Agents E&O Loss Prevention
Looking to insure a marina?
There are tools to navigate these choppy waters
By Curtis M. Pearsall, CPCU, AIAF, CPIA
As spring approaches, your agency is likely to see opportunities to secure commercial accounts dealing with watercraft business. Marina accounts (which can also be classified as boat yards or boat moorage) offer a multitude of services to both private and commercial boat/yacht owners.
Many of these risks offer slips or dock space rental and usually also launching slips—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 and/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. For marinas that do not offer all of the services mentioned, these services often are contracted elsewhere to meet their customers' needs.
Benefits of the Risk Evaluation System
At this point, you might be asking yourself some questions: Where do I start? How do I even know what questions to ask? Do I even have a market for these risks?
A great place to start to learn about these risks is The Rough Notes Company's Producer Online sales and marketing resource. This tool will help you become acquainted with the exposures, what coverages are applicable, what questions to ask and then, based on the state you are in, it will provide you with access to available markets that specialize in writing this class of business.
This System will not only provide a full description of this class of business, it will review each of the various lines of business and what the exposure is for a marina. The goal is to help you become educated about this class of business and demonstrate to your potential customer that you understand their exposures and what insurance protection they should consider.
Whether you have been in the business one day or 40 years, often the key to success is knowing where to go for necessary information. These risks can present a tremendous amount of exposure. Without the use of the available tools, it would be extremely difficult to identify the exposure and propose the 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. Therefore, from a property perspective, even though the risks are close to the water, the lack of equipment and/or training is an issue you and the carrier must consider. Using the tools of the checklist, you can review all of the exposures and ask the necessary questions. For example, does the account do 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?
• The sales and service of boats. This is a significant potential exposure. If your account has this exposure, you must determine the type(s) of the boats sold and/or serviced. This can range from canoes/kayaks and cabin cruisers, to fishing boats and power/racing boats. This is all key information for the company underwriter.
• Crime and other exposures. There is also the potential for a considerable crime exposure. Other key questions deal with businesses that offer tours or boat rentals. Most of these accounts have a substantial inland marine exposure, so you must determine whether they take boats out of the water and store them for the season. Even if they don't, they may contract out these exposures. You must thoroughly understand the risk because this information will be invaluable when presenting the risk to the underwriter. This will also help ensure that you are doing the best job possible for your client.
• Environmental impairment exposure. Key items for discussion include:
—Do any of the other occupancies in this building pose a catastrophe risk or other hazard to the applicant (explosion, fire, chemical, other)?
—Describe how the applicant disposes of waste. Describe tank storage on the applicant's premises.
—Describe the procedures in place to control spillage during the filling process.
There is no doubt that large losses have occurred in this class of business. You must offer sufficient limits and an umbrella with various limit options.
It is difficult to say what the market is for this class of business because the exposures are so varied. Having access to specialty markets (through the Producer Online) is invaluable in helping get the account placed. In addition, these specialty markets typically provide a very comprehensive offering.
Signatures, close checking, education and training
If your customer does not take all the coverages you proposed, get their signature on those coverages that they declined. This signature will be crucial should a claim develop down the road and they allege they asked for certain coverage(s).
Receipt of the policy
After placing the account, check the policy when it is received to ensure it matches what was requested. This issue is at the heart of the following claim:
An agent had a marina as a client and procured a policy covering physical damage to boats stored in the marina. 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.) Unfortunately, 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.
Curtis Pearsall, CPCU, AIAF, ARM, CPIA, is president of Pearsall Associates, Inc., a risk management consulting firm that specializes in helping agents protect themselves. He is also a special consultant to the Utica National Agents E&O program. He can be contacted at email@example.com or (315) 768-1534.