Marine Insurance: Be Sure You Understand the Exclusions in Your Policy

Whether you own a commercial vessel or a yacht reserved strictly for personal use, you know that marine insurance is vital to protect your investment and to insulate yourself from liability in the event of an accident. But what you may not know is that marine insurance policies are often loaded with exclusions that could leave you vulnerable and unprepared.

It is vitally important to understand what your policy covers and whether you need to take additional steps to protect yourself. Of course, there are frequent times when insurance companies insist that the subject of a claim is excluded when a close reading of the policy terms in light of legal precedent shows that the insurance company’s assertion is false. In those situations, the team at Ver Ploeg & Marino works to uphold the rights and interests of policyholders wrongfully denied payments under their policies. 

If you contact our team, we can review the terms of your marine policy and explain the exclusions that apply in your particular situation based on principles of admiralty law as well as the laws of your state. For background, here are some of the exclusions most commonly included in marine policies.

Coverage is Dual in Nature

As with car insurance, there are different types of coverage for marine vessels. Hull and machinery coverage provides resources when the vessel suffers physical damage from storms, fire, collisions, or other causes. This includes damage to the hull, propulsion system, and other machinery.

Protection and indemnity coverage, often referred to as P&I insurance, protects the policyholder from liability. It can provide compensation when a member of your crew or a third party is injured. If your vessel causes damage to another vessel or to other property, P&I coverage can pay for that damage. Moreover, if your vessel transports damaged cargo, P&I coverage could cover the cost of repair or replacement.

However, exclusions can apply to both types of coverage in a wide variety of situations. These exclusions often remove coverage just when it is most needed.

Critical Marine Policy Exclusions that Insurance Carriers Enforce Against Policyholders

Every policy is unique, so it is essential to review the terms carefully to identify the situations in which the insurance will refuse to cover the cost of losses. These exclusions can be grouped into three categories.

Wear, Tear, and Gradual Deterioration

Quite often, marine policies cover damage caused by sudden accidental perils at sea. They do not cover predictable degradation caused by exposure to saltwater, sunlight, and humidity. That may seem reasonable, but insurance companies sometimes apply this exclusion in an inappropriately expansive manner. 

For instance, if you file a claim for hull damage sustained in an allision with a dock, the insurance company might deny the claim on the grounds that the hull was breached only because it was in a weakened state due to deterioration that is excluded from coverage. In this type of situation, a knowledgeable insurance attorney could present evidence to directly link the damage to the allision, an incident that should be covered under the policy.

Breach of Navigation Limits

It is important to review marine policies carefully to determine the geographic boundaries that apply to coverage. These are often quite precise, and the limits are enforced strictly. A policy might specify that it covers only incidents occurring within 100 miles of the Florida coast, for instance. Or it might specifically exclude certain islands or other designated areas during hurricane season. If you cross the invisible boundary even for a brief period, the insurance company may attempt to deny coverage for the entire voyage.

Lack of Maintenance

Maritime law imposes an implied duty on vessel owners to ensure that their vessels are seaworthy and their equipment is fit for its intended purposes. If there is a breakdown, collision, or other damage, insurance companies will often review maintenance logs in detail and insist that the owner has neglected necessary maintenance, thereby voiding coverage.

Commercial Use

Many marine policies for yachts specifically exclude commercial use of the vessel. If the owner takes work associates, clients, or networking partners out for an afternoon, the insurance company may try to argue that the voyage had commercial purposes and that coverage for incidents on that voyage is excluded.

Limitations

Marine policies will frequently impose requirements that can result in exclusions if not met. For instance, a policy may require that the vessel be operated only by specifically named individuals or by those with particular qualifications. In the case of hurricanes and other named storms, insurance carriers often require vessel operators to comply with hurricane plans, which may include marina storage mandates. Any failure to comply with the plan will result in the insurance company excluding coverage related to the storm.

Fuel spills and wreck removal can be extremely costly due to environmental cleanup costs. However, insurance companies often exclude these situations. If they do provide coverage, they often set coverage limits that are so low that they leave vessel owners liable for substantial expenses.

When Coverage is Wrongfully Denied Based on an Exclusion

Vessel owners can take a few precautions to prevent insurance companies from wrongfully denying coverage based on an exclusion. Keeping meticulous records of maintenance, navigation data, and other information can make it much easier to refute accusations. However, an insurance company will often stubbornly refuse to honor its obligations until an experienced attorney gets involved.

The team at Ver Ploeg & Marino has decades of experience representing policyholders in complex insurance disputes, so we are well-versed in the tactics insurance companies use to shirk their responsibilities. Sometimes, all it takes is a letter from us to get the company to reconsider its position. But we know how to succeed in court if negotiations fail to produce satisfactory results.

For a confidential consultation to discuss how our team may be able to help prevent or resolve an insurance dispute, call us at 305-577-3996 or contact us online at your convenience.  

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