CYA Blog

Running A Charter Yacht - Will Someone Please Now Show Me The Right Way To Do It?

2010-04-21T08:44:00.015-04:00

Being on a motor yacht has been more – and also less – than I thought it would be. I guess I expected something totally different from crewing; and what I got was, well… “interesting” to say the least.

During my time onboard we went through three engineers, three stewardesses, two deckhands, two generator tensioner wheels, three generator impellers, one main engine coolant pump, three tow lines, one dock line, two ruptures on inflatable tenders, a black water pump, a grey water pump, a custom mirror in a stateroom, four a/c units, an oven, three waverunner batteries and one relay switch, a garbage compactor, a swim ladder, a tender throttle control, etc… and the list goes on.

I’ve seen a chef get too drunk to cook for guests (more than once). I’ve seen an engineer forget to start the water makers and swear we went through 1,200 gallons of water in three hours while the guests complained they couldn’t shower or flush toilets. I’ve seen a stewardess open the crew hatch to smoke, ash on the deck and leave her butts on the deck.

I learned that other yacht owners and captains don’t like it when you dock in St Barth at 3am without prior notice of late/early arrival.

I learned that apparently it’s okay to enter and exit ports and stay a couple of days without checking into or out of customs (who knew?). And I learned that when you work on a boat apparently it’s okay to go two months without being paid.

I learned that Someone should have done something Anyone could have done and No one ends up doing it – and the captain gets pissed at Everyone.

I learned that if you're dating a crewmate it's okay to overdrink, oversleep and skip shifts as long as you have someone to blame for your work not being done. I learned that the boat develops a personality based upon the crew – and with two couples and one single guy that personality tends to be an attitude of, “the boat is here for our pleasure, not the pleasure of the owner or guests.”

I've seen drunk guests drive tenders. I've seen drunk crew drive tenders. I've seen crew go out drinking with guests, get drunk and not work the next day because they're too hungover.

I’ve seen a yacht slip anchor without the captain on board and almost hit a 70’ Sunreef because the chef didn’t know how to 1) start the mains; 2) activate the helm station controls; 3) operate the windlass from the bridge… and the captain put her in charge in spite of this. (The engineer and I saved the day, thankfully.)

I learned apparently it's okay to extinguish cigarettes on fiberglass, pump out bilges at the dock, throw garbage overboard, etc… I learned that you don't need fire drills, safety briefings or man overboard drills; and apparently no one needs to know the location of the flare kit the EPIRB or life jackets.

But the most important thing I learned in the past few months is this: If I owned a yacht that was in a charter fleet without effective and active management I would be scared stiff at the prospect of handing over the keys without me, the owner, being onboard. The things I’ve seen have given me tremendous insight into running and chartering a yacht – and have instilled in me a certain amount of trepidation when dealing with owners regarding insurance-related matters.

I’m not saying all boats are like this or even close to being like this; but if it’s happening on one boat then to whatever varying degree I’m sure it’s happening on others as well. Regardless, I’ve seen so many situations that would cause owners and insurers alike to shudder with fear at the possible outcome that it would make your head spin.

And in all of this people still say, “Insurance is too expensive.” Based upon what I’ve seen on one boat I say insurance is cheap as chips!

What people fail to understand is that yachts are driven by human beings – human beings with flaws. And as a result, these flaws are ever present onboard and can (and do) creep into the operation of the vessel. It is precisely these flaws that insurers guarantee (within reason) at the owner’s potential financial peril.

(Note: I would encourage everyone to open up an insurance policy and read the “Warranty of Seaworthiness” that all owners agree to in order to insure a yacht.)

So the next time you hear of an owner complaining about the cost of yacht insurance, feel free to pass this along and perhaps he/she will gain a greater understanding of exactly what could be happening on their multi-million dollar asset while they’re not around; and maybe they will understand the inherent vice present when human beings are hired to look after such expensive and luxurious “toys” unsupervised.

Perhaps it will make owners think twice about their hiring practices and vessel management. Because if ever there was a case to be made for boats needing active oversight from a management company, I think I’ve come real close to making it. Yacht managers and charter managers, I tip my hat to you all because after what I’ve seen it’s nothing less than a miracle that you all are not locked up in Trembling Pines Rest Home being fed applesauce with a plastic spoon in a rubber room.

In the mean time, rest assured that CYA/Comprehensive Yacht Assurance will continue to actively review risks and counsel owners, managers and brokers alike regarding a vessel’s coverage because like I’ve said before: CYA does not insure yachts – CYA insures the assets that purchase, maintain and run the yachts. Because if there is one point upon which owners and insurers alike will agree, it’s this: it’s all about the money – who guarantees it and who puts it at risk.

At CYA we do it right – without cutting corners – which means we may not always be the least expensive; but at the end of a long day my head hits the pillow and gets a good night’s sleep knowing that CYA clients are well looked after; and the owner’s assets and interests are covered.

"What happens when I sign a water toy indemnification form?"

2009-11-24T11:01:00.001-05:00

“What’s the big deal about signing water toy indemnification forms? All I’m doing is releasing another party from liability.” This was just one of the questions I received over the past week and it’s an oldie but a goodie.

Again: Blindly signing a water toy indemnification form is NOT a harmless act; nor is it – in my opinion – advisable. It is potentially financially ruinous for the charterer.

If a charterer signs a water toy indemnification form the charterer is doing three things: 1) releasing everyone from all liability surrounding the operation of water toy; 2) assuming 100% of the financial responsibility in the event he causes damage and; 3) limiting or voiding any liability protection that could have answered a claim had he NOT signed the form.

So why does signing an indemnification/release form void charterer liability (CL) coverage? Simple – because the CL policy is NOT designed to pay for someone else’s negligence. What do I mean?

What if your charterer causes damage whilst on a waverunner but he isn’t responsible? “How?” Well perhaps the yacht owner’s negligence in maintaining the water toy lead to the accident – but since the charterer released the owner from responsibility then he has assumed the yacht owner’s negligence, possibly thinking that he has CL cover so he’s covered. This is NOT the case.

CL Insurance policies are very clear in that they will NOT automatically take on any additional liability assumed under contract. And by signing a water toy indemnification form or hold harmless agreement the insured is – basically – acting outside his authority based upon the terms of his liability policy.

Any resulting claims are likely to be denied because the CL policy is not designed to assume liability for a third party; and the presence of a signed water toy indemnification form effectively voids coverage under the CL policy leaving your charterer on the hook for any and all expenses from all parties.

Charterers AND OWNERS need to understand the contracts to which they are a party. And if you don’t understand it – don’t sign it!

Chartering And Indeminification Forms

2009-11-24T11:00:00.000-05:00

As we enter Caribbean charter season I am writing more and more charterer liability policies and more and more I’m answering the question, “What if my client has to sign a water toy indemnification form on the yacht?”

People think of hold harmless agreements and indemnification forms as standard operating procedure that really are just matters of formality. Be that as it may, these “harmless” indemnification forms can be disastrous if they are not understood.
What is “indemnification?” In insurance terms “indemnify” means to make an insured whole or to restore an insured to their pre-loss position. Merriam-Webster defines it as “to secure against hurt, loss or damage; to make compensation to for incurred loss, hurt or damage.”

So what does a water toy indemnification form do exactly? It is a guarantee by the signator/operator of the water toy (not the owner of the toy) that the operator will be a financial guarantor for the benefit of all parties for any losses he is responsible for. It also effectively removes everyone except the operator from any financial or legal liability with regards to the water toy’s operation.

It may also void any cover under the operator’s homeowners policy and/or personal umbrella leaving the operator with no defense for any legal action that may arise, and leaving him without financial defense for any subrogation from other insurers.
It also VOIDS ANY CHARTERER LIABILITY COVERAGE!

I’ll say it again: if your charterers purchase charterer liability coverage and then sign a water toy indemnification form - or any hold harmless agreement - they are (at the very least) voiding their charterer liability coverage and becoming solely and wholly responsible for any and all damages that may arise out of their operation of that water toy.

Charterer’s liability is NOT a warm fuzzy blanket that provides absolute protection for your charterers – it is a specialized coverage that must be understood.

What Will You Do If Healthcare Reform Increases Costs?

2009-10-05T13:14:00.011-04:00

Regardless of your politics there is no denying that the overriding attitude in the US at present is “uncertainty” when it comes to health care and health insurance.

With no definitive health care reform plan on the table – save a severely bastardized version of the president’s original bill – Americans really have no idea what is going to happen to their employer-sponsored benefits plans.

However, employers are beginning to think about what THEY’LL do should any bill make it through Congress that results in higher health insurance premiums. This table shows how some US employers are likely to respond to increases in cost.

Employer Actions if Healthcare Reform Increases Employer Cost
(% responding very likely or likely)
Reduce benefits 87%
Increase prices for customers 38%
Reduce employment 30%
Reduce salaries/direct compensation 27%
Accept reduced profits 11%
Other 6%
Source: Towers Perrin’s Health Care Reform Pulse Survey, September 2009

Furthermore, nearly one-third of employers surveyed said they would assess the impact of proposed fines for non-compliance and if the fines were less than providing health coverage they would consider scrapping their employer-sponsored plans altogether. What can you do?

Arm yourselves with information and be prepared for any changes that may come down the pike at any time. Although any changes to the current US system would not take immediate effect, you can be certain that some changes will be implemented and everyone needs to be on the alert for how the changes affect them. And just the mention of “reform” will surely cause some healthcare stakeholders to make pre-emptive moves to better position themselves for any impending government intervention, so be prepared.

Business owners need to know how changes will affect their bottom line AND how to mitigate any additional expenses. Business owners DO have options available to help ease the burden of potential implementation of the president’s anti-competitive reform. Business owners with employees who experience low claims can benefit if their plans are structured properly; and businesses with high claims also have options available to them to help ease the strain.

Individuals and families need to know that they can shop around and they too can avail themselves of cost-saving measures designed to ease their financial burden with regards to money spent on health care.

CYA doesn't handle yacht insurance exclusively - CYA has the experience, the expertise and the established strategic partnerships that allow us to provide individuals and business owners alike with the sound counseling they require in order to maximize their health insurance dollars and effectively and efficiently manage their medical benefits.

Force Majeure Part Two: Apply A Little Reasoning

2009-09-08T08:52:00.003-04:00

Last week (on this blog) we dealt with a very interesting issue involving a captain of a one-day charter refusing to leave the dock but failing to officially cancel the charter. The captain told the charter client the seas were too high and the weather too bad – and that he had a charter that left the next day that he really needed to get ready for. (Yes, he actually said this to the client!)

I received a number of emails asking why the captain didn’t claim force majeure – which in this case if the weather was uncooperative could have applied. In my opinion the answer is simple: so they wouldn’t have to return the charter fee to the client.

I’m no attorney and I’m no charter broker or agent, but I’m guessing – and this is just a SWAG – that cancellation due to a captain not wanting to lose his dock spot so the crew could prep for the next charter may not technically be considered force majeure and therefore may not be a valid reason to release anyone from their obligations under a charter contract.

Force majeure, as a concept, is designed to release parties to a contract from their liability in the event something happens that is “beyond the reasonable control of the owner, the crew or the charterer…” such as bad weather.

The MYBA contract lists force majeure events such as fire, storm, fog, etc… and lays out the terms of cancellations and the handling of charter fees. What is NOT covered by the concept of force majeure is a failure to perform for reasons within the control of the parties to the contract – including negligence or misconduct. A captain’s refusal to cruise because it doesn’t suit him is, in my opinion, not force majeure; and may not provide the charterer with a valid reason to file a claim with his trip insurance company.

The concept of force majeure is not intended to be a catch-all term that allows a party to cancel at their discretion in order to avoid their obligations, nor is it a contractual term that should be ignored, avoided or misapplied. It should be used responsibly – and correctly – so that both parties to the contract are treated fairly as a result.

But contracts, by their very nature, aren’t fair. Why? Because someone gives money and someone takes money. And when the money-giver is not satisfied as a result of sometihing the money-taker does or doesn’t do then the concepts of “fairness” or “doing the right thing” are supplanted by contractual obligations that often are devoid of anything even resembling reason; which is why parties should exercise a little common sense and courtesy in the event of a dispute.

While contracts and the terms and conditions they contain tend to be fairly solid, I always believe – especially in this industry – that situational logic and reasoning can be applied to any event; and with some level-headed dialogue and fair play all parties can reach a mutual agreement as to how to proceed; and everyone comes out a winner!

Force Majeuer or Capitaine Paresseux Majeuer

2009-08-31T05:00:00.023-04:00

The following is a true story.

You’re thinking of a special birthday present for your spouse's 50th birthday so you book a one day charter as part of a European birthday holiday. This birthday charter originates in St. Tropez and goes to Nice. The charter is booked, the cake is cut and you're on your way; but when you arrive at the vessel the captain informs you that he cannot leave the dock because the seas are too high to make the run to Nice.

You’re upset, but wisely you’ve purchased trip cancellation insurance so everything is going to be okay... and then it all goes pear-shaped.

Let’s set up our real-life scenario: 1)The charter client arrives for the charter; 2)The captain refuses to leave the dock saying the seas are too high; 3)The charterer requests confirmation in writing that the boat would not be going to Nice; 4)The captain refuses the request; 5) The owner has the charterer’s money; 6) The charterer has no verification the charter has cancelled so cannot file a claim and; 7) The captain and the central refuse to cooperate and continue to prepare the vessel for their next charter whilst all but ignoring the current charterers and their needs.

In this instance there are several simple solutions, but BOTH parties have to be willing to work toward them. If parties can put their heads together a logical and simple solution can be reached – but when a captain/owner/central refuse to cooperate, simple solutions will not happen.

The options for a simple solution here are: 1) Fire up the engines and go or; 2) Assist the client in recovering some of his non-refundable expenses by providing proof of reason for not going so the client can file a claim with his insurer. Simple!

"Why is this letter of verification so important?" you ask. First of all, the insurance company will ask for it as part of the claim process. Second, the insurance company will not simply pay the claim based upon the charterer’s request – they’ll need “proof of reason” for the cancellation, so at some point the owner/captain/central will have to cooperate and provide written verification or the charterer gets screwed - again.

In our example, the captain or owner or central could simply provide a letter to the insured stating, “Due to inclement weather and a high sea state, M/Y Italian Yacht was unable to leave the dock and complete the contracted charter on …” They have admitted no wrong, they have not invoked force majeure and they have assisted the charterer in filing a claim (even though the right thing to do would be for the owner to refund the appropriate amount of the charter fee to the client).

However, in this situation the owner was not involved and the central and the captain were “appalled” that the charterer would ask for such assistance; but not so appalled that they couldn’t charge an additional E 1,100 for transport to Nice or retain E 1,000 as a gratuity. The charterer disagreed with this amount but the captain threatened to call the Italian police, so the charterer relented.

So now the charterer is out nearly $16,000+ and has no way to file a claim to recoup money taken from him by the vessel. Happy birthday...

Charterers pay a lot of money to "be treated as if they were the owner" - I wonder if this captain would dare treat his owner the way he treated these clients.

Chartering is supposed to be fun and charter professionals are supposed to ensure that things get done correctly for the benefit of the parties to the contract.

We all need to remember that we are in business not simply to sell insurance or yachts or charters; we’re in business to build relationships - and people pay us a lot of money to do so. And with the state of the economy and the charter market being what it is, it only makes sense that we should all go above and beyond in order to please our clients in order to keep our industry alive and well.

Captains And Owners: Avoid Problems By Knowing Your Coverage

2009-08-24T07:22:00.005-04:00

Last week I was speaking with a captain and we were discussing charter schedules, navigation areas and the like, and I asked him if he was running true demise charters and he replied, “Yes.” So I asked him if the vessel was insured for demise charters and he said, “I have no idea. Does it need to be?” - YES it needs to be.

Vessels must be insured for their intended use, so if the vessel is going to be chartered then the vessel must be insured accordingly. And if the vessel is going to be engaging in true demise charter – not the quasi-demise charters that dominate the industry – then the insurance policy must be endorsed to extend coverage for losses incurred by the vessel whilst being demise chartered.

A lot of the charters for which I write Charterer’s Liability coverage are written on a demise basis, but upon inspection of the charter party and the yacht services agreement I see that the charterer is hiring back the owner’s full-time captain/crew. While the charter contract says “demise” or “bareboat,” in the eyes of the insurance company it is not a demise charter. It’s a “skipper charter” which is different from a demise charter.

If a vessel engages in both demise charters and skipper charters, the vessel needs to be endorsed to extend cover whilst doing both. If a vessel only “skipper charters” then demise coverage is not needed. How do you know when what is needed? Ask a marine insurance agent; preferably me.

Regardless, captains and owners need to know the distinction between the two types of charter most prevalent in our industry, and how (or if) both types of charters apply to their vessel’s use because incurring losses while improperly insured can put the owner and all aboard at significant financial risk.

For more information on this topic, call Gary Carroll at CYA/Comprehensive Yacht Assurance at 954.604.2888 or gary-p-carroll@cyacht.net

Drugs And Crew: Who's Responsible For Irresponsible Crew?

2009-08-15T13:44:00.004-04:00

Not a week goes by that I don’t have a conversation with someone in the industry about captains and crew, drug use and insurance and the conversations invariably end with the question, “Why don’t insurance companies require drug testing for crew?”

The answer is simple: It is not 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 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.

Just as is the case in most every employment contract, the owner 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 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 use. 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.

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.”

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.

The insurance policy clearly states that the responsibility of maintaining the yacht in a seaworthy condition and ensuring the yacht is operated responsibly belongs to the owner. 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 and transport controlled substances for recreational use.

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 it is determined that drug use played a role in the 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.

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. Seriously, drug use is illegal. I’m not kidding – it’s really not legal. “Oh, but Gary – it’s just a little pot or a little blow…” It doesn’t matter if it’s a little or a lot – it is not legal, period.

I would encourage all owners to routinely test all crew for drug use 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.

I also have heard and been party to many discussions on this and some people say, "crew who use put people's lives in danger." I'm not that fatalistic. My opinion, as an advocate of and for my clients (owners), is that crew who use drugs put their owner's assets at risk - and that is absolutely unacceptable to an insurance agent/broker who is charged with the duty of protecting that owner's assets.

So what have we learned? Insurance companies don't require drug testing because it is not their job to engage in employment practices with their clients. It is the yacht owner's responsibility to ensure that the yacht is seaworthy and adequately crewed for its intended use; and warrant this seaworthiness to the insurance company that insures the vessel.

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 to 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 hundreds of thousands of dollars 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.

For more information on this topic please contact Gary P Carroll of CYA/Comprehensive Yacht Assurance at 954.604.2888 or gary-p-carroll@cyacht.net.

Kickbacks Or Commissions: Who Gets Them - Legally?

2009-08-06T11:34:00.006-04:00

I was asked recently, “If I send you a client for insurance – who gets the commission?” My answer was simple: “The licensed and insured insurance agent gets the commission.”

There is a lot of hullabaloo going on on Dockwalk.com regarding yacht brokers offering portions of commissions to captains (or others) as an incentive for captains to assist the broker in selling the yacht.

Captains and crew argue that they should get some of the broker's commission because they helped sell the yacht and effectively helped themselves out of a job. Brokers argue paying captains is a way to ensure the vessel shows well and possibly sells quickly. As an insurance agent I don't agree with either of these philosophies but I'm not a yacht broker or a captain and so operate within different parameters.

Dockwalk.com has a forum on this topic if you're interested. I'll refrain from interjecting too much opinion here and offer up only a bit of information regarding kicking dollars toward others following a sale from an insurance perspective. Personally, I think the practice is wrong and anti-competitive... but that's just me.

I'm not sure how it works for yacht brokers and I'm not certain if any federal or state statutes govern the procedures brokers must follow in order to compensate unlicensed persons following the sale of a vessel. And since I'm not a yacht broker I do not know if FYBA or CPYB (or individual brokerages) have any professional standards regarding this practice. However, the insurance industry has federal and state statutes that dictate to whom and how any compensation may be paid following the sale of an insurance contract.

With regards to insurance there is very little grey area: Offering people cash incentives to purchase insurance policies - even the customer - is illegal in the State of Florida. Doing so is known as coercion or rebating - practices dealt with clearly by the Deceptive Trade Practices Act and state statute.

Florida Statue section 626.9541 titled “Unfair methods of competition and unfair or deceptive acts or practices defined” defines rebating as: "knowingly… (b) Paying, allowing, or giving, or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance contract, any unlawful rebate of premiums payable on the contract, any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract;…"

The statute also deals with compensating anyone following the sale of an insurance policy. The following is from the Florida Statutes 626.112:

(8) No insurance agent, insurance agency, or other person licensed under the Insurance Code may pay any fee or other consideration to an unlicensed person other than an insurance agency for the referral of prospective purchasers to an insurance agent which is in any way dependent upon whether the referral results in the purchase of an insurance product.
(9) Any person who knowingly transacts insurance or otherwise engages in insurance activities in this state without a license in violation of this section commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

Again, I don’t sell or captain yachts so I can't make a determination of whether or not yacht brokers offering or giving portions of commissions to captains (or others) is right or wrong; I'll let the yacht brokers and the principals of the yacht brokerages make that determination.

I sell insurance and I am happy to do what I do to help you and your clients have a great experience on the water; but I cannot risk my license to do it – and I would never expect anyone to risk theirs for me.

OPINION: Health Care - A Giant Hole In The Country Where The Government Is About To Throw Your Money

2009-07-28T08:50:00.011-04:00

Over the past several months I’d been noticing some rounding on my car tires and I was visiting the service station more often to put air in my tires. My service tech told me I had about 500 miles left on the tread – and that was about 5 months and 1500 miles ago. Oh well…

So, my car tires are trashed. Time to buy a new car. Makes perfect sense, right? If you get a flat tire don’t replace the tire – just buy a new car. If that sounds logical to you then you probably agree with what lawmakers are trying to do with the US healthcare system.

Lawmakers – almost to a person – will agree that certain aspects of the healthcare system are flawed and even broken. I’ll agree with that. Why? Because no one is talking to one another and that causes problems.

Medical facilities, physicians and insurance companies are lacking in a standardized IT platform that allows effective, consistent, real-time communication regarding patient care. Couple that with ineffective use of second opinions generating higher payouts by insurers that could (possibly) be avoided by having seamless access to a patient’s complete medical history; patients that are experiencing poor quality or inadequate and improper care; patients that are forced to return to doctors or hospitals for follow-up or repeat care that could have been avoided; etc... and you can see that the communication breakdown has a serious knock-on effect.

But here’s the deal: implementing a “universal” healthcare plan won’t fix the problem. Kind of like buying a new car won’t fix the tires on the old car. All lawmakers are doing is implementing an astronomically expensive, new, untested plan instead of taking a logical step: fixing the existing plan.

The problem with healthcare in the US is not economic – it’s systemic. The problem isn’t that healthcare is expensive because health insurers are robbing the American public. The problem is that health insurers are simply loading in the cost of doing business to the rates they charge participants and those rates are reflective of systemic flaws that create inefficiency at all stages of the process - which inflate costs.

But this isn't solely the fault of the health insurers, the providers, the patients or the government. It's evidence of systemic failures from ALL stakeholders that lead to negative cost metrics - put simply; there are broken bits that aren't being fixed and they're continuing to cost everyone money.

Something we must realize is this: Health insurance companies aren't evil and health insurance companies don’t treat patients. Health insurance companies sell a product and coordinate payment for services rendered. They are in business to turn a profit and their profits depend – in part – on efficient patient care; and a key component to efficient patient care is communication and access to current information. Insurance companies and providers do the best with the information they have available... which sometimes isn't very good.

Regardless, blaming the health insurance companies as the sole culprits for the systemic problems associated with healthcare in the US is like blaming a bartender for getting you drunk. The bartender has no control over how much alcohol goes into the bottle or down your throat; and while they should be more involved in the prevention of drunkenness, if you wake up hungover you’re just as much to blame if not moreso.

Likewise with the healthcare system. As a patient you have rights – and you have responsibilities. You have the right of access to care but you also have the responsibility to ensure that you get care that is adequate and appropriate for your specific needs.

But when we have a system that does not promote or support personal responsibility by the patient - or professional responsibility by providers and insurers - then no amount of “universal” care will fix that. It will simply add more bodies to the broken system. (And what you end up with is a bunch of pissed-off drunks with empty pockets and throbbing headaches blaming the bartender for what they allowed to happen to themselves.)

So what’s the solution? Let’s tax the wealthy, fine employers who don’t provide insurance, fine individuals who don’t buy it and "re-direct money from existing federal programs" in order to fund this untested $1,500,000,000,000 prototype. Yep – all we need is more money. Clinton tried this and it failed but since we have a new president, maybe the same plan will work this time. (See: definition of "stupid" below)

When you have a systemic problem, the standard political move is to grandstand and throw money around like rice at a wedding; but until you address the problem you’re going to do nothing more than maintain your expensive and broken system which ends up costing everyone even more money. The Congressional Budget Office has already warned the present administration of this, but Obama and Pelosi are sailing full steam ahead in spite of the warnings.

Question: What were the last words of the naval architect who designed and built the "unsinkable" Titanic and encouraged the captain to sail north in spite of ice reports? Answer: Man, this water is cold.

What lawmakers, health care providers and insurers failed to realize and adequately address (or simply ignored) 10+ years ago when this really became a major issue during president Clinton's administration is what they’re doing (which is little to nothing) is stupid. Stupid – noun – the belief that doing the same thing repeatedly will yield a different result. And now the Forrest Gump theory of government intervention is about to take place: Stupid is as stupid does.

It was stupid to think the system would fix itself and it’s stupid to think that money will fix the problem – along with 50,000,000 additional patients, increased taxes, punitive penal provisions, increased government involvement, etc... The government in its infinite wisdom has seen fit to come in and do what governments do: burn the building down, tax everyone to re-build it, and hope the new building is pretty enough to distract us from the real problem which is this: It’s not the building that’s broken… it’s just not wired properly.

The government should NOT be getting involved in the micro-management of health care. Why? Because they can’t even manage their own systems. Medicare and Medicaid are flawed in design and in implementation (and funding), and the Veterans Administration is behind on processing nearly 1,000,000 claims; but now – for whatever reason – the government feels capable of successfully implementing a $1,500,000,000,000 plan that guarantees insurance for everyone and taxes folks to fund it. Smart or stupid?

What the government should be doing is encouraging health insurance companies, hospitals and providers to work to standardize their IT platforms to increase efficiency of claims filing AND increase access to up-to-date patient information, which could improve the quality of care drastically - which in turn could begin to drive expenses down. It won't fix everything, but it's a start.

What the government should be considering is NOT taxing the wealthy and penalizing business owners, but rather offering tax credits or breaks to stakeholders so they can more efficiently improve the delivery of care to patients. Reward progress, don't punish laziness.

I’m all for supporting the sections of the plan that deal with mandating that hospitals, doctors, providers and insurers immediately update their systems to reflect not only the most current technology but also a willingness to grow in sophistication with regards to the provision of comprehensive care to a more sophisticated consumer. What I don't support is this “tax-and-spend” philosophy. That is not what is needed here.

What needs to happen with the healthcare bill is that everything EXCEPT the sections on supporting providers and insurers enhancing their communication/IT capabilities should be thrown out. The idea of additional taxes on folks who already contribute disproportionately to the economy to pay for yet another government entitlement program should be stricken from the plan.

Shift the paradigm, shift the thought processes and shift the method of operation and you'll change the system. It happens with other products, why not healthcare?

Think about this: About 20 years ago a cell phone cost $1,000, weighed seven pounds, lasted 60 minutes on a single charge, and had bad reception and ridiculously high per-minute usage rates. No one could afford them and no one wanted them because - basically - they sucked.

Today, companies are giving away tiny cell phones that do everything a laptop computer can do – which is why more people have cell phones than have health insurance. Why? Because the technology is cheap – and demand for it is fueled by consumers who are willing to pay for it because they can afford it and the technology companies know that in order to maintain market-share they MUST provide consumers with the most current technology at the best price. This technology has value.

Healthcare in the US could enjoy the same benefits simply by exploiting already available technology to enhance the healthcare product and stimulate competition, thereby creating a higher-quality product and making it available and affordable to more people. Value. This way the government wouldn’t have to tax us to pay for its Ponzi healthcare scheme.

Secretary of Health and Human Services Kathleen Sebelius, and other democrats, continually spout the idea that the president’s plan is one based in personal responsibility – which is contradictory to the reality of the current plan - and they know it. They're trying to over-sell the concept in an attempt to divert our attention from the reality of the plan; so they're lying to us and they're hoping we don't catch on and instead simply repeat the mantra "Universal Health Care" without knowing all the facts.

Well, Sebelius is a fool if she thinks she can sell the concept of imposing additional taxes to create an entitlement program and have that concept communicate the message, “You are responsible."

Entitlement programs actually tell people, “Since you are not responsible enough to do this for yourself, we’ll hold your hand and do it for you and we’ll tax other responsible folks to pay for your shortcomings.” This is not personal responsibility – this is entitlement and it weakens a nation... or at least this nation that was founded not upon the ideals of entitlement but rather empowerment.

During this debate a lot of people seem to be spewing forth the age-old quote; “You can tell a lot about a society by the way it treats its poor.” And they’re right. And by creating entitlement programs that keep the poor powerless and financially subjugated it says that we – as a society – do not place enough confidence in anyone’s ability to effectively better themselves by their own efforts, so we will do it for them. Effectively it says, "We've given up hope."

If we fix the system, people will have greater opportunity. If we demand more from all stakeholders in the health care system (including patients being more active and responsible in their health care) then we can fix the system. People like to exercise circuitous logic and blame folks for their shortcomings. It’s the government’s fault. It’s the hospital’s fault. It’s the insurer’s fault. Guess what? It’s OUR fault for not demanding more, sooner.

But before the government steps in and completely mucks things up, WE need to demand more from those to whom we already pay large sums of money to keep us alive and healthy. And the government needs to demand that all stakeholders in the US healthcare system step to.

If the government would demand the healthcare industry – as a whole – develop enhancements to their systems by utilizing available and affordable technology we wouldn't have to perpetuate the ideals of entitlement and we could move away from an entitlement philosophy and toward a realistic system of actual empowerment with regards to health care in the US.

That said and done, I feel this is a large part of what is necessary to make the US system the best in the provision of care AND affordability. Is the process simple? No… but the concept is.

By the way, I got four new tires, a balance and alignment and all for $800; and my car runs like a dream. I saved myself $40,000, fixed the actual problem and didn't solve my problem by buying a new car. I wonder how much of that $1.5 TRILLION we’d save by fixing the actual problem as opposed to simply throwing money at it.

Bareboat Chartering Requires A Specific Bareboat Endorsement

2009-07-24T13:16:00.001-04:00

I was speaking recently to a charter agent and a maritime attorney about chartering and we got into a discussion about the importance of reviewing the vessel’s insurance to ensure that the vessel’s policy is properly endorsed for the vessel's intended use.

I mentioned to the agent and attorney that a lot of policies carried by boats will be endorsed with wording such as “permission to charter” or “occasional charter” and that this vague wording may not mean the vessel is insured for the type of charter being run – namely bareboat charter; a point with which the attorney agreed.

I know a lot of folks use demise contracts and they’re running the ‘wink-wink, nudge-nudge’ type of demise charter in which the charterer contracts with the owner’s vessel and the owner’s existing crew. Fair ball – technically this isn’t a bareboat charter so it’s relatively safe to say all is well with the insurance, assuming the aforementioned wording. But if you want to know for sure, contact the company and get written confirmation.

However, in the event you are running true bareboat charters it is vitally important that the vessel be insured and endorsed to allow for bareboat charters.

A vessel bareboat chartering without the proper endorsement could put parties to the charter contract at risk and also could put the vessel owner at risk with his insurer in the event of a loss. If a vessel is bareboat chartering and is involved in a loss, and the vessel was not insured for bareboat charter, then the vessel owner could be left holding the financial bag for the loss. And if you're the captain driving that vessel I don't need to tell you what comes next...

So, how can you tell if a vessel is insured for bareboat charter? Call the owner’s insurance agent and ask him/her to provide you with the endorsement showing the vessel is insured specifically for bareboat charter.

But if someone says the boat is insured for bareboat charter because the declarations page says "permission to charter" know that the wording "permission to charter" probably does not mean "permission to BAREBOAT charter" unless you have specific wording in the policy stating otherwise.

Regardless, it is always in the best interest of all parties to check BEFORE the charter.

For more information on this topic please contact Gary P Carroll at CYA/Comprehensive Yacht Assurance at 954.604.2888 gary-p-carroll@cyacht.net

Customer Service – Are Insurance Clients Getting What They Pay For?

2009-07-19T17:13:00.000-04:00

Service. We all try to pride ourselves on the service we provide to our clients and when it comes down to it in this industry service is THE product we’re actually selling.

But lately I’m taking calls from captains and managers regarding situations they are encountering with their present insurance representation which makes me believe that in some situations service is taking a back seat to profits.

I took a call on Saturday from a captain in New York who has worked for an owner for nearly 15 years – utilizing the services of a single insurance agent and company for 13 of those 15 years. But when the agent was asked if the policy could be endorsed for a specific situation, the client was told without hesitation, “Sorry… there’s nothing I can do.” Fifteen years of paying premium and there’s nothing the agent could do. Sorry folks – I don’t buy that.

Here’s why I don’t buy that: On a Saturday I made two phone calls and guess what… this captain and client have options. So what the current agent should have said is, “Sorry... there’s nothing I’m willing to do.”

Yacht insurance clients pay tens of thousands of dollars in premium, a portion of which ‘hires’ me for the year. If a client asks me to do something and I tell him “there’s nothing I can do” without reason or justification, I expect him to fire me.

If an agent fails in his capacity as an owner’s advocate I feel it’s time to fire that agent and get a new one; one that understands the concept of customer service. One who understands that even if the answer is “no” it’s always worth it to make the effort to get a “yes.” An agent who’s willing to abandon linear logic because it’s easy and instead use innovation and creativity to solve problems for their clients. Yes – I know such an agent.

At CYA/Comprehensive Yacht Assurance, we want your business and will work to earn your trust and keep your clients happy. For more information contact CYA/Comprehensive Yacht Assurance at 954.604.2888 or info@cyacht.net

Risk - Consumers Transfer It; Insurers Pay For It

2009-07-17T07:49:00.004-04:00

People tell me all the time, “Insurance companies get rich at our expense.” While this may or may not be true, let's look at this in context and understand some basic insurance concepts.

The first concept is the concept of risk. "Risk" as defined by a financial advisor is the uncertainty of loss or gain. "Risk" as defined by a casualty underwriter is the potential for loss. Big difference in definition and concept.

Insurance companies are all about risk. How do we determine risk? How do we price risk? How do we avoid as much risk as possible? Etc... The insurance companies look to maximize their profits by pricing the risk correctly and assuming (taking on clients) the best risk they can.

The second concept to consider is how we deal with risk. As a consumer, there are three basic ways to approach risk: accept it, transfer it or avoid it. If you accept it you bear the financial responsibility of any losses. If you avoid it you avoid activities that could lead to a loss. If you transfer it, another party (insurance company) pays claims for any losses; and purchasing insurance is the most popular way to transfer risk.

Regardless, insurance is something everyone needs that no one wants to use. Because like I always tell people, when you use insurance something usually has gone wrong. It's not 'health insurance' - it's 'sick insurance.' It's not 'life insurance' - it's 'death insurance.' It's not 'yacht insurance' - it's 'my yacht was damaged or destroyed insurance.' It's not 'liability insurance' - it's 'I messed up and now someone is suing me insurance.'

So the overall concept of insurance is simple: you transfer risk by buying insurance, something goes wrong that is covered by the insurance you bought, the insurance company pays to indemnify you (make you whole). But... is insurance expensive or are people simply averse to the pricetag?

M? I think insurance is cheap, considering... Here is a very simple example to illustrate my point: if you own a $3million yacht and you pay $30,000 per year it would take you 100 years of paying premiums to equal the financial risk the insurer bears from day one. If someone offered you $30,000 but told you that you could be on the hook for $2.97 million, would you take the deal?

Now, couple proportionately low premiums that you pay with items for which the insurance company is immediately on the hook, like: legitimate losses, scams/fraud, charter endorsements, third-party liability in excess of the value of the hull, medical payments, employer liability, statutory coverage (Jones Act and USL&H), lagging investment portfolios, etc... and it’s easy to see that insurers bear a significantly greater proportion of financial risk (on the front end and back end) than you or I ever will.

And if you still think insurance companies are getting rich at our expense, perhaps they have to get rich in order to pay claims: Because while risk is uncertain, human nature is not. Insurance companies know this, and we pay for it. Truth be told, I WANT my insurance company to be rich because when I submit a claim I don't want my insurer to have to go begging for money - I want them to pay.

For more information on insurance concepts, contact CYA/Comprehensive Yacht Assurance at info@cyacht.net or 954.604.2888.

Warranties And Representations: Key To Understanding Parties’ Obligations

2009-07-16T16:43:00.001-04:00

Recently a captain posed a question to me regarding representations and warranties in an insurance contract – asking if one or the other can increase an insured’s liability under the contract. What are ‘representations’ and ‘warranties?’

Representations and warranties are defined as follows: A representation is a statement of such facts or circumstances relative to the proposed adventure, as are necessary to be communicated to the underwriters, to enable them to form a just estimate of the risk. A warranty being in the nature of a condition precedent, must be strictly and literally complied with; whether a warranty be material to the risk or not, the insured stakes his claim of indemnity upon the precise truth of it, if it be affirmative, or upon the exact performance of it, if executor… (A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856.)

Put simply: a representation is a statement made by an applicant/insured that is true and accurate to the best of the person’s knowledge. A warranty is a statement of fact. A misstatement of a representation (misrepresentation) isn’t necessarily going to lead to the cancellation of the contract if it was made unknowingly or accidentally; however, if an insurer discovers that a representation was made by the client in a deliberate attempt to mislead the insurer then the representation becomes a “material misrepresentation” and can be grounds to void the insurance contract.

Too often it is the case where an applicant may think, “Aaah… that’s not important,” and they fail to disclose information they deem unnecessary or arbitrary – but the insurer would consider it significant (or “material”) to their underwriting the risk. Once the offer is made by the insurance company and the client agrees to the terms, that misrepresentation could be deemed “material” and could cause them to lose their coverage. Further – if the insured makes a “warranty” that is knowingly false, the insurer will have grounds to terminate coverage with no obligation to honour any claims.

The truth is always the best course of action and dealing plainly and candidly with a marine insurance specialist is key to providing the best service for the client AND the insurer. For more information on this topic contact Gary Carroll at CYA/Comprehensive Yacht Assurance at info@cyacht.net or 954.604.2888.

Never Let A Yacht Broker Sell You Insurance

2009-07-16T12:12:00.000-04:00

Okay boys and girls, here’s a story called, “Great Lakes Reinsurance (UK) PLC v. Maria Arbos, et al. 2009 AMC 334 (S.D. Fla. 2009.)” Once upon a time Maria Arbos bought a 50’ Sea Ray from large yacht brokerage; her friend Mr. Quevedo paid for the vessel, and a yacht broker assisted Arbos with arranging marine insurance on the vessel. It gets better…
The yacht broker contacted the insurer and provided information to the insurer, such as naming Quevedo as an authorized operator who had not been involved in a marine loss for the past ten years; and also allegedly misrepresented the owner’s boating experience – all of this over a signature that may or may not have been the client’s.
Well kids, a year after the policy was issued the vessel disappeared. Shocking, eh? Arbos submitted a claim for the insured value of the vessel. Subsequently, Great Lakes discovered Quevedo previously owned a vessel that was reported stolen and that Arbos had no prior boating experience. Great Lakes denied the claims – a move upheld by the courts that ruled the representations about no prior losses and boating experience were material. Material misrepresentations are all an insurer needs to void coverage. Insurance company wins – client loses, again.
There’s a very good reason why insurance agents take mandatory insurance courses, pass insurance exams, pay thousands of dollars annually for E&O insurance and participate in mandatory insurance continuing education. What is that reason? Because we sell insurance – not boats. Unlicensed yacht brokers playing insurance agent is wrong on a number of levels; not the least of which is it’s illegal AND doesn’t serve the best interest of the client.
For more information on covering your assets and your clients’ assets (correctly and legally), contact Gary P. Carroll at CYA/Comprehensive Yacht Assurance at info@cyacht.net or 954.604.2888.

Charterers As Additional Insureds On A Yacht Policy? Know The Consequences

2009-07-16T11:46:00.000-04:00

When dealing with charter brokers and agents in our handling of charterer liability insurance I always get the question, “Can’t the owner just add the charterers as additional insureds on his policy?” Sure. By the way, I don’t have health insurance, could someone add me to their policy so I could go see a doctor?

First of all, a lot of underwriters won’t do it. Why? Because they don’t have to. And because they are not in business to assume risk for anyone other than the person(s) they insure. And let’s be clear on that: insurance companies don’t insure boats – insurance companies insure the assets of people who own boats.

Secondly: if you add a charterer as an insured on a vessel and they cause damage to the yacht or to a third party, the owner’s insurance company answers the claim. In this case the insurer has no rights of recovery against the charterer; so the owner’s experience is saddled with a loss which leads to increased rates at renewal. And that adverse rating could follow that owner for 5-10 years, while the charterer simply walks away.

Adding charterers as additional insureds: Is it done? Probably. Would I advise my clients to do it? No. I believe that if a person is going to charter a yacht they need to be willing to assume their share of financial responsibility - period.

For more information on this, contact CYA/Comprehensive Yacht Assurance at 954.604.2888 or info@cyacht.net