E&O Insights: How to Calm the E&O Waters When Insuring Marinas

As spring approaches, agencies may have some opportunities to secure commercial accounts dealing with watercraft business. These accounts, typically classified as marinas, boat yards or boat moorage, offer a multitude of services to private and commercial boat/yacht owners. Understanding the class of business and the variety of these exposures could make a difference in “calming the errors and omissions waters.”

Benefits of Risk Evaluation System

Many of these risks offer slips or dock space rental and usually launching slips, too – some to members only and some to the public. Some offer storage facilities, both wet and dry (out of the water). Other services include: boat rental facilities, service and repair facilities, dry dock facilities for painting, refitting, refueling, refill of water and other supplies, sales of equipment and accessories, and restaurants or bars. The marina might provide lifts to take boats out of the water and also offer recreational opportunities and instruction, boat races and contests, demonstrations, and promotions as well.

These risks present a wide array of exposures. A great place to start learning about these risks is an exposure analysis checklist. This will help your producers to better understand the exposures, the applicable coverages and key questions to ask.

These checklists provide a full description of this class of business and the exposures broken down by line of business. They provide tremendous assistance in helping insurance producers become more educated on this class of business. Without the use of this tool, it would be extremely difficult to identify the exposure and propose necessary coverages.

Exposures to Consider

There are a wide variety of coverages to consider, including property (real and personal), business income, general liability, environmental impairment and workers’ compensation. The checklist will provide important questions to ask such as:

• Is there any boat repair?
• Do they do any spray painting?
• Do they have a liquor liability exposure?
• Do they have any exposure to the Longshore and Harbor Workers’ Compensation Act?
• Do they lift boats out of the water?
• Are they involved in instruction, boat races and contests, demonstrations, and promotions?

Sales and Service. The sales and service of boats is a significant potential exposure. If your account has this exposure, you must determine the type(s) of boats sold and/or serviced. This can range from canoes/kayaks and cabin cruisers, to fishing boats and power/racing boats.

Tours and Rentals. There is the definite possibility that the marina offers tours or boat rentals. They may also store boats for the season. These all present some unique exposures that the agency needs to understand when presenting the risk to the carrier and the eventual proposal to the prospect.

Environmental Impairment Exposures. There are a host of possible environmental exposures such as:

• Do any of the other occupancies in this building pose a catastrophe risk or other hazard to the applicant (explosion, fire, chemical, other)?
• How does the marina dispose of waste? Are there any fuel tanks on the applicant’s premises?
• What is the procedure in place to control spillage during the filling process?

Large losses have occurred in this class of business, so there should be consideration and discussion on limit options/umbrellas, etc.

Attention to detail is important, as noted by the following claim.

An agent had a marina as a client and procured a policy covering physical damage to boats stored there. The client wanted coverage for theft and vandalism in addition to the other perils. The procured policy excluded loss by theft and vandalism. Coverage could have been bought back for those perils for $400. The agent missed the exclusionary language, and a theft of equipment from a boat occurred. The client claimed $23,000 in damages. Due to the agent’s negligence, the loss was settled for $17,500.

Insuring marinas can be complicated. There are a host of exposures and it is fair to say that no two marinas are the same. By proper use of the various exposure analysis checklists, agents will be better able to understand the exposure of the specific marina.