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Boat insurance is not what you think it is

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During one of our captain’s classes, we talked about insurance issues related to guiding and commercial operations. One of our students was an insurance agent. He provided the following comments.  It is a little scary to find out what is not covered and why. It is worth the read especially related to offering paid for services and alcohol usage.

NOTE: This is not professional advice. You need to contact your insurance carrier or agent to review your policy contract.

Start by reading the definition. For example, one professional angler’s policy defines Fishing guide” means a person who, for supplemental compensation, accompanies, assists, or transports a person or persons engaged in fishing.  Fishing guide does not include a person who acts on this behalf as their sole source of income.

Coverage territory: Policies will have a “coverage territory”.  Coverage can be limited to inland waters, the Great Lakes, coastal waters, rivers, or any combination of them.  They need to ensure they are getting coverage for the correct territory.  For example, the typical “coverage territory” is inland waters and rivers, so the Great Lakes and coastal waters are not in the “coverage territory” and therefore no coverage is in force on those waters.  They need to be sure that they are getting coverage for the waters they operate in.

Coverage value is usually broken down by the hull, motor(s), trailer, and accessories.  The trailer is the trailer, motor(s) are typically considered the gas powered motors, the hull includes the hull itself and anything attached that cannot be easily removed (basically anything that doesn’t have exposed fasteners and can’t be removed easily like flush mounted graphs), and accessories is everything else (usually limited to items related to the operation or safety of the vessel – rods, reels, tackle, etc. are not accessories on most insurance policies).  

Many of the students will have bow mounts.  Including them in the hull value or accessories value varies from carrier to carrier so they will have to confirm.  

After all of that, I prefer to insure everything in a “package value”.  This typically allows you combine the value of everything, other than accessories, into a lump sum.  The rate is a touch higher, but definitely worth the extra few bucks.  Over the years, motors will lose value, but guys will add things to the hull so unless you are consistently updating those values, they are often out of whack.  I prefer to know that I have $65,000 for my hull, motors, and trailer, rather than $7,000 for the trailer, $20,000 for my main motor, $5,000 for my kicker, and $33,000 for my hull.  

What if I added (2) flush mounted HDS 12 touches next year and a high performance trim tab kit and then my boat was stolen?  My hull might now be worth $37,000, but I am capped at $33,000.  My main motor might only be worth $18,000 now, so that’s all I would get, my kicker worth $3,500, and trailer worth $6,500.  If I had them broken apart, I would be looking at getting $61,000 instead of the $65,000 I am paying for.  Having them in written on a “package vale” would get me the $65,000 I am paying for.

The policies usually pay Actual Cash Value (market value basically), so those figures fluctuate and nobody knows what those will be at the time of loss, I prefer to know that I have flexibility in the valuation process and that everything is not capped at certain amounts and if those amounts are too high on one thing, I can potentially get that over insured amount back on something else that might be underinsured.

Exclusions: Make sure you understand what is excluded from coverage:Freezing, thawing, or contact with ice, when the condition is expected or anticipated and the insured watercraft was not prepared for cold weather storage or winterized to the standards of the manufacturer or accepted marine standards; Damage from birds, rodents, insects, animals, vermin, and marine life except if loss is caused by collision;

Example: This Policy does not cover bodily injury, property damage, or loss  when the insured watercraft is:
a. outside of the policy territory.
b. used for a commercial purpose or marine business;
c. used unlawfully to traffic in or carry persons, drugs, narcotics, or other property;
d. owned in whole or in part by someone other than you or your spouse
Passengers for Hire: Coverage is usually restricted or completely eliminated if they rent out the vessel, are carrying passengers for a fee (guiding or otherwise), or if the vessel is being operated in “any official race or speed contest”.  The first 2 are pretty self-explanatory, but the 3rd one is not as cut and dry.  Is a tournament a “race or speed contest”?  Personally, I believe it could be and prefer not to leave it up to an insurance carrier’s claims adjuster, an arbitrator, or court.  

If they run their boats in tournaments, they just need to let their agent or carrier know and verify if there is coverage.  I would do this via email so that you have the response in writing and save that email.  If an agent says coverage would not be excluded for tournaments, but they were wrong, it is possible that the insurance carrier would exclude coverage, but that agent’s Errors and Omissions insurance would most likely have to cover the loss.

If they are guiding, they have to have a commercial type policy.  There are a few companies that have the ability to insure the vessel on a personal lines policy and offer some sort of guide endorsement.  

Alcohol or drugs consumption: There is a trend in the insurance industry of excluding coverage if they can show alcohol or drugs have been consumed if the loss occurred while the vessel was being operated commercially (guiding for the most part).  It has been fairly standard to exclude coverage if the captain, or sometimes crew, were under the influence.
However, we are starting to see a trend of carriers excluding coverage if anyone on the vessel is under the influence which includes passengers. They need to be aware of this exclusion as it’s not uncommon to take some customers out on a guide trip and the customers plan on having a few beers while fishing.  The captain, or owner, has to know if that presents a problem.

I have highlighted many of the things people are not aware of and end up finding out AFTER something happens.  No fun.  
There is a pretty broad personal lines boat policy that has the ability to add for tourney pros and guides.  It’s a much better policy than most personal lines boat policies, but still a little inferior to a true commercial policy.  

WARRANTY: Please note, Warranty, in the insurance world, means “absolute”.  Basically, there are no exceptions or excuses to violate a “Warranty”.  They are hard to enforce, but it is literally the most unforgiving word in the insurance world.
For example related to guide service “You warrant that the following conditions will be adhered to while your insured watercraft is being utilized for fishing guide activities….”
“If required by your state or any state you navigate your insured watercraft, or if required by the United States Coast Guard, you hold the necessary current licenses to operate as a fishing guide. We may request a copy of any required license for our review at any time.

MISREPRESENTATION AND FRAUD This policy will be voided back to its inception if you at any time intentionally conceal or misrepresent material information relating to application(s), accidents, or losses. Moreover, if a person knowingly makes a claim based on false information with the purposes of defrauding us, that person may be guilty of insurance fraud which is a felony. We have a duty to seek out insurance fraud and report it to appropriate authorities. We will then cooperate fully with authorities as required by law.

Safety Briefing: On another note; they need to perform whatever reviews, instructions, customer’s checklists, etc. the same way every time.  If they don’t do things the same way every time, your documentation becomes fairly worthless should you end up in court.  
For example, if they are going to review vessel safety, rules, etc. on the dock and use a form that the customer signs off on, they have to do that every time for every trip.  They cannot skip it because they are in a hurry or the customer knows what they’re doing or whatever the reasoning might be. 

You will have to show consistency and the opposing attorney is going to try to document a lack of consistency in order to belittle whatever documentation you might have.  If that attorney can show that you don’t go through the same procedures with each and every customer, it won’t matter that you did everything by the book and have all the customer signatures on rules and safety forms saying they have reviewed and understand everything for that day the accident occurred.  

The attorney just documented to the judge and/or jury that you don’t have any set process or procedure prior to leaving the dock and that who’s not to say you didn’t do this after the fact.  If they can find a hole in your consistency, you are in trouble.  Basically, do the exact same thing every time.  If that means nothing, then do nothing.  If that means forms and checklists that customers sign off on, you have to do it every time, or don’t do it at all.  

The most fool proof way I know of doing this is the same way large corporations do it.  You require people to book trips on your website.  When they are booking their trip, there will be a form outlining the rules, safety procedures, etc. and requires them to check a box or something stating they as well as all members of their party have read and understand everything.  Then you just have to perform your Coast Guard safety requirements at the dock and you are ready to go.  

That’s just my thought on the ideal way to cover your tail, but not everyone is disciplined enough to maintain consistent procedures.  Well, that is until after they have had the opportunity to experience a personal injury lawsuit first hand.
 I know there is probably more here than you wanted, but I wanted to overload you with information and let you choose what you wanted to know about and possibly mention in your courses.  If you have any questions on any of this, or if I can be of any other assistance, please do not hesitate to contact me.      

Scott M Swain, CIC
Account Executive
Alliance Insurance Centers, LLC   
800.844.6662 (Toll Free)   



  • Guest
    Herman Andersen Monday, 23 July 2018

    Does boat insurance companies require a USCG license captain

  • Guest
    capt gary Friday, 14 September 2018

    Good questions. Normally only if it is commercial operation whcih include anything were money is exchanged. Secondly If you are moving another boat without them present, first it is a bad idea with out being on their insurance policy, secondly they will require you to have insurance to move others boats.

  • Guest
    Carlos Montero Monday, 29 March 2021

    Great info
    Thank you

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