Introduction to Yacht & Super Yacht Insurance / Warranties Presented by Eric Frantz Cert CII AIB Insurance Brokers Ltd 11th June 2015 - MIM Yacht & Super Yacht Symposium

Sections of Cover The optimal coverage available in the market usually caters for the following main risk exposures emanating from the ownership of a Yacht or Super Yacht; HULL - Your yacht and associated property .   LIABILITY - Your third party liabilities as a boat owner.  PERSONAL ACCIDENT - Your - and your guests' - accidents, medical expenses and travel arrangements. EMPLOYERS’ LIABILITY - Your paid crew members. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Main Key Benefits (1) “All Risk” basis, with minimal Exclusions. Agreed Value Basis. All claims settled on the basis of “New for Old” replacements, without any deductions, or any financial contribution from the Boat owner. Fixtures and fittings, as well as Fine Arts extensions. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Main Key Benefits (2) Personal Effects cover for owners and guests includes clothing, fishing gear and sports equipment. Personal Accident cover for owners, guests and crew, including additional cover for search and rescue, medical emergency aboard including patient transportation costs. Ships Cash cover. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Main Key Benefits (3) Emergency tow and assistance to nearest safe port/harbour. Water sports Liability. Cover for US crew. Pollution hazard cover in line with state law and regulations. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (1) What is the meaning of a Warranty; - In the context of insurance, it means a promise, by an insured party, to do or not to do something, or a statement regarding an aspect of the risk. - The promise or statement must relate to circumstances which, in the event of a breach, the law will allow an underwriter to repudiate the contract altogether – and walk away without paying in the event of a claim. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (2) Type of Warranties; Expressed – Must be included in the policy, or at least be contained in some document referred to in the policy. Express warranties are normally added as a deliberate and fundamental stipulation of the contract. Implied - Cannot be found in policies, they can be implied automatically by law depending on the specific insurance legislation of a particular flag/registration jurisdiction. We will consider the more important ones below. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (3) What happens if a warranty is not complied with? The essential characteristic of a warranty, whether express or implied, is that it is a condition which must be strictly complied with, whether it is material to the risk or not. Any breach of warranty, even though unrelated to the risk or loss, is sufficient to terminate the contract from the date of the breach – and therefore relieve the Insurer from any obligation to pay. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (4) 3. Discharge from liability is automatic and is not dependent on any decision by the Underwriter to treat the policy as at an end. Furthermore, the assured cannot use the excuse that the breach has been remedied, and the warranty complied with, before/after the loss occurred. 4. An inquiry into whether the breach of warranty actually affected the risk is out of the question. Where a warranty has been broken, even though the loss may have been totally unconnected with the breach, the Underwriter is still free from liability. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (5) Examples of Typical Expressed Warranties; The two most widely used policies wording being the Institute Yacht Clauses and the American Yacht Form contain warranties that the yacht is only to be used for ‘private pleasure purposes’ and is not to be ‘Chartered’ unless Insurers specifically agree to such use. The Institute Yacht Clauses also include a ‘Navigational Limits’ and the ‘Vessel’s Maximum Speed’ as warranties. Other popular forms often demand that when the yacht is under way a competent person must be on board and in control of the vessel. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (6) Implied - the warranty of Legality; Arguably the most important warranty is not expressed, but implied. Under the pertaining marine insurance legislation of many countries there is an implied warranty that the ‘adventure’ (i.e. a charter or a period of use by the owner and/or crew) will be lawful, and The yacht will be used in a lawful manner, as far as the assured can control the matter. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (7) (1) With regard to legality of the adventure, at one end of the spectrum a yacht will clearly not be covered where the owner uses it for smuggling/other illegal activity. (2) Problems arise where the owner does nothing wrong and has no knowledge of anything illegal being undertaken– say for eg. where a crew member brings a small amount of drugs into a port, and the yacht then catches fire. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (8) (3) Illegality may stem from local law as well as the yacht’s flag state law: eg. a yacht chartering in Spanish waters without a Spanish charter licence would not be covered. (4) Bribing a port official to secure a berth during an adventure may breach the warranty of legality. One would also want to ensure that the complex US security regulations are complied with when entering their waters. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Insurance Warranties (9) (5) Courts have been prepared to overlook those regulatory breaches where only fines can be imposed. However it should be noted that non-compliance with the International Safety Management (ISM) Code or the Large Yacht Commercial Code (LY2) both carry prison sentences of up to two years – therefore giving underwriters the right to walk away from all claims in the event of any non-compliance. In other jurisdictions, all the rules must be adhered to – to the letter – if an owner is to make a successful insurance claim. (6) So important is the warranty of legality that breaches of it cannot be waived by a kind Insurer, neither can the parties agree to overlook it. 11th June 2015 - MIM Yacht & Super Yacht Symposium

Thank you 11th June 2015 - MIM Yacht & Super Yacht Symposium