Marine Insurance covers so many different situations that it tends to defy simple explanation -- from a Court's perspective, the risks faced by a ship are very different than those faced by a small runabout. But from an insurance perspective, these vessels are often covered by the same general coverage, and subject to the same general exclusions. Generally, the courts will look at an insurance policy, review its terms, and attempt to apply the words' "ordinary meaning and effect." Ordinary meaning, however, tends to have a slippery quality in maritime discussions, since there has been hundreds of years of discussion of certain words by the courts. Wake damage, unexplained disappearance, collision, operator negligence, lost cargo, injured passengers, sinking in calm seas - all of these differing types of claims will likely lead to differing results even under a single contract. Under different contracts, the results become even more difficult to predict. Much will depend on the sophistication of the surveyors, salvors, lawyers and other professionals that have been assigned to the claim.
Nevertheless, there are a few general principles that a vessel owner should keep in mind with respect to marine insurance. For someone seeking coverage, the most important concept is known as uberrimae fidei, or the duty of absolute good faith concerning the contract. Under this doctrine, the failure to reveal a material fact (such as a prior sinking or questionable hull survey) can be grounds for the termination of the policy. If your boat sinks, and the insurer finds omissions in the application, the adjuster may not pay the claim.
The next most important thing is to read the contract, and determine what duties and limitations are placed on the owner/operator. Are there navigational restrictions? Are you prohibited from taking passengers? Are you required to have certain equipment, or to notify the insurance company at any time that significant repairs are undertaken? If there are requirements set out in the contract, it will be important to have met them in the event of a claim. If you are giving notice to an insurance company under a contract, give the notice in writing.
A policy of marine insurance, particularly a hull policy, is categorized by the extent of the risks that it covers. Some policies cover everything, unless specifically excepted. Such policies are known as "all risks" policies. There is always coverage for the boat, even in the event of operator negligence, unless the owner operator violates one of the conditions of the contract. What are the conditions? The contract will say, but maintaining the vessel in seaworthy condition is often mentioned. Cooperating with the insurance company's investigation is also important.
The opposite end of the spectrum from "all risks" contracts, are those that only cover "enumerated perils." Enumerated perils covers those items that are specifically stated, and no others. One might think that this would simplify matters, but one of the most common clauses reads as follows:
"Touching the Adventures and Perils which the Underwriters are contented to bear and take upon themselves, they are of the Seas, Men-of-War, Fire, Lightning, Earthquake, Enemies, Pirates, Rovers, Assailing Thieves, Jettisons, Letters of Mart and Counter-Mart, Surprisals, Takings at Sea, Arrests, Restraints and Detainments of Kings, Princes and Peoples, of what nation, condition or quality soever...." As one can see, this clause leaves plenty of room for debate as to what is covered and what is not covered under the policy.
The best advice in dealing with a question about marine insurance is to read the contract, then read it again. It is easy to make a mistake, and purchase coverage that does not meet the needs of the purchaser. It is equally easy, in the event of a loss, to state the claim in terms that are not covered. Even after reading the contract, however, do not forget that many terms in the contract will have a long history in maritime law. If there is a dispute, consult an attorney that can present your case in the best possible light, with the support of controlling legal authority.
Disclaimer: This article is intended as a resource to boaters and does not constitute legal advice. Legal issues involving vessels are complex matters and you should speak to a qualified attorney to discuss your specific concerns.