Any prudent vessel owner knows the importance of a comprehensive hull insurance policy. After all, you rely on your insurance to mitigate the losses that arise from those typically unforeseeable and often unavoidable marine perils unique to the workboat industry. But beware, your policy many not be worth the paper it’s written on if you, as the insured, have not maintained your vessel in a staunch and sound condition.
The typical hull policy is rife with conditions, warranties, endorsements and waivers which impose express obligations on the insurer and the assured, alike. However, one fundamental prerequisite for binding hull coverage may not be expressly stated within the four corners of the policy. Under the federal admiralty law, a vessel owner must provide a vessel that is “seaworthy” in order to obtain binding coverage. In this context, a vessel is legally seaworthy if it is in a condition sufficient to encounter whatever perils the it may be fairly expected to encounter while at sea.
There are subtle, but important differences in the vessel owner’s duty of seaworthiness under a time hull policy, which insures the vessel for a specified duration, as compared with a voyage policy, which provides coverage for a particular trip. For a voyage policy, the law imposes a duty on the vessel owner to warrant that the vessel is seaworthy at the commencement of the voyage. If this warranty of seaworthiness is breached, then no recovery can be had under the policy. The obligation on the part of the owner is absolute, and an insurer need not prove that the owner had actual knowledge of the unseaworthy condition to deny coverage.
For coverage to attach under a time hull policy, the vessel must be seaworthy at the commencement of the policy. This is likewise an absolute duty, and an owner’s lack of knowledge of an unseaworthy condition will not prevent coverage from being nullified. Furthermore, although the owner need not warrant the seaworthiness of its vessel for the duration of the policy, it must not knowingly permit the vessel to set sail in an unseaworthy condition. A breach of this duty can likewise void coverage.
Whether a vessel is actually seaworthy is generally a fact-specific inquiry. The advice of legal counsel or assistance from your broker may guide you in obtaining the coverage necessary to protect your marine equipment. However, the most comprehensive policy available will be of little benefit if the owner is not diligent in maintaining its vessel in such a condition that complies with those obligations mandated by law.
Note: This article first appeared in WorkBoat Magazine. The internet version of the article can be found here.