(January, 2017)

Many persons who need protection for watercraft property and its related liability handle things by modifying their homeowner policy. However, a separate policy is a more comprehensive method. In addition to offering broader coverage, a dedicated policy is necessary because many types of boats do not qualify for coverage under a homeowner form. HO coverage is restricted to boats of modest size, power and value.

Related Court Case: “Boat Exclusion Not Affected By Fact That Outboard Motor Could Not Generate 50 HP At Time Of Loss.”

This article analyzes some features and issues found in Insurance Services Office’s WT 00 01–Watercraft Policy (01 10 edition).

PART D – Coverage for Damage to Your Watercraft

A. Insuring Agreement

1. Typically, a watercraft policy’s physical damage section will provide protection against a wide variety of loss sources that may damage or destroy covered property. Under this policy, protection against tangible, accidental loss is provided for any property that meets its definitions of:

·         “your covered watercraft”

·         “boating equipment”

However, coverage is subject to the policy’s applicable deductible. That deductible only applies once per a given loss. In other words, if an insured suffers a loss to her boat and then, on another date, to her boating equipment, the deductible would apply to each loss. If she experienced a loss to her boat AND equipment in a single loss, then the deductible would only be applied once.

2. The Watercraft policy defines what it means by boating equipment, but only with regard to the coverage offered under this section. The policy does not consider outboard motors to be boating equipment. However, it does classify property that is owned by the insured and which is related to the covered watercraft due to being a part of its normal operation or maintenance as boating equipment. This status is conferred whether such equipment is used within or outside of the applicable, covered watercraft.

The policy offers the following items to illustrate what is considered to be boating equipment:

Items similar to the above would also qualify as boating equipment.

C. Exclusions

There are a variety of instances when physical damage protection is denied, specifically the following:

1. Loss involving business activity which includes insureds who rent their craft to others, who receive income from transporting property (cargo) or persons or who make their craft available for charter trips.

2. Losses that solely involve the following are disqualified from coverage:

a. Any source of loss that can be attributed to regular wear and tear, aging, property defects and/or due to breakdown are excluded

b. Loss that is attributable to the insured’s failure to properly maintain covered craft

c. Damage from scratching, marring, denting and chipping

d. Damage caused by either extreme heat or freezing

e. Loss due to temperature extremes including improper winterizing. However, an exception exists for damage occurring to winterized craft IF the process was performed by a competent source.

f. Damage caused by icing to a covered craft either while afloat or while moored

g. Loss that is indirect, due to loss of use or similar incidents

h. Loss caused by the physical nature and defects of the covered property (inherent vice/latent defects)

i. Breakdowns, both electrical and mechanical

3. There is no coverage for loss related to using or preparing watercraft for racing; however, there is an exception for sailboats. It is likely that the exception is due to the fact that, even in racing, the handling of a sailboat is not likely to significantly increase the exposure to loss; also, sail boat operators tend to have much more experience in boating than their motorized peers.

4. Loss due to any type of war, military activity, nuclear or radioactive activity or event is ineligible for coverage, including a loss that is covered by any special nuclear energy policy

5. Loss or damage (including confiscation) of property by any government agent due to an insured’s illegal activity.

Note: This exclusion does not affect payments to which loss payees may be entitled. However, such payments would likely result in subrogation activity by the insurer against the insured.

6. Diminished value is not covered