Why Did My Marine Insurer Deny My Claim?

I just received a surprise from my insurance company when they denied coverage after my boat was partially submerged at the dock. There is some question as to the cause of the incident, but they are claiming that a hose clamp failed on a raw water hose. They told me the claim was denied because there was no evidence of an impact from an unforeseen cause. I don’t understand this, since I have made successful claims in the past for everything from torn sails to a rig failure, none of which were due to any kind of an impact. Have marine insurance policies changed over the past few years?
The language and scope of coverage of marine insurance policies will vary, depending upon who a boat owner is insured by, but the denial of our reader’s claim was probably not due to any recent changes in his insurance policy.

Our reader may have misunderstood the communication from his insurance company.  It is true that a marine casualty must result from an “unforeseen” incident for coverage to exist, but it does not require an “impact” or a “collision.” Instead, the boat owner must prove that the loss was “fortuitous.” This standard will often be met simply by proving that there was nothing wrong with the boat immediately before the incident.

Nonetheless, a marine insurance policy is not designed to protect a boat owner from every calamity imaginable. An insurance claim may be denied if the casualty was caused by an incident that is expressly excluded from coverage under the terms of the policy, or if the boat owner failed to comply with certain obligations set forth in the policy.

One of the most significant obligations of a boat owner under a marine insurance policy is the requirement that the boat be maintained in a seaworthy condition. Referring again to our reader’s question, coverage will almost always be challenged for a boat that sinks at the dock, because seaworthy boats generally don’t sink at a dock. If certain maintenance items are overlooked, such as the proper adjustment of a stuffing box or battery maintenance, a serious problem may develop, particularly if the boat is unattended for a long time. These are, in fact, among the most common causes for a dockside submersion, and the insurance investigators will likely look to these issues first when they investigate a sinking.

A marine insurance claim may also be denied if the loss is caused by an event that is expressly listed in the insurance policy as an excluded cause. For example, a loss caused by gradual wear and tear will usually be expressly excluded from coverage, which may exclude engine problems, torn sails, or corrosion damage from coverage. Most policies also exclude manufacturing or design defects from coverage, which may lead to a denial of a claim for a structural failure.

When a boat owner submits a claim to his or her insurance company, the insurance adjuster will appoint a marine surveyor to investigate the claim and determine the cause of loss.  Boat owners should understand that the insurance company’s surveyor does not represent the interests of the boat owner.

Insurance surveyors are hired by insurance companies, and while they are expected to conduct the investigation without bias, they owe no direct duty to the boat owner. In fact, the boat owner may never see a copy of the surveyor’s report. Therefore, if there is any uncertainty about the cause of the loss, the boat owner should consider hiring his or her own surveyor to participate in the investigation.
 
In the end, insurance coverage questions can be complicated, regardless of the cause of the loss. An experienced maritime attorney should be contacted to evaluate the coverage provided under the insurance policy and to provide advice in the event of a denial of coverage.

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