Generally speaking, Insurance Services Office (ISO) Commercial General Liability policies do not cover owned watercraft unless they are ashore on premises you own or rent. Nor do they cover nonowned watercraft unless they are less than 26 feet in length and not being used to carry persons or property for a charge. Coverage is, however, afforded for liability assumed under any insured contract for the ownership, maintenance or use of watercraft.
With this in mind, whether you?ve just discovered that an executive officer is using a personal yacht that is more than 26 feet in length for business purposes, or your company has purchased a watercraft for commercial, research or pleasure purposes, you will likely need to look beyond the ISO Commercial General Liability policy to cover the unique exposures relating to the ownership, maintenance, use or entrustment to others of any watercraft owned or operated by, or rented or loaned to any insured.
For owned watercraft, a Watercraft Liability policy, often referred to as Protection & Indemnity (P&I) insurance, will be necessary. In the United States, the liability of vessel owners for injury and death is segregated into four categories.
The first, liability for death, injury or illness to the crew may arise from the vessel owner?s obligation to provide ?maintenance and cure? (a per diem subsistence and medical care), a vessel owner?s warranty of seaworthiness to the crew, or the vessel owner?s liabilities under the Merchant Marine Act of 1920, known widely as the Jones Act. The second is liability to someone else?s shore workers under specific sections of the U.S. Longshore and Harbor Workers? Compensation Act. This is typically not covered under a P&I policy, though some forms may be amended to cover the exposure. When not covered under the P&I policy, Longshore coverage usually can be added to the vessel owner?s workers? compensation policy. The third involves liability to passengers, guests and onboard visitors. The fourth involves other liabilities including maritime rights to indemnity or contribution, some of which may be covered under P&I insurance depending upon the form used.
P&I policies go further to cover other unique exposures. Most forms cover reasonably incurred repatriation expenses for any member of the crew or any other person employed on board the vessel. To the extent they do not fall within scope of any available hull coverage, collision liabilities are covered as well, whether or not the vessel owner actually has hull insurance. P&I policies also cover damage to other vessels not caused by a direct collision with another vessel.
They also cover liability for damage caused to any dock, pier, jetty, bridge, harbor, breakwater, beacon, buoy, lighthouse, cable, or any fixed or movable object whatsoever, except another vessel or craft or property thereon.
Fines and penalties assessed for the violation of any laws of governmental authorities, unless they are due to the failure, fault or neglect of the insured or its officers to exercise the highest degree of diligence to prevent a violation of law, are also covered.
P&I policies also cover the cost of investigation and defense, though these payments are typically paid within the policy?s limit, not in addition thereto. Furthermore, a P&I is an indemnity policy, which only pays losses to the insured after liability has been established and when the insured has actually paid for the loss.
There are several P&I forms available, each deserving careful scrutiny when selecting the one that best meets the needs of the vessel owner.
CHARLES COX,a principal of the Orchard Park, N.Y., consulting firm of Aldrich & Cox, is a columnist for Risk & Insurance®.
June 1, 2006
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