On the water: boats and risks
People who love water love boats. It might be gross misuse and the sailors among us might be offended by it, but I’m going to use the term boat to refer to any type of watercraft an individual might own, with the exception of personal watercraft. I will call personal watercraft, personal watercraft, so that we can be clear and use the same language today.
I have been told that the best day in the life of a boat owner is the day you buy the boat, and the second best day is the day you sell the boat. I guess that means boat ownership has its problems. Of course it is. As insurance and risk professionals, we understand that everything has its problems. We review the risks of everything we do before we do it. We understand that everything has its own risks and problems.
Yes, boats and watercraft are fun and useful. People use boats for fishing. People use boats for water skiing. There are people who take their boats on lakes, rivers and oceans. Some boats are simple to pilot and sail due to the size of the boat and the waterway being navigated. Some boats are more complicated due to the size of the boat and the waterway being navigated.
People use personal watercraft to get around on water, like riding a motorcycle, except you get a rash rather than a crash rash.
As it is spring and the weather is warming up, now is a good time to talk about boats, their risks, risk management and potential insurance implications. I hope you’re reading this before you end up at that party your friend is throwing on his new boat.
It occurred to me to start with insurance, even though I hadn’t planned to write about the insurance side until later. Reading different boat insurance policies reminded me of reading automobile policies. It made perfect sense when I thought of it, because a boat is a vehicle and vehicles come with certain risks. So, what are the risks associated with boats?
There is a risk of damage to the boat. Whether a person is driving the boat, sitting on a trailer, or being on a trailer behind a vehicle heading down the road, something can happen to the boat and damage it. It could collide with another boat, dock or run aground which as we all know means it hit the ground underwater and got stuck and potentially damaged in the process .
Of course there’s a difference between damage to the boat while it’s on the water and damage to the boat while it’s behind the truck, on the road, but we don’t look at insurance policies for the moment. We face risks.
Someone could be injured by the boat. Whether they’re driving the boat, a passenger on the boat, or a passer-by (or a swimmer), they can hurt themselves.
Driving a boat can be a lot of fun for someone who loves boats, but because it’s a vehicle, people can get hurt while driving it. Boats also have the added risk that a person could be injured while waterskiing, tubing, or otherwise being towed behind the boat. It’s a risk you don’t normally see with ground vehicles (unless you live in Florida, but that’s another matter).
Any time there is a risk of personal injury, there is also a risk of property damage. The pilot could be distracted, inexperienced or otherwise unable to control the boat. This could cause the boat to collide with another boat or watercraft. Lakes and rivers also have docks that extend into the water. Some extend quite far into the water.
Some waterways have very expensive docks and boats which, if collided, could cause significant and costly damage.
There’s probably more that we haven’t covered directly, but that’ll suffice for now.
Boat risk management
So how do you manage the risks associated with boats? This is a valid question to ask and answer, because once we have identified the risks associated with something, we need to work out ways to mitigate those risks. Of course, the easiest way to manage and mitigate boat risk is not to have boats in your life in the first place, but if the risk doesn’t outweigh the benefit you receive from boats, you will have to face the risk.
One way to manage boat risk is through education. The new boat owner must find out about his new passion before setting out on the high seas, on the lakes or on the river. I’ve mostly hinted that I’ve dealt with boats that run on one type of motor, but there are several different ways boats can be run and each of them requires some training, practice and skills. skills.
Operating a small sailboat is different from operating a competition sailboat. Driving a canoe is different from driving a kayak. A small jon boat is very different from a 25 foot fishing boat, which is really different from operating a larger yacht than Delaware. Some boats really need a licensed captain, some don’t, but even without a license there’s a lot to learn.
Another avenue of education to manage the risks of a boat is to learn how to react in the event of an emergency. This could mean learning to swim or staying afloat until help arrives. It can also mean learning artificial respiration in case someone gets too long in the water or can’t swim.
There’s clearly more to consider, but let that be enough for now. Let’s explore what owning or operating a boat could mean for customers’ insurance policies.
The short version of this conversation is that a customer who has a homeowners policy (any of the homeowners policy series) and a car policy is going to find that they need to be careful how they read them regarding boats, because here’s the spoiler. There may be some coverage, but don’t bet the farm is the right coverage or sufficient coverage.
Let’s look at the most likely edition of the ISO Homeowners 3 – Special Form, the HO 00 03 05 11. We are not looking at the 2022 edition as it is not available at the moment and it will take a year before a greater number of customers actually have this form, if their operator uses it. This is an example anyway, so read the entire policy before making recommendations to anyone at any time.
It starts with a definition that we need to be aware of. Craft means a craft designed primarily to be propelled on or through water by wind, engine power or an electric motor.
So, we start by broadly defining what a watercraft is. It’s so that we can either create a broad exclusion and then put in exceptions to create some coverage, or we can create a broad coverage and narrow it down with exceptions that create exclusions. In this case, it is the first. There is a broad exclusion with some exceptions. Rather than focus on the exclusion, let’s look at the exception and see what coverage might exist for the boat owner or user.
The first thing we notice is that there is a small amount of coverage for damage to the watercraft itself. Under the special limits of liability we find this.
The special limit of liability for each class listed below is the aggregate limit for each loss for all property in that class. These special limits of liability do not increase the limit of liability for Coverage C.
vs. $1,500 on watercraft of all types, including their trailers, furniture, equipment and outboard motors of all types.
A quick online search showed that a trailer that can be used to transport a small boat can cost upwards of $1,500, not including the boat itself. A small fishing boat that can carry two people (with an outboard motor and a trawl motor) costs over $20,000. You might ask about something “simple” like a kayak. It’s a good question. On the same website they range from $600 to “ask for price”.
It’s time to examine this disclaimer and find out what it tells us.
Coverage E and F do not apply to any “watercraft liability” if, at the time of an “event”, the watercraft involved is:
a. Driving or training for a race, speed contest or other scheduled or organized competition. This exclusion does not apply to a sailboat or planned log cruise;
b. Rented to others;
c.Used to transport people or goods for payment; Where
d.Used for “commercial” purposes.
It’s an interesting place to start the exclusion. So we have certain activities that we don’t want to insure, which makes sense. A home insurance policy does not provide for these activities and would certainly exclude certain commercial uses. So far, that makes sense. It’s as simple as possible.
If exclusion B.1. does not apply, there is still no coverage for “nautical liability” unless at the time of the “event” the watercraft is… We are not going to delve into the intricacies of the rest of the exception to the exclusion. It details exactly which types of watercraft are excluded and which are not. It’s complicated in this edition of proprietary forms and honestly, it’s not much better in the latest update. It’s a little better, but only a little.
Let’s just say that liability coverage is intentionally limited to a very specific set of watercraft. Given the very limited coverage for damage to watercraft and related property, we can say that many owners will not have the appropriate coverage without considering a policy specific to the type of boats they intend to own. to buy.
When you have clients who want to cruise the high seas or troll a river in search of the mythical fish everyone is talking about, be sure to have a conversation about their risks and how they plan to manage them.