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As one of the oldest forms of insurance, marine insurance has taken on many shapes and forms in this modern world. Under the simplest circumstances, selecting proper insurance is a difÞ cult task. For companies involved in offshore construction and dredging operations, the procurement of proper insurance is of the utmost importance. Your insurance requirements are more complicated than the average marine operator due to the construction aspect of your operation. In order to make informed decisions when procuring insurance, it is important to know the basics of what types of insurance are available as well as what each type of policy covers. Marine insurance protects vessel and cargo owners from losses sustained as a result of Òthe Perils of the Sea.Ó Marine insurance can be separated into three categories: hull and protection and indemnity coverage, cargo coverage, and marine liability coverage. Hull coverage protects the vessel itself and its machinery. These policies typically cover physical damage, salvage costs and also provide collision liability Ð also known as a Òrunning down clauseÓ. Protection and indemnity coverage, also called ÒP & IÓ coverage, covers bodily injuries and property damage caused by a vessel. It not only covers collision liability not included in a Òrunning down clause,Ó but also covers other important potential liabilities. Essentially, while P & I policies insure the vessel ownerÕs incurred liability, it is important to Þ nd out what exactly is and is not covered by the policy in order to make an informed decision about what additional coverage you need to purchase. HULL INSURANCEWhen looking to obtain hull insurance, there are some important issues to be aware of. Some policies have deductibles, or deductible-like provisions, which create a minimum amount of damage before the insurer pays on the policy. A deductable in a marine policy works just as it would with any other insurance policy. An insured must pay a certain amount themselves, and the insurer will cover any amount above that to repair the injury. However, some policies use a different provision called a franchise. A franchise is a minimum amount of damage that must be incurred before the insurer covers the loss Ð but then the full amount of damage, including the franchise, is covered, up to the policy limit. These deductibles and franchises protect insurers from liability for the normal wear and tear a vessel suffers due to its everyday use. Two other important clauses to be aware of in hull policies are ÒInchmaree ClausesÓ and ÒSue and LaborÓ Clauses. An Inchmaree Clause covers latent defects in the hull and machinery. This protects the buyer of a vessel from injuries caused by ß aws in the design, or in the manufacturing of the vessel, which may take time to become apparent, but can be the cause of an accident or injury. Sue and Labor Clauses dictate that a vessel owner is required to take necessary measures to repair the vessel after damage occurs. If the repairs are successful, the owner is compensated for the reasonable costs of the repairs. If the repairs are unsuccessful, the insurer must pay for both the total loss of the vessel, and the repair costs the owner incurred in attempting to save the vessel from further injury. While it may sound counterintuitive for insurers to do this, it forces vessel owners to attempt to salvage a damaged vessel before the insurer becomes liable for the total loss of the insured vessel. If you are purchasing a vessel that has the potential to ß uctuate in price, or could be costly to replace, some insurers allow vessel owners to purchased ÒIncreased Hull CoverÓ or ÒHull InterestÓ policies. These policies allow an owner to take out a policy for an amount greater than the fair market value of the vessel. This protects an owner against ß uctuations in price throughout the year, while also providing the owner with money that may be needed to cover administrative costs incurred while procuring a replacement vessel. CARGO INSURANCECargo insurance covers goods on vessels in transport. It is usually obtained shipment by shipment, but can also be purchased for a set period of time. Cargo policies can be separated into three types of coverage: Òall risk policies,Ó Òwith average policies,Ó and Òfree from particular average policies.Ó ÒAll riskÓ policies offer the most protection, covering all losses attributable to external causes. Though called Òall riskÓ policies, misconduct and fraud normally prevent INSURANCEMarine Insurance PitfallsMaking Sure That You Are Adequately Covered ? Attorney Larry DeMarcay Weighs In By Larry DeMarcay 22 MNJuly 2012
