Crew Insurance: Are you confident you’re covered?

Jul 25, 2022 by Dorie Cox

Liability insurance is not a cut-and-dried proposition when it comes to injury and illness in yacht work.

Many things can break on board a yacht, including the crew. So when a crew member falls down a hatch, contracts malaria, or runs over a snorkeler with the tender, it’s important to know how liability insurance coverage works. Yet, as with many things yacht-related, it can be confusing.

Am I considered crew?

“Crew” are defined as those employed on a vessel who are aboard, in service, and necessary to the vessel’s intended navigation, according to Scott Stamper, managing director with Risk Strategies/Atlass Insurance Group. If employees meet that criteria, then the vessel has liability regardless of the contractual agreement that outlines their method of compensation, health insurance, vacation, or other benefits.

On the other hand, “persons who are temporarily contracted to carry out maintenance, repair, or refit in a shipyard or marina are not crew,” he said. Labeling such workers as “crew” may provide access to marinas and shipyards, but it does not ensure liability coverage in the same scope as crew. Say the yacht captain adds a professional boat washer to the crew list while in the shipyard. While on the top deck, the cleaner slips on soap suds, falls, and breaks his back. Although the captain hired him and labeled him as crew, he is not — and that affects the level of vessel liability.

Dayworkers are also not crew. They are temporary subcontractors, he said, and insurance typically will not respond to the injury claim of a dayworker in the same way it would for a crew member.

That equation, however, can change in light of many variables: vessel ownership structure, flag state, crew nationality, and navigational itinerary, for example, Stamper said. “Ultimately, it may not be how the insurance chooses to respond, but how a judge or court of competent jurisdiction may interpret the claimant’s employment connection to the vessel.”

Are the self-employed covered?

Those who are defined as “crew” fall under the vessel’s liability coverage, even if they are self-employed, Stamper said. Their method of compensation — as a paid crew member, an employee, 1099 independent contractor, or subcontractor through a limited liability company (LLC) or S Corporation — has more to do with taxation than their validity or status as a paid crew member. Recovery for expenses related to injury or illness in connection with their crew duties is clearly owed by the vessel, he said. But if the employee is not defined as “crew,” it becomes a gray area.

Graeme Lord, president and owner of Fairport Yacht Support, notes that after an incident involving a limited liability-type company, the question of whether the captain or crew member is the employee of the yacht or of his own business often ends up in the legal arena. An LLC may enhance a crew member’s financial situation, Lord said, but what it hasn’t done is looked at the liability. The issue then becomes the legal costs of engaging with the insurance company.

“As an LLC, you are taking on Goliath,” he said. “You may extract yourself from the lawsuit, but it will be very expensive.” He has seen insurance companies say, “No worries, we will handle it,” after an accident. But later, after depositions, it is established that the captain is not an employee of the yacht.

Then there’s the case of captain or crew negligence — and here’s where it really gets tricky. Generally, the yacht’s insurance covers the captain and crew for their own negligence, according to attorney Erin Ackor, at Moore and Company. “However, if the captain or crew member is employed through their own entity, this causes problems for the insurance, as this captain and crew company cannot generally be added to the owner’s policy as a joint or additional insured.”

What’s more, an insured or joint insured cannot be liable to themselves, she said. Captains and crew can obtain their own insurance versus being added to the owner’s policy, but this has to be worked out with the vessel underwriters, including obtaining a written agreement on what coverage they will provide.

What about dayworkers?

A dayworker’s particular relationship with the yacht is key here. Rupert Connor, president of Luxury Yacht Group, recommends that yachts have an insurance clause for temporary workers, as well as have them sign a contract and use a time card. “It says, basically, ‘We are responsible for this and nothing else. If you think something is unsafe, you need to stop work and notify this person onboard.’ It defines that they are not a crew member, but an hourly laborer,” Connor said. On the other hand, if a yacht has five crew on holiday and five replacements contracted on a day rate, they are effectively part of the crew and insurance would cover them, he said. “I would give those crew an SEA that just pays fixed duration rate instead of voyage.”

What if there’s no employment contract?

Legal and insurance experts urge crew members to always work with a signed Seafarers Employment Agreement. However, if an incident occurs and there is no written agreement, crew may still be entitled to remedies on an oral contract alone under seafarer protections provided in conventions such as the Jones Act or the Maritime Labor Convention.

Maritime injury attorney Adria G. Notari of Notari Law cautions against accepting partial payments or advances marked as ‘final payment’ or ‘payment in full,’ because it might forfeit your right to further compensation. In one case, a crew was injured working on board without a written crew agreement. The employer tried to terminate him before reimbursing complete medical expenses and paying wages due. “In the memo line of the check, they wrote, ‘final payment,’” Notari said. “Fortunately, he contacted me before cashing the check.”

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About Dorie Cox

Dorie Cox is a writer with Triton News.

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