Who to insure with?

[Nautibusiness]

so if there is a fault that renders the boat unseaworthy but which you didn't or shouldn't reasonably have known about (say, a hairline crack in a newish seacock fitted by a reputable yard) then the contract wording prima facie allows insurer to argue you are not covered.

That would be what most would consider a "latent fault" I guess?
My own claim that was covered by Denovo was under their latent fault clause.

The definition or policy wording isn't available to me right now - namely as the boat was sold some time ago, but in essence it is a fault that is a manufacturing defect that you couldn't possibly have known about or discovered through your usual maintenance.
In my case, a main bearing bolt had worked loose and was resting on the bottom of the sump. The now very slight looseness around the crankshaft caused metal fatigued which eventually showed itself when the prop was jammed by an unseen underwater solid object hitting it and locking it up at cruising revs whilst offshore. Ping (or rather BANG) the crankshaft snapped.

It was only through investigation that the engineers and insurance companies surveyor discovered the cause of the failure and at that point Denovo guided me to claim under their latent fault clause.

JFMs analogy, would I think, be remarkably similar?

 

[MapisM]

All well and good, but...

...On a slightly different note (still on topic, anyway), I have one question for all of you:
Did anyone ever give a thought on the insurance costs vs. the risks realistically involved with your pleasure boating habits?
I mean, most of you seem to just assume that you've got to be covered, and try to find the best policy available.
Nothing wrong with that of course, but I'm wondering if I'm alone in having decided to keep the premium money in my pocket and the risks on my shoulders, getting insured only for T.P. damages.
I understand that when the boat is financed, an insurance can be required by the bank, so there's no need to evaluate anything.
Let's leave this case aside, it's obviously not relevant in the context of my question.

 

[sailorman]

...On a slightly different note (still on topic, anyway), I have one question for all of you:
Did anyone ever give a thought on the insurance costs vs. the risks realistically involved with your pleasure boating habits?
I mean, most of you seem to just assume that you've got to be covered, and try to find the best policy available.
Nothing wrong with that of course, but I'm wondering if I'm alone in having decided to keep the premium money in my pocket and the risks on my shoulders, getting insured only for T.P. damages.
I understand that when the boat is financed, an insurance can be required by the bank, so there's no need to evaluate anything.
Let's leave this case aside, it's obviously not relevant in the context of my question.

The issue is getting WHAT you think you are paying for.
Water ingress might well write off a vessel
YOU might not be covered to the extent you assume you are.

 

[jfm]

Not particularly wishing to pick an argument with you (we both already know that I wouldn't win it) but what is annoying is that the standard policy wording does make use of the term 'seaworthy' (clauses 2.2 and 10.1.7), without defining it. The cert of ins carries the only definition. That's kinda the beginning and end of my point.

Cheers
Jimmy

Ah ok, I see your point. Sorry, I hadn't seen/had forgotten that the word seaworthy is used in the main policy as well.

Yup this introduces uncertainty. Between two legally-advised parties without a David v Goliath element, generally an English court will say that the word Seaworthy with capital S has the meaning in the definition, and without the capital S it bears its ordinary English meaning. But in a retail policy that is far from clear. A policy holder might well argue successfully (only if he wants to though...) the contra preferentem rule applies so that the definition of Seaworthy applies also to seaworthy. In any court you could also point to the fact these people have "form" being their absurd 2.12.5.d. It is a dog's breakfast and I fully agree your complaint. You win!

 

[jfm]

...On a slightly different note (still on topic, anyway), I have one question for all of you:
Did anyone ever give a thought on the insurance costs vs. the risks realistically involved with your pleasure boating habits?
I mean, most of you seem to just assume that you've got to be covered, and try to find the best policy available.
Nothing wrong with that of course, but I'm wondering if I'm alone in having decided to keep the premium money in my pocket and the risks on my shoulders, getting insured only for T.P. damages.
I understand that when the boat is financed, an insurance can be required by the bank, so there's no need to evaluate anything.
Let's leave this case aside, it's obviously not relevant in the context of my question.

That's a very valid point MapisM. In UK people do tend to assume everything should be insured, but you're right that it makes sense to consider the risks. In my view I want pretty comprehensive cover on the boat because I consider the risk of a loss quite high, and the value is high relative to my total NW, and the premium feels cheap. High risk x high % of NW x low premium = buy insurance. In the case of my London and out-of-London homes however I have not bought any contents insurance for exactly the reasons you state and I just have buildings cover plus 3P (in case the postman trips over when delivering mail, for example)

 

[jfm]

That would be what most would consider a "latent fault" I guess?
My own claim that was covered by Denovo was under their latent fault clause.

The definition or policy wording isn't available to me right now - namely as the boat was sold some time ago, but in essence it is a fault that is a manufacturing defect that you couldn't possibly have known about or discovered through your usual maintenance.
In my case, a main bearing bolt had worked loose and was resting on the bottom of the sump. The now very slight looseness around the crankshaft caused metal fatigued which eventually showed itself when the prop was jammed by an unseen underwater solid object hitting it and locking it up at cruising revs whilst offshore. Ping (or rather BANG) the crankshaft snapped.

It was only through investigation that the engineers and insurance companies surveyor discovered the cause of the failure and at that point Denovo guided me to claim under their latent fault clause.

JFMs analogy, would I think, be remarkably similar?

Remember, in general (not looking at any particular policy) the exclusions trump all inclusions. So to get a contractual payout from your insurer, you must FIRST fit within something that is covered, eg latent defect, and then NOT fit within an exclusion.

As regards my made-up hairline crack seacock, that might be a latent defect. But if it also renders the boat unseaworthy, it's an exclusion. Exclusions generally trump inclusions. Your dropped con-rod bolt happened to fall within an inclusion, and not fall within an exclusion, =happy days. Not so, arguably with the seacock...

This raises a very important point, if you'll forgive me for sounding like a schoolteacher. You must not look at your policy and see what it covers, and think "that's ok then". You must FIRST see that the policy positively covers what you want covered, and AND THEN check that nothing that you care about is uncovered by an exclusion. Exclusions trump inclusions

 

[rafiki_]

Rafiki
5. Sure, the workman might have his own injury cover, so if he hurts himself on your boat due to your negligence, his insurers will pay him. But the terms of his insurance policy will likely cause him to subrogate his claim against you to his insurers, and they will potentially come after you. The fact you have a lovely powerboat means you likely have some net worth, so are worth coming after. You are being unbelievably naïve here imho, Rafiki.

Putting this another way, you can rationally decide the risk of someone being injured by your (innocent) negligence is so small you don't want to insure it, or large enough that you do want to insure it. But what you can't do with any rationality is think the risk is large enough to need insuring, and then think the other guy's insurer will cover it with no come-back to you - that's just irrational logic imho

So JFM, if I understand you correctly, I ought to get any workman employed by me on my boat, to sign a disclaimer form absolving me of any responsibility? Is that standard practice?

 

[jfm]

So JFM, if I understand you correctly, I ought to get any workman employed by me on my boat, to sign a disclaimer form absolving me of any responsibility? Is that standard practice?

No that's absolutely not what I said; I've never suggested anything of the sort. It just wouldn't happen, and isn't afaik standard practice.

 

[volvopaul]

On the subject of latent defect one of my customers had a claim refused this year by HKJ .
They were on the latent defect train, it took him a long time for his underwater claim to be settled.

I have told him about this thread as he is a looker on here but not a contributor much. I hope he has the time to give us his story I'm sure it would be good to hear about a true claim and how it was handled by them .

 

[jfm]

sudden accidental incursion of water into the Vessel , directly caused by an identifiable and unexpected occurrence.

Agree all you say Scarron. The bit quoted above is interesting. I don't know if other policies have this - I've never seen it that I can recall. The "unexpected" is a bit worrying. Imagine something that would have been expected by a sensible person in possession of the facts (the cracked seacock) but wasn't actually expected by anyone because there was in fact no human in possession of the facts (no-one actually knew about the crack). Does that trigger the exclusion? I dunno. Why have such unknowns in a policy?

But what prompted me to reply was not that. It was the "identifiable". If your boat sank, got recovered, and surveyors were puzzled as to the cause, this seems to mean potentially no insurance cover. Two real life experiences come to mind:

1. When poor TCM's Leopard 23m took on much water in France a few years ago, they recovered it, lifted it, drained it, and placed it back into the water. It was fine - sat there floating for a month. No-one to this day knows how water got in (before anyone cackhandly comments anything to do with scuttling, as the insurers did, he didn't: he wouldn't as he loved that boat, and there were young children on board and friends/guests)

2. A good friend of mine who has boated with me on Match in the Med several times had (about 3 yrs ago) a 45 foot almost new FariPrinSeeker, and it took on a load of water in on a calmish day and nearly sank. Water was above top of engines and boat was properly sinking. Lifeboat got it back to base and they lifted, drained, relaunched. It was fine - no water came in. Still no-one knows why it happened, though there is a plausible theory the guy who just serviced the engine the day before came in the night and did up the thing he'd left undone. Also, just to confront the point, there was no scuttling - he wouldn't do it, plus had several guests on board and is multi zillionaire to whom a 45 foot boat is like buying a pack of chewing gum and he immediately went out and bought a new boat. Whatever actually happened, that cause was and still is not identified

So, sh!t happens, and unidentifiable sh!t happens too, hence that clause doesn't fill me with glee

 

[petem]

In this case, I do not see that the "indirectly" word makes any real difference and on this point I wouldn't criticise HKJ for using that word

Pete, I've quoted your post above but heavily cropped it down. I can't see how you expect the N+G will pay, based upon the words that you have yourself quoted. In your example, the proximate cause of the sinking seems to be electrolysis, so the loss is "resulting from electrolysis", as I see it. The absence of the word "indirectly" seems to me to make no difference.

Therefore I don't believe the contract requires N+G to pay. You've reached the opposite conclusion though. How come?

Cor, this feels like a 'homework question'! Anyhow, here we go....

--------------------------------------------
As you've pointed out, there are two elements to this:

1) The "proximate cause".

Lets say we have a boat with metal sea cocks with bonding straps. The manufacturer will testify that the bonding should entirely prevent galvanic corrosion. However, at some point the strap has been damaged causing the sea cock to corrode and ultimately disintegrate. The damage and resulting corrosion occurred within a few weeks (in between the owner's visits) and once the sea cock failed the boat sank quickly.

Surely the proximate cause would be the failure of the bonding strap (needless to say there would need to be investigation into why it, e.g. latent defect, accident, contractor negligence, etc)? In proximate cause terms, "But for" the failure of the strap, the sinking would not have occurred.

2) The exclusion

The N&G exclusion in full is...

"What you are not covered for:
loss or damage resulting from electrolysis, osmosis or like conditions."

As the word "indirectly" is not present I would interpret the exclusion being restricted to the item which was directly damaged by the corrosion (i.e. the sea cock or in my other example the outdrive). Not other damage indirectly caused by the corrosion.

Indeed, as our friend John Macaulay (Haven Knox-Johnston) admitted....

The problem has arisen as a result of the words “directly and indirectly” which when strictly interpreted suggests that any consequential or resulting damage would also not be covered.

I (perhaps naively) believe that the Ombudsman will sometimes find in favour of the P/H where an exclusion could be taken literally to reject claims that most people would expect to be covered. See...

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/29/29-travel.htm

In particularly...

"We considered that if the firm's interpretation of the clause in question were upheld, the exclusion would be unreasonably wide and would exclude all sorts of situations for which most people would expect to be covered. For example, it would exclude a claim where a drunken driver injured a holidaymaker."

--------------------------------------------

Do I pass the test?

 

[petem]

Agree all you say Scarron. The bit quoted above is interesting. I don't know if other policies have this - I've never seen it that I can recall. The "unexpected" is a bit worrying. Imagine something that would have been expected by a sensible person in possession of the facts (the cracked seacock) but wasn't actually expected by anyone because there was in fact no human in possession of the facts (no-one actually knew about the crack). Does that trigger the exclusion? I dunno. Why have such unknowns in a policy?

But what prompted me to reply was not that. It was the "identifiable". If your boat sank, got recovered, and surveyors were puzzled as to the cause, this seems to mean potentially no insurance cover. Two real life experiences come to mind:

1. When poor TCM's Leopard 23m took on much water in France a few years ago, they recovered it, lifted it, drained it, and placed it back into the water. It was fine - sat there floating for a month. No-one to this day knows how water got in (before anyone cackhandly comments anything to do with scuttling, as the insurers did, he didn't: he wouldn't as he loved that boat, and there were young children on board and friends/guests)

2. A good friend of mine who has boated with me on Match in the Med several times had (about 3 yrs ago) a 45 foot almost new FariPrinSeeker, and it took on a load of water in on a calmish day and nearly sank. Water was above top of engines and boat was properly sinking. Lifeboat got it back to base and they lifted, drained, relaunched. It was fine - no water came in. Still no-one knows why it happened, though there is a plausible theory the guy who just serviced the engine the day before came in the night and did up the thing he'd left undone. Also, just to confront the point, there was no scuttling - he wouldn't do it, plus had several guests on board and is multi zillionaire to whom a 45 foot boat is like buying a pack of chewing gum and he immediately went out and bought a new boat. Whatever actually happened, that cause was and still is not identified

So, sh!t happens, and unidentifiable sh!t happens too, hence that clause doesn't fill me with glee

Wow!

 

[Galia]

The P'nius (aha! Resolved the spelling issue) quote is in, its double the GJW quote.

Yep mine was double HJK, including £70 for Third Party, and a tenner for legal cover. Any idea how to get an actual policy doc as opposed to the summary. My quote says to check the policy document but I have been unable to locate it on the Pantaenius website. (Not that I have any reason to doubt JFM's recommendation !! )
George

 

[jfm]

Ha ha

1. In part 1 you've moved the goalposts but fantastic homework on the principles!. Sure, the proximate cause with the goalposts as you've now moved them was failure of the bonding strap not electrolysis and that's exactly how Seahope and I won his case when his seacock fizzed away and his boat sank. We found a PC further up the food chain. But shifting the goalposts is a bit too convenient so let's assume the investigators find your boat at the bottom of the harbour, with a snapped and somewhat corroded seacock and a perfectly connected bonding strap

2. Good stuff - imho you are putting forward a perfectly arguable case and the insurer, or if not them, the ombudsman/courts might well agree with you. The actual decision might depend on other clauses in the policy, for example if the words "directly" and/or "directly or indirectly" are used elsewhere in the policy, then their absence in this clause might point you to the interpretation intended. And you have the benefit of the contra preferentem rule. If I were betting, I'd bet that you would win not the insurer, but you don't have certainty, while other insurers do offer certainty on the point by leaving it not open to doubt, so it's your call as to which policy to buy

BTW, I don't thin the alcohol ombudsman thing is a great precedent here. If ombudsman had agreed with insurer, it would have led to an absurdity even though within the words of the exclusion, the absurdity being the drunk driver hypothesis. In the case of boat insurance, it isn't at all absurd for a policy to exclude all losses whose proximate cause is electrolysis. Furthermore, the big body of caselaw on PC (that I'm guessing you have researched) says every loss that flows automatically, inevitably and without further intervention by any person or thing from an excluded risk is not covered. Needless to say, the sinking of a boat follows automatically/inevitably etc from the electrolytic failure of the seacock. That's what you're up against Pete. Could go either way. Hence my view which is get a policy that takes away this uncertainty

One last thing important thing that I just remembered. I need to check the correspondence on this one but in Seahope's case, where a seacock undisputedly fizzed away by electrolysis and the boat sank, the insurer sought to avoid paying the whole claim. I do not recall the policy wording on the point and we won it anyway by finding a completely different non electrolysis proximate cause. But if we hadn't found that cause, the insurer's position was rejection of the whole claim, not just the £30 for the seacock itself. Again, hence my view that you should just avoid all this uncertainty and get a policy that expressly only excludes the £30 for the seacock and not the £1/2m for the boat.

 

[MapisM]

I consider the risk of a loss quite high

Why? Imho, the risk of a loss in a sensibly used pleasure vessel is acceptably low.
Here, I said that. Now, where's my red horn...?!?
Besides, it's surely lower in modern boats with top notch equipment like yours, rather than in old tubs like mine.

Otoh, I understand (and agree with) the rest of your reasoning.
Of course the value relative to anyone's NW is a sound element for the evaluation.
I've always been a bit conservative in this respect, thinking along the lines that for any sort of "toy" I'm not willing to allocate life-changing amounts.
...not to mention that even in the event of an uninsured total loss, arguably with boats the owner's NW is likely to increase rather than go south.
It's just a matter of time, but not having to keep the thing afloat is bound to reduce the expenses significantly!

On a more serious note, I'm intrigued by "cheap" premiums.
Which sort of % of the insured value, on a yearly basis, are we talking about?

 

[petem]

Ha ha

1. In part 1 you've moved the goalposts but fantastic homework on the principles!. Sure, the proximate cause with the goalposts as you've now moved them was failure of the bonding strap not electrolysis and that's exactly how Seahope and I won his case when his seacock fizzed away and his boat sank. We found a PC further up the food chain. But shifting the goalposts is a bit too convenient so let's assume the investigators find your boat at the bottom of the harbour, with a snapped and somewhat corroded seacock and a perfectly connected bonding strap

2. Good stuff - imho you are putting forward a perfectly arguable case and the insurer, or if not them, the ombudsman/courts might well agree with you. The actual decision might depend on other clauses in the policy, for example if the words "directly" and/or "directly or indirectly" are used elsewhere in the policy, then their absence in this clause might point you to the interpretation intended. And you have the benefit of the contra preferentem rule. If I were betting, I'd bet that you would win not the insurer, but you don't have certainty, while other insurers do offer certainty on the point by leaving it not open to doubt, so it's your call as to which policy to buy

I think that's a B+ at least ?!?!?

Anyhow I did consider moving the goal post for part 1) in a slightly different direction...

Lets say that the boat manufacturer concedes that all sea cocks suffer from corrosion sooner or later. The 'proximate cause' cannot be corrosion as that event is certain to occur (I made this rule up but it sounds kid of logical to me). Therefore the proximate cause would surely be lack of maintenance? Of course that could give the insurer other 'get outs' if the policy holder could reasonably have been expected to check and renew the seacocks (and that might depend what the manual says).

These things considered, I really don't believe that insurers intend that corrosion exclusions extend beyond the actual corroded item itself.

Another thought....

I have car insurance that excludes damage resulting from corrosion / rust (I don't actually but it's a feasible proposition IMHO). A break pipe corrodes and I end up driving into the back of a lorry. Would you expect the insurer to pay?

 

[MapisM]

The issue is getting WHAT you think you are paying for.
Water ingress might well write off a vessel
YOU might not be covered to the extent you assume you are.

Yep, but that comes after the point I was talking about - namely, whether it's worth being insured or not.
I suppose you are assuming that a boat MUST be insured, as most folks apparently do in the UK, according to jfm answer to my question.
I'd be curious to hear if there's anyone who actually considered the option of NOT being covered at all.

 

[sailorman]

Yep mine was double HJK, including £70 for Third Party, and a tenner for legal cover. Any idea how to get an actual policy doc as opposed to the summary. My quote says to check the policy document but I have been unable to locate it on the Pantaenius website. (Not that I have any reason to doubt JFM's recommendation !! )
George

Yacht http://www.pantaenius.co.uk/en/insurance/products/insurance-for-yacht-hull.html

MoBo http://www.pantaenius.co.uk/en/insurance/products/insurance-for-yacht-hull.html

 

[jfm]

the policy document but I have been unable to locate it on the Pantaenius website.

Left hand column George, under "downloads" http://www.pantaenius.co.uk/en/service/downloads/clauses.html

 

[sailorman]

Yep, but that comes after the point I was talking about - namely, whether it's worth being insured or not.
I suppose you are assuming that a boat MUST be insured, as most folks apparently do in the UK, according to jfm answer to my question.
I'd be curious to hear if there's anyone who actually considered the option of NOT being covered at all.

Some just take 3rd party