THIRD PARTY LIABILITY

Risk

Risk of the legal owner’s liability to third parties, while your yacht is in service.

Required

For yachts of 300 gross tonnes or more, third party liability cover is required by, and in accordance with, the Merchant Shipping (Compulsory Insurance of Shipowners for Maritime Claims) Regulations 2012 (UK) and Directive 2009/20/EC on the insurance of shipowners for maritime claims (EU). Most port states and private marinas require third party cover.

Remarks

Offered as Third Party Liability (TPL) insurance, or as broader Protection & Indemnity (P&I) cover - particularly for larger yachts. Historically, because third party claims can be so large (think oil spills), commercial ship owners joined together to form Protection & Indemnity Clubs, known as P&I Clubs. The larger ones are members of the International Group which has liability pooling arrangements to cope with the largest claims. Operating on a mutual not-for-profit basis, meaning that members can be asked to pay additional amounts to make the books balance, yacht owners can be an awkward fit. Some Clubs now offer fixed-premium cover. P&I Clubs in particular have claims handlers and foreign correspondents able to provide immediate advice following an incident, and can provide useful loss prevention guidance. In the unlikely event of a yacht being detained at a port following, for example, an accidental diesel discharge, the club will also have the known and respected financial muscle to provide security and allow the yacht to be released while the claim is processed at a later date. This support can be extremely useful in helping to keep a charter schedule on track, especially where problems are encountered in exotic destinations where local insider knowledge and contacts are vital. Although owners and managers should always ensure that they make the most of the Clubs’ support, this network is often overlooked. It can be packaged with Freight, Demurrage & Defence (FD&D) cover, which combines hands-on legal support provided by P&I Club in-house lawyers, and cover for external legal advice.

EMPLOYERS’ LIABILITY

Risk

Risk of the legal owner’s liability for bodily injury or disease sustained by any of its employees and arising out of and in the course of their employment.

Required

Required within the waters of, and yards within, Great Britain under the Employers' Liability (Compulsory Insurance) Act 1969 as supplemented by the Employers' Liability (Compulsory Insurance) Regulations 1998, in respect of any employee ordinarily resident in Great Britain.

Remarks

This is a specific requirement of United Kingdom law, but similar requirements apply in many other jurisdictions, such as under the Jones Act in the United States. Cover will usually already be provided by a P&I Club (if applicable) so make sure you’re not paying for separate employers’ liability unnecessarily. Your broker should be able to advise you of cover limits applicable. It’s easy for dayworkers to become employees for the purposes of the law – even though they aren’t formally employed as crew or otherwise.

MLC REQUIREMENTS

Risk

Risk of the legal owner’s liability for repatriation of crew and associated essentials, liability for outstanding salaries, etc, and liability for contractual payments for death or long-term disability due to an occupational injury, illness or hazard.

Required

Required in respect of all chartered yachts, where the Maritime Labour Convention 2006, as amended, (MLC) is in force, and aboard yachts registered in countries applying the MLC, pursuant to Regulation 2.5 Standard A2.5.2 Paragraph 9 and Regulation 4.2 Standard A4.2.1 paragraph 1(b) of MLC.

Remarks

Cover will usually already be provided by a P&I Club (if applicable) so make sure you’re not paying for separate MLC cover unnecessarily. Your broker should be able to advise you on whether such cover is needed.

CREW WELFARE

Risk

Risk of a crewmember being unavailable for work for longer than necessary.

Required

Some elements may be required by law.

Remarks

Typically covers treatment costs, and financial repercussions, for crew in the event of illness or accident – whether on duty or not, and whether on board or ashore. Cover varies considerably, and there may be some elements of the cover which overlaps with, or includes, employers’ liability insurance and/or cover required by MLC. Beyond legal requirements, unless you’re prepared to pay this out of your own pocket, it makes sense to insure against crew accidents and medical treatments costs. It’s a benefit which is appreciated and may help to ensure that crew with minor injuries can return to work as soon as possible.

OIL POLLUTION

Risk

Risk of the legal owner being held liable for the criminal acts of crewmembers in causing oil pollution, and the effects and costs of cleaning up.

Required

Insurance is usually required in respect of all yachts over 1,000 GT by the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, but liability under this convention extends to vessels of all sizes. May also be required by other local laws, such as the United States Oil Pollution Act 1990.

Remarks

Fines and clean-up costs can be enormous, and the spectre of criminal liability – potentially meaning that beneficial owners cannot shelter behind an owning company – means that you must be clear that the requisite cover is in place. Cover is normally provided by P&I Clubs, and Blue Cards, proving cover, can normally be obtained on request. Fines can be issued for not carrying proof on board.

WRECK REMOVAL

Risk

Risk of the legal owner being fined for not being insured against the costs of wreck removal.

Required

Insurance can be required in respect of all yachts of 300 GT and over – by a small but growing number of countries – under the Nairobi International Convention on the Removal of Wrecks 2007. It can also be mandated by local laws.

Remarks

Cover is normally provided by P&I Clubs, and Blue Cards, proving cover, can normally be obtained on request. Fines can be issued for not carrying proof on board.

HULL & MACHINERY

Risk

Risk of loss of, or damage caused to, your yacht, its engines, equipment, fittings and accessories.

Required

Not normally required by law.

Remarks

The term Hull & Machinery is a little misleading since the whole yacht will be covered, not just the hull and ‘machinery’ – a shipping term essentially meaning the engine and sterngear. The precise scope of cover will vary. Check, for example, whether fine art and valuables are covered, as well as your other personal effects and those of guests and crewmembers. Be aware of conditions in respect of named storms, and geographical cruising limits. Also check whether tenders are covered. Aircraft and submersibles carried on board are normally excluded.

WAR & STRIKES

Risk

Risk of loss of, or damage caused to, your yacht, its engines, equipment, fittings and accessories, caused by war, terrorism, insurrection and strikes, and not covered by your Hull & Machinery policy.

Required

Not normally required by law.

Remarks

While cruising in a war zone isn’t going to provide the most relaxing experience, this fills gaps in the Hull & Machinery policy which may exclude passages through waters known for piracy, and damage caused where volatile political demonstrations spill over into harbourside areas.

FINE ART & VALUABLES

Risk

Risk of loss of, or damage caused to, works of art and other valuable items, installed or carried on board your yacht, and not covered by your Hull & Machinery policy.

Required

Not normally required by law.

Remarks

Because the sky could otherwise be the limit to losses – and because yacht insurance has its roots in commercial shipping, works of art and other valuable items are normally excluded from Hull & Machinery policies. This insurance fills that gap. Be alert of the need to agree item descriptions and valuations at inception.

SUBSEA EQUIPMENT

Risk

Risk of loss of, or damage caused to, submersibles being carried on board your yacht, and not covered by your Hull & Machinery policy.

Required

Not normally required by law.

Remarks

Submersibles being too specialist a risk for many underwriters, they are normally excluded.

KIDNAP & RANSOM

Risk

Risk of you having to pay for crisis response, negotiation services and ransoms in the event of a kidnapping.

Required

Not normally required by law.

Remarks

While damage caused to your yacht, by pirates, should be covered by Hull & Machinery or War & Strikes Risks, costs associated with any resulting kidnapping are not. This insurance looks to plug that gap.

PROJECT RISK

Risk

Risk of loss of, or damage caused to, your yacht, its engines, equipment, fittings and accessories, while being built.

Required

Not normally required by law.

Remarks

Hull & Machinery insurance is for yachts that have been completed – not in-build projects. The builder will insure the project (and this should have been addressed in the build agreement) but the builder’s cover may be limited. This cover looks to plug that gap, as well as covering parts and equipment in storage at the yard and awaiting installation.

PROJECT LIABILITY

Risk

Risk of the legal owner’s liability to third parties, while your yacht is being built, refitted or repaired.

Required

May be required by law.

Remarks

While the builder’s insurances should provide cover in respect of its own contractors and employees, it will not normally cover your project manager(s), crewmembers and contractors which you engage in respect of the project, and its tenders. You may have specific employers’ liability insurance obligations, or the local equivalent.