Insurance is a product that a boat owner may choose to purchase, to provide financial protection in the event of an accident. It is a contract with the insurance company that is intended to benefit the boat owner, and it does not provide any direct protection to a third party who may have been injured by the boat owner. As such, the boat owner has no legal obligation to report a claim to his or her insurance company.
The insurance relationship described above is not unique to marine insurance. Like most states, California does not recognize a claim for “third party bad faith” against any insurance company. This means that the injured third party may not sue another boat owner’s insurance company, even if the claim processing is delayed without cause or otherwise mishandled. The injured party’s only claim is against the person at fault for the injury, who in turn may or may not decide to hold their own insurance company accountable for the poor handling of a claim.
Finally, the reader’s decision in this case to avoid submitting the claim to his own insurance company was a mistake. If his insurance adjuster agrees that he had no role or fault in the accident, his premiums are not likely to increase. More important, all insurance policies require claims to be promptly tendered to the insurance company, and a claim may be denied in the event of an unreasonable delay in that communication.
The reader’s concern about letting the other guy “off the hook” is similarly misplaced, since his own insurance company will pursue reimbursement, or “subrogation,” against the other party if it feels that is warranted.
The relationship between a boat owner, his or her own insurance company and another boater’s insurance company may be very complicated, and of course no two cases involving these issues are alike. Boat owners should always contact their own insurance company in the event of an accident or injury, regardless of who may have been at fault — and failing to do so may leave the injured party without any coverage at all. A maritime attorney experienced in insurance claims should be contacted for a more detailed discussion.