ISO Yacht Coverage Form

ISO YACHT COVERAGE FORM

(January 2020)

 

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INTRODUCTION

The Insurance Services Office (ISO) Yacht Coverage Form is designed for vessels operated for pleasure use. "Yacht" is a generic term. As used with this coverage form it means larger pleasure boats such as cabin cruisers, sailboats and houseboats. These vessels are propelled in a variety of ways including outboard and inboard motors, inboard/outdrive motors, sail boats with or without power units and water jets. The yacht’s equipment and machinery, motor, personal effects, boat trailers and accompanying dinghies are all considered covered property under the policy. Bodily injury and property damage arising from ownership, maintenance, use, operation, loading, unloading, boarding and disembarking from a covered yacht are provided by the liability coverages. Medical Payments, uninsured boater, underinsured boater and the United States Longshoremen's And Harbor Workers Compensation Act, Uninsured and Underinsured Boaters coverages are also provided.

ELIGIBILITY

Each insurance company determines its yacht eligibility criteria based on its individual underwriting appetite. The yacht's total length, engine horsepower, navigational limits, and the type of master and crew are some of the eligibility issues considered. Some companies write only “brown water” exposures, meaning navigation on inland lakes, rivers and other bodies of water. Others specialize only in “blue water” exposures, meaning navigation on oceans and seas. Coverage is typically limited to only vessels operated for pleasure use such as recreational boating, leisure time activities, and limited types of business entertainment.

POLICY CONSTRUCTION

Yacht Coverage requires at least these two forms:

DECLARATIONS

The advisory Yacht Declarations contains the following information:

General Information

Note: It is not uncommon for there to be multiple owners and therefore should be multiple named insureds.

Property Coverages - Limits

·         The Yacht section has two spaces for the entry of the covered yacht’s manufacturer, year built, model, length, registration number, type of motor and its  horsepower and limit of insurance.

·         The Boat Trailers section has two spaces for entry of the covered boat trailer’s the manufacturer, model, serial number and limit of insurance.

·         The Personal Effects section has a space for a limit of insurance for personal effects.

Liability Coverages - Limits

The following limits must be entered

Coverage Amendments

·         The exclusion for Paid Captain and Crew does not apply if the box is checked.

Deductible

Separate deductibles are entered for each of the following:

·         Yacht

·         Personal Effects

·         Tenders and Dinghies

Loss Payee

The Loss Payee name and address is needed because notification is required if the policy is cancelled or non-renewed.

Premiums

 Separate premium are provided for each of the following:

FORM ANALYSIS–IH 00 82–YACHT COVERAGE FORM

Note: This is an advisory form that has not been filed for use with state insurance departments. Insurance companies that choose to use the form must specifically file it for its use. The form cannot be adopted in the same manner filed ISO forms are adopted.

A. DEFINITIONS

Defined terms are used throughout the policy. Restricting their meaning to the definition provides the means for all parties involved with the policy to have a clearer understanding of the coverage intended. You and your refer to the named insured on the declarations and also the named insured’s spouse if the two are living in the same household. We, us and our, refer to the insurance company providing the coverage. Nine other terms are defined:

1. Bodily injury is bodily harm to persons. Sickness, disease, or resulting death are also bodily injury. The  costs of required care and loss of services that are a direct result of the injury are also considered bodily injury.

2. Insured is the named insured. It is also relatives living in the named insured's household. It is also unrelated persons who are under 21 years of age and living in the named insured's household. These persons are covered only if in the care of the named insured or one of the resident relatives.

Note: Remember that the named insured includes the named insured resident spouse. That means that the children and relatives of the spouse have the same status as children and relatives of the named insured. However, if a separation occurs, the spouse and his/her relatives are automatically no longer insureds. The paid captain and members of the crew are insureds.

Corporations, firms and any person not described above are also insureds but only when using the named insured’s yacht with the named insured’s permission.

3. Pleasure use is a term used in the policy to restrict coverage. Coverage applies only when the yacht covered is being used for pleasure use. Pleasure use includes such activities as recreational boating and leisure time activities. Pleasure use is also business entertainment but only when the named is not receiving any direct compensation or remuneration for allowing the covered property to be used in this way.

4. Pollutants is a broad and expansive term. It includes solids, liquids, thermal or gaseous contaminants and irritants including, but not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor and waste. Waste also includes materials intended for recycling, reclamation and reconditioning, as well as for disposal.

5. Pollution is any actual, alleged or threatened release of oil, fuels, petroleum products or other pollutants.

6. Property damage is destruction of or physical injury to tangible property. The loss of use of any tangible property is also property damage even when the tangible property itself is not damaged.

 

Example: Marjorie’s yacht, Pretty Boy, escaped damaged during a serious storm. However, she is unable to use it as its anchor is entangled by debris stirred up during the storm. She has to hire divers assist in freeing the vessel. Further, she has to rent another yacht to host a planned anniversary celebration. She turns in these expenses to her insurer as a loss of use claim.

 

7. Suit is a civil proceeding that seeks damages. The allegation must be that damages resulted from bodily injury, property damage, or pollution and that those damages are covered by this insurance. Arbitration and other alternative dispute resolution proceedings that allege such damages are also considered suits but only when the insured is required to submit to them or does so after obtaining the insurance company's prior written consent.

8. Uninsured or Underinsured Boater is the party that owns or operates a boat or yacht not scheduled on this policy and is legally responsible for an accident. In addition, they must meet one or more of the following criteria:

·         At the time of the accident, the party did not carry a bond or insurance policy to cover liability

·         At the time of the accident, the limits of bodily injury bonds or policies carried were not sufficient to fully pay its obligations

·         Is not identifiable. Commonly called a hit and run.

9. Yacht is any vessel or boat. The following property that is associated with the yacht is also considered yacht:

·         Machinery and equipment but only when considered integral to the yacht’s operation

·         The yacht’s masts, spars, sails, rigging and tackle

·         Small boats called tenders or dinghies that are either carried on the deck or towed behind the yacht. These boats must be less than 16 feet with no more than 35 horsepower.

·         Any equipment that is considered necessary in order to maintain the yacht or to operate it in a safe manner.

B. PROPERTY COVERAGES

1. Coverage

a. Covered Property

The insurance company covers the yacht(s) and boat trailer(s) on the declarations. If a limit of insurance for Personal Effects is on the declarations, it also covers Personal Effects but only while on board the covered yacht or while being loaded on or unloaded from it.

b. Property Not Covered

Certain property is not covered.

·         Money, securities, accounts, bills, currency, deeds, evidence of debt, notes, letters of credit, and stamps

·         Gold, silver, platinum, other precious metals or alloys, jewelry, costume jewelry and precious and semi-precious stones

Note: Much of this property is more correctly insured under a Personal Articles Floater.

Related Article: Personal Jewelry and Furs Insurance

·         Aircraft

Note: This property is more correctly insured under aircraft coverage forms and policies.

Related Article: Overview of Aircraft and Aviation Insurance

·         Hydrocycles, jet skis, waverunners, windsurfers and similar personal watercraft

Note: This property can be covered under personal watercraft coverage forms and policies.

Related Articles:

AAIS Boatowners Coverage Form Overview

(Non-AAIS) Boatowners Policy Coverage Form Analysis

·         Devices designed for flight, such as parasails and hang gliders

·         Fuel for the yacht and fuel (food and beverages) for the people along with similar items.

·         Contraband and property that may be legal but in the course of illegal transportation or trade.

 

Example: Cigarettes are legal goods but, when Kenneth decided to buy cigarettes in Kentucky and then travel up the Ohio River and sell them in Pittsburg in order to circumvent higher local cigarette taxes; they are being traded illegally and coverage for the cigarettes is excluded. 

                       

·         Property that is over 50 miles from the home port(s) or storage location(s) shown on the declarations. This applies only if the property is in transit by any type of carrier for hire.

c. Covered Causes of Loss

Covered causes of loss are risks of physical loss or damage that is either direct or indirect. Causes of loss that are part of the Exclusion section are not covered.

d. Additional Coverages

·         Additional Acquired or Replacement Property

There is coverage for up to 30 days when the named insured acquires a yacht or boat trailer that is either an addition to the described yachts or is replacing one of them. When the acquired item is a replacement the coverage is identical to that which is on the replaced item. However, if the acquired item is an addition, its coverage is the same as the broadest coverage on any scheduled yacht.

This is not free coverage. The named insured is required to report the value of the newly acquired property to the insurance company within 30 days from the acquisition date and to pay any premium due starting from the acquisition date. If not reported, coverage automatically ends 30 days after the acquisition date or at the end of the policy period, whichever comes first.

 

Example: Fred Finkelstein insures his Classic Curmudgeon Cabin Cruiser under a Yacht Coverage Form. Fred purchases a 30-foot sloop, the Johnnie B., a week before the expiration date but forgets to tell his insurance agent of the acquisition before he takes it out for a shakedown cruise and to check out its sails and rigging. The coverage on the Classic Curmudgeon renews but this additional coverage on the Johnnie B. ended on the expiration date. When the Johnnie B. takes on water during a sudden squall and capsizes three days into the renewal policy period, the wind goes out of Fred's sails when he discovers that the loss is not covered.

 

·         Operating Other Yachts

There is coverage for a covered loss when the named insured is using, with permission, another yacht. The maximum payment is the limit of insurance for the named insured's yacht. However, this insurance is excess over any other insurance that applies to the same loss.

There is no coverage, however, if the named insured has any ownership in the other yacht, if it is rented to or chartered to the named insured, if it is furnished for the named insured's regular use, or if the named insured was using it for other than pleasure use.

 

Example: Fred lets his son and his wife borrow the Classic Curmudgeon and Barney Brookstone lets Fred borrow his yacht, the Blinkin' Blarney. Fred is an experienced navigator but the Blinkin takes more getting used to than expected and he runs it aground on the rocks. Because Barney has valid insurance on the Blinkin, this additional coverage stands ready to respond on an excess basis over Barney's coverage just in case his limit of insurance is inadequate.

 

·         Protection And Recovery

Reasonable costs to protect a covered yacht following a loss are covered as are the costs to recover a yacht that has been damaged. However, the payment will not exceed that yacht’s limit of insurance.

When the National Weather Service issues a hurricane watch or warning there is coverage for having the yacht pulled from the water and then put back following the storm. As an alternative to removing the yacht, payment will be made to have the yacht navigated to a safe harbor provided the individual is qualified to do so.  

 

Example: Fred is going through an interesting series of trials. This time it appears that a powerful but extremely localized hurricane will brush Fred's homeport but points south should escape unscathed. Fred realizes that his homeport's haul-out facilities are full and pays Captain Crunchbottom, an experienced navigator, to pilot the Curmudgeon to a safe port 30 leagues south. This coverage extension pays Captain Crunchbottom's navigation fees.

 

·         Towing And Assistance

This coverage applies to the necessary and reasonable expenses the named insured incurs for services to the yacht if it is disabled. These are:

o    Labor charges for technicians who repair or attempt repairs on a covered yacht but only for those operations that take place where the yacht was disabled

o    Towing to the closest service facility where repairs can be made, such as a marina or boat yard

o    Delivery charges for fuel, oil, parts or batteries

o    Roadside assistance for a covered yacht trailer

The cost of the fuel, oil, parts, batteries or yacht trailer tire is not a covered part of this supplement.

The maximum payment is $500 in a single occurrence and $1,000 per 12-month policy period.

Note: This additional coverage is not subject to a deductible.

 

Example: Fred drove the Curmudgeon into a harbor he was planning to put into for the night. Unfortunately, he hit a jetty that protected the harbor from excessive wave wash. The yacht was dead in the water and a tugboat had to tow it down the coast to a shipyard that could make repairs. The good news was that this coverage extension applied to the cost of the tow. The bad news was that it only paid $500 of the total $1,200 tow bill and Fred had to pay the other $700 out of his own pocket.

2. Exclusions

The insurance company does not pay for loss or damage caused directly or indirectly by any of the following:

a. War

Coverage does not apply to loss or damage caused by any act of war. This includes undeclared and civil war, insurrection, rebellion, revolution or warlike action by a military force or by military personnel. It also includes property destroyed, seized or used for military purposes, including their consequences. The capturing, seizing, arresting, requisitioning, confiscating or detaining of the yacht by lawful or unlawful means by order of any civil or military authority, or attempts at any of these, is also excluded.

When destruction or seizure takes place for a military purpose, it is considered an act of war. If the destruction or seizure results in further loss or damage, the resulting damage is also considered an act of war.

Note: What is being destroyed or seized is not mentioned. This is important because it means that insured property may sustain loss or damage because of its close proximity to such property that is not covered.

 

Example: Homeland Security is searching for a vessel fitting a certain description that is carrying contraband to assist in a terrorist plot. Authorities board Bud’s yacht because it closely matches the description. His yacht is heavily damaged because of the authority’s hurried search. Because Bud’s yacht was damaged during a military seizure, the damage to his yacht is not covered.

 

b. Nuclear Hazard

There is no coverage for loss or damage caused by weapons that use atomic fission or fusion, nuclear reaction or radiation, or radioactive contamination from any cause. However, direct loss or damage by fire resulting from nuclear reaction or radiation or radioactive contamination is covered if this coverage form insures fire.

c. Non-Pleasure Use

The insurance company does not pay for loss or damage while the yacht is being used for other than pleasure use.

 

Example: Fred Finkelstein charters the Classic Curmudgeon to a local game-fishing company whose own vessel was in dry dock for repairs. The company planned to use it for some fishing excursions. During one of them, it struck another vessel, damaging both of them and injuring two passengers on the other vessel. Fred has no coverage because the yacht was being used for business purposes.

 

d. Flaws

Coverage does not apply to damage to the hull or machinery resulting from flaws that were present at the time the vessel was built and that cannot be detected by conventional testing methods. However, coverage does apply to damage to other covered property that the flawed hull or machinery causes.

Note: This is sometimes referred to as latent defect. It is a fault in the property that cannot be discovered by a reasonably thorough inspection. Even then, inspections alone may not be sufficient to detect certain deficiencies without themselves being destructive. For example, wood beams in a vessel cannot be fully assessed without actually destroying them.

e. Wear And Tear

Loss or damage caused by or resulting from wear and tear is excluded. In addition, gradual deterioration, weathering, bubbling, osmosis, delaminating of plywood or fiberglass, corrosion, rust, electrolysis, mold, rot, inherent vice, vermin, insects or marine life caused loss or damage is also not covered.

Note: Wear and tear is damage, diminishment in value or erosion due to long or hard use or exposure, including breakdown over time and eventually becoming unusable because of previous use. This includes the tendency of property to pull apart or break down into pieces because of forces applied to it. Osmosis is diffusion of water through a semi-permeable membrane. An example of blistering involves paint where small to medium size bubbles develop under the paint film. Electrolysis is chemical decomposition produced in an electrolyte by an electric current. Many of these represent qualities, faults or weaknesses in covered property that causes it to damage or destroy itself.

f. Failure to Maintain Property

There is no coverage for loss or damage if the named insured does not maintain covered property in good condition and repair. The good condition requirement is that the yacht not be damaged by ordinary weather, water conditions, or the stress of normal use.

g. Intentional Acts

Loss or damage caused by the named insured's willful or intentional acts is excluded.

Note: Only the intentional acts of the named insured are excluded.

 

Example: Fred Finkelstein decides to play a trick on his children who are holding a birthday party for a friend on the Classic Curmudgeon. He arranges for a flare to launch and ignite when they open the cooler to retrieve the seafood they plan to cook on deck. However, the flare propels sideways instead of up, penetrates the side of the cabin, and starts a fire in the lounge area. There is no coverage for the fire or resulting smoke damage. However, if Fred’s son had played the same trick, there would have been coverage because he is an insured but not a named insured.

 

h. Marring and Scratching

The insurance company does not pay for loss or damage caused by marring, scratching, chipping or denting. However, coverage from these events does apply if caused by a sudden and accidental impact. That impact must be with another object that is not under the control or the named insured and also not in control of a person being directed by the named insured.

i. Temperature Extremes

Loss or damage caused by extremes of temperature is excluded. However, coverage does apply if the loss or damage is caused by or results from improper winterizing done by a competent marina or similar facility.

j. Ice

If the covered yacht is moored or laid up, there is no coverage for any ice damage that occurs.

k. Loss of Use

There is no coverage for loss caused by delay, loss of use, or any other consequential loss.

Note: This appears to contradict the Covered Loss statement above that states that Covered causes of loss are risks of physical loss or damage that is either direct or indirect.

l. Design Error

Coverage does not apply to loss or damage due to errors in or improper design.

Note: Because there is no explanation as to who must make the design error in order for this exclusion to apply, it could lead to coverage being denied with resulting court challenges.

3. Limits of Insurance

The most the insurance company pays for loss or damage in a single occurrence is the limit of insurance that applies for the particular coverage or the specific yacht as stated on the declarations.

Any payments made under Additional Coverages–Protection and Recovery reduces the limit of insurance to pay for other damage. However, the limits that apply to all other Additional Coverages are in addition to the Limits of Insurance.

4. Deductible

The insurance company does not pay for loss or damage until the amount exceeds the deductible amount on the declarations. This deductible applies per occurrence. The insurance pays the amount of the adjusted loss or damage in excess of the deductible up to the limit of insurance that applies.

No deductible applies to a covered yacht that sustains a total or constructive total loss.

5. Valuation

a. Yacht, Excluding Outboard Motors

·         Total Loss

The insurance company pays for a total loss to the named insured's covered yacht if it is completely lost or destroyed or if the cost to recover and/or repair it is more than the limit of insurance.

This provision does not apply to outboard motors.

·         Partial Loss

If the covered yacht sustains partial loss or damage, the insurance company does not pay more than the limit of insurance that applies or the cost to repair or replace with materials of similar quality, whichever is less. There are no depreciation deductions except for losses involving plastic or canvas coverings and sails.

This provision does not apply to outboard motors.

Repair costs are determined by yacht repair yards, equipment repairers, or surveyors who are considered acceptable by the insurance company.

b. Outboard Motor, Boat Trailer or Personal Effects

The amount the insurance company pays for losses to outboard motors, boat trailers and personal effects is the least of the following:

·    The limit that is available to pay for the particular property

·      The actual cash value of the item that it is damaged or has been lost. The value is established as of the time of the loss; not at the time of the settlement.

·     The actual amount that is spent in the repair or replacement of the item that is damaged or has been lost. The material used in the repair or replacement must be in accordance with manufacturers specification or approved repair practices.

C. LIABILITY COVERAGES

1. Liability Insurance

a. Coverage

The insurance company pays for the damages the insured is legally liable for up to the limit of liability. Coverage under this policy will respond only if the damages are from a claim or suit brought against an insured. The damages must result from bodily injury or property damage that arises from the ownership, maintenance, use, operation, loading, unloading, boarding, and off-boarding or leaving the covered yacht.

The damages include prejudgment interest awarded against the insured.

Note: The prejudgment interest is unusual. Usually this is provided within the Supplemental payments section. By being part of the damages, it will reduce the limit available to pay losses.

Even if a suit is groundless, false or fraudulent, the insurance company must provide a defense and must do so at its own expense. The insurance company will choose the counsel and decide when and how to investigate or settle each claim or suit. The duty to defend ends when the amount paid for damages exhausts the limit of liability.

b. Operating Other Yachts

There is coverage for the named insured’s liability due to damages when the named insured is using, with permission, another yacht. This insurance is excess over any other insurance that applies to the same loss.

There is no coverage, however, if the named insured has any ownership in the other yacht; if it is rented to or chartered to the named insured; if it is furnished for the named insured's regular use; or if the named insured was using it for other than pleasure use.

c. Additional Liability Insurance Coverages

·         If an insured is legally obligated to respond to any of the following this insurance will pay: Any and all attempts to raise or the actual raising, removal or destruction of the wreck of the named insured's covered property

Note: There is no reference as to who actually does the work or on whose behalf, only that an insured is held liable and the property is considered covered property belonging to the named insured.

·         Not raising, removing or destroying the wreck of the named insured's covered property

·         Property damage that arises out of pollution. Also, any federal, state or local statute or regulation-imposed assessments, clean-up costs or expenses to contain pollution.

 

Example: The Classic Curmudgeon sank upon entering Callow Cay. The area was so shallow the government required removing the Curmudgeon to prevent damage to other vessels. When it sank, its fuel leaked and pollution control activities to contain the spill and then to clean it up began. This coverage applied to the $600,000 cost to remove the wreck and the $100,000 pollution containment and clean up costs.

           

d. Liability Exclusions

The insurance company does not cover:

·         The named insured's liability to other insureds

Note: This is referred to as "cross liability" in other liability coverage forms and policies.

·         Liability of other covered persons to the named insured, the named insured's spouse, or other persons that live in the named insured's household

·         Liability to any paid captain or crew for loss of life or for  bodily injury when required under The Merchant Marine Act Of 1920 (The Jones Act), the Death On The High Seas Act, or General Maritime Law

Note: This exclusion does not apply if the box to eliminate it on the declarations was checked.

Related Article: The Merchant Marine Act Of 1920 (The Jones Act)

·         The named insured's liability for injury or damage in the time period when a land vehicle or trailer transports the covered yacht

 

Example: The Classic Curmudgeon was being hauled on a trailer from Muskegon, Michigan to Superior, Wisconsin. The chains holding it down snapped under the excessive strain when turning a curve. The yacht slid off and landed on the highway, causing a multi-car pileup, a few minor injuries and a day-long traffic delay. Separate lawsuits were filed against the transportation company and Fred Finkelstein, but his insurance company denied coverage because of this exclusion.

           

·         Injury or damage that any insured person intends or expects

·         Liability that the named insured assumes under any contract or agreement

Note: This means that even written contracts involving dock rental or indemnity agreements related to vessel storage are excluded.

·         Fines or penalties any governmental entity imposes on the named insured

2. Medical Payments

a. Coverage

The insurance company pays necessary medical expenses resulting from bodily injury caused by an accident. These expenses must be incurred within one year after an accident. In very unusual wording, medical expenses that are not yet incurred but that are deemed to be medically necessary at a future date are also covered as long as that future date is within the one-year time frame.

The accident must arise out of ownership, maintenance, use, operation, loading, unloading, boarding, off-boarding or leaving of a covered yacht. It also pays similar expenses as a result of taking part surface water activities such as water-skiing or aquaplaning but only when they start from the covered yacht.

b. Exclusions

This coverage does not apply to:

·         Any person covered under any federal or state workers compensation law or act

·         The named insured's employees

·         Trespassers

·         Persons injured resulting from or in connection with being towed in or on a device intended for flight

Examples are parasailing or kite skiing.

c. Proof of Loss Requirements

The insurance company requires a complete sworn proof of loss from the injured person making a claim under this coverage or a person acting on that person's behalf. It must include:

·         Information on each service provider who performed covered services, including names and addresses

·         The dates of the services provided and the nature and extent of the service provided

·         Detailed statements of charges, indicating amounts already paid

The insurance company must receive the proof of loss as soon as reasonably possible after the services are rendered.

d. Additional Requirements

Any person making a claim under Medical Payments coverage must submit to physical examinations by the insurance company's selected physicians. However, requests for such examinations must be reasonable and the insurance company must pay for the cost of the exam(s). The injured person must also provide pertinent medical reports and records or give the insurance company permission to obtain them.

e. Limit of Liability

The Medical Payments Limit of Insurance on the declarations is the insurance company's total liability for all medical expenses paid to one person for bodily injury as the result of one accident.

f. Admission of Liability

Payments made under this coverage are not an admission of liability by the named insured or the insurance company.

3. Longshore and Harbor Workers Compensation

The insurance company pays the named insured's liability as the covered yacht owner under the Federal Longshore and Harbor Workers Compensation Act. This applies only when coverage is provided under Paragraph 1. Liability Insurance. The loss payment will not exceed what is required by the act.

4. Uninsured or Underinsured Boater Insurance

a. Coverage

There are uninsured and underinsured boats just like there are uninsured and underinsured motor vehicles and this coverage recognizes the fact. The insurance company pays all compensatory damages a covered person is legally entitled to recover from an uninsured or underinsured boat’s owner or operator because of bodily injury to an injured person who was on the named insured’s yacht when that injury arises from ownership, maintenance or use of an uninsured or underinsured boat.

b. Exclusions

This coverage does not apply:

·         To claims settled without the insurance company's written consent

·         If a governmental entity owns the uninsured vessel

·         If the uninsured or underinsured vessel is owned by the named insured.

·         If the uninsured or underinsured vessel is furnished to the named insured or any other insured for his or  her regular use

·         Where the physical evidence does not support the claims that  the named insured's yacht was actually struck by an uninsured or underinsured vessel

·         To the direct or indirect benefit of any insurance company or self-insurer under federal or any state compensation law or act

c. Limit of Liability

The most the insurance company pays is the Uninsured or Underinsured Boater Limit of Liability on the declarations. This limit applies regardless of the type of expense, the number of persons injured, claims made, or number of vessels involved in an accident or a series of accidents arising from the same occurrence.

D. GENERAL CONDITIONS

This conditions section also includes exclusions. It is important to read all exclusions carefully.

1. Bankruptcy

The insurance company is not relieved of its obligations if an insured becomes bankrupt or insolvent.

2. Cancellation

a. The named insured can cancel at any time by returning the policy to the insurance company and advising it in writing of the date cancellation is to be effective.

b. The insurance company can cancel by providing written notice to the named insured at least 30 days before the date cancellation is to be effective. However, the notice period is 10 days if the cancellation is for non-payment of premium. The company can either deliver the notice to the named insured or mail it to the named insured's last known mailing address. If it mails the notice, proof of mailing is sufficient proof of notice.

c. Return premium is calculated on a pro rata basis if the insurance company cancels. It is calculated at 90% of pro rata if the named insured cancels.

Note: There may be multiple named insureds but this section does not address which of the named insured has the right to request cancellation and to whom the cancellation notice must be mailed.

3. Changes

All agreements between the named insured and the insurance company are contained in this policy and none can be changed. The only exceptions are those endorsements issued by the insurance company. The company adjusts the premium on the effective date of change in cases involving a premium adjustment.

4. Concealment, Misrepresentation or Fraud

This is an unusual condition. In most policies concealment, misrepresentation or fraud by any insured would void coverage. Under this condition, such action on the part of the named insured will result in a loss not being paid. However, the policy remains intact. Furthermore, such actions by an insured (not the named insured) do not impact a loss. This means that a child or relative could fail to disclose information with no impact on coverage.

5. Dishonest, Illegal or Intentional Acts

Note: This is a common exclusion and so it is unusual to see it as a condition.

Coverage does not apply to any loss, injury, damage or expense caused by dishonest, illegal or intentional action taken by any person who has been entrusted with covered property. This condition applies, regardless of whether a criminal court convicts such persons or not.

Note: Damage caused by the named insured’s willful act is excluded under the Property Coverage Exclusion g. Liability Exclusion (5) excluded coverage for injury or damage expected or intended by an insured. This condition must work with those two exclusions because they are not the same and involve different parties and different actions.

6. Navigational Limits and Lay-Up Period

The Navigational Limits or Lay-Up Period on the declarations may be breached by an event beyond the named insured's control. In that case, coverage remains in effect only if the named insured notifies the insurance company of the breach in writing within 10 days of the breach. The named insured must then pay any additional premium the company may require. However, coverage does not apply if the named insured voluntarily breaches the Navigational Limits or Lay-Up Period without prior notice to and written approval by the insurance company.

Note: This policy does not explain what constitutes a navigational limit or lay-up period breach.

7. Policy Period

The insurance company pays only covered losses that take place during the policy period. However, covered yachts in the course of navigation when this policy expires are covered until they arrive at the next port and are safely moored for 24 hours. The named insured must inform the insurance company that the expiration was extended and pay any additional premium required.

 

Example: The Classic Curmudgeon goes out to sea for a three-week vacation cruise. However, its insurance policy expires halfway through the voyage. Fred Finkelstein suddenly remembers this on his way out and calls his agent. The agent, in turn, notifies the insurance company and it extends the policy until the Classic Curmudgeon returns from the trip.

 

8. Premium

The first named insured on the declarations pays all premiums and also receives any return premiums the insurance company pays.

9. Racing

Note: This is a common exclusion but, in this policy, it is listed as a condition.

Coverage does not apply to loss, injury, damage or expense arising from or during any race or speed test.

This limitation does not apply to sailboats or predicted log events.

Note: A predicted log event is a contest where each skipper attempts to most accurately predict the time his vessel will take to navigate a specified course. The course is published in the race instructions issued by the host club several weeks prior to the contest. It usually consists of four or more legs totaling about 25 miles. Before the contest, skippers turn in predicted logs that specify the time they expect to use on each leg of the course. To maintain integrity, no watches or time-keeping devices are allowed on the vessel during the event. As each mark is passed, the Observer records the time on the actual log. After completing the course, the Race Committee computes the percentage error between the predicted and actual logs for each boat. The skipper with the lowest error is then declared the winner.

10. Transfer of Interest

This coverage ends when the covered property or this policy is sold, assigned, transferred or pledged unless the insurance company agrees and gives its written consent to the transfer.

11. Broadened Coverage

Any policy revision put into effect during the policy term that broadens coverage without an additional premium charge applies to this policy.

Note: This is the same as the "Liberalization Clause" in other coverage forms and policies.

12. No Benefit to Others

This insurance does not benefit any party having custody of the covered property.

E. LOSS CONDITIONS

1. Your Duties after Loss

The named insured must do certain things following an accident, loss, damage or expense involving covered property.

a. Covered property must be protected from further damage. The insurance company reimburses reasonable expenses the named insured incurs to recover the property and keep it from any additional damage. Payments made to recover or protect damaged property are in addition to any other payments the company makes for covered losses but the most paid for the recovery and protection is the limit of insurance that applies to that property.

b. The named insured must maintain accurate records of repair expenses.

c. The named insured must give prompt notice of a loss to the insurance company or its agent. The notice must include the time, place, and details of the loss as well as the names and addresses of all known witnesses. In addition, the appropriate law enforcement agency must be notified if the property is stolen or vandalized.

2. Abandonment

No property of any kind can be abandoned to the insurance company.

Note: The insurance company may agree to accept abandoned property. If it does, it does so in writing.

3. Proof of Loss

The named insured must send a signed, sworn proof of loss to the insurance company as soon as possible after receiving the company's written request to do so. The proof of loss must present the facts of the loss based on the named insured's best knowledge and belief. The insurance company has the right to require the named insured to submit to an examination under oath.

4. Claim or Suit Against You

The named insured must promptly send notices, demands, summonses and other process papers that relate to the accident to the insurance company. Because the company then pays the ensuing costs of the suit, it has the option of naming the attorney or attorneys to represent the named insured.

Note: An important feature of this condition is that payments the insurance company makes for the named insured's legal defenses are in addition to payments it makes under coverage for liability claims against the named insured. Because there is no stated amount, defense costs are technically unlimited.

5. Assistance and Cooperation

Persons making claims have certain obligations. They must:

a. Cooperate with the insurance company as it investigates, settles or defends claims or suits brought under this policy

b. Assist the company in enforcing any right of contribution or indemnity against any party that may be liable to any covered person

c. Let the insurance company inspect and appraise all damaged property before it is repaired or disposed of

Note: This condition obviously does not apply to property that was stolen or is otherwise unrecoverable.

d. Provide proper written authorization enabling the insurance company to obtain medical files and any pertinent or related records

e. Submit to physical examinations by physicians the insurance company selects as often as reasonably required and at appointed times and places

f. Obtain the insurance company’s prior written consent before assuming any obligations or accepting fault or liability.

g. Obtain the insurance company’s prior written consent before incurring expenses on behalf of the company. Written consent is not required for medical expenses under Paragraph C.2. Medical Payments or for expenses made to protect covered property from further loss under Paragraph E.1. Your Duties After Loss.

Editorial Note: This condition creates obligations for persons who may have no relationship to the insurance contract. This means it may be difficult to enforce and that could be to the detriment of the named insured.

6. Payment of Loss

The insurance company pays or makes good on covered losses within 30 days after it either reaches an agreement with the named insured, a final judgment is entered, or an appraisal award is filed.

The insurance company does not pay any part of a loss that others paid or made good on because this is indemnity coverage.

7. Our Right to Recovery

a. Subrogation

Any party whose losses are paid for by the insurance company must relinquish its right of recovery against others to the insurance company. The amount is limited to the amount the insurance company paid. That party must do everything necessary to secure those rights and must not do anything after a loss to impair them.

 

Example: The Mighty Vessel steered right into Pam’s Elegant Queen. The Elegant Queen was a total loss. Her insurance company paid $250,000 for the Elegant Queen. The insurance company assumes Pam’s right to recover $250,000 and, later, sues the owner of the Mighty Vessel.

 

b. Recoveries or Salvage

Recovery or salvage on a loss accrues exclusively to the insurance company's benefit up to the amount it paid.

Note: There is no mention as to recovery expenses, deductibles paid by the insured or if the named insured has an option to take the recovery in return for the return of the loss payment.

8. Legal Action Against Us

Before any legal action can be brought against the insurance company, all policy provisions must have been met.

The insurance company cannot be brought into any action against an insured. In addition, no action can be brought against the insurance company until the insured's obligations have been determined by a final judgment or an agreement the insurance company signed under Coverages, C.1. Liability Insurance and C.3. Longshore and Harbor Workers Compensation.

9. Other Insurance

a. Section B. Property Coverages

If other insurance coverage applies to a covered loss, the insurance company pays only the proportion of the loss that its limit of insurance bears to the total amount of insurance that applies, whether or not the other insurance is collectible.

b. Section C. Liability Coverages

This insurance coverage is excess over any other valid and collectible insurance except insurance that specifically applies as excess over this insurance.

ENDORSEMENTS

ISO does not offer any specific endorsements for exclusive use with the Yacht Coverage Form. ISO has developed one form that can be used to respond to specific situations.

IH 99 19–Additional Covered Property

This endorsement can be used to include coverage for types of property ordinarily excluded or not covered, such as hydrocycles, jet skis, parasails, hang gliders, fuel, food, beverages and electronics.

UNDERWRITING CONSIDERATIONS

Yacht underwriting involves analyzing a wide range of property that can be covered, such as the yacht itself (commonly referred to as the hull), motors, sails, machinery, equipment, boat trailers, and personal effects. In addition to Bodily Injury and Property Damage liability coverage, Liability insurance also includes coverage for Medical Payments, Longshore and Harbor Workers Compensation, and Uninsured and Underinsured Boaters coverages.

The year built, manufacturer, and model of the vessel and its motor or motors must be considered. The vessel's length, weight, style, hull material, value and limit of insurance must be examined, as must the type of motor (inboard, inboard/outboard, or outboard), horsepower, maximum speed, and type of fuel. Older vessels must be underwritten more carefully. A licensed marine surveyor should inspect the yacht periodically to determine that its condition is sound, that it is seaworthy, and that it is not subject to any operating limitations or qualifications. In all cases, the yacht should be operated only for the purpose for which it was designed and should not be used for any activity that exceeds its capabilities.

Along the same line, the motor's maximum horsepower should not exceed the yacht manufacturer's maximum operating horsepower. Speed is a relative issue. Yachts that tow skiers will need more speed than those engaged in pleasure cruising or fishing. A very important thing to keep in mind is that faster vessels are more likely to be stolen.

Consider the fuel used. Diesel fuel is less volatile than gasoline so gasoline-powered yachts are more susceptible to fire losses. Equipment should be suitable to the type of vessel involved and how it is used. A small sailboat that operates on large inland lakes or bodies of water does not need much of the equipment found on power craft that operate on the ocean well away from shore. The type of navigation equipment must be examined. This includes Global Positioning Satellite (GPS) systems, plotters, depth finders, radar and other navigation equipment. Fire extinguishers, automatic fire extinguishing systems, fume detectors, and carbon monoxide detectors are very important for powered craft. All navigation equipment and protective devices should be inspected and tested periodically.

Operator experience is extremely important. Because many of the characteristics of operating a motor vehicle also apply to vessel operators, a Motor Vehicle Report (MVR) is a good first step to gain insight into an operator's skill and experience. The same line of thinking applies to youthful operators. Operators should be encouraged to take recognized instructional operating courses before operating the yacht. All operators should be in encouraged to take advanced courses depending on the size of the yacht. Paid captains and crews are favored over individual operators in almost all cases.

Navigation area is a significant consideration. While conventional wisdom suggests that vessels on inland waters are more desirable, keep in mind that they may be exposed to barge traffic, congestion and underwater trees and stumps on man-made lakes and reservoirs in addition to ordinary navigational issues. Regardless of the body of water, smaller vessels should operate relatively close to shore and only larger vessels with experienced operators, captains or crews and extensive navigational and protective equipment should never get more than 15 miles from shore.

The lay-up period and storage facilities must be examined carefully. Some vessels in certain areas can operate year-round. Others, such as those that operate in northern waters, are laid up, primarily during the winter months. The lay-up period should be commensurate with climatic and water conditions. Lay-up can be on shore or in the water, with on shore storage preferred. Lay-up in the water usually requires a deicer system or other means to keep the water from freezing and damaging the hull. In any case, some degree of winterizing the vessel may be required. A qualified professional should always do this and do so at a marina or similar facility.

Land transit is an important consideration. Many yachts are moved overland from port to port based on where the owner lives and vacations. The named insured may transport the vehicle or may hire another to do so. The size of the yacht is one of the more important considerations along with the experience of the person or entity transporting the yacht, the land distance between ports and the frequency of the transport.

Loss experience is very important. At least five years is preferred.