Marine insurance

Most marine insurance policies provide cover for sinking. The extent of the cover depends on the reason for the sinking. For example:

• full cover generally applies if the sinking was caused by an accident that resulted in a sudden and rapid ‘incursion of water’
• no cover, or restricted cover, may apply if the sinking was caused by a slow build-up of water in the vessel

A slow build-up of water may indicate that the boat wasn’t seaworthy and/or the customer hadn’t maintained the boat adequately.

Sometimes we’ll see a dispute about how a sinking happened and whether no cover or restricted cover should apply. We’ll look carefully at the evidence, including the cause and speed of the incursion of water.

You may reject a claim because a customer knew their vessel was unseaworthy when they used it and loss or damage occurred because of its unseaworthiness.

In these cases, we’ll usually look for evidence that the: 

• vessel was regularly and well maintained by a professional marine engineer
• the servicing and maintenance were carried out according to manufacturer and industry recommendations 

If you claim that your customer should have known that the vessel was unseaworthy, we’ll carefully consider the customer’s knowledge. If they’re a qualified and experienced skipper, we may expect them to have a technical understanding of the vessel and its seaworthiness. But we don’t generally expect a customer to have this level of knowledge.

You may reject a claim because a customer: 

• didn’t carry out basic checks and precautions before casting off
• ignored weather warnings
• ignored warnings about the condition of the vessel

In these cases, we’ll look at the evidence to see if your customer was:

• aware of the risk, but chose to carry on without taking precautions to avert it – in which case we may say it was fair of you to reject the claim
• unaware of the risk – in which case we may decide you should pay the claim

Whatever the knowledge of a customer, there are some basic checks and precautions that insurers say should be carried out. These include:

• checking the bilges (inside the bottom of the vessel) to make sure there isn’t any water in them, as this may be evidence of a leak
• putting bungs into the drain holes at the back of the vessel if it’s being launched from a trailer
• closing all sea cocks to stop water coming into the vessel
• checking all safety equipment

Insurers sometimes reject a claim because a customer hasn’t carried out certain checks and precautions. If you expect the customer to carry out certain checks and precautions you should make this clear in the policy details.

Disputes about non-disclosure and misrepresentation of information often happen because of the way customers answer questions about their experience on insurance proposal forms. For example, a customer who has hired a speed boat once a year for 20 years may state that they have 20 years’ experience.

It’s often difficult to establish a customer’s experience in boat handling, because they may not have had marine insurance before or don’t have other supporting evidence.

You may reject a claim because you suspect a customer deliberately sank or set fire to their vessel to get the insurance money.

The types of alleged fraud we usually see include when an insurer says that a customer:

• made up a claim
• presented a claim in a way that would be covered by their policy when the circumstances of the loss or damage weren’t actually covered
• exaggerated the extent of the loss or damage

Fraud is a serious accusation, so we’ll expect you to provide robust evidence to support your reasons for saying a claim is fraudulent.

We’ll also take into account whether a customer’s alleged dishonesty was to get something they would have got anyway because of the true situation. In these circumstances, we might not think the alleged dishonesty is enough to stop you paying the claim.

You may reject a claim because a customer didn’t meet certain security requirements.

Marine insurance policies often include additional security requirements for smaller boats and personal watercraft – which are easier to steal. A policy may require this kind of vessel to be anchored to an immovable object and fitted with a hitch-lock.

We’ll look carefully at whether you brought the security requirements to the customer's attention. If we decide you did do this, but your customer didn’t follow the requirements, we’ll consider whether meeting these requirements would have made a difference to the vessel being stolen. 

A customer may complain about the cash settlement you’ve offered when their vessel sinks or is stolen or ‘written off’.

We’ll ask both sides to provide evidence for their view on the vessel’s fair market value. We’re likely to give weight to any valuation made by an independent qualified marine surveyor or a local yacht/boat brokerage.

Jose went to the marina to use his boat and found it had partially sunk, so he made a claim to his marine insurer.

The insurer accepted his claim and made Jose a settlement offer of £4,366. This was after the insurer had asked an independent marine surveyor to assess the boat’s pre-loss value.

But Jose was unhappy with this as he had recently overhauled the boat’s engine at a cost of £3,800 and felt the hull and other equipment was worth more than £500.

What we did

We asked for a copy of the surveyor’s report and found the valuation had taken into account the overhaul of the engine.

Our decision

We appreciated that Jose had recently spent a similar amount to the settlement offer on having the engine maintained. But the independent marine surveyor was qualified and independent, and there was nothing to show his valuation was insufficient. We didn’t uphold the complaint.

Naseem was sailing his boat out of the local marina when it unexpectedly started to take on water and ultimately sank.

The vessel was recovered and lifted into a dry dock. Naseem’s insurer inspected the vessel and noted the hull had some corrosion because it had been in salt water for long periods and during the winter. The insurer declined the claim on the basis that the vessel wasn’t seaworthy, and this had resulted in the loss.

Naseem was unhappy with this and said that he couldn’t have known about the corrosion as it was below the boat’s waterline.

What we did

We asked Naseem about the boat’s history and for its servicing and maintenance records. Naseem said he’d bought the boat about four years ago. He said he didn’t use it very often, so he didn’t think he needed to have it serviced. He confirmed that the boat hadn’t been in dry dock throughout this time.

Our decision

We thought that if Naseem had taken his boat for a service at some point during the last four years, the corrosion would have been noticed. As he hadn’t, we thought it was reasonable for the insurer to decline the claim.

Hazel was sailing her yacht out of the local harbour when the main mast collapsed. After the boat was towed back to its berth, Hazel made a claim to her insurer for the cost of repairs, which totalled £14,000.

The insurer appointed a marine engineer to inspect the damage. The engineer assessed the boat, including the collapsed mast, and concluded that the mast was corroded and this had caused it to collapse. The insured rejected Hazel’s claim because her policy excluded loss or damage caused by corrosion or wear and tear.

Hazel disagreed that corrosion or wear and tear was the cause of damage. She said there were strong winds when the mast collapsed and she felt this should be covered as accidental damage.

What we did

We looked at all the available information, including the policy terms. While we accepted there were reasonably strong winds at the time, we found they weren’t storm force winds.

We also considered the marine engineer’s report. This showed the mast had extensive corrosion because it had been exposed to the elements over a period of time.

We also asked Hazel for the yacht’s maintenance records, but she could only provide a visual check of the hull.

Our decision

We were satisfied the engineer’s report showed the reasons for the mast’s collapse were corrosion and wear and tear. As these were excluded under the policy, we thought it was reasonable for the insurer to reject the claim.