As a boat owner you might be considering putting your boat into a bare boat charter fleet. If so, you need to know a boat that is used for bare boat charter presents some unique insurance exposures that must be properly addressed. The largest exposures are liability, including bodily injury, property damage, pollution damage and clean up, wreck removal and Jones Act crew liability. The Jones Act is a federal law that requires a yacht owner to provide what could be considered workers compensation for seaman, but the benefits payable under Jones Act are substantially more than state workers compensation. So, anytime there is a paid crew or instructor on board the exposure exists and must be covered. A paid crew could be a licensed captain taking unskilled customers for a ride; it could be an unlicensed boating instructor that is teaching a sailing school; and it could be a captain hired by the fleet manager to move a boat. Anyone being paid to work on the boat can be considered a “paid seaman” and therefore qualifies for Jones Act coverage.
A standard private pleasure yacht policy covers these exposures but not if the boat is used commercially (charter). Owners putting their boats into charter should be careful to obtain a yacht policy that specifically allows for charter use. A specifically designed Charter Endorsement is added to the standard policy which deletes the “Private Pleasure Use” Warranty and extends the coverage’s for commercial use. This endorsement also extends the physical damage coverage as well. Because your boat will be used commercially and used more often than just for one owner the rates for charter boats are higher than private pleasure. However, those rates are influenced by the size of the fleet and the safety record of the fleet. If a fleet experiences numerous losses, then the rate for everyone in the fleet may increase. There are very few marine insurance companies and agencies that understand the risks and provide the proper coverages and for consistence purposes you should insure with the company/agency that covers the whole fleet.
Key coverage’s that are a must for qualified protection are: Agreed Value Hull coverage, towing coverage of at least $3,000, Protection & Indemnity with a $1,000,000 limit including wreck removal, Jones Act, USL&H (US Longshoreman & Harbor Work Act – covers people who come to work on your boat at the dock if they do not have the appropriate insurance) and pollution. Medical Payments of at least $5,000, Personal Effects coverage of $2,500 and a good policy will also include Loss of Charter Income to protect the income from a pre-arranged charter should a covered loss occur. Furthermore, a charter policy should be underwritten by a financially stable company with at least an A rating by AM Best & Company and who specialize in charter insurance.
If you are wondering what the top five claims in the charter world are here is the answer: striking a submerged object, grounding, collision, fire and minor injuries (bumped heads, stubbed toes, broken bones, etc). Any physical damage claim has a deductible applied to it, usually 1% of the insured value and any injury has full coverage with no deductible.
By: Mike Smith
Executive Vice President
Global Marine Insurance Agency
Global Marine Insurance Agency is solely dedicated to providing insurance coverage to members of the boating community. Let us help you protect your investment. Get an online quote today…