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Compass Info4U Blog
Wednesday, November 28 2018
Commercial Hull Builders Risk

Insurance Minute: Builders Risk 
If you are going to shell out half a million dollars or ask a bank to give you a loan so you can build a brand spankin new fishing boat then make sure everybody has the right insurance. As the person looking forward to showing off the latest and greatest fishing boat around you should have a builders risk policy for the finished value of the boat right from the start. Don't wait until 6 months after the hull is delivered (You are very unlikely to get a builders risk unless its very near the start) Don't let the builder say "Oh don't worry about it, I have insurance." They may be able to build the finest fishing vessel around but chances are they don't know Jack about insurance. If you go this route (not recommended) Get a Certificate of Insurance from them documenting the coverage and be named as an additional insured and if a bank is involved they will want to be listed as mortgagee as well. 
I have seen a BIG$$ Fishing boat (BIG) sit there uninsured and everybody said the other guy had insurance and nobody had insurance and that would end up being a "wicked pissah" (which isn't actually professional insurance lingo) if the whole place went up in smoke with no I said...Exactly. 
Are we all excited yet? See how invigorating insurance is? Wait til I get going.... 
Next the Builders Risk should have a Protection & Indemnity Insurance. And I know the well versed Skipper will respond;
"Paul, P&I covers my Jones Act exposure for the sternman under the employ of my vessel. How is that relevant to the construction of my new boat?" 
True, Protection and Indemnity covers your sternman for Bodily Injury that may occur under the employ of your vessel. However it also covers property damage and bodily injury caused by the vessel to a third party. This could include the vessel just coming off its mooring and while adrift causing damage. Or underway. Accidents happen. 
Again how does this pertain to New Construction?
Sea Trials! Sea Trials can be interesting times. Hopefully everything all works out. Sometimes it doesn't work out. 
Vessels cruising up to the dock being showed off by their owner have plowed into wharfs when "Oops" the reverse gear didn't work. People get hurt. Wharfs get damaged. Boats get damaged. 911 gets called. Lawyers get called. It can get messy. So any astute skipper would say, "Well if something went wrong its the boat builders fault!" Well remember we may be talking about the nicest boat out there, and remember they may not know Jack about insurance? Will they pay for it out of pocket? Maybe they had coverage but the policy has expired. who knows. This is why it is so important to C.Y.A. 
Cover Your Assets! 
And lastly, I could go on and on, but lastly if you are a boat builder, Make sure you have a true Marine General Liability Insurance. Make sure it has a blanket builders risk rider covering the value of all the vessels combined laying around your shop. A GL policy covers your standard GL issues, trips and falls on the snow in the driveway, etc. It is not going to cover the highly technical exposure to some kind of failure which could occur under Completed Operations coverage. Make sure you have Completed Operations. Make sure it is a specialty Marine GL. Underwritten exactly for the risks inherent within your industry. If you complete Sea Trials and any boat builder should make sure you have Protection and Indemnity and include a Longshoremans endorsement on that if you have employees. Also the policy should be rated on your Gross Sales. You are in the business of selling things. Building and selling high end fishing vessels. This could be upwards of several million dollars. 
Well if everything all goes to pieces and there is a total loss and you present a claim to the company for $500,000 and the policy has been rated improperly on an exposure of $22,600 in payroll - there is a big ol miscommunication coming down the pike and I wouldn't want to be on the short end. You have not been paying the proper amount for insurance. Do you expect them to pay out $500,000? Probably they will, maybe, but all kinds of things could happen here. Did you misrepresent sales, unintentionally? Here is where your agent needs to know what they are talking about. Insurance companies likely will audit policies regularly to make sure everything is in order. 
"But I don't want to pay insurance on $500,000 in Gross Receipts. It will go up!! (Waaaaa) Don't you think the Insurance company can say the same thing? Insurance Company: "I don't want to pay $500,000 in a claim when you were actually paying for $22,600 in coverage!" 
So its important to make sure proper coverage is in place on all fronts. 
So anyway if you have actually read this all the way to the end I congratulate you and you should hold your head up high swimming in all your new knowledge, and you deserve a coffee and give me a call and we'll have a coffee and talk about insurance! Or the Red Sox. Insurance conversation can quickly turn to the Red Sox

Posted by: AT 10:32 am   |  Permalink   |  Email