The Yacht Law Podcast
The Yacht Law Podcast
Navigating the Stormy Waters of Yacht Insurance: A Comprehensive Guide
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Ever wondered why yacht insurance premiums have hit the roof? Does the frequency of named storms have everything to do with it, or is there more to the story? Here's a promise: By the end of this episode, you'll become well-versed in the complex world of marine insurance and the important role of an experienced insurance broker. It's a crucial education to help prevent you from making a costly mistake--even multiple costly mistakes.
We dive deep into the legalities surrounding marine insurance. For instance, did you know your insurer may include a captain's warranty clause - necessitating an insurer-approved captain? How about the possible repercussions of breaching policy terms? You’ll learn about a Supreme Court showdown, too, that could forever change the marine insurance game. Could you imagine the implications of a ruling that upholds the underwriters' freedom to choose contract language from another state's law in their contracts when the yacht isn't even in that state?
As the old saying goes, the devil is in the details, and that certainly holds true for insurance when it comes to yacht-transport contracts, a.k.a. contracts of carriage. Not only do we dissect landmark legislation, but we also explore the important yet often misunderstood domain of NBOCCs (non-vessel owning common carriers) and the limitations of liability. You will learn why obtaining the right insurance for yacht transport is more crucial than ever.
Finally, did you know your policy may exclude yard periods, and why a shipyard's insurance certificate matters as much as a contractor's? We further discuss a unique case where a yard contract had insurance with a limitation of liability clause, but a court ruling toppled the tables in favor of a superyacht owner.
This episode is a wake-up call to all yacht owners - highlighting the absolute necessity of understanding insurance cover notes and policies thoroughly.
Have a yacht law question? Email it to info@megayachtnews.com or michael@moore-and-co.com for your chance to have it answered on our podcast. All requests for confidentiality and/or anonymity are respected.
Hiring a lawyer is a big decision. Visit Moore & Company for the legal team's qualifications and experience. And, to learn the latest about superyacht launches, shipyards, designs, and destinations, visit Megayacht News.
Welcome everybody. Michael, how are you? It's good to see you after the Fort Loderdale boat show.
Speaker 2:Doing great Diane. Thank you very much. Always good to be here.
Speaker 1:So during the boat show, I heard some people talking about an insurance symposium that had been taking place maybe the first day of the show or a few days prior to the show, something like that, and it was pretty timely, since you had suggested that we talk about insurance on this episode of the podcast. Whether you're talking about insurance for a 20 footer, a 75 footer, a, you know, a 175 footer, I think pretty much insurance is a hot topic, and a hot topic for a number of reasons. These days, primarily because premiums are higher than ever, coverage is tougher than ever, people just seem to be tearing their hair out over a number of different aspects and then also, with all the newcomers and yawning, people are seeing things that they've never had to deal with before. So I think we have ourselves quite a number of very interesting things to dive into today.
Speaker 2:Great, let's do it.
Speaker 1:So one of the things that certainly has been taking people by surprise, from what I've seen, is that the premiums have gone up so dramatically and there are fewer underwriters who are actually providing marine insurance. So the question is why? I think the obvious first answer is because we've had a lot of named storms in recent years, but I suspect that that's not the only issue. What are you seeing from the, from your clients and overall in the industry?
Speaker 2:Right. I think that, first of all, the full evolution of commuterization, coupled with data analytics, has changed the insurance world in a sense of as they try to you know they call it risk management. So they're always trying to figure out how to manage their risk in terms of the exposure that they have, and the data analytics comes in. When you mentioned a 25 foot boat, you know this applies to whether it's 25 feet or 250 feet. It's to me it's just kind of all the same. We treat every certainly every matter the same. If 25 foot boats can get into big trouble, 250 foot boats can get into big trouble. It's not just hull value, which is one thing. I think.
Speaker 2:The other side of that coin is third party liability, often referred to as PNI or protection and indemnity, but basically it's defending against claims brought against the vessel by third parties. So is it, is it a part of, is it because of hurricanes? I think it is in part because of hurricanes, but I think it's also part of the analytics of having to do with fire and things of other risk than you know. The big three are windstorm, fire and theft. That's the big three causes of loss or hull loss, and then you have on the PNI side, anything and everything that can happen to a boat, the kind of trouble boats get into, Mm-hmm, why don't we go into that a little bit?
Speaker 1:because that was one of the things I thought was pretty interesting and I think it's something that the newcomers in yachting we've had so many new people come into this sector over the past couple of years. I think this is something that they may be wrestling with. When you buy insurance for a yacht, it's not like buying insurance for your car or for your motorcycle, et cetera, where you have one policy that covers everything you were just talking about, how there's the whole insurance and then the PNI insurance, the protection and indemnity. Mm-hmm, why are they? Why are they separate?
Speaker 2:Well, I think that actually, I think that the kind of risk that have to do with the vehicles that you mentioned, like car insurance and motorcycle insurance, there are some similarities. These things that move and the operator who moves them is critical. So the analytics comes in to play when the operator itself is analyzed as to is this a safe risk for this insurance company to undertake? But I think it may. In many ways it isn't like insurance for cars or not insurance for homes, that's true, but I think that when you get into maritime insurance marine insurance you can. You are dealing with the inherent risk of the sea. You, just for the benefit of our listeners, you sure as hell want to be sure you have a marine insurance broker.
Speaker 2:It is a massive mistake to just use any old insurance broker, because you do need a qualified marine insurance broker to basically help you, as the insurer and the person that needs insurance, actually obtain the right kind of insurance to protect the risk that are inherent with the so-called marine risk. You'll often hear them referred to in the yacht world as all marine risk policies or all risk policies. Those are things that do cover the things that are inherent with respect to boating, things that you know. Sinking, for example, you know would be sinking. Collisions, groundings would be three examples. Also things like windstorm, much more prevalent for yachting and boating risk, rather than, say, a motorcycle which you simply put away, put on the, put inside the garage or whatever. So it's a very complicated, complex series of variables. But at the end of the day, your first step is to be sure your marine insurance broker knows what they're doing so they can get to the right kind of coverage.
Speaker 1:Right, that makes a lot of sense. So when, let's say, somebody has worked with a good marine insurance broker, they have a policy, they're about to sign the dotted line, with any contract, there's always fine print that needs to be paid attention to, and in looking at a lot of the different aspects of that fine print when it comes to yacht insurance, there were certain things that I was quite surprised by, and I'm thinking that some owners might also be quite surprised by, one of them being the need for and I think you were the one who informed me about this the captain's warranty that the captain's name not only needs to be included, but they need to be approved.
Speaker 1:So, talk about that, and why do the insurers want to see that?
Speaker 2:Yeah, I think this is something that is just really popping up like daisies in the spring, but this is a very important thing. Let me say this as a preliminary to what you're asking the way it seems to work these days is the insurer, the person that needs insurance, the yacht owner, the boat owner. When I say yacht, I'm not any boat of any size or class. In fact, sometimes you'll have two boats with separate insurance that are part of the same you might say the same flotilla or the same. They're connected, being the tender and the yacht itself. In many cases, you'll have two separate policies governing these two vessels. For whatever reason, that's the way that particular owner likes to do it, or maybe the underwriters like to do it that way. There's some reason that the marine insurance broker suggested they have two separate policies. But among the most important things you think about is the vessel insurable. This is really a massive, important, critically important thing to determine as you're going forward with to the wonderful world of yachting. There are increasingly, it seems, boats out there that are extremely difficult to find insurance for Now. This can be from a variety of reasons, but, practically speaking, in many cases the good insurance broker will provide you, as the insurer, what is called a cover sheet. This is to avoid what you refer to as the fine print. You have a yacht policy that may go on for days, because the underwriters want every contingency covered and to make sure they're always trying to get clarity as to what's covered, what's not covered, what are the exclusions, et cetera, but in the cover sheet, you will often see the most important aspects of the policy. For example, we had just last week well, the 10th of November, which would have been just a few weeks or so ago we learned that the vessel was not insured for fire, which was quite shocking, because fire is one of those risks that often comes up. I think, though, that if you look at the policies, they will often talk about some things like windstorm, lightning, strike, theft on the cover note, but they don't necessarily explain that you are covered by fire.
Speaker 2:If you got deeper into the policy itself, but with respect to the captain's warranty, this is something we are seeing quite often. Basically, this is a vessel that is usually of a certain size in class that the person that's going to operate the boat, let's say it probably comes into play at around the 75-foot marker. Basically, what the underwriters have found is that there have been a lot of people out there trying to drive these boats 50-feet, 60-70-foot boats and above. Trying to drive them. The people driving them are just simply not qualified. So they've added this thing called the captain's warranty.
Speaker 2:That's a clause that requires a licensed master. For a US flag vessel, for example, it had to be a United States Coast Guard licensed captain. It may be a license from any number of flag states, it just depends. It's as complicated as the entire insurance world is complicated. Here's an example we have a wonderful yacht owner. He's buying a new yacht. He's buying a beautiful Bonetti manufactured yacht. He and his wife are Americans. They are introduced by a Monaco-based brokerage house to a wonderful, lovely individual who they immediately are taken by.
Speaker 2:Without that, the captain has a Belgium license, a license issued by the country of Belgium. We all know Belgium, it's one of the Benelux countries and that's. But strangely enough we have learned that that license is simply not recognized by several flag states. And so now we're on this kind of scramble of what flag will accept the vessel as an operator and when the person doing the operating is a Belgium licensed captain. So we're going to have to work through that.
Speaker 2:But the way it works is that they usually distinguish between caretaking and operating. A caretaker can be someone who is reasonably qualified, who just simply is on the vessel to make sure that it's not sinking, that water's being taken out of the vessel faster than it's coming in, this kind of thing. But operations when you start to, when you go from caretaking sitting at the dock, sitting on the mooring buoy, and start to actually navigate, which is to say you start to operate. You in many, many policies today you have this operator has to be approved. They go so far as to say that the resume of the operator has to be in their files, which means electronically sent to them, and they have to be on record as, having said, we approve, we sign off on this individual. If the vessel is operating and that resume is not in their file, he has not been approved. In other words, sending it to them is not good enough. That's what they mean by that. Yeah, that's what you get a lot, but I sent you his resume. That's not good enough. You have to have a response. I got onto a Marine Assurance Brokers case a little bit just this week and I said I need you to respond in writing with the word approved. I need to see the word approved. And he said, no, no, I got it, I got it, I got it. And he sent me an email immediately it's approved. And I said fine, thank you very much, have a nice day. And that was the end of that.
Speaker 2:But you learn the hard way. As an example, just to drive home the point for our listeners, we had a loss and the broker was very, very sure that he had sent the resume in. He just didn't understand how this could be. It turns out the email was stuck in his outbox. Now we've all had that happen, everybody can relate to that now and we all remember the first time that happened to us. Oh my God, I thought I sent you the email. It's stuck in my outbox, something you know, some magical internet thing or computer thing. And this shifted the risk and the liability of the problem to the Marine Insurance Broker because he had not in fact sent the resume out, he had not in fact received the word approved and the underwriters had denied coverage. So that's a biggie. I mean, that is a biggie. That is about as that. That's one of those things that just ruins your day.
Speaker 1:Yeah.
Speaker 2:Because the underwriters are not there. They're a business. They're not heartless, ruthless, soulless type entities. They're a business and they run their businesses by the rules, and the rules are resume in our file and the word approved. So the words of the wise. That's one of those things that you really must be very much aware of. And the other thing that I and I'm just going to mention this because I've seen it more than once Somehow these Marine Insurance Brokers have to remind their clients that every time they renew the insurance, at least that at that moment each year, to make sure the captain that's on board is the same captain that they sent the resume in regarding that that captain has been approved. You get a lot of this. Well, he's better qualified than the first guy. So well, you know that's an opinion, but the simple truth is, you've got to have, you've got to have him approved.
Speaker 1:Yeah, I was going to ask you because if they don't update the resume with the insurance broker and therefore the underwriter, then technically there's no approval for that renewed policy. Even in a scenario where these days there's more rotational captains and more rotational crew overall, I think on some yachts you need to have that second captain's resume submitted, approved, etc. What about a temporary leave? If somebody needs to have a family situation addressed and they're going to be off the yacht for a certain number of weeks, certain number of months, there's a temporary captain. That person needs to be submitted and approved now too.
Speaker 2:Absolutely, absolutely true.
Speaker 1:Wow.
Speaker 2:Absolutely true. We've just to give you a variable, because I think sometimes these hypotheticals are better remembered than the concepts. But the captain approved, was highly qualified, he was highly certified and he was approved. But when the incident happened and now the lawyers get involved and you're looking at everything with the clarity of 2020 hindsight the captain, who had the resume, who was in fact approved, lived in Fort Lauderdale. He did not live in La Paz.
Speaker 2:The incident occurred in La Paz. There was no approved captain on board the vessel at the time of the named windstorm damage. So you said to yourself well, how did this happen? And the answer is well, the captain was also a yacht broker, so he wanted the opportunity to be helpful to the owner of the yacht and, whenever called upon, he would hop on a plane and go to La Paz and operate the vessel for the owner. All of that's perfect, but what about when he's not on the yacht? So see, they'd never covered that aspect of the vessel. And, of course, the vessel had to navigate, it had to be operated, had to be moved from a certain location in the face of an incoming hurricane named storm. So that, in and of itself, is a violation of the policy that it would never be moved without the approved operator on board, and many, many cases again. These are variables, but under many laws, once breached, the breach is not cured by the vessel coming, for example, to a birth. Once you're in breach, you stay in breach.
Speaker 2:There are some policies that follow a different rule, but you have to read your policies and understand these things. For example, I give an example that I've experienced, which is, under certain policies, if you go, for example, to, let's say, your policy doesn't cover Cuba, so you go to, these are this is the navigational limit. Most of these policies these days are very, very clear on navigational limits. But you go to Cuba that's not covered, so you've reached the policy. Does your policy reinstate when it, when you return from Cuba back to the United States, for example? And so sometimes they do, sometimes they don't. But you just need to know that. You just need to know, and the safest way to know is to always be careful to have the under the underwriters know where you're, you know where you're going if you're going out of your normal navigation limits.
Speaker 1:Right, right Now. Something else you brought to my attention was the warranty clauses. There's a Supreme Court case actually that's pending right now about jurisdiction and something to do with New York and Florida. What explain that? Because this I thought was really eyeopening.
Speaker 2:This is actually a it's going to be a sea change in what is now pending before the Supreme Court. It's been argued but not yet decided. Now, using the example that I just used of reaching the warranty of navigational limits, and if I may just say before we turn to this new subject, more and more you see specific latitudes in policies, specific latitudes. For example, miami is a 25 degrees latitude north. You know the latitudes run north to south are much more important. Usually you don't normally see longitudes in that navigation limits. But you know I mentioned La Paz. La Paz is 24 degrees north. So if your policy states states, as it often does, that between certain months and the traditional months are June through October, the hurricane season you have to be north of 25 degrees latitude north, ie out of the hurricane zone. If you're south of that, under what we're going to talk about, under certain law, new York law, if you have any laws, you see that would be not covered under New York law. But if your loss is related to not a hurricane but fire or water or grounding, under Florida law you would be covered. See, because Florida law is what's called a non-technical state. New York law is called a technical state. So if you breach under New York law for any reason, you will have no coverage.
Speaker 2:Now that brings us squarely into the most important case in the Supreme Court. It's pending right now and it has been pending since the 1955 decision of the so-called Wilbur and Bogue Company. Now, I'm sorry to say this, but these insurance company people, they're not stupid. So what they've done is they've inserted New York form selection clauses and law selection clauses not form, excuse me, law selection clauses in more and more of their policies. And they do this specifically to be able to say, even though your vessel ran aground and you have a total loss for grounding, you're not going to be covered because your fire extinguishers were not certified.
Speaker 2:You see the problem. One thing has nothing to do with the other. Logic would suggest to you that's ridiculous. I happen to think it's ridiculous. But the problem with the issue before the Supreme Court that they're going to have to decide is freedom of contract. The hapless yacht owner is free to contract. This is a massive doctrine in the law the freedom to enter into contracts. So the Supreme Court, the ones that are the that sort of I don't want to get into the Supreme Court politics, but you have strict construction as you have not so strict construction as you have everything in between.
Speaker 2:But they have a case pending right now. It's called Great Lakes Insurance versus Raiders Retreat Realty and they're going to decide this thing and they're going to resolve this longstanding issue since Wilbur and Bogue Company. Wilbur and Bogue Company was in fact a case that said you got to have causation. You can't point to you know one shortcoming and say that's the reason we're not paying if that shortcoming did not have a causal relationship to the law. So there's another case it's called Bremen versus Sepada Offshore and a third one they're going to handle all three of this at one time called Carnival Cruise Line versus Shuddy. And these are they're maritime law cases and they all involve not only choice of law but also choice of forum. As a historical footnote hopefully not an antique footnote I was the lawyer on Carnival Cruise Line versus Shuddy.
Speaker 1:Lucky you.
Speaker 2:Well, the thing about it was and there may have been a precursor to it, I just don't remember how.
Speaker 2:I'm going to go back and look at it, but when the case came down, basically it said that if the parties to the contract in this case the contract of carriage, the contract that puts the passenger on the cruise ship if that contract says that all of your lawsuits must be brought in Miami Florida, then all the lawsuits have to be brought in Miami Florida. Many of people raised heck about that and I said but wait a second, we live in Seattle. Are we living in Vancouver? This is not fair that we have to bring this case in Miami Florida. Well, under the doctrine of freedom of contract, the forum selection clause was upheld and this is the reason that a lot of lawyers in Miami have a bedroom on their houses entitled to Michael Moore bedroom, because that's how they got their cases and that's why the Miami and South Florida bar is so renowned, because almost all of the cases against the cruise ships and cruise lines are brought in South Florida under Carnival versus Shuddy.
Speaker 1:That makes sense. It sounds very much that the Supreme Court is going to be dealing with an apples to oranges comparison that I don't think you even need to be a lawyer to understand how. It is a bit questionable, so that'll be interesting to follow. When, just a moment ago, when you were talking about contract of carriage, that brought to mind something that's along those same lines, but in a different way not carrying a person, but carrying an actual vessel.
Speaker 1:When it comes to the transport companies and their contracts of carriage, it seems like insurance can get pretty sticky too, because some of the transport companies own the actual vessels that they're using, whereas others do not, and they are therefore contracting with a third party, which, of course, is all legal and goes on all the time. But if something happens, such as the case with the super yacht the sailing super yacht, my song a few years ago you have a third party that was carrying the vessel on behalf of the original yacht transport contractor that the owner, the owner's team, had signed the contract with. That sounds pretty sticky and I'm wondering how do the insurance companies handle that? Do you actually need, as an owner, to have an extra policy covering the third party, since the third party is the actual carrying agent, if you will.
Speaker 2:One of the reasons I enjoy being a part of this podcast is just, people have their ideas about what a maritime lawyer is, and you come up with these things that are vitally important in the yacht world that, unfortunately, most people don't think about them until after something very bad has happened.
Speaker 2:So the first thing to the first point is this If you're trying to move a cargo, which in this case is a yacht, let's call it, let's say that's what the art world moves. It moves yachts from point A to point B, and you have this decision to make. Do you move it on its own bottom, as they say, or do you want to send it on a carrying vessel? And so you can turn to what is called a freight forwarder and they will help you find a carrying vessel to transport your yacht. You get into what in a world that is referred to as where there's a class of vessels called NBOCCs it stands for non-vessel owning common carrier NBOCCs. Now, these groups are very little is understood about them in the yacht world. I mean, I can tell you from experience, but the NBOCCs are themselves out looking for ways to book cargo. They will issue a bill of lading the lading is the classic term a bill of lading. The lading is the contract of carriage of a contract of a freightment, as what you'll also hear which is the contract that moves the cargo from point A to point B. Those contracts normally provide under the carriage of goods by Sea Act Almost always the carriage of goods by Sea Act, referred to as CAGSA, has a limitation of liability provision in the contract of a freightment or under the bill or under a different type of contract of a freightment A $500 limitation of liability. So if your $5 million yacht jumps out of its cradle on the way across, they'll give you a check for $500 and wish you well. So you definitely, absolutely positively, have to book insurance for the passage.
Speaker 2:Now this comes up, this will come up. The importance of this is it comes up in a variety of right ways. You could call your marine insurance broker who will place that insurance for you. Sometimes the carriers themselves will offer you insurance, but one way or the other, it's just important to understand that you're not insured as cargo. You have a $500 package limitation under the bill of lading, also under the carriage of goods by Sea Act, and it's gonna be a very sad day if this vessel suffers damage and you're now trying to say that the fault of the loss of the vessel or the damage to the vessel was caused by the carrying vessel. The remedy is clear get your own insurance, make sure you're booked.
Speaker 2:Let me give you another example of what happens, squarely on point with your question. You can have a vessel that's fully insured in, say, fort Lauderdale, florida just use that as an example and that vessel is now being transferred. It's sort of got insurance, it's in navigation, it's now going to a freight forwarder's book, it's booked, its passage under a bill of lading and it's on a carrying vessel and it's heading toward Dubai. Except that the policy of insurance that the owner obtained doesn't cover Dubai. Dubai is outside the navigational limit. As a result, when the vessel arrives in Dubai, it arrives as an uninsured vessel.
Speaker 2:Now that presents multiple problems. Number one most ports will not allow the vessel to discharge the yacht unless the yacht owner can show proof of insurance. So the insurance company, the first thing they're gonna do is call their marine insurance broker back in Fort Lauderdale and he'll be enjoying lunch at the Mestrobe, mestrobe, mesaluna, and the call, his lunch, will be interrupted, and he'll say well, number one, you didn't tell me you were going to Dubai. Number two you're not covered for Dubai. It's outside the navigational limits. Number three we don't book insurance for Dubai because we're based in Fort Lauderdale. But let me get on it, I'll see what I can do.
Speaker 2:But until you get insurance, the port will not allow you to discharge the vessel, and so that vessel is now holding up a ship full of a lot of other cargo. And that's when you will become familiar with an expression of once on demurrage, always on demurrage, and the demurrage rates for those carrying vessels can sometimes be $50,000 a day. And a recent example that I'm aware of the vessel was delayed six days and so the vessel owner had to pay. The yacht owner had to pay an additional $300,000, even after getting insurance as a condition pre-cedent to being up to discharge the boat. He had to pay $300,000 to get the vessel discharged into the loving arms of the two tow boats that were waiting for the boat when it was discharged in the discharge port Very costly.
Speaker 2:So it's very, very shocking and surprising and anger-creating. If you don't really know, you know how these things work. You can talk through your blue in the face about the unfairness of it all, but I can assure you that ship will never discharge that vessel, that yacht, until they get paid and until you show them proof of insurance for the port where you're located.
Speaker 1:That's a costly mistake to make.
Speaker 2:Yeah, it's a massive mistake and unfortunately, sadly, we see too many of these things. But it's a combination of the owner just there's not thinking. You know our boat. We've been living large in South Florida, we're happy, life is good, we have our boat, we go here, we go there everywhere. Why don't we cruise around the med for a while? So that would be an example of something we see every spring and every fall.
Speaker 2:I mean massive transportation back and forth from the med to South Florida, from the med to the Caribbean and other parts of the world, and you just simply have to have all your ducks lined up. And insurance is a massive part of that, because not many ports in the world will accept you unless you improve that you're totally insured. If a boat sinks, for example in a harbor, the very few boats are going to be worth more than the cost of rec removal. So if you don't have insurance for rec removal and, by the way, this is such a problem that there is something called the blue ticket that you go and call most of these flag states and you say, well, what is this thing? I keep hearing about this blue ticket and the answer is well, that's the ticket. That's a quick ready reference for the flag state to know that the yacht is insured for rec removal. If you don't have the blue ticket, you're not in many flag states, you're not even going to get registered.
Speaker 1:Wow Okay.
Speaker 2:This is just a final thought. It's crazy, but it's incredibly important.
Speaker 1:Yeah, definitely.
Speaker 2:What you're looking for and we all have these things come up. It's like well, what is this blue card I keep hearing about? Well, it's something that there was something called the Nairobi Rec Removal Convention and somehow they talked about a blue card as an easy way to say you don't have to read the entire policy. But you sure as hell better be able to show the blue card pursuant to the Nairobi Rec Removal Convention or you won't be allowed to discharge your vessel into this port, because if that boat sinks, you're screwed in tattoo. The port is.
Speaker 1:Right.
Speaker 2:You're going to create billions of dollars worth of damages and the report will have to spend millions of dollars just to get the thing out of the way.
Speaker 1:Yeah, All right. So one last question because we're coming up close on our time, but I do want to make sure that we cover this, because this is also a big issue. When it comes to yard periods, owners obviously want to keep the boats maintained properly. You need to keep the boat maintained properly too, to keep your insurance. But when it comes to those yard periods, particularly when it comes to the so-called hot work with welding et cetera, there are requirements to well.
Speaker 1:The owners, I should say, are required to show their insurer the shipyard's insurance certificate as well as any contractor's insurance certificate, and this was something that surprised me because they need to get another premium quote. So the main policy, if you will, doesn't cover the work necessary to keep the boat in proper condition to keep the insurance. It's almost like a vicious circle here, that is, you need to keep the insurance so that you need to keep the boat maintained, so that you keep your insurance, but you can't go and maintain the boat under your typical insurance. You have to get another insurance policy and show everybody else's insurance so that you could keep your insurance. I mean, it's baffling.
Speaker 2:You know it's data analytics. Once again, I think that the everyone in the chain is going to it would need everyone needs to be covered. So you've got a vessel that's going into a yard and it's going to be. You mentioned hot work. So they're going to be doing, they're going to be basically using controlled fire if they're welding and lots of sparks just flaming and so forth, you know, and lots of volatile materials around oils, petroleum products, you know, diesel fuel, whatever name it. It's there. Yeah, you're going to have to be.
Speaker 2:You're not going to be allowed in most yards these days until you can show proof of insurance. It's just that simple. And the insurance that you're required to maintain, both on your, both on the owner's side as well as the yard side, has to contemplate the use of. You know the fact that welding will go on. That would be one example of something that hot works will not be covered unless specifically insured for. But you know it's the cost of doing business. It's a very important cost of doing business to make sure everybody's covered.
Speaker 2:I will leave you with this thought, though, diane. So we had a case where the policy, the yard contract, basically said you must have insurance and must be covered for under paragraphs six, eight and nine of the docket agreement. But one of the things that make a long story short it required insurance, as you were discussing before you could enter into the, into the yacht, into the yacht yard, and the court did not enforce the light and limitation of liability clause which said if you don't have insurance, you will not, you know you'll, you'll have, you must have insurance and as part of the insurance you're limited, you're, our liability is limited to like a thousand dollars. Yeah, about worth, you know, 10 million. And they're trying to limit the liability to a thousand.
Speaker 2:But the court ruled that because the yard had not insisted on seeing the policy at the time the vessel arrived, it basically said to the court that that clause was not important, was not being enforced, and so the yard could no longer rely on it. And so the court threw out the limitation of liability clause and basically said the yards liable for all the damages that it caused to the yacht owner. So you know a little bit of a an aside perhaps, but it certainly made the yacht owner happy because his yacht had suffered some pretty serious damages but whereas he would have had to have eaten that damage, he's now can ask the yard who caused the damage to pay for it why? Because the yard had not insisted on seeing the policy of insurance which they, in their contract, said they had to see.
Speaker 1:Right.
Speaker 2:As the vessel entered the yard. So insurance is just one of those things that permeates everything across the board. Very important. You do have to read your cover notes. You do have to read your policies. You do have to have a retain, a proper marine insurance broker. If they're not billing themselves as marine insurance brokers, you're just gambling, as far as I'm concerned, with what kind of policy you're going to get, and you know you're going to find out the hard way that the policy that your friend and your brother-in-law and your sister-in-law and your cousin booked, you know it'll. It'll be a very unhappy day for you if you have insurance Right.
Speaker 1:Right, yeah, avoid those expensive mistakes Everybody, that's for sure. Well, michael, this has been eye opening, really, really interesting. Thanks again for all of your insight. I know we've definitely educated a few people, more than a few people here today, and I'm sure we'll have more than a few people also scrambling to go double check their policies, make sure that everything is covered and it, you know it works both ways. It's not just the owners who need to have their ducks in the row, it's the shipyards, the contractors, et cetera. You know they need, like you said with this last example, they need to make sure that the boats are covered so that everybody knows exactly what's going on.
Speaker 2:Exactly.
Speaker 1:Well, thanks everybody for listening. If you have a yacht law question you would like us to address on an upcoming episode of the yacht law podcast, and a few of you actually have taken advantage of that, so thank you. Please contact Michael or me. Our email addresses are listed in the show notes. We will certainly be getting to a few of those suggestions in the coming weeks. We want to help you make better, educated decisions, whether you are a yacht owner, a crew member, a representative in the industry or someone seeking to learn more in general about the world of yachting. And, of course, we will keep you anonymous, if you so wish, until next time. I'm Diane Byrne. Michael, why don't you sign off?
Speaker 2:And that Michael Moore signing off. Take care.
Speaker 1:Thanks everybody.
Speaker 2:All the best.
