“What is Boat Builders Insurance?” I was asked at a networking event recently. Well, of course, the obvious answer would be a rather simplistic “insurance for people who build boats”, but luckily I took a bit of time to pause before answering, as the answer, perhaps, is not that Simple as one might think.
First of all, we have to ask ourselves “What is a boat builder?” This is important because there are many maritime companies that include this activity in their business description, but repair ships rather than build them. Similarly, there are people who build boats but do not describe themselves as boat builders. For example, a boat builder may build or repair vessels, which may be pleasure craft, which we would normally call a ship, or a larger commercial vessel, which we would describe as a ship. We can also add to the mix craftsmen who restore ships rather than build them from scratch, as well as those individuals or companies who will “fit out” a ship’s hull, either for their own use or as part of their business activities. .
Therefore, Boat Builders Insurance is a specific insurance solution that may be part of a broader insurance program for individuals or businesses that engage in one or more of the following activities, but do not necessarily describe themselves as boat builders: boats:
• Manufacture or construction of pleasure boats and/or some commercial boats.
• Restoration of boats such as classic or historical boats.
• Reconditioning of pleasure boats.
• Authorization of boats.
Regardless of the activities listed above, the structure of the boat builders insurance solution is a standard format. It will provide specialized coverage for physical damage and civil liability. Let’s take a look at the elements of what the market refers to as builder risks:
Obviously, the wording of insurance policies will vary from insurer to insurer and the exact scope of cover, conditions and exclusions should be checked. Generally speaking, however, a Boat Builders Insurance Policy will provide “All Risks” coverage in respect of physical loss or damage to vessels under construction, including hulls and machinery, rigging and equipment. It may also, depending on the wording of the policy, cover molds and associated molding tools. Other coverage provided under the physical damage portion of coverage may include specialized provision for costs such as:
• Repair or replace any defective part that is condemned for discovering a latent defect during the construction of the boat. However, defective welds would probably be excluded.
• The costs of completing the launching of the insured vessel under construction following the failure of a launching operation and the costs of surveying the bottom of the vessel after a grounding if reasonably incurred specifically for that purpose.
• Loss or damage to the vessel under construction due to faulty design of any part or parts of the vessel and the salvage cost of the vessel under construction reasonably incurred to prevent or minimize any loss that may be recovered under Boat Builders Insurance .
• Loss or damage to the vessel during transit between the construction site and a launch point for sea trials.
The insured values of vessels under construction will normally be based on the total value of vessels under construction at any given time (works in progress if you wish) and the maximum value of any vessel under construction.
This would normally be the finished value, that is, the cost of construction or restoration, and not the sale value. However, in some cases, a boat builder may require installation payments at various stages of construction from the beneficial owner of the boat. When this happens, the sum insured may reflect payments made by the beneficial owner and, towards the end of construction, possibly mean that the sum insured is higher than the cost of construction, as the owner’s interest must be noted on the policy box and certificate.
In higher value construction and refurbishment, it may be possible to structure the sum insured (and therefore the premium) around the cost/value of the construction in various stages. I arranged coverage for a superyacht builder where an initial premium payment was made followed by additional premium installs that were charged based on the builder’s periodic declarations of value.
Third party liability:
This portion of coverage must cover the legal liabilities of the owner of the vessel under construction arising from physical loss or property damage to others and/or death or bodily injury to others while the vessel is afloat for the purpose of work on she. or while conducting sea trials. It must also cover reasonable costs incurred in the removal and disposal of the wreck or any negligence or failure to raise or remove the wreck. The third party liability indemnity limit will normally be a minimum of £3,000,000, but where larger value vessels are the subject of insurance, more appropriate indemnity limits should be obtained.
Independent or combined solution?
People who are refurbishing or outfitting their own pleasure craft can obtain builders risk insurance through some pleasure craft insurance policies. Coverage would include hull and machinery up to an agreed completion value and also third party liability. Individuals should seek advice on employers’ liability insurance requirements that may arise in the event that any work is performed by subcontractors or volunteers.
Commercial businesses, charities and trusts can include their builders risk coverage in a bundled commercial marine insurance policy where coverage for their property, business interruption, public, products and employer’s liability insurance could also be placed . There are also stand-alone options available and it is recommended that boat builders seek the advice of a specialist marine operations insurance broker to ensure that their insurance program is properly aligned with the needs and objectives of the business.