Beware the Exclusions
 

When we survey any vessel and the subject of insurance comes up, I always offer this bit of
advice. When your vessel is placed with an insurance carrier through an agent, read your policy.
You really need to go to the section of your policy marked, exclusions, and understand what you
are not covered for. Even though your policy may say all risk, there is always some risk. If you
know of anything in life that has no risk, that’s where you are safe, but as of yet, I haven’t
experienced that one on this die of Jordan.
Let’s discuss some of the most common exclusions and how they may affect a loss and resultant
claim.

1. Corrosion - You now own a mode of transportation that for we who operate around the
coastal waters resides in the most corrosive environment on this planet. Corrosion is your
enemy and could have a devastating effect on how a claim’s handler views your loss
through the lense of your policy stipulations. Some examples:

My mast tumbled over the side of the sailboat I recently bought and I placed a claim
against my policy. The insurance company assigned a surveyor to inspect my vessel’s damages
and ascertain the cause of loss. His/her report stated that upon visual inspection, the stainless
steel chain plates revealed a corrosion problem. Although most of us surveyors who have been in
harness and know our stuff are not metallurgist, we know cavity or pitting corrosion when we see
it. We have to say what we see and know, so guess what, this is not a covered loss because your
policy does not cover corrosion. So, I as a policy holder and a premium payer are really hacked
off that I just received a reservation of rights letter stating that this is not a covered loss due to a
corrosion exclusion.

So what I take away from this situation is that I should have read my policy and been
given good and educated advice from my surveyor. Your surveyor can only report on what he/she
sees, but they should give you a warning or inform you of a possible risk.

A similar situation is you get ready to go fishing on your older center console and
suddenly your vessel reeks of gasoline. You pick up the back hatch and discover your bilges
filled with the stuff. Get off the boat! The surveyor can find no visible sources of leakage and you
have to de console and de-deck the boat to remove the aluminum fuel cell. When it finally comes
out, the bottom is riddled with corrosion cells that have perforated the tank bottom. Guess what;
you are on the hook for the repairs because your policy doesn’t cover corrosion.

Or your older Asian trawler starts really smelling, like diesel fuel and your bilges are
awash with the stuff. Shut off your bilge pumps. You have to remove your engine and chop the
boat up a bit to get these corroded mild steel tanks out that weren’t really supposed to last this
long. Get out the old check book.

Many of these problems could have been postponed or drastically delayed by proper
installation or applications of prophylactic barrier coats, but this isn’t the case, and your planned
next trip just went to hell with the boatyard bill.

The salt water manifold on your foreign motor yacht supplying your multiple reverse cycle heat
pump systems corroded when the distribution sea water pump was running and it flooded your
engine compartment doing thousands of dollars worth of damage. The metallurgical lab the
manifold was sent to for testing after your flooding says it was not marine grade bronze. It had
approximately 30% zinc and experienced impingement corrosion. It’s now up to your claim’s
handler and how your policy exclusions are interpolated by the company’s legal team.
Don’t get me wrong. After 32 years of investigating marine claims, I know your carrier
wants to step up and do the right thing. I also know they don’t want to pay for something
excluded by policy stipulations of this legal document we call an insurance policy. They really
don’t want to get into a bad faith situation which can get real legal and real expensive, but a
contract is a contract.
I could go on and on, but you probably see that any corrosion issue could be a costly
experience.

Let’s move on to wear and tear which often overlaps lack of proper maintenance and care.
Understand this above all your marine insurance policy does not equate to an extended warranty.
You have to maintain your boat don’t expect your insurance company to do it for you. They are
not in the maintenance business.
Your 8KW generator went out and won’t make any juice and you place a claim. It locked
up and during the tear down it is discovered that your exhaust injection elbow has never been
serviced as per the manufacturer’s recommended maintenance procedures. Guess what. You are
buying a new one. I often tell my clients that my car insurance company doesn’t buy me new
tires when the old ones get slick, I do.

Your six year old 150 HP outboard motor lost compression and is running rough. Number two
cylinder liner and piston is severely scuffed. You had a short duration lack of lubrication to one
cylinder. It could have been a leaned out carburetor or oil delivery problem. Your insurer is not
going to replace your power head because they don’t cover mechanical break downs.
Your engine compartment flooded affecting everything in that space. It is discovered that your
engine isolators and their foundation stringers settled causing your port shaft to get out of
alignment which unevenly wore your bronze flax packed stuffing box which in turn ate your
packing. Guess what. You are responsible for maintaining your vessel. Your insurance company
isn’t. They only agreed to cover a one time event that damaged your vessel, not your lack of due
diligence or lack pf proper maintenance and care including worn out components.
We investigated a claim some years ago where a coconut rat got on a big charter boat,
land stored off season in the BVI’s. This rat did $ 65,000 worth of damage below to wiring,
plumbing, and upholstery. It was an all risk policy but guess what. It doesn’t cover vermin. Do
you smell a rat.
Your bilge pump discharge hose on the starboard side rotted off its thru hull fitting and
fell into the bilge and turned into a re-circulating pump. Do you get the picture?
One of the most important lessons I learned living aboard for 35 years is that it was up to
me to keep my vessel floating and in good condition with respect to many systems. Most of these
years I was uninsured, and this fact alone encouraged my good maintenance practices. I had no
one to blame or pay for repairs but me!
Now if you screw up really bad and do something stupid like cutting corners and driving over a
granite jetty although I don’t suggest such folly, your are golden. If you strike another vessel
because you can’t drive very well, your only cost will be your deductible and lots of shame.
Both your gasoline engines on your old sport fish stopped. You had GRP tanks and have
been using ethanol fuel. Guess what. Your policy doesn’t cover delamination and the alcohol
dissolved your tanks. Get out the check book and take a deep breath.
What I see the most of in my business is lots of people who don’t want to take responsibility for
their own actions or lack thereof and are looking to blame or have someone else pay for their
mistakes. Does this sort of sound like our present government grid lock?
I hope this short rant will encourage you to improve your maintenance, read your equipment
manuals and become aware of what could be a costly boating lesson.

Neil K. Haynes September 27, 2011