Force Majeuer or Capitaine Paresseux Majeuer - Trip Insurance And Professionalism Save The Day

The following is a based upon a client's true story.

A lucky man's amazing wife booked a weekend charter as part of a European birthday. The charter was scheduled to begin in Italy and make a quick passage to France, but when the clients arrived at the yacht they were told by the captain that the seas were too high to depart.

The charterer was upset at the prospect of their $15,000 trip being cancelled, but wisely they had purchased trip cancellation/interruption insurance so they were confident that everything was going to be okay.  As this was their first experience with chartering in Italy they soon realized that all the confidence in the world won't supplant the reality of the dark side of the Italian chartering experience.

Let’s set up our real-life scenario:

1)The charter client arrives for the charter. All furniture is covered up, the interior has not been readied, the hot tub is empty, the boat is not provisioned correctly and two crew members are unaccounted for;

2)The captain refuses to leave the dock saying the seas are too high, forcing the guests to spend their entire weekend at the dock (in spite of the fact that weather reports, sea state reports and photos of boats departing and arriving in the marina revealed no such adverse weather) or abandon their charter altogether with no refund and no offer of re-booking;

3)The charterer, wanting to file a trip interruption claim, requests from the captain confirmation in writing that the boat would not be departing due to inclement weather;

4)The captain refuses the request while continuing to prep the boat for its next charter and while boats of all types and sizes arrive and depart to and from the marina - in spite of his claims of inclement weather and all the while serving the guests with leftover provisions... and no hot tub;

5) The charterers - forced to make changes to prepaid hotels and helicopter/auto transfers at their expense - now seem to have no way to recoup the expenses incurred as a result of an unresponsive, unprofessional and unaccommodating captain;

6) The captain charged the guests €1,100 for arranging (not paying for) transport to France and withheld another €1,000 from the balance of the APA as a gratuity.  When the guests complained the captain threatened them with police action.

Happy birthday.

When the charterers got me involved, along with their US-based charter broker, I explained to them how to file the claim and what the insurance company would need to process the claim.   The charterer's broker went above and beyond her call of duty and - as a team - we were able to make headway in resolving this issue in spite of the unprofessional and unaccommodating yacht captain and his owner's representative.

Fortunately, the claim was eventually settled by the travel insurance company - but not before unnecessarily running the charterers/victims around in circles and, more than likely, souring them on ever chartering again.

There are three types of people in this industry:  problem creators, problem solvers and those unfortunate few who can't make up their minds which one they are.  All stakeholders in this industry need to remember that we are in business not simply to drive boats, sell insurance, sell yachts or sell charters; we’re in this industry to build relationships - and people pay us a lot of money to do so.

"It's a standard yard contract - nothing in it that I'm worried about."

That was a quote from a captain during a recent conversation about a client's upcoming yard period.

It amazes me how diligent captains can be regarding safety training, project management, situational awareness and passage planning - but they'll slap their names on any old contract without reading it; not knowing that their signature could be just as financially ruinous as running hard aground or sinking the vessel.  And it doesn't matter who signs the contract because it's the owner's assets that are on the line - so people signing yard contracts need to be sure what they're doing is correctly.

I'll use a hypothetical scenario to show you just how simple it is to let an insurance company off the hook.

Captain Einstein hauls out at XYZ Yard and prior to hauling he/she signs a standard yard contract containing a provision stating the yacht owner releases the yard from liability and assumes the yard’s liability and also says (for all intents and purposes) the yard won't be sued by the insurance company or the owner - even if the yard is negligent!  Put into layman terms, the yard is saying, "Even if we screw up - we're not responsible and we're not paying."  Why would anyone sign this without an insurance company giving them the okay?

During the yard period the captain uses a piece of yard equipment which malfunctions, strikes a transformer starting an electrical fire that quickly spreads and ultimately ignites and destroys several boats, injures a number of people and does significant damage to the yard.  The root cause of the accident was determined to be that the piece of equipment had not been properly maintained by the yard - not user error.  The yacht insurance company investigates, finds the yard contract, goes right to the section with the hold harmless/indemnification/release of liability, checks for a signature and:

1. Reduces the claim 
2. Denies the claim or 
3. Voids the yacht’s policy 

The insurer has these options at their disposal based upon the fact that the captain did not have the authority to assume the yard’s liability (or act on behalf of the insurer) and the captain did not have the authority to release the yard from liability or waive the insurer’s rights of recovery - without written permission from the insurer. 

"But Gary, it was the yard's negligence in maintaining the equipment that caused the loss."  You are correct; BUT - when the captain signed that yard contract it may be argued that the captain assumed the yard's liability which means the captain assumed the yard's negligence thinking that his yacht policy would cover him automatically; and the captain does not have the authority to do this - and the insurer does not have the obligation to perform based upon the captain's actions.

Insurance policies are very clear as to what they will and will not cover and what they will and will not do or allow.  Here are examples taken straight from the exclusions section of a company's yacht policy regarding assuming liability without prior written consent:

• (The policy excludes) Any liability assumed by an insured person under any contract or agreement without our prior permission.
• No assignment of or change of interest in this policy or in any amount payable under it will be binding on or recognised by us without our prior written consent.
• No one covered under this policy or acting on their behalf shall waive, limit or impair our right to recover and/or the amount to recover against a third party before or after a loss.

If a yard contract is signed without insurance company consent the yacht owner could be held personally financially liable for the damage to his yacht, other yachts, the facility, employees, crew, subcontractors, damage to the environment, civil/criminal penalties, etc... and the owner may not have an insurance company to defend him - even though the damage was the result of the yard's negligence.  

This is a very rough and basic example but it illustrates just how serious this situation can be - and it is entirely avoidable.  

This is why I strongly offer this little bit of advice: Defer signing third party contracts until you receive written consent. Send the contract to the owner/manager/attorney and let them confirm the terms with the insurer before signing.

And captains, remember:  get it in writing FIRST.  Because the ass(ets) you cover just might be your own(ers)!

Kickbacks Or Commissions: Who Gets Them - Legally?

I was asked recently, “If I send you a client for insurance – how much of a finder's fee do I get?” My answer was simple: “If you have an insurance license specific to the product, we'll talk.  If not, you get nothing.”

I'm not sure how it works for yacht brokers and I do not know if any federal or state statutes govern the procedures brokers must follow in order to compensate unlicensed persons/third parties following the sale/charter of a vessel. Furthermore, I do not know if IYBA, MYBA, CPYB or brokerages have any professional standards or guidelines regarding the practice of providing financial incentives for referring business or compensation after a yacht or charter sells.  I know it happens.  I've seen it happen.  Whether or not it is effectively regulated is a big unknown.

Regardless, the insurance industry has federal and state statutes that dictate to whom compensation may be paid following the sale of an insurance contract.  With specific regards to insurance there is very little grey area and it is regulated. Simply put,  along with kicking back a percentage of commission to a person who purchases a policy, offering unlicensed people cash incentives to purchase insurance policies or paying a referral fee is illegal in the State of Florida, according to the Deceptive Trade Practices Act and Florida 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 - licensed or unlicensed -  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 yachts or charters so I can't make a determination of whether or not yachting industry brokers offering or giving portions of commissions to third parties is right or wrong; I'll let the yacht brokers and the principals of the yacht brokerages make that determination.

Regarding compensating unlicensed insurers for referring business I'll simply say this - I know others do it but I don't.  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.

A Captain's Guide To Voiding Insurance Coverage In One Easy Step

I seem to cover this topic quite a bit but it is very important so I'll keep covering it until we all have a firm grasp on it.

Recently I was having an online exchange with a captain about insurance coverage being voided due to acts of yacht crew and the captain commented that, “…if they (crew) can void your coverage, your coverage is garbage.” While I can understand the emotion I think it’s important to discuss the reality of just how easy it is to void insurance coverage, but first lets start with some basics. 

If you READ YOUR POLICY it will tell you in no uncertain terms who the policy covers, what the policy covers, where the policy provides coverage, when the policy provides coverage, how the policy provides coverage and - most importantly - situations why a policy won't provide coverage.  The 5 Ws and H of insurance.  The terms of coverage, duties of the insurance company and the duties of the insured are spelled out in plain and relatively easy-to-read English;  but still, captains and crew manage to find ways to reduce or void coverage.  Today we'll look at one way to void insurance coverage and how to avoid it. 

A very common way (and probably the most popular and easiest way) to void your cover is to sign any contract that assumes liability, releases another party from liability or in any way attempts to modify terms of coverage or assign the policy without the insurer's written approval.  And you can do ALL of these things by simply signing a yard contract - something I've seen not just captains do but mates, engineers and yacht managers do as well.  Shockingly, as a bosun on a 43m even I was asked to sign one (and the answer is "no, I didn't sign it").

Lets take a look at some wording from a standard yacht policy.  This wording comes from a single policy and is only a small portion of wording contained in the policy terms that deals with explaining how actions of the insured can lead to coverage being terminated:

• “Failure to comply with any warranty will, in normal circumstances, void this insurance from the time of the breach.”  
• “If the insured gives up rights to recover damages from anyone who may be liable so as to deny Us the benefit of such recovery had We made payment of a claim, We may consider this policy null & void.”  
• "This insurance shall inure to Your benefit only and shall be void in case this policy or the interest insured thereby shall be assigned, transferred or pledged without Our previous consent in writing…"
• "You must assume no obligation, admit no liability…without Our written permission…"
• “We do not provide liability coverage for:  liability assumed by You under any contract or agreement unless specifically endorsed hereon…"

Now lets look at wording from a local yard contract and compare what it requires to what the insurance policy forbids:

"...YACHT OWNER agrees to release YARD...from any liability to YACHT OWNER for, and YACHT OWNER will defend, indemnify and hold YARD, its co-ventures, partners, customers, contractors, officers, shareholders, members, directors, employees, agents, invitees, vessels, masters, and crews, and the representatives of any of them (collectively called "YARD GROUP") harmless from and against all suits, actions, claims, and damages based upon personal injury, death, property damage, or loss, whenever occurring, suffered or incurred by YACHT OWNER, its own contractors and sub-contractors, or its invitees, or the officers, employees, agents, invitees, or representatives of any of them (collectively called "YACHT OWNER GROUP"), arising out of or in any way directly or indirectly connected with access to (including without limitation ingress and egress) and/or use by any member of YACHT OWNER GROUP of any vessel or property owned and/or operated by YARD GROUP... whether or not caused or contributed to by the sole or partial negligence, strict liability, or fault of YARD GROUP, or the un-seaworthiness of any vessel or appurtenance owned or operated by YARD." 

Did you catch all of that?  If you - or any crew member - sign a yard contract with this wording you are telling the yard that the owner’s insurance policy will cover ALL liability and ALL negligence of the yard; effectively you are agreeing that the yacht’s insurance policy will become the yard’s insurance policy – and you do NOT have the authority to make that call without the insurance company giving you prior written approval to do so.  

I cannot stress this enough.  You – as a captain – do NOT have the authority to negotiate terms of cover for or on behalf of the owner/vessel without the prior written consent of the insurance company.  You do NOT have the authority to assume liability and you do NOT have the authority to assign the policy.  Doing so can - and probably will - void cover.  This is not "garbage" - this is basic insurance procedure.

Regarding yard contracts, a maritime attorney friend of mine said, “Most captains are signing these things without understanding what they’re signing until there is a problem and at that point it’s too late.”  The executive vice president of an insurance company and head of yacht underwriting told me, “What we find is the captains don’t understand what they’re signing and the yards don’t understand what they’re asking people to sign – but they’re still signing.”

A lack of understanding seems to be a common theme so lets lay down some ground rules with regards to third party contracts and how to deal with them.

First, send the contract to the vessel’s owner and insurance agent before signing and do NOT sign the contract until you get written approval to do so. I suggest having captains/crew avoid signing them all together. Next, make sure the yacht owner's representative reads the contract and then get written confirmation from the insurance company that the yard's contract is acceptable before signing.  Some insurers require vessels to submit a list of work to be done for underwriting approval prior to the work being started and they also require a copy of the yard’s liability cover.

 

Most importantly, do not take advice on signing yard contracts from anyone not authorized to exercise authority over the yacht's insurance policy.  And here’s the kicker:  as a captain you do NOT have this authority. Neither do owners.  Neither do yard owners, yacht managers, brokers, etc…  The only party who can make that call is the insurance company.

If you sign a hold harmless and if you assume the yard's liability without an insurer's permission or assign the terms of your yacht policy to another risk you can count on your coverage being voided and there's no excuse for this happening - ever.  And this is just one of many ways captains and crew can easily void a yacht's insurance cover, regardless of that policy being "garbage" or not.  

My point is this:  Ask questions, engage the insurance agent/company, call an expert.  As one charged with the huge responsibility of taking care of the owner's asset you owe the owner at least that much; and it doesn't cost you anything.  

You see, when you purchase an insurance policy you purchase all of the insurance expertise and advice that goes along with it.  Use the agent, the broker, the underwriter, the insurer’s legal department, etc… and avoid making the mistakes that could lead to the policy being voided because if the policy is voided due to the actions of captain or crew it's not the policy that's "garbage," but rather the actions of the offending crew member - which could lead to his career being trashed.

Next week we'll discuss what could happen if you, as captain, void an owner's insurance cover.

With Drama Below Deck Safety Suffers On Deck - The Media's "Reality" Of Yachting Is Fake

I was having a rather intense conversation with a captain friend of mine (and member of the Yacht Captains Association) about a continued effort by the media to glamorize our industry without paying attention to the reality of the inherent dangers in yachting.  As a result, we have begun to see an influx of young crew who enter the industry with the misguided notion that it's okay to party and screw their way through the industry; responsibility be damned.  We both agreed that, as a result, our industry could be heading down a very slippery slope.

Here's a little reality you won't see on any reality show.

The IMO puts out stats on merchant mariner casualties each year, and the statistics show that deaths among crew run between 100-200 crew each year for all reporting sectors.  According to the USCG between 700 and 1,000 recreational boaters will die in the US each year.  In the past week alone the Sun Sentinel has reported on a man killed after being caught up in the props of a boat;  two boaters who were rescued by the USCG after their boat flipped and; another accident resulting in death in the Jupiter Inlet.

Furthermore, so far this year we’ve seen hundreds of passenger deaths due to a lack of attention to safety and another couple dozen people died after their 30' boat capsized with more than 60 people on board.

“But Gary – this has nothing to do with yachting.”  Perhaps. But it DOES show that maritime activities have inherent dangers that result in thousands of injuries and deaths each year.  And it does show (unscientifically) that it appears people are more likely to die in the recreational marine industry than in the commercial industry. And while certain desperate circumstances may be the driving force in some cases, these deaths support the notion that no amount of passion, emotion, desperation or drama can override the realities of the dangers of our industry, nor can these aspects prevent injury or death. Stated simply:  In the reality of an onboard emergency there is no room for drama.  

It's a bit of a paradox, actually.  Because the most important safety element on board a yacht - the human element - is the same element a certain "reality" TV show uses to exploit conflict and salacious onboard drama in order to sell their show to networks and advertisers.  Basically, they are cashing in on a huge part of what responsible yachtsmen and women do NOT want in the industry - drama.  

It's funny to watch the trends the media creates.  Put out a show about Navy SEALs and everyone wants to be a SEAL.  Put out a show about space and everyone wants to be an astronaut.  Put out a show about drunk, horny yachties and suddenly that’s what permeates the industry. 

Perhaps, instead of focusing on the crew member sitting on a PFD while hanging on the anchor chain drinking a beer making out with a stew while on charter, these shows should show more instances of deck crew engaged in MOB drills or collision/grounding drills or fire drills, or an engineer dealing with a fuel leak or a chewed up impeller.

And instead of showing idiots running around naked and drunk maybe the show should infuse its content with sidebars on the dangers of onboard fires or what happens to the guests and crew when a guest’s son is killed while riding a waverunner, or a guest has a heart attack snorkeling, or a crew member is injured doing their job in order to protect the guests.

And lets not forget about crew members in foreign ports who are mugged, robbed, beaten, raped and murdered… THIS is the unglamorous reality of our industry; yet viewers are more concerned with who the deckhand is screwing or what type of bug the stew is going to have up her butt today. TV "reality" is produced while REAL reality is ignored.

Whether we (or "reality" TV) choose to acknowledge it, we work in a dangerous industry.  More people die in marine-related incidents each year than in aviation-related incidents;  BUT the media continues to focus on all the BS drama that a lot of crew seek to avoid.  Why?  Because drama labeled “reality” sells.  This needs to change.

I’m going to give another shout out to the Yacht Captains Association because I truly believe we need an organization like this in order to re-direct our industry back to an ideology of “Safety First.”  We need responsible and qualified captains and crew who take their jobs seriously and focus on the safe operation of vessels, and who understand that if the vessel is operated safely the fun will naturally follow.

We need a paradigm shift in our industry.

 

These days we are seeing an increasing number of MCA and USCG ticket holders taking positions for which they are not suited which, potentially, puts everyone on board and within the vessel’s LOA in danger. We see green crew hired on large vessels for which their present skill-sets are not adequate.  We see captains who overlook alcohol and drug use or who overlook basic watchstanding guidelines whilst underway.  And now we have the added benefit of a "reality" show that glamorizes irresponsible and/or unqualified crew.  And it all contributes to increasing the likelihood that an accident will happen…and accidents WILL happen.

Steps need to be taken to redirect the focus of yachting from this perceived carefree, glamorous lifestyle back to safety.  The MCA and USCG must step up their efforts of safety compliance and enforcement, insurance companies must also overhaul their underwriting guidelines with regards to who can and can’t operate a vessel, and everyone in the industry should support the YCA in its efforts to support captains, to assist captains, to mentor captains and to ensure that capable and qualified captains are onboard (and in command of) yachts; captains who understand that safety is our number one priority – not ratings or readers.  And crappy reality TV shows need to be more responsible when they represent our industry to the general public (yeah, that'll happen…).  A paradigm shift.

Regardless of your feelings on the glamorization of our industry (I think it’s clear where I stand on the issue), when it comes down to it the FACTS regarding our industry remain the same in spite of any contrived "reality" a TV show chooses air, and the facts are: the work is hard and requires knowledge, experience and skill; the danger is high and requires situational awareness, maturity and responsibility and; the injuries and deaths are real – the TV shows and articles are not.