Protecting Your Rights in an Insurance Claim Investigation

Our boat suffered a “partial submersion” while we were under way during a short cruise a couple of months ago. We managed to make it back to the dock in the company of the Harbor Patrol and a commercial assist company, but the boat suffered quite a bit of damage. The incident occurred several weeks after lot of work had been completed on the bottom at a local yard, but we are really not sure what caused the boat to take on water. We submitted a claim to our insurance company and they sent a surveyor out to investigate the claim, but we have not heard anything from him or the insurance company for several weeks. We are now concerned that the claim may be denied. What should we do to protect our rights?

Marine insurance claims are typically a lot more complicated than claims under an auto insurance policy or claims for other types of property damage. A power or sailing yacht is a collection of complicated mechanical systems that operate in a harsh environment, and boat owners are required under the terms of their insurance policies to maintain their boats in seaworthy condition.

The insurance company is therefore entitled to conduct a comprehensive investigation to determine the cause of the loss and to confirm that the loss is covered by the terms of the insurance policy. These investigations often take a few weeks, but the boat owner need not sit idly on the sidelines during the course of the investigation.

Boat owners should first understand that the marine surveyor assigned to the claim by the insurance company does, in fact, work for the insurance company. He or she has been retained by the insurance company to investigate the cause and extent of the loss and will report the findings back to the insurance company. The surveyor does not work for the boat owner, and in most cases the boat owner will never see a copy of the surveyor’s report.

For large insurance claims, boat owners should, therefore, consider hiring their own marine surveyor soon after the incident. Boat owners are familiar with the role of a marine surveyor in the pre-purchase inspection process, but insurance and accident investigation require a different set of skills and experience, so care should be used in the selection process. Don’t be afraid to use a surveyor who also does work for insurance companies, since these individuals are more likely to be experienced in claims investigation.

The incident described by the reader raises several other issues. First, he required the help of a commercial assistance tow company, and he was presumably presented with a bill from that company. This invoice should be paid by the insurance company, regardless of whether the underlying claim for the damage to the boat is paid. Marine insurance policies include a provision known as a “sue and labor clause,” which requires the insurance company to reimburse the boat owner for actions taken to prevent further loss. In this case, the services provided by the commercial assistance company may have prevented the boat from sinking before it returned to the dock.

The other issue confronting our reader concerns the work performed by the boat yard. This loss occurred soon after the boat was launched, after the completion of a lot of bottom work. The investigation of the loss may find that the yard was negligent in the performance of that work. If that is the case, the claim will probably be covered by the insurance policy, since marine insurance typically covers losses caused by the negligence of a boat owner’s agents and vendors. As a consequence of paying that claim, the insurance company will then have the right to pursue a “subrogation claim” against the yard for reimbursement of that payment.

Finally, we should note that a boat owner has a right to be kept informed by the insurance company at regular intervals during the claim investigation process. California insurance regulations require an insurance company to investigate a claim in good faith, and to provide written updates to the insured boat owner at intervals of no less than 30 days apart.

Boat owners who are pursuing significant insurance claims should contact a maritime attorney experienced in insurance coverage issues as soon as possible. In the early stages of the investigation, the attorney will be a good source for a referral to a qualified surveyor to represent the boat owner. And, in the event of a problem with coverage, the attorney will discuss the boat owner’s legal options.