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Will My Insurance Policy Cover Damage to My Boat During Charters?

My boat is a part of a charter fleet managed by a company in the Pacific Northwest.  I take the boat out of service for personal use for a few weeks each year. When I picked it up this year, I was appalled by the condition of the boat. The damage is extensive, ranging from an engine problem to a  broken hatch cover to a layer of mold and mildew under the V-berth cushions. We carry full insurance on the boat, and we were informed that the charter company was covered by the same insurance company. We have made some inquiries to our insurance broker as to repairs for the damage and lack of maintenance, but he said that we are probably not covered for this sort of thing, because it would be characterized as “ordinary wear and tear.” That seems a little extreme, especially since all of the damage occurred since the time of our last visit to the boat, which was less than a year ago. Can you help with possible legal claims against our insurance company or the charter company?
Our reader is looking for help from his own insurance company and from the charter company. We will take a look at both of those options — as well as the charter customers who actually used the boat, and who may have been responsible for some of the damage.            

Let’s start with his insurance company.            

Insurance coverage questions are often analyzed by reviewing the language of the insurance policy. Our reader did not provide us with a copy of the policies, but we can still make some broad generalizations that will apply in most cases.            

Our first broad generalization is that insurance is designed to cover a fortuitous event.  The word “fortuitous” is often used to describe a positive event, but in the insurance world a  fortuitous event is any event — good or bad — that is dependent on chance or accident. A car crash is, therefore, a “fortuitous” event.            

Our reader’s threshold question is whether the damage to his boat may have been caused by a fortuitous event. Some of the damage, such as the mold and mildew problem, clearly was not a product of chance or an accident. On the other hand, some of the other damage, such as the broken hatch cover, may fall within the definition of a fortuitous event.            

This takes us to the next step in the insurance coverage analysis. Was the damage caused by some condition or event that is specifically excluded from coverage in the language of the insurance policy?            

Most recreational vessel insurance policies are “all risk” policies. This type of insurance covers all damage that may be suffered by the boat as a consequence of a fortuitous event, unless the damage is caused by an event or condition aboard the boat that is expressly excluded from coverage.            

The exclusions listed are fairly standard among most recreational vessel policies, and they generally include failure to maintain the vessel, ordinary wear and tear, and “inherent vice.”            

Inherent vice is a loss caused by the nature of the thing insured and not the result of a fortuitous external cause. The mold and mildew problem described by our reader would clearly fall into that category, and the engine problem may be due to a maintenance failure.            

It appears, based on this discussion, that our reader’s insurance broker was probably correct in his opinion that the damage would probably not be covered by insurance. However, it also appears that our reader has not yet submitted a written claim.            

His policy may include a provision that requires all claims to be submitted in writing within a specific period of time. And, since insurance coverage questions are very specific to the facts of each case, he should give it a shot, even if coverage is unlikely.
Marine insurance coverage issues are often complicated, but the remaining issues in our reader’s case are fairly straightforward. The question of whether the charter company may be liable for damage to the boat will probably be answered by a review of the charter vessel management agreement between our reader and the charter company.            

A typical management agreement will probably allocate responsibility for maintenance of the vessel to the charter company. If a significant amount of the damage to the boat was due to a maintenance issue, he may want to pursue a claim against the charter company.            

Conversely, the management agreement probably absolves the company of any damage caused by a charter customer. In that case, the charter agreement invariably requires the charterer to return the vessel in the same condition as it was at the inception of the charter — in which case, the charterer will be legally obligated to pay for any damage.            

In the end, our reader is entitled to be reimbursed for any repair costs, but the target of any legal claim will vary, depending on the nature of each specific damage claim.

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