Recent Cases Reinforce the Need to Understand the Product Being Sold
Three cases, one in the insurance press and the other two matters that LMI are assisting on are examples of where the belief that all insurance policies are the same and that all that matters is the price is plain wrong.
The first is a matter involving the use of a commercial dive boat that was being used for private purposes at the time of an incident. The insurer in this case denied liability as the vessel was being used for private rather than commerical use. As a result, the insurance broker was found to be legally liable on the grounds that the advice was not that of a reasonable professional insurance broker, they (the firm) had to meet the claim.
If you look at the Institute Time Clauses – Hulls and the Institute Protection and Indemnity Clauses – Hulls – Time (or the Institute Port Risks Clauses) then you will see that that there is no mention in those clauses that creates an exclusion or a warranty in respect of the use of the vessel. This, of course, can be altered by endorsement.
There are a few companies now who have their own company wordings and on looking at a CGU wording as an example I found that their policy automatically includes private use for their charter vessels (refer page 2 – definition of Usage).
Clearly, brokers who arrange cover for commercial watercraft that may be used for social, domestic and pleasure purposes by the owners need to be careful. Motor policies have dealt with this issue successfully for years, but it appears, on the facts as I know them, that not all marine hull policies in the market are the same.
The other claims involve contract works policies. In these cases, the cover was different between insurers and these differences were not picked up at the time of transferring the insurance from one insurer to another. LMI PolicyComparison is an extremely important service to assist brokers understand the vast majority of differences easily and quickly. Having said this, while LMI PolicyComparison compares contract works, marine transit and a dozen other classes, it does not at this stage compare marine hull policies as part of their standard offerings. As with any complex covers, the comparison researchers can provide one-off comparisons on request.
Turning back to the contract works cover, in both cases the contract works were being conducted on existing buildings. In each case, the broker had placed the contract works insurance with a different insurer to the property (Industrial Special Risks) insurer. This created at worst a gap in cover and at best a dispute between insurers arguing as to which policy covered the loss. While not every property/ISR insurer offers contract works insurance, my strong view is that the contract works insurance should be with the same insurer as the ISR is arranged.
When a claim occurs, no one remembers the price of the insurance, certainly not the Insured. All they want is a policy that covers them for the event and a prompt, fair and reasonable claim service from the insurer and their loss adjusters, surveyors and or investigators.