CLASSIFYING RISK–BOAT DEALERS AND MARINAS

(April 2019)

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INTRODUCTION

Operations that provide services to the boating industry can be difficult to classify because of overlapping services provided and products sold. This diversification has helped good operations survive economic ebbs and flows and other market conditions. An insurance agent who wants to write more of this class of business must carefully examine and understand each operation performed so that the classification is correct.

MARINAS

A marina is where boats and their owners gather. These gatherings logically lead to additional revenue producing opportunities. Many marinas offer boats for sale, repair and service of boats, gasoline and oil sales and even boat building activities. All these sales and services are considered part of a marina operation.

There is no classification for Marinas. Instead Marinas are combined with Boat Yards in a single classification, Class Code 10107: Boat Yards or Marinas–Public. When this classification is used there is no need to separate out the sales for boat sales, boat or ship building, boat repair, or gasoline sales because they are to be combined with all other marina operations. The only operations that are listed in the note that are to be classified and rated separately are boat storage and moorage, boat rentals and charters, lodging accommodations, and restaurants.

BOAT DEALERS

Class Code 10101: Boat Dealers is all about the sale of boats, accessories, gasoline, and oil. This is far less inclusive than Boatyards and Marinas so if a boat dealer builds or repair boats or provides boat storage and moorage, they must be separately classified.

WHICH IS WHICH?

Do the two classifications seem a little close? Both include the sale of boats and accessories and both include the sale of gasoline and oil. However, the boat dealer does NOT include repair and boat building while the marina does.

Neither code includes boat storage or moorage. However, the marina code specifically states that boat rental, accommodations and boat rental must be separately classified while no such reference is made in the Boat Dealers code. Because ISO does not list items to be separately rated whimsically it must be assumed that these references are to operations that could be found regularly at the marina classification.

Therefore, a marina/boatyard builds, sells, and repairs boats. It also sells gasoline and oil. In addition, some marinas provide storage facilities, restaurants, boats for rent, and/or rooms for rent.

A boat dealer sells boats, gasoline and oil. In addition, some boat dealers also provide storage facilities, boat repair and boat building.

Neither classification specifically states that the location of the risk is on or off the water. We can make decisions based on pre-conceived ideas, but the classifications must speak for themselves and water is not part of the discussion.

Based on the classifications, marinas would appear to be oriented to complete service for the boat-owning customer. Boat dealers appear to be similar to car dealers with a primary orientation to the selling of boats and then providing service necessary to bring a customer back to buy additional boats.

However, determining whether to use the Marina or the Boat Dealers classification is not the final step. A careful review of the risks operations that are to be separately classified must be made.

SEPARATELY RATED CLASSIFICATIONS

The first step to properly classify any multi-classification risk is to evaluate all activities and operations performed, both on the premises and at other locations. Doing this is quite interesting but also very time-consuming. Insureds are often not aware of the insurance implications of some of the little things they do simply to help their customers, such as sharpening propeller blades or accepting mail deliveries.

The next step is to break down each of the operations into specific classifications. Properly separating operations and classifying them correctly can reduce premium because when operations are combined, they must be classified and rated according to the highest rated classification within the combination.

However, the separation of operations in order to save premium is effective only if the cost to maintain records does not exceed the premium savings.

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Example:

Scenario 1: John points out to Small Marina that by separating out the various operations a premium savings of $2,000 is possible. However, in order to separate out the operations Small Marina would need to purchase a new cash register, relabel its inventory and train its employees in entry. The benefit to Small Marina is too small for it to make the change at this time. However, when Small Marina purchases a new cash register, it may consider making the change.

Scenario 2: John talks with Larger Marina about the savings available by separating out operations and using multiple classifications. Larger Marina is excited about this for two reasons. First, because the savings are considerable and, second, because they are already maintaining such records for their own analysis.

The primary classifications are subject to published loss costs. However, some others are "a" rated or "subject to rate." The insurance agent should provide information and details on those classifications so they can be evaluated properly and have the lowest rate assigned to them. Helpful information and details include:

Engine horsepower. Engines that produce greater horsepower are charged higher premiums because of higher loss potential and severity. There is a significant difference in the potential damage a high-performance boat can cause compared to a pontoon boat.
Seasonal usage must be considered simply because the boat is operated for only part of the year.
Participant age is important because certain water facilities are geared to children. Such activities place a greater responsibility on the supervisor. This increases the potential for liability to the operation if an accident occurs.
Storage ashore and storage afloat represent different hazards. The amount of each kind must be considered, and the rating should reflect those exposures and hazards, especially considering the hazards of removing boats from and then returning them to the water.

Boat Dealers and Marinas

Whether the risk is a boat dealer or a marina, the following classifications may be required to cover some of the more common operations:

Class Code 10105: Boat Storage and Moorage

Class Code 40111: Boats–Canoes or Rowboats–Not For Rent–Not Equipped With Motors
Class Code 40115: Boats–Motor or Sail–Not For Rent
Class Code 40117: Boats–Not For Rent–NOC
Class Code 10110: Boats–Canoes or Rowboats–For Rent–Not Equipped With Motors
Class Code 10117: Boats–Motor or Sail–Rented to Others
Class Code 40140: Boats–Non-Owned Over 26 Feet
Class Code 10119: Boats–Rented to Others–NOC

Boat Dealers

These classifications are operations that would need to be rated separately for boat dealers but not marinas:

Class Code 51400: Boat or Ship Building–Inboard and Inboard/Outboard
Class Code 51401: Boat or Ship Building–Without Motors
Class Code 91235: Boat Repair and Servicing

Marinas

Marinas often have restaurants on premises and may provide lodgings. The appropriate class codes to use would be based on the type of restaurant and the type of lodging.