Saturday is scheduled to be a beautiful day offshore, and it’s all you can do to get through the workweek. You call the marina to have your boat put in the water. You tell your buddies to meet you at the dock to drink some cold ones and get rigged up for the following day. You leave the office with a big smile on your face as you hop into your truck, daydreaming about pelagics dancing through your spread. However, when you pull into the marina, you notice a large group of people gathered around the dry stack. You push through the crowd and see your beautiful boat tilted over on the concrete. Your boat fell off the forklift! Not only is your weekend ruined, you are in a state of panic because your baby is lying there helpless on the ground, battered and beaten. But deep down inside, you find comfort and mutter to yourself, “Thank goodness I have insurance.” Not so fast.
Unknowingly Waiving Your Rights
At some point in time, almost all boat owners use a marina, whether it’s full time or when the boat is in transit. What many owners do not realize is that there are often clauses in marina contracts that may not only release a marina from liability but simultaneously void the owner’s insurance policy due to something called a “Waiver of Subrogation” clause.
Subrogation is the right of the insurer to assume the rights of the insured. In other words, an insurer is entitled, after payment of a loss to an insured, to pursue any right of action against a third party (i.e., the marina) whose wrongful act caused a loss. A simple way to think about this is that the insurance company, or carrier, is stepping into the shoes of the insured in seeking recovery for a loss. Many marina contracts contain clauses requiring the insurance company to waive their right of subrogation. These clauses typically look something like this: “Yacht owner shall cause its insurance carrier to waive their respective rights of subrogation with respect to the same, and to so notify the marina.” These clauses can have a huge impact on your insurance coverage.
Subrogation is an important legal tool for insurance companies. As such, many insurance policies include specific language that prevents the insured from interfering with a carrier’s subrogation rights. These clauses will often be titled “Right of Recovery” or “Our Right to Recover,” and the language varies greatly between carriers and individual policies. Some insurance policies contain a specific exception for the waiver of subrogation only for the policyholder’s marina or yard contract. In such a case, a marina’s contract is unlikely to void your policy. However, most policies are less forgiving and may be void if the insured takes any action that interferes with the carrier’s right of subrogation.
Transfer of Liability
Typically, marina contracts also contain clauses that transfer liability away from the marina. For example, under most common exculpatory and hold harmless clauses, the owner agrees to release and waive any and all claims against the marina and its personnel for property damage or injuries to the owner, even if caused in whole or part by the negligence of the marina. Generally speaking, these clauses are indeed enforceable, even against acts of negligence by the marina or its personnel (but not always gross negligence) so long as the contract language is clear and unequivocal.
Avoid the Combination
The combination of a waiver of subrogation and exculpatory clause could leave a boat owner without a method of recovery, even if they did nothing wrong, as in the nightmare situation I described above. In other words, if a marina contract contains an exculpatory clause and requires you to waive your insurer’s subrogation rights, not only may you not have a claim against the marina, you may have also voided your insurance policy at the same time because you impaired your carrier’s right to recover.
The first step in avoiding this situation is to read your insurance policy and your marina contract. Be familiar with the terms of both documents. Regardless of the scenario, the first step you should take is to contact your insurance agent and/or maritime attorney prior to signing a contract and let them review the relevant materials so they can ensure you will be protected. You might need to renegotiate the terms of a marina contract, add a policy rider or simply provide proof of your policy language to the marina. Each situation is different. Regardless, this is a real scenario that can be encountered by any boat owner, but it is easily preventable if you stay informed and take the correct precautions.
Raleigh P. Watson is a contributing author, and a Partner at Miller Watson Maritime Attorneys.
