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Marine News from the Great Lakes

Ask The Expert: Implied Seaworthiness

Published: Thursday, October 11, 2018
By: Cary R. Wiener, President of Pantaenius America Ltd.

Question:

We have just ordered our first yacht and are shopping for insurance. We have friends (seasoned yachties), who were recently denied coverage for a claim due to something called “hidden implied warranties of seaworthiness.” They tried to explain it to us, but we’re confused. What does this mean, and how can we avoid the same dilemma?

Answer:

Most of us are familiar with warranties that cover the repair or replacement of a purchased item when something goes wrong — like ones that cover HDTVs or cars. These are warranties given by the manufacturer of the product you are purchasing and are typically “expressed” in writing in a document given to you when you pay for the item. If you don’t follow the terms of an expressed warranty to the letter, it can halt or suspend any coverage that was promised. The same holds true in the case of a marine insurance policy, except that the stakes can be huge. In this case, a warranty that is violated can void a policy on a very pricey vessel. That means no coverage, plain and simple.

However…

“Seaworthiness” is a Different Kind of Warranty

In simple terms, from the moment you purchase a yacht and sign on the dotted line of a marine insurance policy, you are offering a promise — your “warranty” — to the insurer that your vessel is in seaworthy condition, that the vessel is fit in all respects for her intended service. But, unlike a warranty received when purchasing a TV or a car, where terms and conditions are spelled out in black and white (albeit, usually in a brochure with lots of fine print), a warranty of seaworthiness is silently implied into most hull insurance policies by force of law. No words need to be spoken, and nothing even needs to be written down.

In fact, some insurers, without telling their clients up front or mentioning such warranties in the terms of their policies, may invoke “hidden” implied warranties of seaworthiness to deny coverage when faced with a claim.

“Seaworthiness” Defined

Courts of law have found vessels to be unseaworthy for a broad range of deficiencies:

  • Lack of a bilge pump or other tools and equipment
  • Defective gear
  • Broken hand tools and other instruments/apparatus being in a state of disrepair
  • Insufficient manpower assigned to perform a particular task
  • Unfit crew members
  • Improper methods of loading or storing cargo
  • Unsafe work methods

What’s more, an unseaworthy condition need not be permanent or present for a long time; it can be momentary and even arise after a voyage begins.

General maritime law implies two different warranties of seaworthiness that marine insurers can invoke to deny coverage:

The Absolute Implied Warranty of Seaworthiness

This warranty applies at the beginning of the insurance policy, and while often called “drastic” by courts, these same courts have nonetheless recognized it as part of the law that governs marine insurance policies.

Under the Absolute Implied Warranty of Seaworthiness, if your yacht is in port when your marine insurance goes into effect, and it can be demonstrated by the insurer that the yacht was not seaworthy at that time, your policy is deemed null and void from its inception. In other words, if your yacht suffers damage and you file a claim, if your yacht is deemed unseaworthy, you may discover that you have no coverage whatsoever.

Under this hidden warranty, it’s irrelevant whether you, the insured, were aware of the unseaworthy condition — or, believe it or not, whether the unseaworthy condition in any way caused the loss that gave rise to the claim.

The Negative Implied Warranty of Seaworthiness

This second implied warranty amounts to an unwritten, ongoing promise by you, the insured, that you will not knowingly take or send your yacht out to sea in an unseaworthy condition. Suppose, for example, that your boat departs on a voyage, and you’re aware that the engine room fire suppression system on your vessel is not working properly. If you subsequently present a claim arising from an engine room fire which a working suppression system would have halted or diminished, the claim can be denied due to this breach of the Negative Implied Warranty of Seaworthiness.

This seaworthiness warranty goes into effect as soon as the policy has been issued and continues throughout the life of the policy. However, some insurers fail to mention this warranty when they contract for coverage. What’s more, you won’t find it written anywhere in the terms and conditions of their policies.

Before purchasing marine insurance, yacht owners should look for the exclusion of Implied Warranty of Seaworthiness in their policy.

Also, make sure the yacht insurance company does not hide the warranties its clients are required to make regarding the seaworthiness of its clients’ yachts. These warranties are a client’s promise to exercise “due diligence,” or reasonable care, to make and keep a yacht seaworthy -- and a promise to disclose all material facts concerning the vessel’s seaworthiness.

These promises are necessary, because yachts are in their owners’ control, not the insurance company’s. Still, these expectations should always be spelled out in a yacht insurance policy, never hidden.

Have a question about yacht safety or insurance? Send it to [email protected].

About The Author

Cary R. Wiener is President of Pantaenius America Ltd. and a maritime lawyer who has worked on many famous cases, including the Exxon Valdez. He is licensed in all fifty states and is passionate about safety on the water.

 

This article first appeared in the Fall Issue (Sept/Oct) 2018 of Great Lakes Scuttlebutt magazine.


tags: Boating 101, Insurance

YE2018

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