance policy. A person needs to buy a separate policy of flood insurance in order to have coverage for loss and damage caused by floods.

Marine insurance also usually involves exclusions and limitations as to what a policy may cover. For example, a policy of marine insurance may not cover losses in situations such as the following:

• Commercial Use of Vessel: The owner of a vessel uses it for commercial purposes or other non-recreational activities;
• War-related Event: The vessel sustains damage or is lost because of a war-related event;
• Normal Wear and Tear: The damage to a vessel has been caused by the normal wear and tear associated with normal use;
• Out of Region or Route: The ship or boat is damaged when it travels out of the region in which it is normally located, or off the routes, it usually travels as identified in the policy;
• Infestations: Most boat insurance policies exclude coverage for damage caused by insects, animals, and mold. So, if termites damage wooden parts or barnacles and zebra mussels cause damage, a person’s marine insurance would not cover the loss.
  • Experts stress the importance of boat owners taking steps to protect their vessels from infestation. An owner should take such actions as cleaning, draining, and drying all boat equipment after use. It is also important to keep the vessel and equipment in it dry when it is not in use;
• Damage Caused by Marine Life: Most boat insurance does not cover damage that is caused by marine wildlife, including sharks, octopi, whales, and other creatures. If a person believes that there is a risk to their vessel of this type, they would want to seek out a supplemental policy;
• Faulty Machinery: Basic boat insurance policies usually do not cover machinery unless it is damaged by a covered risk, such as a collision or a storm. A person may want to purchase a separate policy for a valuable motor or other machinery on their boat;
• Accessories: Most boat insurance does not cover risks to additional accessories and equipment unless it is specifically provided for in the policy. Accessories are such items as life jackets, navigational gear, GPS systems, and anchors. A person may have to purchase an additional policy to protect accessories of this kind if they have exceptional value;
• Improper Storage and Transportation: Marine insurance can provide coverage all year against fire, vandalism, theft, and winter storms. However, marine insurance might exclude coverage if a boat is damaged because it has been improperly stored and transported. Most marine policies do cover a boat when it is on land, but only if the owner takes appropriate steps to keep it safe;
• Unnamed Operators: As with car insurance, marine insurance covers the boat only if it is operated by drivers named in the policy. So, if a boat is being driven by an unnamed operator, it is not covered. If a boat is involved in an accident while an unnamed driver is operating it, the insurance will not cover the loss;
• Competitions: Most marine coverage would not apply to losses incurred if the vessel was damaged heil racing at high speeds. If an owner plans to use their boat in races, they would probably want to purchase supplemental insurance that would provide coverage, especially additional liability insurance, in case of a collision during the race.

Of course, commercial marine insurance is a more complicated issue. A shipping company is likely to have a risk management department with employees who devote their efforts full-time to figuring out what kind of insurance coverage the company needs. They are likely to be well-versed in the risks for which insurance is required, the amounts of coverage needed, and where to find it on the marine insurance market.

What Other Concerns Should I Have About Marine Insurance?

Marine insurance involves other aspects to it that make it unique from insuring other property items. The concerns of which a boat owner should be aware when they purchase a marine insurance contract are the following;

• Many owners of recreational marine vessels insure their boats with their auto or home insurers, which may not be familiar with all of the nuances of maritime and admiralty law. It might be better to deal with a broker who specializes in marine insurance;
• Under admiralty law, the marine insurance contract must be made in good faith, meaning that no misrepresentation, fraud, or concealment of any facts regarding the vessel should be made;
• A policy can be voided for a breach of any of the warranties implied in law or under the contract, such as the implied warranty of seaworthiness.
• The boat owner must have an insurable interest in the vessel at the time of loss to have a claim.

One important consideration is how an insurance company responds to claims. A person would do well to research a company’s reputation for handling claims and whether it handles claims fairly and efficiently. A company that routinely denies claims, possibly without justification, may have policies that look good on paper, but if they do not pay when the policy requires them to do so, a person would want to avoid them.

Say that a person submits a claim to their marine insurance company for a loss, and their company wrongly denies it. They can sue the insurance company for insurance bad faith just as they can sue the company that provides their homeowner’s insurance, their car insurance, or their health insurance company.

In addition, it is important to keep in mind that in most states, the law would provide that there is an implied warranty of good faith and fair dealing in most insurance contracts that requires the company and the insured as well to act in good faith and act fairly in their dealings with each other in connection with the insurance agreement.

Do I Need an Experienced Attorney for My Marine Insurance Issue?

If you are shopping for marine insurance, you want to consult an experienced insurance lawyer. LegalMatch.com can connect you with a knowledgeable lawyer who can help make sure you get the insurance you need. An insurance lawyer can read a policy and clearly identify what is covered, what is not, and whether you need an additional policy to cover risks that are excluded by a standard policy.

Or, if you are in a dispute with your insurance carrier about a significant claim that you have made, you should talk to a knowledgeable insurance lawyer. Your lawyer can advise you of your rights in connection with claims for loss and make sure you get the coverage to which you are entitled by your policy.