A powerboat driven by its owner who has had too much to drink hits another vessel and causes lots of damage, possibly injuries. One might assume that insurance would cover the damages, but at the Ft. Lauderdale Mariners Club Marine Seminar yesterday, recent court cases show the shades of gray.
Unlike automobile insurance, which drivers are required by law to carry, boat insurance is voluntary, which means lawyers and judges respond to insurance policies strictly as contracts.
The catch is that many policies have a criminal or illegal acts exclusion that gives the insurance company an out if the vessel is used in criminal or illegal ways. It’s easy to address in obvious cases where, for example, a yacht is used to transport drugs.
But when the operator is legally impaired by alcohol and has an accident, is he covered?
In a 2005 case, the insurance company paid. In 2011, it didn’t.
“Insurance companies are starting to say, why am I paying for this?” said Christopher Abel, an attorney with Willcox & Savage in Virginia. “Remarkably … the stunning thing is there is almost no established case law on this.”
Some insurers now say that alcohol-related accidents aren’t accidents at all, he said. If the operator drank enough to be impaired, he/she could expect that something bad was going to happen.
The debate — and eventual case law — comes when a third party is hurt or has property damaged. Will the drunk boat owner’s P&I coverage (the protection and indemnity insurance) cover that? Should it?
Two court cases exist, Abel said, one in Michigan and one in Virginia, both in 2011. In each, a victim sued the drunk boat operator’s insurer for damages and lost. In the Virginia case, the operator had had a bottle of banana schnapps and had smoked marijuana, according to Terence Harris, senior vice president of marine claims with The Travelers Companies.
“What does society want?” he asked. “If there’s coverage, there’s coverage. To pay the injured third party, the first party has to be covered, too. Do we want that?”
Carroll Carney Robertson, senior vice president of marine insurance claims for BoatUS, was on the other side of that case. BoatUS insured the vessel that drunk boat owner hit.
“Yes, I support exclusions for criminal acts, and yes, even for first-party damages,” she said. “But what about liability and third-party damages? The public has a reasonable expectation to deserve that. … BUI is not an intentional act. It’s a loss of judgment. By its nature, it’s negligence, and that’s what we intend to cover when we talk about P&I.”
This issue of coverage under the illegal acts exclusion might even extend into violations of navigational rules as it applies to claims, Abel said. It will be up to the judges to ultimately decide.
Lucy Chabot Reed is editor of The Triton, firstname.lastname@example.org.