Page 18: of Maritime Logistics Professional Magazine (Q1 2011)
18 Maritime Professional 1Q 2011
Failing to Plan means that you are Planning to Fail. Bill
Davis, Senior Vice President and Marine Practice Group
Leader at Wells Fargo Insurance Services USA, Inc. explains why.
ARE YOU COVERED? REALLY?
A vessel owner receives a call informing him that the crew took his vessel outside the insured trading area to chase a business opportunity. That’s when disaster struck. Is he cov- ered by his insurance? He might be if his broker thought to add a “held covered provision” to the policy’s trading war- ranty.
Another owner decides to train new crew by having them “job shadow” aboard ship. As they follow regular crew for “on the job training”, this increases the number of employees aboard the vessel beyond the warranted limit in the vessel’s
Protection & Indemnity (P&I) policy. If one crew member gets hurt, is there still coverage despite the warranty breach?
The answer would be yes if the broker thought to get the underwriters to agree to drop the warranty in lieu of a decla- ration as to the average number of crew aboard. Alternatively, the broker might have gotten the crew warranty amended to allow higher crew counts for training purposes.
Still another vessel owner contracts to time charter his ves- sels to a large corporation for a specific project. The charter party requires the vessel owner’s P&I policy to name the charterer as an Additional Assured and to amend the P&I pol- icy to delete any wording that limits coverage to insuring only liability “as a vessel owner”. Again, this is not a problem if the broker regularly reads his client’s contracts and arranges for the necessary policy amendments.
YOUR BROKER SHOULD KNOW. DOES HE?
The three examples demonstrate the value of having a knowledgeable marine insurance broker who is not only familiar with his clients’ operations and contractual liabili- ties, but also skilled at tailoring insurance policies to meet the client’s specific needs. Not all insurance agents and brokers have this kind of experience, and even among those who pur- portedly do, there may be great differences in experience, skill, and in-house resources. For this reason, maritime busi- nesses should use caution when choosing an insurance broker to help them with risk management decisions and the place- ment of their marine insurance.
Marine insurance is fundamentally different from property and casualty (land based) insurance in that marine insurance is largely unregulated as to coverage and pricing while prop- erty and casualty insurance is usually written on standardized forms and at rates that are filed with and approved by the
State’s Department of Insurance. The characteristics of marine risks have many more variables because they move about and often disappear over the horizon. Hence, it is hard- er to regulate coverage and rates, and for this reason, marine insurers are not as constrained in what they can insure.
Marine businesses make up a small portion of all the insur- able risks in the world, so it follows that marine insurance is a small part of the insurance industry, and most insurance brokers do not specialize in this unique discipline. Further, the freedom from regulation means that marine insurance is limited only by the imagination of the broker in creating cov- erage to meet his clients’ needs and his ability to get the underwriters to insure them.
CHOOSING A BROKER: HOW & WHY
Good marine brokers possess great skill at writing policies that are specifically designed to cover their clients’ risks, often starting from a blank piece of paper but incorporating some standardized clauses. Traditionally, large risks are insured by subscription policies written by the broker and insured by a number of insurers, each of which signs on for a percentage of the risk. In fact, the term “underwriter” came from insurers writing their names under the description of coverage, thereby agreeing to take the risk.
So how does a vessel owner or a shipyard or any other mar- itime business know that their broker measures up to the chal- lenges of the job? What skills and resources should one look for in choosing a marine broker?
A good, practical knowledge of maritime operations is essential. It is difficult in an office setting to teach an insur- ance professional about maritime operations and the various risks associated with different kinds of vessels, shipyards and/or terminals. It is easier to start with a person who
For ProtectionBy Bill Davis, Wells Fargo Insurance Services USA