THE WORST-CASE SCENARIO
Be prepared because during your client’s yacht ownership an incident, fire or accident will most inevitably happen. Being your client’s confidant means that when this happens, you will get a panicked call from your client looking for immediate guidance, which is usually never Monday through Friday during business hours.
As lawyers, we don’t necessarily like to think about it, but part of our duty is to look at a situation and recognize what the worst-case scenario may look like, as we have counseled many clients through disasters and emergencies through the decades and, ultimately, must plan how to mitigate or rectify the situation.
Should something go wrong on the yacht, such as a fire, there are steps that a yacht owner should have already taken before hand, as well as afterwards, to make the process go as smoothly as possible.
Inspection and Survey
Before an event, have the yacht regularly inspected and surveyed. The owner should have the captain or surveyor go through the yacht and her auxiliary vessels and check all connections for fuel leaks, inspect electronics, inspect fire extinguishers, and verify that all equipment is currently certified and all systems are in working order.
The owner should also have an “insurance survey.” Have the owner’s insurance broker, or maritime attorney, review the yacht’s insurance policy and make sure that it is up to date, that the coverages are in place, that it covers the proper and current named captains, operators, geographical limitations, auxiliary vessels, mortgages, and that it covers all items onboard. Then take the insurance policy, yacht’s registration,
ship’s documents, mortgages and make copies and store them in a safe place off the yacht, with the client’s maritime attorney, so that these documents do not “go down with the ship.” In addition, when something happens, the owner who is already frenzied will not have to scramble for these documents.
When disaster strikes
In the event of an incident, fire or accident, first and foremost, the welfare of the crew and passengers is paramount. Make sure everyone is safely taken off the yacht, take care of any physical injuries and get everyone to safety. Then, call the Coast Guard – if you haven’t already had the chance – or the appropriate jurisdiction’s local authorities, a salvage company, and take the necessary steps as any prudent or reasonable owner would to minimize the damages as much as possible.
Once all the crew and passengers have reached a safe location, contact the yacht’s marine insurance broker and insurer and give them notice of the incident, fire or accident. Be cognizant to write down all names of the crew, passengers, witnesses, and persons aiding or with knowledge of what happened, and any other details so you can make the report to the yacht’s insurance broker and insurer.
Once the owner or the owner’s representative has contacted the yacht’s insurance broker and insurer, the insurer will want to take a statement of the owner, captain and key witnesses. Prior to making any statements, contact your maritime attorney, as it is possible that the insurer, especially in case of a large loss, may be looking for a way to deny any claims or coverage.
Within marine hull insurance policies, the insurer is authorized to take statements from the yacht owner as to the cause of the incident, fire or accident. The insurer then will use this information to review coverage and compare it to the original insurance application that the owner filled out when applying for insurance coverage. The yacht owner needs to cooperate fully with the insurance company as non-cooperation can be a reason for denial of coverage.
Inspect Your Policy
Look over the marine hull insurance policy, check the deductibles, and keep track of all expenses, repairs, etc. These could be charged against your deductible if the yacht is not a total loss. Also, consider if any passengers or crew have any claims or loss, as these may also be covered losses. If so, then notify the yacht’s insurer.
Additionally, other losses that may be coverable under the yacht’s insurance policy are cancelled charters due to the incident, fire or accident. If the yacht’s insurance policy covers loss of charter revenue, then these damages will be coverable upon supplying the insurer with the appropriate documentation proving the charter and a breach of the charter. The dockage, crew wages, and equipment leases might also be coverable, but if the yacht is a total loss then the owner may need to cancel these services.
In closing, the yacht’s insurance policy is the bible of what is covered and dictates what amount(s) are recoverable. The time to review the policy is before the loss, so should an event occur, the owner is protected and can recover covered losses.
* The information offered in this column is summary in nature and should not be considered a legal opinion.
**Danielle J. Butler is the managing partner of Luxury Law Group and the president of MIASF. Michael Karcher is the senior litigator at Luxury Law Group. They may be contacted at 954-745-0799 or firstname.lastname@example.org or email@example.com.
Article Author: Danielle J. Butler