Often, captains focus on refit costs and overlook aspects of the shipyard agreement, said attorney Andrew High, manager at High Law, of Florida and Washington, D.C. “They just agree on a number and don’t think to call their insurance company or us. From the legal side, we want to make sure they don’t waive their rights.”
An insurance company or attorney can try to negotiate amendments later, “but there is no guarantee that we can make this happen once they have a signed agreement, especially if work has already begun,” said Rob Carron, senior associate with WTW Marine Superyachts.
“Ideally, captains would call when they have a quote for services, with as much lead time as is feasible,” he said. “And they should call before they sign anything.”
It’s important to review the shipyard’s contracts for adverse language that transfers a third party’s liability back on the yacht owner, Carron said. “Most yacht hull insurance contracts contain an exclusion stating that they will not cover physical damage claims when the shipyard contract states the yard is not responsible for damages caused to the yacht, even if the damage is the fault of the shipyard.”
The wording typically goes on to not allow the owner or owner’s insurance to ‘subrogate’ or recoup their losses from a responsible party. “This is commonly referred to as a ‘waiver of subrogation’ and is unacceptable to yacht insurers,” Carron said, adding that yacht insurance underwriters are not in the business of insuring shipyards.
You’re doing what?: Proper coverage
The terms “maintenance,” “repair,” and “refit” seem to be used interchangeably, so what is considered a yard period may vary in time and scope. Because the definition is unclear, owners should consult their insurance company about specific needs, including whether they should add “builder’s risk” insurance to property and material coverage, Carron said.
Even installing a handrail can require insurance changes. Hot work does not have to be a major cut in a steel hull — but welding, soldering, grinding, or work that produces heat or a spark. This increases insurers’ loss exposure, Carron said. To be sure you are protected, request each contractor’s insurance information, procedures, and work description, he added.
The yacht insurance company also may request the yard’s insurance policy to ensure that the work being done is covered, said Dan Bornarth, assistant vice president of operations at Bradford Marine.
After hurricanes Harvey, Irma and Maria, insurance coverage changed, according to Carron. Many yachts had refits in the U.S. when they stayed for the summer during the Covid-19 pandemic instead of crossing to Europe — and summer hurricane season is an increased insurance risk. “In particular,” he said, “if you're not going to be able to move the yacht to sea in the event of an oncoming storm, there is a strong possibility the yacht will be faced with a complete windstorm exclusion or a very high named-windstorm deductible.”
Not my fault: Captain, owner, shipyard liability
In the case of an incident, liability can be complicated for the yard, yacht owner, contractor, or even the yacht captain
Attorney High said he reviews coverage protections for the yacht owner. But sometimes the owner tries to blame the captain. “The owner says, ‘My captain signed this and he shouldn’t have,’ ” High said. “But the law of agency applies. The captain is your representative and if he has acted on your behalf, then he is able to sign.”
Still, yacht captains may be liable for more than they expect. Marina Mile Yachting Center in Fort Lauderdale requires service technicians and contractors to have a certificate of insurance (COI), but captains may try to work around the rule, said David Hole, general manager. They say, "I’m just looking," or “I’ve been doing this for 30 years” — or the captain will put the contractor on the daywork list. But if the captain hired a contractor that was not covered on the insurance, the captain himself could be held liable.
“As captain, you have the responsibility to assess the risks and to protect the yacht owner. Anyone who is on the boat is a potential liability,” Hole said. “How many captains read their insurance binder? Some don't even have a copy of their insurance policy.”
“It’s not a scary process, just don’t be nonchalant,” High said. “This could be a good feather in the captain’s cap, when the captain says to the owner, ‘Hey, heads up, let's get on the phone together, so you don’t have increased risk.’ ”
Yacht fires a warning: Know your insurance details