An owner may believe that the delayed projects are cosmetic in nature, and that the insurance company will be unlikely to learn of the oversight. Unfortunately, the signed statement required by most insurance companies to confirm the completion of survey recommendations must be executed by the yacht owner in good faith, and a misrepresentation will probably lead to the denial of an insurance claim.
Marine insurance policies are generally controlled by the doctrine of ’uberrimae fidei,’ requiring the parties to the policy to deal in ’utmost good faith.’ This doctrine technically applies equally to the insurance company and the yacht owner, but it is most often applied to the yacht owner, whose disclosures at the time that he or she applied for the policy are carefully examined.
Simply put, the yacht owner is required to disclose any information that may be related in any way to the coverage that is being considered, and the insurer may avoid the payment of a claim even if the failure to disclose was an innocent mistake – even if the oversight had nothing whatsoever to do with the loss.
The disclosures by the yacht owner are generally made through two avenues: the insurance application and the marine survey. The application will seek information regarding the background and experience of the yacht owner and the intended use of the vessel, while the marine survey will provide information to the insurance company about the condition and value of the vessel.
The information submitted on an insurance application must, of course, be truthful and complete, and any communication regarding the condition of the vessel must be equally forthcoming. Most insurance companies will require some action to be taken to correct the deficiencies noted in the report, and a misrepresentation or inaccuracy in that communication will be deemed a violation of the insured’s obligation to deal with the insurance company in ’utmost good faith.’
There may be some amount of flexibility in dealing with the survey recommendations, but the yacht owner should contact his or her insurance agent to discuss a workable approach to the project. The insurance company may agree that the replacement of a cosmetic feature of the yacht’s interior is not necessary, but the yacht owner may void the insurance if he or she reaches that conclusion without the insurance company’s cooperation.
The denial of a marine insurance claim may be based on various factors, but regardless of the basis for denial, it may subject a yacht owner to a loss of thousands of dollars. The completion or negotiation of a list of survey recommendations is a comparatively simple process that will help to keep your coverage intact.