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Navigating the nuanced waters of insurance coverage

September 1st, 2016 / By: / Feature

InsuranceGraphiMarine fabricators face a number of unique circumstances in their operations. They perform onsite work at their shops and offsite work at marinas. They use expensive-to-replace tools and equipment both on and off site. Occasionally a fabricator must bring parts of a customer’s watercraft back to his or her facility to do the work.

Such special conditions necessitate tailored insurance solutions. By working closely with insurance agents and providers who are familiar with the marine industry, fabricators can acquire the right types of coverage to protect their assets.

Coverages to consider

At the heart of any small business insurance plan is general liability. “General liability covers claims you are legally liable for that are made by others against you for bodily injury and/or property damage,” explains Alex Kripetz, managing director of the Ocean Marine division at insurance provider Travelers.

A common example of a general liability claim is a slip and fall by a visitor on your premises or another area for which you are responsible. General liability also covers claims for products and completed operations.

“Once the contractor completes his work and releases the boat to the owner, products and completed operations coverage provides the insured coverage from bodily injury and property damage as a result of his work,” says Charles Skinner, executive vice president of Wade S. Dunbar Agency in Oriental, N.C. The company’s Marine Insurance House division specializes in all areas of marine insurance. “This is not warranty coverage. A shoddy job is a shoddy job.”

Kripetz adds, “A completed operations claim can arise months, or even years, after you finish a job. That makes general liability very important coverage to have at all times.”

For marine fabricators who bring a customer’s watercraft or boat parts to their shop for repair, ocean marine insurance specialists recommend purchasing coverage known as marine operators or ship repairers legal liability. “There is no coverage under general liability for the boat itself while under your care, custody or control,” Skinner says.

Kripetz calls this type of coverage “an extremely important piece of the ocean marine insurance puzzle that can potentially leave a large gap in coverage if not properly addressed.”

In tandem with the care, custody and control coverage, marine fabricators may require a traveling workman endorsement. “This is to ensure that your care/custody/control coverage follows you when your work takes you away from your premises,” Kripetz says.

Along a similar line, Kripetz recommends that ocean marine contractors purchase tools and equipment coverage to address loss or damage occurring at job locations. “You need insurance that is as mobile as you are,” he says.

Although these core insurance products are strongly recommended for robust protection against liability, there is one type of coverage mandated by law: workers’ compensation insurance. This provides wages and medical benefits to employees who suffer work-related injuries and illnesses. Each state determines how many employees are necessary before an employer must carry workers’ compensation insurance.

Marine fabricators also must be aware of applicable federal laws. If you are an employer with employees who work alongside or on the water, Kripetz recommends consulting with an insurance agent or attorney who is familiar with ocean marine exposures in order to see if federal law requires you to purchase specific marine coverages as well for employee bodily injury or death.

Work completed on commercially licensed vessels—for instance, six-pack charter boats—requires coverage under the U.S. Longshore and Harbor Workers’ Compensation Act. If they don’t have coverage, marine fabricators can face stiff penalties: imprisonment of corporate officers or a fine of up to $10,000.

“It is one of the most overlooked areas with artisan contractors,” Skinner says. “They don’t see a need, but if they ever have a problem, they have a major problem.”

Finding the right fit

Given the nuances of insurance coverage in their industry, marine fabricators benefit from partnering with knowledgeable agents. “Marine insurance is not the same animal as homeowner’s insurance,” Skinner says. “Marine contractors need to make sure their agent has a good working knowledge of the market and works in that field on a constant basis.”

For example, many commercial insurance providers don’t underwrite marina access, “but most marinas require proof of insurance to walk on the docks at all,” says Janeen Richards, owner of Crafted Canvas in Dunnsville, Va.

This proof of insurance, also known as a certificate of coverage, provides information such as types and limits of coverage and the policies’ effective periods.

“Marinas want to have less and less responsibility when subcontractors are working on the property,” says Chris Ritsema, founder and owner of Canvas Innovations in Holland, Mich.

Ritsema saw this play out several years ago after a local boat owner was working on his watercraft and it exploded in a marina’s warehouse. Three boats were damaged in the explosion and resulting fire, while many other vessels suffered smoke damage, according to reports of the incident. The building also received extensive structural damage.“Because of that incident, marinas in the area tightened restrictions on subcontractors,” says Ritsema, adding that boat owners no longer can perform work at the marina.

Word-of-mouth recommendations

Finding the right agent can help marine fabricators navigate the uncertain waters of insurance coverage. A good starting point is through peers. Ritsema, whose company has six employees, found an agent through word-of-mouth twice—with the second time being the charm. A friend who maintained and cleaned boats referred Ritsema to an insurance broker, but ultimately the agency could not support the coverage required by the marina.

Then Ritsema learned that one of his customers provided marine-specific insurance, including marine operators legal liability necessary to perform work on boats at the marina.

He has been with the agent for six years. Ritsema’s other coverages include commercial general liability, workers comp and automotive liability. For Ritsema, the relationship illustrates the importance of finding the right expert.

“The type of insurance we need in our industry is very expensive,” he says. “You want to deal with a reputable company.” To do so, Ritsema suggests talking to other marine fabricators or contractors who have had claims.

A good insurance agent should be thorough in every aspect of coverage, educating his or her clients along the way. Richards, who works from her shop at home, didn’t initially realize that the business portion of her house wasn’t covered by a homeowner’s insurance policy. “My homeowner’s policy will not underwrite a home business, so I have a portion of my commercial insurance that deals with the business property itself and covers my equipment should it become damaged,” she says.

The relationship between fabricator and agent also relies on regular communications. Tony Floyd, vice president and secretary of Heber Springs Marine Upholstery in Heber Springs, Ark., recently reached out to the company’s insurance agent after the shop added $50,000 worth of equipment.

Insurance agents should respond quickly to requests as well. “You’ll need to get a copy of the certificate of liability insurance made out to the specific marina you need to go to, and that’s a lot of back and forth responding over time,” Richards says.

When attaining and updating insurance coverage, Floyd follows a guiding principle: “If at some point everything were lost in the building, would you be able to continue the business?”

The cost of insurance premiums can be a hard pill to swallow for marine fabricators, especially those who are new to the industry. “Like many things that have to do with start-up costs, it’s hard initially to think about paying $500 a year when you don’t have that many jobs in the beginning,” Richards acknowledges. “However, I think not having insurance can be pretty expensive, too, if something went wrong.”

In reviewing insurance coverage for Heber Springs Marine Upholstery, Floyd brought lessons from his 22 years of running an air conditioning business. In that time, he experienced equipment losses and endured a frivolous lawsuit.

“With general liability insurance, even if people are bringing a lawsuit for no reason, you can turn it over to your insurance companies and their lawyers take care of it,” Floyd says. “It’s really important to have liability insurance, no matter how small your company is.” Travelers’ Kripetz adds, “It’s worth your time to find an insurance carrier that is as at home in the marine industry as you are.”

Holly O’Dell is a freelance writer based in Joshua Tree, Calif.

Follow these three critical actions before purchasing or renewing insurance plans:

  1. Shop around for a specialist. A marine insurance broker will assess your risks and exposures to determine how much coverage you need. If you want to purchase higher liability limits under one policy for different coverages (marine general, care custody and control, and auto liability), consider a marine bumbershoot, or umbrella, policy. Don’t be afraid to do comparison-shopping to ensure you’re not being oversold—or undersold.
  2. Protect yourself. Use the Consumer Information Source (https://eapps.naic.org/cis/) to access information about insurance companies such as closed insurance complaints, market conduct examination reports, licensing information and key financial data.
  3. Review insurance coverage annually. A growing business often means increasing liabilities. Every year, revisit what is covered and evaluate whether your coverage is still adequate for your current situation. Also inform your agent if you have purchased or replaced equipment.

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