Strengthening your marine insurance
Early in the morning on August 29, 2005, Hurricane Katrina struck the Golf Coast of the United States. Hurricane Katrina was the worst insured loss event in the history of insurance anywhere in the world. It was bigger than 9/11. It was bigger than the earthquake and tsunami in Japan. Hundreds of thousands of people in Louisiana, Mississippi and Alabama were
displaced from their homes. Barges were picked up by the waves and slammed onto shore, while some were moved so far inland that they ended up on top of freeways. Levees broke and flooded the streets, causing nearly 80 percent of the city to be under water. Experts estimate that Katrina caused more than $100 billion in property damage alone.
Hurricane Katrina is an extreme example of disastrous effects that severe weather conditions can have on many things and in particular on the marine industry. But Katrina is not the only example. In the midst of winter, El Nino is proving to be the strongest on record. Workboat owners need to be thinking about winterizing their insurance programs to protect themselves against costly damages. As weather patterns begin to fluctuate, workplace hazards increase, especially on a workboat. High winds destroy ships, storms and hurricanes cause flooding, and icy docks put workers at an increased risk for injury. Regardless of the size of the storm, dangerous weather conditions can have negative affects for workboat owners and seamen.
Among the unforgiving effects that weather can have on a vessel, the first is property damage. Harsh winds and rain cause docks to erode and equipment to wear down. Storms and melting snow cause ocean water to rise, leading to potential flooded docks and vessels.
This year’s El Nino is having an opposite yet similarly devastating effect on the Great Lakes. Climate patterns have caused water temperatures in this region to increase. Warmer water is causing evaporation and subsequently, low water levels. Cargo carriers aren’t able to transport as much as they usually do – with some having to shed more than 10,000 tons of cargo. Warm water temperatures are also resulting in less ice formation. Ice typically provides a helpful barrier between the lakes and the shoreline and without its protection; shores and fragile wetlands are more vulnerable to the wind and waves.
Workboat and brown water vessel owners need to make sure their insurance covers damages caused by winter weather conditions. The vessel owners’ protection and indemnity policy generally provides for the owners’ cargo legal liability, collision with other vessels and potentially piers, docks, jetties and other fixed or floating objects.
Additional coverage that a workboat owner should consider is charterer’s legal liability. This is coverage for damage arising out of loading or unloading in unsafe berth or wharf conditions. The vessel owner should discuss with their broker getting the most coverage from their policy for all possible scenarios that may occur due to increased stormy environments.
The other potential liability resulting from unsafe conditions that workboat owners need to be aware of is the increased risk of workman injury. Freezing temperatures cause workboats and docks to ice over, leaving workmen vulnerable to slips and falls. Workboat owners should be salting docks and decks to help prevent injury and should be requiring their workmen to wear proper footwear. Additionally, workboat owners should also be aware of their crewmen’s rights. These rights fall under The Jones Act and the United States Longshore and Harbor Workers Compensation Act (the USL&H).
The Jones Act, otherwise known as the Merchant Marine Act, allows injured sailors to make claims and collect from their employers for the negligence of the ship owner, captain or fellow member of the crew which, resulted in injury. Workboat owners also need to be aware of the USL&H. The act applies to workers on the barge or harbor, or any other maritime employees. It can create liability on the part of the barge owner for injury or death resulting from an accident occurring on the navigable waters of the United States. Workboat owners need to make sure their insurance policy covers potential liability under either the Jones Act or the USL&H, in case icy conditions result in crewman harm.
Additionally, workboat owners should be aware that property damage and injury coverage policies rarely include flood insurance. When Hurricane Joaquin hit South Carolina this past October, the state faced more than one billion dollars in flood losses, and most of it was uninsured. According to a poll conducted by the Insurance Information Institute, only 14 percent of Americans are insured against flooding. Workboat owners need to buy a separate flood policy through the National Flood Insurance Program, administered by the Federal Emergency Management Agency
, or risk facing thousands of dollars in flood damages in the winter months.
Finally, it is essential workboat owners seek out an insurance provider that specializes in marine exposures. A provider with a niche focus on marine insurance will be able to provide workboat owners with deep expertise and a great understanding of the industry. Specialized insurance providers can also offer innovative solutions that add unique value to their business.
Tracy Markowski has been in the marine insurance business for over 25 years. Prior to working at ProSight she worked for several other large marine insurers, including Munich RE in the United States and Germany.
(As published in the April 2016 edition of Marine News