Yacht Insurance

Abandon / Abandonment: To relinquish or tender all rights of ownership of hull or cargo to insurers as the preliminary step to recovering an insurance claim for an actual or constructive total loss. In yacht insurance, abandonment may occur when a yacht owner formally tenders ownership of the insured yacht to the insurer following a covered total loss under a yacht policy.

Act of God: A natural event such as flood, storm, lightning, or earthquake not caused by, nor preventable by any human agency, and for which no transporter can be held accountable. Under a yacht insurance policy, coverage for Acts of God is subject to specific terms, exclusions, navigational limits, and warranty provisions.

Agreed Value Policy: An Agreed Value Policy stipulates the amount of payment to the insured in the event of a total loss to the vessel. You, the insured and the insurance company agree to this amount of insurance at the outset of the policy. The “agreed value” is usually the purchase price of the hull and equipment. In the event of a total loss, the agreed amount is paid without regard to depreciation. For partial losses, reasonable repair or replacement is made without subtracting for depreciation except for certain items such as bottom paint, sails, canvas, fabric, batteries, tires, outdrives, and machinery. In yacht insurance, agreed value policies are commonly used for luxury yachts and superyachts to provide certainty of settlement.

Actual Cash Value: Actual Cash Value policies will apply depreciation at the time of loss or damage. In a total loss situation, usually the settlement is the lesser of the coverage amount or the actual cash value of the property at the time of the loss. Under a yacht insurance policy written on an actual cash value basis, depreciation may significantly affect claim recovery.

AD&D: Accidental Death and Dismemberment, or Personal Accident Insurance, which pays an agreed amount for accidental death and/or dismemberment, such as loss of eye sight, limbs etc. In yacht insurance programs, AD&D coverage may apply to crew members or insured persons depending on the structure of the yacht policy.

Allision: The striking of a moving vessel with a stationary vessel or other stationary object.

All Risk: All risk coverage provides coverage for any loss unless it is specifically excluded from the policy. The broadest form of insurance coverage available, providing protection against all perils of physical loss or damage from an external cause. Loss must be fortuitous, i.e. accidental, to be covered. All risks does not cover inevitable loss, wear and tear, delay, inherent vice, pre‐shipment condition, inadequate packaging, or loss of market. In yacht insurance, All Risk coverage remains subject to policy exclusions and maintenance obligations.

Berth: Mooring place for a vessel. A location for a vessel at a pier or dock.

Classification Societies: Organizations which survey and classify ships according to their condition for insurance and other purposes; e.g. Lloyd’s Register of Shipping (England), American Bureau of Shipping (ABS ‐ United States), Bureau Veritas (Norway). In superyacht insurance underwriting, classification status may materially influence insurability, coverage terms, and premium structure.

COFR: Certificate of Financial Responsibility.

Collision Clause: A clause in a hull insurance policy insuring the shipowners legal liability for collision damage to another vessel, its freight, or cargo; a.k.a. the “Running Down Clause”. In yacht insurance, the Collision Clause addresses the yacht owner’s third-party legal liability arising from impact with another vessel.

Comparative Fault / Negligence: A legal principle where damages are measured and apportioned in terms of percentage of fault to the responsible parties. The principle is most often seen in collision cases. In yacht insurance claims, comparative fault may affect settlement allocation between involved parties.

Constructive Total Loss ‐ See “Total Loss.”

Deadweight Tonnage (DWT) ‐ See “Tonnage.”

Deductibles: Deductible is what the assured is responsible for paying before the policy starts to pay claims. Deductibles can be a cost savings measure. When you take a higher deductible, your insurance premium is less. Depending on the policy terms, a separate deductible may apply when there is a total or partial loss due to a named windstorm. Under a yacht insurance policy, deductibles may vary based on cruising territory, named storm exposure, or specific risk endorsements.

Entry Documents: Customs papers required to clear an import shipment for admission into the general commerce of a country.

Excess Insurance: Some risks (commonly liability and some types of property) are written on a layered basis, in which one or more layers of excess policies are placed on top of the primary policy to provide higher limits of coverage. Losses are paid by the primary layer first, and then, one by one, by as many excess layers as are necessary to pay the entire loss or until all of the excess layers are exhausted. In superyacht insurance structures, excess liability layers are often arranged to provide substantial protection above primary yacht insurance limits.

Express Warranties: Specific requirements that need to be met before the policy takes in effect, such as Captains CV and a satisfactory quote form. Under a yacht policy, breach of an express warranty may suspend or void coverage.

Exclusions: What the policy doesn’t cover. In yacht insurance, exclusions commonly include wear and tear, gradual deterioration, and certain navigational breaches unless otherwise endorsed.

Hull: The structural framework of a vessel, together with all decks, deckhouses, and hull plating, but exclusive of engines, masts, spars, rigging, and equipment. In yacht insurance terminology, hull coverage refers specifically to the insured physical structure of the yacht as defined in the yacht policy.

Increased Value Insurance: Insurance that covers an excess amount over the insured value of the property; hull or cargo. Such insurance is for a separate agreed amount in excess of the agreed value of the property and is written on a separate policy form which is essentially Total Loss Only insurance. Hull policies limit the amount of I.V. insurance that an owner may place in excess of the hull agreed value. In yacht insurance programs, Increased Value coverage is often utilized to protect additional financial exposure above the primary hull value of the yacht.

Inherent Vice: A loss caused by the nature of the thing insured and not the result of a fortuitous external cause; e.g. spontaneous combustion of bulk grain. In yacht insurance, inherent vice is typically excluded unless specifically endorsed within the yacht policy.

International Safety Management (ISM) Code: The International Management Code for the Safe Operation of Ships and for Pollution Prevention requiring every company and bareboat charterer operating a vessel to design and implement a Safety Management System; effective 7/1/98 on some vessels and 7/1/02 on other types of vessels. In superyacht insurance underwriting, ISM compliance may affect coverage eligibility and premium evaluation.

Jettison: The deliberate throwing overboard of cargo, or of part of the vessel’s superstructure, equipment or stores, in the event of an emergency. Cargo or equipment might be jettisoned to lighten a vessel to relieve it from a strand, to stabilize it during a storm, or to get rid of flammables or explosives during a fire. (Washing overboard is the accidental loss of equipment or cargo overboard due to the action of the elements.) Under a yacht insurance policy, coverage for jettison depends on whether the action was necessary to prevent a greater insured loss.

Jones Act: A 1920 U.S. Statute which provides that a seaman injured by the negligence of the vessel owner, master, or fellow crew member can recover damages for his or her injuries from the vessel owner. In yacht insurance programs involving U.S. crew, Jones Act exposure represents a significant liability consideration.

Laid‐Up: A vessel removed from active operation or navigation. In yacht insurance, a laid-up yacht may qualify for adjusted premium subject to specific lay-up warranties.

Legal Liability: Responsibility imposed by law. Within a yacht insurance program, legal liability coverage protects the yacht owner against third-party claims arising from ownership or operation of the yacht.

Marine Insurance Act: 1906 English law which codified marine insurance case law into a comprehensive code for consistent application. U.S. lacks a counterpart code and depends on case law precedent for its legal decisions. Many yacht insurance policies issued through London markets apply principles derived from the Marine Insurance Act.

MLC 2006: Labor convention taking in effect on August 20th 2013. Vessels involved in “commercial activities” have to comply according to Flag State. Owner has to show “financial responsibility” towards crew. In superyacht insurance programs, compliance with MLC 2006 is often required for charter yachts and commercially operated vessels.

Negligence: Doing something that a reasonable and prudent person would not do, or not doing something that a reasonable and prudent person would do in a particular situation. The failure to exercise normal care or act reasonably under the circumstances. In yacht insurance claims, negligence may affect liability determinations and recovery rights under the yacht policy.

Named Peril: A Named Peril Policy provides coverage for only specific losses listed on the policy. Under a yacht insurance policy written on a named peril basis, only the risks expressly identified in the yacht policy are covered.

Omnibus Clause: Clause in a yacht policy that affords other people the same protection as the Assured when they are operating the Assured’s yacht with the Assured’s prior permission.

Partial Loss: Any loss to cargo or a vessel that is less than a total loss. If the partial loss is directly caused by a peril insured against, it is a particular average loss. In yacht insurance, partial loss claims commonly involve hull damage, onboard systems, or machinery components.

Period of Insurance: Another word for “Policy Period”, or the time the insurance is active. Under a yacht insurance policy, coverage applies only during the stated period of insurance.

Pilot: A navigator who is expert at navigating the waters of a particular port. Many ports require that vessels over a specified tonnage have a licensed Pilot take the vessel into and out of port.

Port Risk: Insurance on a vessel which is laid-up and out of commission, not navigating, and confined to the port area. In yacht insurance, port risk coverage may apply during refit, storage, or extended marina stays.

Primary Insurance: The first layer of insurance on a risk. Excess policies can provide higher limits of coverage when stacked above the primary layer. In superyacht insurance structures, primary hull and liability coverage may be supplemented by excess yacht insurance layers.

Prompt Notice: Notification by an Assured to the insurance company or the company’s representative within a reasonable period of time after the occurrence of a loss. Under a yacht insurance policy, failure to provide prompt notice of a loss may affect coverage rights.

Proportionate Fault: A method of apportioning liability for damages when two vessels collide, where each vessel’s liability for the total damages (percentage) is based on that vessel’s degree of fault or negligence for the collision. It replaced the doctrine of Divided Damages in the United States in 1975 (U.S. v. Reliable Transfer Co.) to agree with the custom and practice of the other maritime nations of the world.

Protection & Indemnity (P&I): Insurance against the shipowner’s third party legal liability for damage to property (such as cargo, harbors, docks, buoys, etc.), collision liability (insofar as such liability is not already covered under the Collision Clause in the hull policy), personal injury, and loss of life. Also known as “PandI.” In yacht insurance, P&I coverage is essential for protecting yacht owners against significant third-party liability exposure involving crew, guests, marinas, and environmental risks.

Proximate Cause: Doctrine of “causa proxima non remota spectator,” or that it is to be the direct, primary, and immediate cause of loss that is to be considered, and not the remote or incidental cause. In yacht insurance claims analysis, determining proximate cause is central to coverage decisions under the yacht policy.

Punitive Damages: Damages in excess of the amount of the actual loss, that are awarded by the court as punishment of a defendant or to set an example for others. Also known as “exemplary damages” or “extra contractual damages”. Coverage for punitive damages under a yacht insurance policy depends on jurisdiction and specific policy wording.

Recovery: Amount received from a third party responsible for a loss on which a claim has been paid. In yacht insurance, recovery actions are typically pursued through subrogation.

Repatriation: Transporting a seaman from a foreign port back to the port where he or she signed on as part of the vessels crew. In superyacht insurance programs, repatriation obligations may arise under crew liability or MLC-related provisions.

Seaworthy: The sound condition of a vessels hull and equipment, machinery, crew, and stowage of cargo, so it is reasonably fit to successfully meet all the varying conditions of sea, wind, and weather normally to be expected on the intended voyage. In yacht insurance, maintaining seaworthiness is a fundamental obligation of the insured under the yacht policy.

SR&CC Warranty (Strikes, Riots & Civil Commotions): A clause in marine insurance policies that excludes liability for losses caused by the acts of strikers, locked-out workers, or persons taking part in labor disturbances or riots or civil commotions or for losses which are directly caused by persons acting maliciously. This coverage may be restored to the policy by means of the SR&CC Endorsement, for an additional premium. Under many yacht insurance policies, SR&CC risks require specific endorsement.

Stranding: The grounding of the vessel, causing it to remain fast for an appreciable length of time. Mere contact of the vessel with the bottom without losing momentum and proceeding on course is commonly termed as “touch-and-go” and is not considered a stranding. In yacht insurance, stranding may trigger hull coverage depending on policy terms.

Subrogation: The transfer of the Assureds right of recovery to the insurance company after payment of a claim. The insurance company steps into the shoes of their Assured (usually the cargo owner) and pursues recovery from any third parties responsible for the loss. Under a yacht insurance policy, the insurer may pursue recovery from responsible third parties after indemnifying the yacht owner.

Sue and Labor: Action of the Assured or its representative to prevent or minimize loss or damage to insured property for which an insurance company would be liable. The Assured is required by the insurance policy to take this action so as not to jeopardize the insurance claim. Under a yacht insurance policy, the yacht owner has a duty to take reasonable steps to protect and preserve the insured yacht from further damage following a covered incident.

Superstructure: The structure above the main deck of a vessel. In yacht insurance, the superstructure forms part of the insured hull and is typically covered under the hull section of the yacht policy unless otherwise specified.

Survey: An inspection report issued by a marine surveyor to show the condition of cargo, vessel, or other maritime property, either before or after a loss. In yacht insurance underwriting, surveys are often required to assess condition, valuation, and insurability of the yacht.

Surveyor:
A marine specialist who inspects cargo, vessels, and other maritime property to determine:

1. The condition and/or value of property. Condition can include adequacy of packing, stowage aboard the vessel, and/or towage arrangements. The surveyor is not an insurance company loss adjuster, but an independent expert who acts without prejudice to the parties involved.

2. The cause, nature, and extent of damage and recommended methods of repair and/or replacement. The surveyor is not an adjuster, and all actions are without prejudice to the insurance policy terms and conditions. In yacht insurance claims, the surveyor’s report plays a critical role in determining coverage and settlement.

Term of insurance: Is the time period during which the term of the certificate or the rates charged cannot be changed by the Underwriters. Under a yacht insurance policy, the term of insurance defines the fixed coverage period agreed between the yacht owner and the insurer.

Third Party: A person or company outside the two parties to a contract; e.g. someone other than the Assured or the insurance company. In yacht insurance, third-party claims commonly involve bodily injury, property damage, or marina-related incidents.

Tonnage (Vessel):
Deadweight Tonnage ‐ Actual weight in tons (2240 lbs.) of cargo, stores, fuel, passengers and crew that can be carried by a vessel when fully loaded to summer load line mark. See “Load Line.”
Displacement Tonnage ‐ Weight of water in tons (2240 lbs.) that a vessel displaces either empty or loaded.
Gross Tonnage ‐ The total capacity in cubic feet of all the spaces within the hull and the enclosed spaces above the deck available for cargo, stores, fuel, passengers and crew. One gross ton equals 100 cubic feet of capacity.
Net Tonnage ‐ Cargo carrying capacity of a vessel; i.e. gross tonnage of a vessel less spaces used for stores, fuel, passengers, crew, navigation and propulsion machinery. One net ton equals 100 cubic feet of cargo capacity. In yacht insurance underwriting, tonnage may influence regulatory requirements and certain rating considerations.

Total Loss (TL):

1. Actual Total Loss ‐ Total loss of an entire vessel or an entire cargo shipment when the property is completely lost or destroyed due to one of the following:
   Physical Destruction ‐ e.g. plywood being totally consumed by fire.
   Irretrievable Deprivement ‐ the owner of the property is deprived of the use of the property even though it is still intact and undamaged; e.g. a shipment of silver ingots is lost overboard; even though they still exist and are undamaged at the bottom of the ocean, they are irretrievably lost.
   Loss of Specie ‐ changes in the character of the property so that it ceases to be the thing shipped; e.g. bags of cement wetted by sea water and hardened into concrete.
   Vessel Lost ‐ a vessel (and its cargo) is posted “missing” at Lloyds and is considered an actual total loss, even though there is no evidence of it sinking.

2. Constructive Total Loss (CTL) ‐ A vessel or cargo is so damaged that an actual total loss is inevitable, or the part or remnant remaining can only be recovered and repaired at a cost exceeding the insured value of the property.

3. Compromised (or Arranged) Total Loss ‐ A negotiated total loss settlement between the property owner and the insurance company under unusual circumstances, e.g. a vessel owner accepts a settlement of less than the face value of the hull policy and retains title to the vessel. In yacht insurance, determination of a Total Loss depends on the insured value stated in the yacht policy and the cost of recovery and repair.

Trading: Another word for “Navigational Area” where the yacht travels. In yacht insurance, trading limits define the permitted cruising territory under the yacht policy.

Under insurance: Insurance effected for less than the value of the property at risk. In yacht insurance, under insurance may result in reduced claim settlement depending on policy wording.

Utmost Good Faith (Uberrimae Fidei): A basic principle of insurance is that the Assured and his or her broker must disclose and truly represent every material circumstance to the insurance company before a risk is accepted for coverage. Marine insurance contracts demand the utmost good faith in disclosing all information that may possibly influence the judgment of the insurance company because the vessel or cargo may be in some far off place in the world, not subject to inspection or verification. It goes beyond the ordinary requirement that there be no actual fraud, which is implied in all contracts. A breach of good faith entitles the insurance company to void the contract. In yacht insurance, failure to disclose material facts about the yacht, its operation, or prior losses may affect coverage validity.

Valued Policy: A policy in which the insured value of the property insured has been agreed between Assured and insurance company when the policy attaches rather than after a loss has occurred; as opposed to an Actual Cash Value policy. In yacht insurance, valued policies are often used for high-value yachts to provide certainty in the event of a total loss.

Warranty: An undertaking in which the Assured promises to comply with certain conditions. Noncompliance constitutes a breach of warranty and the insurance company is discharged from liability from the date of the breach.
Expressed Warranty ‐ An agreement written in the policy that the Assured must strictly and literally comply with. A violation thereof voids the insurance; e.g. trading warranties.
Implied Warranty ‐ Fundamental conditions implied in a contract of marine insurance:
1.) Seaworthiness of the vessel;
2.) Legality of the adventure.
Under a yacht insurance policy, breach of warranty may suspend or void coverage from the date of breach.

War Risks: Those risks related to two (or more) belligerents engaging in hostilities, whether or not there has been a formal declaration of war. Such risks are excluded by the F.C. & S. (Free of Capture and Seizure) Warranty, but may be covered by a separate War Risk Policy, at an additional premium. Under most yacht insurance policies, war risks require a separate endorsement or standalone coverage.