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Can My Insurer Require Yacht Surveyor’s ‘Recommended’ Repairs?

I recently hauled out my boat at a local yard for routine maintenance. While it was out of the water, I had the boat surveyed — pursuant to a request by my insurance company.

We are now ready to launch the boat, but the insurance company wants us to complete all of the surveyor’s recommendations as a condition for their renewal of the policy. We’re a little annoyed at this, since a lot of the recommendations seem to be along the line of cosmetic issues rather than problems that will affect the safety or seaworthiness of the boat. We called around to a few other insurance brokers, but they all require this work to be completed. Is there any way to get around this requirement? What risks do we face if we don’t complete all the recommendations?

Marine insurance companies evaluate the risk of a particular yacht policy based on a lot of factors, and the physical condition of the boat is, of course, an important consideration. The survey report is usually their only tool for evaluating the condition of the boat, and they invariably require the items listed on the report as “recommendations” to be addressed as a condition for issuing or renewing the policy.

Many yacht owners are inclined to take care of the “important” items on the surveyor’s list of recommendations, while overlooking some of the items that they perceive to be less important. They may believe that these lesser projects are “cosmetic” in nature, and that the insurance company will be unlikely to learn of the oversight. However, 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.” Simply put, this doctrine requires the yacht owner to disclose any information that may be related in any way to the coverage that is being considered, and to deal with the insurance company in good faith in all aspects of that relationship.

Failure to do so may lead to their denial of an insurance claim, even if the oversight had nothing whatsoever to do with the loss.

Most insurance companies will require the deficiencies noted as “recommendations” in a survey report to be corrected, 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.”

If a yacht owner wants to be relieved of the obligation to correct all of the recommendations on a report, his or her first course of action should be to discuss the report with the surveyor. This is actually a good idea, regardless of the insurance issues.

A marine surveyor is an expert in evaluating the condition of a boat, and the survey report provides valuable information to the boat owner that may not otherwise come to light. Most survey reports include a narrative discussion and a set of “notes,” in addition to the more serious “recommendations.” Insurance underwriters do not typically require any action to be taken for items that appear in the discussion or “notes” section of the report. A boat owner may, therefore, have an opportunity while discussing the report with the surveyor to move certain questionable items from the “recommendations” section to one of the less critical sections of the report.

If the surveyor is reluctant to reclassify any of his findings, there may, nonetheless, be some amount of flexibility in dealing with the insurance company. But the key — in all of this — is communication. 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 coverage 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 catastrophic 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.

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