Saving Lives and the Bottom Line

Let’s face it, your insurance program is likely the least exciting component of your

operations, yet one of the most important. Risk and loss control, demanding underwriting questions, and worst of all, insurance premiums. With the inherent risks associated with transporting passengers, vessel operations are subject to heightened scrutiny from insurers. Safety and risk management play a critical role in securing and maintaining affordable coverage.

Insureds often have a difficult time with the fact that insurance is non tangible. A hefty bill for something you can’t see or touch can be frustrating, to say the least. Unfortunately, many people do not realize how important insurance is until a loss occurs. The reality is that insurance is a necessity, especially in our current legal environment; the size of judgments and settlements are increasing at an exponential pace with no signs of slowing down. Although insurance is a necessary evil, you can lessen the burden by taking meaningful steps to improve protection of assets, insurability, and insurance program costs.

We all know that safety is paramount, not just for our passengers, but for our customers, employees, and the general public. A loss can have countless devastating consequences—bodily injury to passengers or crew, property damage, regulatory action, and lasting reputational harm, to name a just few. Beyond protecting lives and livelihoods, a demonstrated commitment to safety shows underwriters that your operation is proactively managed and safety is prioritized.

Beyond protecting lives and livelihoods, a demonstrated commitment to safety shows underwriters that your operation is proactively managed and safety is prioritized.

The below section outlines the typical exposures and coverages associated with passenger vessels, along with risk mitigation steps you can take to ensure you’re getting the most competitive insurance rates.

Employee Exposures

Workers Compensation – State Act

• Experience modification factor is one of the biggest drivers of premium. This factor is directly determined by your loss history on workers compensation claims, taking both severity and frequency of claims into account.
• Workers Compensation – United States Longshore and Harbor Workers’ Compensation Act (USL&H)
• More favorable rates can be obtained
• Unlike traditional workers compensation, USL&H is a federal coverage, so many carriers do not report to National Council on Compensation Insurance (NCCI) or other applicable independent rating bureaus. Experience modification factor may not apply to this portion of your coverage.

Jones Act/ Crew Coverage

• Possibly the biggest exposure for passenger vessel operators and their crew. These operations have unique risks and exposures that differ from those of land based or shoreside duties as noted above.
• Over the water employees are protected under federal maritime law.

The three previously mentioned coverages may see the benefit of improved rating by implementing the following practices:

• Comprehensive employee safety training
• Thorough new hire orientation and ongoing education
• Routine safety meetings
• Training
• Job hazard analysis
• Preventive equipment maintenance
• Drug and alcohol testing programs
• Pre-employment screenings
• Formal procedure for hiring especially crew & captains

Hull

• Condition & valuation surveys on your vessels can ensure seaworthiness to safely carry passengers, but they also ensure that your vessel is properly insured to value. An underinsured asset can have its own negative financial impact at the time of loss.
• An active vessel maintenance schedule demonstrates a proactive approach in maintaining the vessel for safety and seaworthiness.

Protection & Indemnity

• Crew coverage, as noted above
• Passenger exposure
  
  • Passenger vessels with high foot traffic are significantly exposed to slip and fall claims. Reduce these risks as much as possible by utilizing proper lighting, signage, and brightly covered transitions to emphasize trip hazards.
    
• Property damage to third party property or vessels

Property

• Many operators have a shop or office location tied to their operations. While not an over-the-water exposure, land based, shoreside property has its own set of hazards, with fire and natural disasters as primary concerns.
  
  • Reduce fire hazards by storing all flammable liquids in a fire safe cabinet.
  • Ensure there’s a proper plan in place to move vessels to a safe berth in the event of inclement weather.

General Liability

• Your liability to passengers extends beyond the vessels. Docks, embarkation areas, parking lots, and any owned premises present an additional slip/trip/fall hazard to passengers and customers, along with the general public.
  
  • Implement a scheduled maintenance program to ensure these areas are properly maintained.
  • Reduce slip/trip/fall hazards (cords or lines laying around, obstructed walkways, poorly maintained docks, etc.).
  • Taking appropriate measures to mitigate slip and fall risks can result in lower insurance premiums.

Commercial Auto

• Many passenger vessel operators also have a land based commercial automobile exposure. Auto premiums have skyrocketed in recent years as a result of high awards for liability losses. The following are areas are premium baring underwriting considerations:
  
  • Written procedures on employees using company vehicles for personal use
  • Written procedures on distracted driving
  • MVR’s run annually
  • Vehicle telematics

For many passenger vessel operators, proper risk transfer via contract negations is of utmost importance. Clear expectations and responsibilities should be outlined and adhered to. For example, let’s say you have a vessel docked at a city pier. Does the city’s insurance cover a slip and fall on the dock, or would that be the responsibility of the vessel operator? Similarly, what if a passenger is injured on the gangway boarding a vessel. They’re not yet on the vessel, but also not on the dock. Where does negligence lie in this scenario? Concise, clear contract wording should remove any ambiguity for these exposures at time of loss. One of the first items a claims adjuster will look for during claim investigation is the contract specifically outlining each party’s responsibilities. Any risk transfer through a contract must be carefully evaluated for both parties to ensure you’re not assuming any contractual liabilities not within the scope of your operations.

Additionally, some vessel operators are located in high-catastrophe areas prone to any number of natural disasters. Primary hazards are wildfires and hurricanes, both of which will have an impact on underwriting considerations. Having a clear plan established for impending disasters demonstrates forethought in protecting your assets and operations. All too often, insureds are scrambling at the last minute to locate a safe berth for their vessels.

Although many insureds consider in-person loss control visits a nuisance, the intention is not to criticize your operation. Rather, this process mutually benefits both the insured and their carrier partner. The overarching goal of a risk control visit is not to bog you down with frivolous recommendations, but to draw your attention to areas in which safety can be improved and risk mitigation enhanced. Underwriters greatly value an insured’s willingness to engage and consider feedback that will improve the quality and safety of your operation.

It is unrealistic to believe you’ll never fall victim to a loss while operating. Losses and accidents are to be expected, which is entirely why we have insurance. How you respond to those losses speaks volumes to a carrier. Without fail, underwriters always ask, “what has been done to prevent future losses of this nature?” Often, a simple fix can answer this question. For example, let’s say there is a two-inch lip on a threshold where it transitions from car stowage to main deck. Trip and falls are frequent in this area. Installing a sign and neon colored tape or paint on the threshold will draw attention to this area, reducing the likelihood of a trip and fall.

Working with a trusted agent that is experienced in maritime risks provides tremendous assistance in developing and implementing a safety program. Whether it be through helping to identify available resources (PVA, carrier training or programs available) or relying on years of prior experience in this area, we want to help our insureds succeed and operate safely and profitably. It is our responsibility to be the liaison between the carrier and insured. We directly advocate for our clients by illustrating the ways in which your safety program reduces the risk of losses and improves the overall quality of the risk. Maritime operations have their own unique, inherent risks and should be treated accordingly.

Risk control is not a one-time, singular project. Conversely, it’s an ongoing process of continuous improvement. Whether you’re operating one vessel or managing a fleet, investing time and effort in risk mitigation will help reduce losses and increase profitability for years to come. Insureds that proactively identify hazards, implement formal risk management practices, and demonstrate a strong culture of safety are undoubtedly viewed as more desirable insurance risks. It might take some time, financial investment, and patience, the but the positive impact on your insurance program and premiums cannot be understated. Underwriters give preferential pricing and coverage to Best in Class risks. Your agent is your marine insurance expert and advocate—if you work together and allow them to guide you, and you’ll be on your way to being the best of the best.

Crista Larochelle // Starkweather & Shepley Insurance Brokerage Inc.

Crista Larochelle
AVP, Commercial Risk Advisor, Starkweather & Shepley Insurance Brokerage Inc.

Larochelle has more than a decade of experience in commercial insurance, specializing in marine risks and the unique challenges facing marine businesses. As a commercial risk advisor, she works closely with clients to develop comprehensive insurance programs tailored to their operations, exposures, and goals. Her expertise includes passenger vessels, marinas, marine contractors, boat builders, and other marine related businesses. Larochelle also serves on the Board of Directors of the Connecticut Marine Trades Association, supporting and advancing Connecticut’s marine industry.