In this article we consider the challenges of insurance and liability risks and end-of-life vessels, for Marina and Yard operators, Yacht and Insurance Brokers, Marine Surveyors and boat buyers and owners.
Marine Hull insurance challenges and end-of-life vessels are world-wide problems. This article focuses on the problems in Australia.
Nowadays, even disregarding legislation and practical considerations, with the majority of private use end-of-life vessels being fibreglass, leaving boats on the riverbank to rot away or scuttling them at sea is not practical or environmentally acceptable.
The magnitude of the problem
International industry bodies estimate that there are between 35 to 40 million fibreglass boats reaching their end of useful life right now. The United Nations estimates that in Europe alone, this is increasing at the rate of 140,000 boats per annum.
In Queensland, since 2018, Maritime Services Queensland (MSQ) has been conducting its “War on Wrecks”. MSQ has removed more than 700 derelict vessels, but it is estimated that there might be up to another 2,000 or 3,000, mostly up rivers, creeks, and mangrove channels; and the number grows every year – in every state and the Northern Territory.
Who knows what the total is across the country, but one thing is for certain – it will be an increasing problem for marina/yard operators, Marine Surveyors and of course boat owners and government authorities.
The claimed solutions
The Queensland War on Wrecks Taskforce Interim Report says one “solution” was thought to lie in the legislated requirement for vessels over, initially 35m but now 15m, to have insurance to pay for the clean-up costs of pollutant discharges and the costs of salvage or removal of a vessel from coastal waters.
The problem with this is that to obtain and keep such insurance, the vessel must be seaworthy. As we all know, no Marine Surveyor worth their salt is going to put their reputation on the line by giving a favourable Survey Report where seaworthiness is questionable.
The liability risks for the Marine Surveyors is just too high as we can attest to given some recent matters the Cornwalls Maritime Team has dealt with.
Plus, a Marine Surveyor who gives a questionable report as to the seaworthiness of a vessel, is risking their own professional indemnity insurance cover.
Insurance companies/underwriters refusing and limiting coverage
Increasingly, insurance companies, driven by the policies of international underwriters, are placing more limits on the insurer’s ability to cover private vessels, based on area of operation, age, type of vessel and construction methods.
There are significant restrictions now on the insurance options available to owners of vessels wanting to operate in cyclone prone areas even, in the case of Queensland, above as far south as Noosa which hasn’t seen a real cyclone since 1976 (Cyclone David), which was a comparatively weak system.
And, as we all know, the cost of Marine Hull insurance has skyrocketed over recent years.
Fortunately, there are still some insurers and underwriters who provide such cover and some brokers who make the effort to ensure they have a “good book” of boats in very good condition, despite their age and construction method.
Those marine insurance brokers are better placed to obtain reasonable insurance coverage for such vessels, though still not cheap.
Some of the more “retail” insurers have a limited understanding of maritime matters. An example is a high brand level retail insurer who, in a matter in which we were consulted, declined a claim because the day in question when the insured vessel caused damage to another, after its mooring lines snapped, was, in effect, too windy! BOM records showed nothing more than 20kn that day! This “insurance group” advertise on the internet and TV that they cover boats. Their target market is tinnies, not “proper boats”, so boat owners, marina and yard and slipway operators should be wary of any policies for marine hull insurance issued by the big retail outfits.
Most marina, slipway and yard operators require every vessel to have a Certificate of Currency for comprehensive insurance before the vessel is allowed into the facility.
However, surprisingly, some operators don’t.
Recently, I took my boat, Silhouette, a 1980 Hugh Morris 46 wooden Moreton Bay Cruiser, north of Brisbane and much to my surprise, the marina into which I booked, did not ask me for a Certificate of Currency or even get me to sign any terms and conditions of being in the marina.
I had sent them a copy of my Certificate of Currency and asked them to send me their “paperwork” before I left but they said, “Don’t worry about it. We can sort that out when you get up here.” Upon arrival, all they wanted was the money – no paperwork was signed at all.
Just think of the liability risks they are exposing themselves to with every boat in that rather large marina!
Marine surveyors are likely to face increasing challenges and liability risk when it comes to surveying vessels which are “marginal” or even close to it.
It is not just the liability risk of being sued by someone who suffers loss as a consequence of a favourable report which should not be so favourable, but also the risk of losing professional indemnity insurance cover if there is a claim relating to that vessel which could come from the person who purchased the vessel or someone else who suffers loss as a consequence of that vessel not being in the condition the report suggests, such as a marina operator or slipway.
So, it’s not worth the risk as any sensible Marine Surveyor knows.
Private boat owners, purchasers and the “right” yacht broker
First of course, is make sure your boat is kept in good condition and to use an AMSA registered Marine Surveyor to regularly inspect your vessel and provide reports which you can use to make sure your vessel is in tiptop condition and to give to your insurer if and when needed.
It doesn’t cost you a lot, but it could save you an awful lot.
Secondly, survey the field of insurance brokers and choose carefully. Some are better than most and will be able to obtain appropriate coverage for you based on their reputation with insurance companies and underwriters, the quality of their book but again, probably only if your vessel is in good nick.
Thirdly, don’t buy a vessel without having a Marine Surveyor do a thorough Marine Survey before you commit to any contract unless it is subject to survey.
And, in that regard, many of the boat sale contracts out there from some yacht/boat brokers do not provide enough protection to purchasers in terms of sea trials and the ability to pull out because the sea trial is not satisfactory, or the surveyor identifies issues that are not acceptable to the purchaser.
A good yacht broker will have a good contract upon which you can rely to properly protect you, though it should be fair between buyer and seller and of course the broker.
Finally, don’t forget that if there are risks or you are presented with a document which you cannot be 100% sure is correct and appropriate to protect your rights in your circumstances, seek the advice of a lawyer who knows what they are talking about when it comes to boats and the legal risks involved before you sign anything
For further information regarding the above article, please contact the author, Ian Heathwood, or any member of our Maritime team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.