“What is Boat Builder’s Insurance?” I was recently invited to a networking event. Of course the obvious response would be a rather slick “Insurance for people who build boats” but luckily I took a moment to pause before answering as the answer may not be as simple as one might think.
First of all, we have to ask ourselves, “What is a boat builder?” This is important because there are many marine companies that include that activity in their business description, but repair boats instead of actually building them. Likewise, there are people who build boats, but don’t describe themselves as boat builders. For example, a shipwright can build or repair ships – which could be pleasure craft – what we would normally call a boat – or a larger commercial vessel which we would describe as a vessel. We can also add the artisans who restore boats rather than build them from scratch, as well as those individuals or companies who “fit out” a ship’s hull, either for their own use or as part of their commercial activities. .
Boat Builders Insurance is therefore a specific insurance solution that can be part of a larger insurance program for individuals or companies that carry out one or more of the following activities, but do not necessarily define themselves as a boat builder:
• Manufacture or construction of recreational craft and/or some commercial craft.
• Restoration of vessels such as classic or historic vessels.
• Converting pleasure craft.
• Boat equipment.
Whichever of the activities listed above is performed, the structure of the Boat Builders Insurance solution is a standard format. It provides specialized coverage for physical damage and third-party liability. Let’s look at the elements of what the market in turn refers to as builder risks:
Physical damage:
Of course, the wording of the insurance policies varies from insurer to insurer and should be checked for the precise scope of coverage, conditions and exclusions. Generally, however, boat builders insurance provides “all risks” coverage with respect to physical loss or damage to vessels under construction, including hulls and machinery, equipment and equipment. It may also, depending on the policy terms, cover all associated molds and forming tools. Other coverages provided under the Physical Damage portion of the coverage may include specialized provisions for charges such as:
• Repair or replace any defective part that has been rejected due to the discovery of a hidden defect during the construction of the boat. However, defective welds are more than likely excluded.
• The cost of completing the launch of the Insured Vessel under construction after a failed launch and the cost of inspection of the bottom of the vessel after running aground, if reasonably specially incurred for that purpose.
• Loss of or damage to the boat built due to faulty design of any part or parts of the craft and the cost of salvaging the boat built reasonably incurred to prevent or minimize any loss that may be recoverable under the Boat Builder’s Insurance.
• Loss of or damage to the vessel during transport between the construction site and a starting point for sea trials.
The insured value of the vessels under construction will normally be based on the total value of the vessels under construction at any given time (work in progress if you will) and the maximum value of each individual vessel under construction.
This is normally the completion value – ie the construction or restoration costs – and not the resale value. However, in some cases a boat builder may require payment in installments at various stages of a build by the ultimate owner of the vessel. When this happens, the sum insured may reflect the payments made by the ultimate owner and, towards the end of construction, the sum insured may exceed the cost of construction as the owner’s interest must be stated on the policy schedule and certificate.
For higher value builds and refits, it may be possible to structure the sum insured (and therefore the premium) around the cost/value of the build in different stages. I arranged cover for one superyacht builder with an initial premium down payment followed by additional premium installments levied on periodic declarations of value by the builder.
Liability third parties:
This part of the cover should cover the legal liability of the owner of the boat under construction arising from physical loss or damage to third party property and/or death or bodily injury of third parties while the vessel is afloat for work. or en route on sea trials. It should also cover all reasonable costs incurred in removing and clearing the wreck of the vessel or any negligence or omission to lift or remove the wreck. The limit of indemnity for third party liability will usually be a minimum of £3,000,000, but where higher value vessels are the subject of the insurance, more appropriate limits of indemnity must be found.
Stand-alone or combined solution?
Private individuals who restore or furnish their own pleasure craft can take out Builders Risk insurance through a number of pleasure craft insurance policies. Coverage would include hull and machinery up to an agreed completion value and also third party liability. Individuals should seek advice on any employer liability insurance claims that may arise where work is carried out by subcontractors or volunteers.
Commercial companies, charities and trusts can include their coverage for construction risks in a combined marine trade insurance policy, which can also include coverage for their property, business interruption, government, products and employer liability insurance. Standalone options are also available and it is advisable for boat builders to seek advice from a specialist Marine Trades Insurance broker to ensure that their insurance program is properly aligned with the needs and objectives of the business.
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