What lies inside a customer’s file makes the difference in insurable risks
There are always hidden issues that can blow up in any industry. The marina industry is no different.
Many marinas are tenants of port districts, counties, cities, state lands, and federal lands whose often stringent agreements expose marina owners to uninsurable risks. We are beginning to see an emerging trend where such agreements not only place onerous risks on the marina operator but also require some risks to be incorporated in the marina lease or licensing agreement and therefore passed on to the individual boater.
This article will focus on some of the challenges marinas face that can be passed on to boat owners resulting in additional challenges for both lessors and lessees.
Marina operators genuinely care about the quality of their waterways. However, in recent years governmental officials, inspectors, environmentalists, attorneys and other parties have made the business of marina operations more challenging by trying to make the marina responsible for what the boater does.
Today there are more requirements on marina owners than ever before and in some instances regulatory officials have tried to make marinas responsible for the water around the boats. An example might be when a boat owner or their vendors clean their boat. The owner decides to use a type of product that could be toxic to the waters, such as an unapproved acidic based cleaner. While the marina owner doesn’t know that the boat owner used a toxic product or unsafe practices, the marina may still be responsible for any damage done to the waters surrounding the boat.
Due to their location the real problem for marinas today can be traced to water run-off from uplands, public streets, storm drains, sewage plants, animals, and non-marine air pollution. This high visibility situation has also created additional challenges to the marina owner’s risk management programs.
Some of the challenges faced by marina owners today can be solved by paying close attention to what’s inside their customers’ files. In many cases, the reason there is a problem is simply because the customer files are not complete.
Many marina owners don’t require or do not have a system to notify the harbor master of important changes that should be documented in the customer file. So when an accident occurs on the marina property, the owners do not have the most current information on file.
Some of the most common problems that can be found missing or not documented in a boat owner’s file include:
- Boat owner is not the customer they have in their file;
- Boat is not the vessel they have in their file;
- No valid contract/slip agreement;
- Vessels not registered/documented;
- No current evidence of insurance coverage;
- Non-approved live aboard;
- Multiple ownership or sale;
- Abandoned or sinking vessel; and
- Owner workmanship on vessel.
Access to Marinas
One of the biggest challenges that marina operators are facing is access to their facilities. The lease or license agreements that are being used in today’s facilities place huge contractual burdens on the boat owners. The boat owners have now become responsible for the actions of any vendor they use unless that vendor has a signed an access agreement with the marina and has minimal coverage/limits naming the marina as an additionally insured.
The well-run facilities are not allowing any access without evidence of comprehensive general liability, marina operators’ legal liability, protection and indemnity, and workers’ compensation.
For example, many yacht brokers have considered their salespersons independent contractors without providing state compensation coverages, turning the marina’s general liability policies into workers’ comp for the uninsured.
The United States Longshoreman & Harbor Workers Act could also be used by a plaintiff if the recreational marina does not meet all of the 1984 exclusions from this act. The standard best management practice is to not allow access to the marina without complying with the proper agreements, indemnifications and coverages.
The boat owner may now have taken on this responsibility contractually and may not be covered under any of his insurance policies. We have found many boat owners liable personally for losses that would be covered under some broad yacht forms like sudden and accidental pollution, raising of the vessel in a navigable waterway, etc. The boat owner must first have the broadest marine form available — not just an endorsement to the homeowners’ policy.
Even with the broadest yacht forms the exposures will not be completely transferred, as the contractual agreement with the marina is excluded in most forms. A boat owner giving the key to a yacht broker, repairer, detailer, furniture store — you name it — places the individual that signed the marina agreement at risk. Make sure that your client has read and understands the severity of their agreement. This is a good time for you to get some advice from a true marine underwriter.
Some of the most common challenges regarding access to marina properties, include:
- Transient to abandoned vessels;
- Boat owner guests;
- Visitors of building tenants or general public;
- Yacht brokers/boat dealers;
- Boat repairers;
- Boat detailers/canvas installation; and
- Bottom cleaning divers/underwater zinc replacement.
Marinas usually already practice the number one rule in real estate — location, location, location. Their files are now heading toward the number one rule in business — document, document, document. Risk management is becoming their mantra starting with their files. A few things to consider when developing risk management practices for marinas, includes:
- Establish Best Management Practices for the marina;
- Develop a slip rental process;
- Set realistic boat owner customer expectations;
- Create stringent lease/license agreements;
- Credit checks/owner documentation, etc;
- Marina rules & regulations signed by boaters;
- Minimum boat owner best management practices;
- Current insurance certificate on file;
- Access agreements signed with certificates in file; and
- Clean marina program designation.
Marinas, boat owners, agents and brokers need to support their industry associations. We can share information in order to improve our best management practices and educate as we navigate the waterways of our life. Happy boating!
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