When boatyard customers sign these work orders, they agree that they will not file a lawsuit against the yard if the boat is damaged while in the yard’s custody. These “hold harmless” provisions are particularly onerous, since they usually extend to cases where the yard is clearly negligent, and they also require the boat owner to protect the yard against anyone else who may want to sue them for that damage.
After waiving the right to sue the boatyard for damage, a boat owner may be inclined to file a claim with his or her own insurance company, which leads to our reader’s other concern. How is a claim like this handled, and can it void the insurance policy?
We can’t answer this question without looking at the particular facts of a case and reading the boat owner’s actual insurance policy, but we can make some general observations.
When a marine insurance company pays a claim to a boat owner, the owner is generally required, under the language of the insurance policy, to assign back to the insurance company his or her right to sue the party responsible for the damage. This is known as an insurance company’s right of “subrogation.” Marine insurance policies also include language that prohibits the boat owner from doing anything that would compromise the insurance company’s right to subrogation.
As noted above, most boatyard work orders require a waiver of any claim against the yard, in the event that the boat is damaged at the yard. The contractual language often takes this waiver a step further by including a waiver of the insurance company’s subrogation rights. These waivers are usually enforceable — and since the waiver impairs the insurance company’s subrogation rights, it amounts to a breach of the insurance policy by the boat owner, which will result in a denial of the claim.
So, if a yard may absolve itself from liability through the language of its work order, and if the boat owner is breaching his or her insurance policy by agreeing to the provisions of the work order, what can a boat owner do?
First, every boat owner should read his or her insurance policy carefully, to fully understand the circumstances under which an insurance claim may be denied. When shopping for insurance, try to get a copy of the policy before deciding on one insurance company over another. Many of us select an insurance company simply by looking for the lowest premium, but the language of the policy may vary considerably between companies.
Next, boat owners should talk to their insurance broker before going to the yard. The insurance company may offer a policy rider that is available for additional premium, to provide coverage in the event that the yard agreement seeks to waive claims against the yard for damages.
If a boat is moored in an area with several boatyards to choose from, the owner may want to shop around to compare the contractual language used by the various yards. Unfortunately, this contractual language tends to be fairly standard from yard to yard. If, however, the project is big and the yard is hungry, a boat owner may be able to negotiate the offending provisions out of the work order — in which case, the insurance policy won’t be affected at all.
The most important thing to take from this discussion is the need to be informed. Boat owners tend to look at insurance policies and yard visits as being fairly routine events, but this is often not the case.
Boat owners should read their insurance policies and the service agreements with all of the vendors that work on their boats. If any of the provisions in these agreements are problematic, they should be discussed with the service provider and a qualified marine insurance broker. And, if the legal effect of the language is in question, a qualified attorney experienced in marine insurance coverage should be consulted.