Monday, May 5, 2014

Drugs And Yachting: Who Is Responsible For Irresponsible Crew?

I was talking with a stewardess last week who was telling me about her situation on board with a chef/stew team who enjoy a bit of Bolivian Marching Powder and she asked me, “Why don’t insurance companies require drug testing for crew?”

The answer is simple: It is not necessarily the insurance company’s responsibility to make sure crew members are sober and drug-free; it’s the owner’s responsibility. That’s right; it’s not the insurance company’s job to be HR manager for their clients and manage yacht crew. Although insurance companies insure vessels based upon manning requirements and licensing agencies may require drug testing at renewal or upgrades and insurers may review and approve captains, they do not search for, vet, interview, drug test, hire/fire, or pay captains or crew. That’s the owner’s responsibility - through his captain.

Just as is the case in most every employment contract, the owner (captain) is responsible for conducting thorough interviews, running background checks, and obtaining all the information he needs in order to make a decision regarding hiring employees. Insurance companies don't necessarily mandate drug testing as a condition of cover; they require owners to exercise due diligence during the hiring process and then provide the insurer with a "warranty" regarding the seaworthiness of the vessel and a warranty stating that the vessel will be used responsibly, legally and in accordance with its stated intended purpose. Since it is the owner's responsibility to make this promise to the insurance company, then the owner needs to know if he's hiring "clean" crew, so the owner has to submit his "warranty" that he is doing so.

What is a warranty?  A warranty is “…a term of the policy whereby a state of fact exists or is stated to exist and or the insured person undertakes to do or not do something or to fulfill or not fulfill some condition. If the insured person does not strictly comply with the terms of the warranty, cover under this policy will cease and any loss that occurs at that time or thereafter will not be paid.”

In an insurance contract (specifically a yacht insurance contract) there are a lot of these warranties at play.  Let's look at a few.

Compliance warranties lay out obligations of the insured. The compliance warranty states the insured will, “comply with all laws, rules and regulations that apply to the uses to which the insured employs the yacht.” This means the owner promises that he and his crew will abide all laws while using the yacht - including drug laws.

The warranty of seaworthiness says that the owner has the responsibility of maintaining the yacht in a seaworthy condition and ensuring the yacht is operated responsibly. The owner must exercise due diligence and ensure that crew hired to operate the vessel do so in accordance with all applicable local, national and international laws and regulations. And I would be willing to bet that there are few - if any - jurisdictions that allow employees to keep, transport  and use drugs recreationally.

At the end of the day, it is the yacht owner's responsibility to make sure that the yacht is crewed with professional staff that are suited to their positions by education, training and experience - NOT the insurance company's. And if an owner utilizes the services of a crew agency or management firm the owner must ensure that those organizations act in his best interest. If a crew agency or management firm does not act in good faith or fails to perform due diligence, and that failure leads to a loss, it remains the OWNER’S responsibility.

And if a loss occurs and it is determined that drug use played a role in a loss, the insurer may argue that the owner’s failure to exercise due diligence regarding his crew lead to the loss – and at that point the insurer may have cause to deny claims or cancel the coverage, as per the terms of the insurance contract which means the owner can be held personally responsible for the loss without having the benefit of an insurnace company to defend him.

Regarding drugs, some folks feel a little recreational drug use is harmless while others feel it is absolutely wrong.  I’ll avoid opinion and stick with facts: the recreational use of controlled substances is illegal and I would be willing to bet the USCG and MCA would have a problem licensing those who test positive for illegal substances. (I wonder if people with this cavalier attitude toward drugs would feel the same about recreational drug use if they applied that attitude to commercial airline pilots.)

Furthermore, local, state and international standards and licensing authorities notwithstanding, all yachts have crew operations manuals that are very clear on alcohol and drug policies - and every employee who signs their employment contract promises to abide these policies - so it's up to the captain to ensure that crew strictly obey on board policies designed to keep EVERYONE on board safe

I advocate routine drug testing in spite of the fact that insurers don't require it because in this day and age it is the safe and responsible thing to do. I’ve heard the argument that owners don’t want to have to pay for drug testing – in which case those owners had better be prepared to personally pay for any claims that are the result of “polluted” crew members causing the insurance company to reduce or deny claims.

So what have we learned? It is the yacht owner's responsibility, through his captain and crew, to ensure the yacht is seaworthy and adequately crewed for its intended use and the owner must warrant this seaworthiness to the insurance company;  which means captains MUST be vigilant in their efforts to ensure that they and their crew uphold ALL legal and social requirements in order to make that warrant true.

I would go one step further and say it is the responsibility of the captain and crew to exercise discretion, responsibility and respect for the owner and his assets and entirely avoid the use of illicit drugs while under the employ of a vessel. The owners spend millions and millions of dollars on their yachts and millions more crewing them, fueling them, provisioning them and insuring them - only to potentially have their insurance cancelled and their yacht and perhaps their personal assets attacked as the result of irresponsible crew.