What are the requirements for running a spectator boat?

I volunteer my boat every year as a spectator boat for an annual fund raising regatta run by a large charity. I will typically have five or six guests aboard, plus a volunteer from the foundation who acts as a steward for the guests and a friend who acts as my crew. I don’t receive any money for my participation, but we are invited to a banquet the night before, receive lunch before the race and attend the hosted party afterwards. We had a small incident last year and, while no one was hurt, the incident raised a few questions. First, would the volunteer spectator boats for this event be considered to be carrying passengers for hire, for which a Coast Guard licensed captain should be running each of the spectator boats? If so, would the spectator boats need to be inspected by the Coast Guard? And finally, regardless of the Coast Guard requirements, should we look into a special insurance policy for the event or perhaps ask the guests to sign a liability release before boarding the spectator boats?

Our reader is referring to Coast Guard regulations which require passenger vessels to be inspected by the Coast Guard, and the vessel operators to be licensed captains.

Generally speaking, Coast Guard inspection and a licensed captain are required for any boat that is carrying any passengers for hire. An exception to the vessel inspection requirement exists for vessels carrying six or fewer passengers (commonly known as a “six-pack” charter), but the operator of a passenger vessel must be licensed – even if the vessel is carrying only one passenger for hire. This brings us to the real question: What is a “passenger for hire?”

Federal law (Title 46 U.S. Code, sec. 2101) defines a passenger for hire as a person for whom an economic benefit is contributed as a condition of carriage on the vessel, where that benefit flows directly or indirectly to the owner or any other person having an interest in the vessel.

Our reader described the spectator boats for the regatta as being donated for the event. The boat owners do not receive any money, but the charity throws a couple of parties to thank them for their service. The parties or other “thank you gifts” may be characterized by the Coast Guard as a form of indirect compensation to the boat owners, but they will be more concerned with the participation of the “guests” who are aboard the boat.

Our reader said nothing about any payments made by the guests, but since this is a fund raising regatta we can assume that the “guests” are actually paying passengers. And, since they would presumably not be aboard the spectator boat without making some kind of donation to the charity, their donation will be characterized as a condition for carriage aboard the vessel.  That satisfies the first and most important prong of the test.

As noted above, the “thank you gifts” to the boat owners will probably be characterized as an indirect economic benefit paid to the owner, and as such our reader’s concerns are well founded. The guests aboard the spectator boats will probably be characterized by the Coast Guard as “passengers for hire,” and licensed captains should therefore be operating the spectator boats.

With this analysis in mind, the boat owners will be tempted to simply forego the “thank you gifts” to allow the event to go ahead without being burdened by the licensing requirement. That gesture would, unfortunately, not make much of a difference. In practice, the Coast Guard does not pay much attention to where the economic benefit is flowing. They are much more concerned with whether payment by the guest was a condition for carriage aboard the vessel. If the guest is aboard because he or she made a donation or other payment, the boat must be operated by a licensed captain.

Our reader’s other questions are more straightforward. He asked whether a special insurance policy should be obtained and whether his guests should sign a liability release.

The insurance question is answered with the same advice that we give to every insurance question: Read your policy and talk to your broker. Many marine insurance policies provide coverage for a limited number of charters, but the policy may be limited to a particular type of charter. All marine insurance policies require complete and comprehensive disclosure by the boat owner of anything that is relevant to the operation and condition of the vessel. A charter is relevant to the operation of the vessel, so communication in writing to your insurance broker is critical.

Our reader’s final question, regarding the execution of a liability release by his guests, is more complicated. For the purposes of this article I will note simply that a release is always a good idea, but the scope and effectiveness of a liability release may be limited by a long list of factors. A maritime attorney experienced in marine insurance and charter operations should be consulted for more specific information.

David Weil is licensed to practice law in the state of California and, as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.

David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, is a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. He is also one of a small group of attorneys to be certified as an Admiralty and Maritime Law Specialist by the State Bar of California. If you have a maritime law question for Weil, he can be contacted at (562) 438-8149 or at dweil@weilmaritime.com.

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