Property Coverages

Both coverage forms state that covered property means yachts and trailers that are described in the declarations. The ISO form includes personal effects while on board or being loaded or unloaded from the covered yacht if a limit is indicated on the declarations; coverage for personal effects is found in the AAIS form under the personal property and equipment supplemental coverage extension. Both forms are written on a special perils basis and thus cover all risks of direct physical loss unless otherwise excluded.

Several types of property are explicitly not covered on both forms under the property not covered sections. On the AAIS form, yachts being used in a business or hired for charters, contraband, property involved in racing or stunt activity, or yachts being used as residences are not covered.

The ISO policy does not cover accounts, bills, currency, deeds, money, securities, or other evidences of debt; jewelry, precious gems or metals, or semiprecious gems; aircraft or other devices designed for flight, such as hang gliders or parasails; personal watercraft, such as wave runners and jet skis; fuel, food, beverages, or other provisions; contraband; and property more than fifty miles form the storage location or home port while being transported by a common, contract, or carrier for hire.

The ISO form contains an additional coverage, Operating Other Yachts, that might apply to a temporary substitute. If the named insured is operating another yacht with permission, and a covered loss occurs, the insurer will pay the amount of the loss up to the limit of insurance shown in the declarations for the covered yacht. If other insurance applies, then the insurance provided by this policy is excess. Four exclusions apply. There is no coverage if the other yacht is rented to or under charter to the named insured; owned wholly or in part by the named insured; furnished for the named insured's regular use; or being used for purposes other than pleasure use.

Similarly, the AAIS form covers direct physical loss to nonowned yachts the named insured or another insured operates, subject to the limits indicated in the dec page. If no limit is indicated, the most the form will pay is $50,000.

Each coverage form pays for costs incurred if the yacht becomes disabled. In the ISO form, the coverage is called “Towing and Assistance,” which includes towing to the nearest place where repairs can be made, delivery of gas, oil or repair parts (not including the cost of the parts), labor for emergency repairs at the place of the disablement, and boat trailer roadside repair if coverage for the trailer is indicated on the declarations. Coverage is limited to $500 for any one occurrence with a maximum of $1,000 in any one twelve-month period.

The AAIS form provides coverage for emergency service and promises to pay reasonable costs incurred for necessary commercial services if a covered yacht or trailer becomes disabled. The form covers labor for an engineer or mechanic to repair the covered yacht or trailer at the place it is disabled, towing to the nearest marina or service area, and the cost to deliver parts, fuel, oil, or a battery.

The ISO form covers reasonable costs the named insured incurs to protect or recover a covered yacht following loss or damage. If the National Weather Service issues a hurricane watch or warning for the area where the covered yacht is located, the insurer will pay the cost to haul the boat out of the water and refloat it after the watch or warning has expired. The insurer will also pay the cost for a qualified person to navigate the boat to a safe harbor. The limit of insurance that applies to the covered yacht is the most that will be paid. The AAIS policy provides similar coverage under the storm protection supplemental property coverage, although the severe storm or hurricane watch or warning must be issued by the National Oceanic and Atmospheric Administration. No deductible applies to this coverage.

The AAIS form extends coverage to two types of property: newly acquired property and personal property and equipment. Yachts that are acquired during the policy period are covered by the policy, but the coverage ends when policy expires, thirty days after the property is acquired, or when the insured reports the property to the insurer. Additional premium is required starting from the date the insured acquires the additional property. Personal property and equipment of the insured is also covered while on board or being loaded or unloaded to or from a covered or nonowned yacht. Such property and equipment stored in locked dockside storage is covered if the storage is for the insured's exclusive use. ISO's wording is similar but uses the term “personal effects” and does not contain a provision for locked dockside storage. ISO also provides an additional coverage for additional acquired or replacement property, which covers additional or replacement yachts or boat trailers for up to thirty days. The new or replacement yacht must be reported to the insurer within thirty days from the date of acquisition.

Exclusions Applicable to Property Coverages

Both forms exclude loss resulting from war, which includes both declared and undeclared war, civil war, destruction or seizure for a military purpose, or seizure by any civil authority. The ISO form adds “arrest, requisition, confiscation or detainment” of the yacht to this list; the AAIS form adds quarantine of property.

Both forms exclude loss caused by any nuclear reaction, radiation, or radioactive contamination. But if fire results, the direct loss caused by the fire is covered.

Both forms exclude coverage for loss or damage caused by on-going, and therefore uninsurable, perils, such as marring, wear and tear, osmosis, blistering, delamination, and electrolysis. These latter four causes of loss need some explanation. Osmosis and blistering are two terms often used interchangeably (although incorrectly) for the same thing, and that is the result of fiberglass absorption of water. Water passes through the vessel's gelcoat and can cause the phenomena called osmosis or blistering because of the resulting appearance. If not repaired, the end result can be the delamination of the fiberglass—in other words, it pulls away from the hull. Electrolysis is the breakdown or corrosion caused by a slight electrical charge passing between metal parts of the yacht and the water.

Both forms exclude loss or damage caused by marine life, but this must be read in context. On the ISO form, the exclusion appears among those things that will occur over time. For example, staining caused by marine algae or loss caused by unremoved barnacles is not covered. However, if the boat were to sustain damage through an encounter with a playful porpoise, that loss would be covered. The ISO form adds that damage caused by bubbling is not covered; bubbling is a process used whereby air bubbles are forced up through water to keep it from freezing. Many marinas in northern areas use this system if it is not feasible to take boats out of the water.

Both forms exclude damage caused by ice, but the ISO form specifies only while the boat is moored or laid up while afloat. The forms add that there is no coverage for damage caused by extremes of temperature, but the ISO form excludes damage resulting from improper winterizing if the winterizing was performed by a competent marina or similar facility from the exclusion.

The ISO policy excludes loss caused by flaws or latent defects in hull or machinery, but any resulting damage to other covered property is covered. The AAIS form uses the more generic term “property” instead of specifying hull or machinery.

Both forms exclude intentional acts and maintenance or repairs, as well as loss of use.

The AAIS form contains exclusions the ISO policy does not. One eliminates coverage for voluntary parting (trick or device); another eliminates coverage for missing personal property where the only proof is unexplained or mysterious disappearance. The exclusion does not apply if the property was in the custody of a carrier for hire, nor if the covered yacht was stolen in its entirety while in the water. Criminal, fraudulent, or dishonest acts committed by the named insured, others with interest in the property, those the insured has entrusted with the property, the insured's partners, officers, directors, trustees, joint venturers, and employees or agents not in the course of their employment are also excluded. Mechanical breakdown in not covered by the AAIS form.

The ISO form excludes use of the yacht for other than pleasure use and error in or improper design.

Liability, Medical Payments, and Uninsured Boaters Coverages

Both coverage forms pay damages for which an insured is legally liable arising out of property damage or bodily injury. Loss must be caused by an accident arising out of the ownership or operation of the covered yacht. Both forms provide a defense. The duty to defend ceases once the limits have been exhausted by a settlement.

The ISO form extends liability to the operation of another yacht with the owner's permission. Only the named insured—you—is covered. ISO precludes coverage for the operation of another yacht if the other yacht is owned wholly or in part by the named insured; rented or under charter to the named insured; furnished for his regular use; or being used for purposes other than pleasure (pleasure includes incidental business entertainment as discussed in Policy Overview; Definitions). So, if the named insured rents a yacht to use as a replacement while the covered yacht is temporarily out of commission, there would appear to be no coverage.

Both forms provide additional coverage for costs incurred because of the insured's legal obligation to raise, remove, or destroy the covered yacht if required by federal, state, or local ordinance. The ISO form also responds to clean-up of pollutants. The AAIS form limits coverage to 30 percent of the limit of the liability coverage, unless another amount is selected. The ISO form does not limit the coverage.

The AAIS form includes additional defense expenses, among which are loss of earnings by a covered person for time spent away from work at the insurer's request, up to $250 per day per insured; expenses the named insured incurs at the insurer's request; and prejudgment interest.

Both the AAIS and the ISO forms cover necessary medical expenses arising out of bodily injury. The AAIS form states that the coverage applies to the maintenance, use, or ownership of the covered yacht, while the ISO form states that a person may be boarding or unboarding or leaving the covered yacht, or engaging in waterskiing, aquaplaning, or a similar activity from a covered yacht. The intent with the AAIS form might be to preclude medical payments for water skiers, but since the policy does not exclude coverage for this activity, it seems unlikely. Expenses must be incurred within one year from the date of the accident resulting in bodily injury for the ISO form, three years from the date of the occurrence for the AAIS form.

Uninsured boaters coverage operates similarly to that under an auto policy. The ISO form includes under- as well as uninsured boater coverage. The coverages reimburse an injured person for damages because of bodily injury received aboard a covered yacht and for which another operator is responsible. The applicable limit must be indicated on the declarations page because the coverage is not automatically included.

The AAIS form provides only uninsured boater coverage. The uninsured vessel is one having no liability bond or policy at the time of the occurrence, a hit-and-run that cannot be identified, or one having insurance, but the insurer denies coverage or becomes insolvent. As with the ISO form, the AAIS insured must select the coverage and pay any additional premium.

Exclusions Applicable to Liability, Medical Payments, and Uninsured Boaters Coverages

There are some similarities between the exclusions in the ISO form and those in the AAIS form. Neither form covers injury or damage occurring while the yacht is being transported on land, and neither covers expected or intended bodily injury or property damage. The policies will not pay any fines levied against any insured or for any loss arising out of racing, except for sailboats and predicted log events.

The ISO form does not cover the named insured's liability to other insureds or vice versa. The ISO form also eliminates coverage by stating there is no liability coverage for loss of life or bodily injury to any paid captain or crew under the Jones Act, Death on the High Seas Act, or General Maritime Law. These are laws addressing coverage for captain and crew aboard vessels. The Jones Act allows injured or deceased crew (or their representatives) to claim damages for loss caused in whole or in part by negligence of the employer or its agents or employees. The DOHSA allows recovery similarly to the Jones Act but is also available for survivors of persons who are not crew members. General Maritime Law (or the Moragne remedy) allows for recovery for death within the territorial waters as well as the high seas. This law allows claims for punitive damages.

The AAIS form precludes coverage for loss resulting from activities related to a covered person's business; war; an occurrence for which the insured is also an insured under a nuclear energy policy; and bodily injury or property damage resulting from pollutant—the discharge of pollutants that is sudden and accidental is covered. Other liability exclusions include abuse, communicable diseases, controlled substances, criminal acts, and parasailing or kite sailing.

On the AAIS policy additional exclusions apply to personal liability coverage only, such as liability assumed under contract (except for that relating to dock rental or boat storage) and damage to owned or rented property (except for a dock or storage area rented solely to an insured). Bodily injury to a person if benefits are provided by the U.S. Longshore and Harbor Workers' Compensation Act, workers compensation, nonoccupational disability, or occupational disease laws or regulations is not covered. Employees are also excluded if bodily injury occurs in the course of employment. Insureds—the named insured and the insured's relatives or residents of the insured's household—are also excluded, as are nonpermissive users and property owned , occupied, used, or rented by an insured except property damage to a launching ramp, dock, or yacht storage house rented solely to the insured.

The AAIS form also contains the following exclusions that apply only to medical payments coverage: bodily injury to a person who is entitled to benefits under the U.S. Longshore and Harbor Workers' Compensation Act, workers compensation, nonoccupational disability, or occupational disease laws or regulations and bodily injury to trespassers. ISO's medical payments sections carries these same exclusions as well as exclusions for the insured's employees and for injury resulting from being towed or in device intended for flight such as a kite ski or parasail.

Exclusions applicable in both forms for uninsured boater coverage are claims settled without the insurer's written consent and vessels owned by the insured or furnished for the insured's regular use. The AAIS form excludes coverage for business pursuits, criminal acts, parasailing or kite skiing, trespassers, and racing. The ISO form precludes coverage if the uninsured vessel is owned by a government agency, for occurrences where there is no evidence of direct physical contact between the insured's and the other vessel, or when the coverage accrues directly or indirectly to the benefit of any insurer or self-insurer under a state or federal compensation law or act.

Longshore and Harbor Workers Compensation Coverage

The Longshore and Harbor Workers Compensation Act gives those who typically work at longshoring or other maritime employment coverage that is essentially the same as those who are afforded benefits by state workers compensation laws. Injury must occur on any navigable waters or any adjoining pier, wharf, dry dock, or other area used by an employer in loading or unloading, repairing, dismantling, or building a vessel.

Under the ISO form, if the insured has selected liability coverage, then LHWC is automatically included for the named insured as owner of the covered yacht. Coverage does not exceed the applicable statutory limit.

Loss Settlement Conditions

The named insured's duties following a claim or loss are similar to those in other policies, be they personal or commercial forms, so they will not be reviewed here. Conditions pertaining to property valuation differ from those in other property forms because of the nature of the property covered—once a yacht sinks, depending upon where it sinks, the cost of recovery may well exceed the limit of liability applicable to the hull.

In event of a total (or a constructive total) loss, the AAIS form pays the limit less any deductible, reduced by the salvage value if the insured retains the salvage, provided the covered yacht is completely destroyed. In the event of a partial loss the insurer pays the reasonable cost of repair or replacement not to exceed the lesser of the policy limit, the replacement cost, or the amount actually spent.

The ISO form states the insurer will pay for a total loss, excluding outboard motors (in the ISO program, the insured must select a separate limit for outboard motors; a separate provision applies to recovery), only if the covered yacht is completely lost or destroyed or if the cost of recovery and/or repair is greater than the applicable limit. The same provisions apply for a partial loss as in the AAIS program.

ISO has a provision governing loss to personal effects, outboard motor(s), or boat trailers. The insurer pays no more than the limit of insurance, the actual cash value, or the cost to repair or replace. In the event of a loss to a covered yacht (other than a total loss or a total constructive loss) that the insured does not repair or replace or covered losses to upholstery, carpet, mechanical or electrical parts, canvas, sails, or rigging, the AAIS form pays the least of the amount to repair or replace the damaged part, the actual cash value, or the amount indicated on the declarations page is paid.

Miscellaneous Conditions

Because the conditions of these forms are so similar to those in other property and liability coverage forms, we only address those that have definite application to yacht or maritime coverage.

The coverage territory in the AAIS form includes the Great Lakes and coastal waters that extend 100 statute miles or less from the U.S. or Canadian coasts.

The policy period condition in the ISO form states that if the policy period expires while the yacht is at sea (or is being navigated), coverage will not cease until the yacht has reached the next port and has been safely moored there for twenty-four hours. In this situation, the insured must notify the insurer and pay any additional premium.

The ISO form's conditions governing a lay-up period should be noted. The form voids coverage if the navigational limits or the lay-up period is breached unless the insured has given prior notice to the insurer and received written approval. However, if the lay-up period or navigation limits are breached due to circumstances beyond the insured's control, the policy provides coverage if the insured gives the insurer written notice within ten days after the breach and pays any additional amount due.

The ISO insurer has the right to any recovery or salvage, in event of a loss, until the sum paid by the insurer is made up. The AAIS provision is more extensive, allowing either the insured or the insurer to notify the other if property is recovered. Then, costs incurred by either party are paid first. If the insured keeps the property, the amount of the claim, or a lesser amount if the insurer agrees, must be returned to the insurer. If the claim paid is less than the agreed loss because of a deductible or other terms, recovery is prorated between insured and insurer based on the interest of each in the loss.

Endorsements

The ISO program allows coverage for additional property to be added by attaching endorsement IH 99 19 07 99. This endorsement may be used to cover jet skis, hang gliders, food, fuel, or beverages, as well as other property.

The AAIS program can be endorsed to provide the following coverages: limited navigation period, waterskiing exclusion, ice damage or freezing coverage, personal effects coverage, business meeting and entertainment coverage, chartering coverage, captain and crew coverage, named storm deductible, electronic equipment deductible, actual cash value settlement provision property coverage, replacement cost settlement provision property coverage, additional interests, additional insured, loss payee provision, installment premium payments, renewal plan.