With the recent release of its personal lines Yacht forms and manual rules, AAIS has three up-to-date programs available to insurers for covering privately-owned watercraft:
- The Boat and Outboard Motor class of coverage provided through the AAIS Personal Inland Marine Program (PIM). Forms and rating information for this class provide property and limited liability coverage for small boats such as canoes, kayaks, rowboats, and boats designed to propelled by outboard motors, as well as the motors themselves.
- The AAIS Boatowners Program, which provides forms and rating information for sailboats and motorboats (inboard and outboard) up to 30 feet in length and up to speeds of 50 miles per hour. Personal watercraft, such as “Jet Skis” and “Wave Runners,” are also eligible for coverage under the Boatowners Program, with no restriction on speed.
- The AAIS Yacht Program, released in September 2010, provides advisory forms and manual rules for insuring sail- and motor-powered yachts and similar craft at least 26 feet in length.
Previously, AAIS yacht forms were provided as a coverage class in the AAIS Inland Marine Guide. With the latest release, the AAIS Yacht Program will be offered in tandem with the AAIS Boatowners Program, at no additional charge. Current users of the Inland Marine Guide will continue to have access to the yacht forms and manual rules as part of their Guide affiliation.
Coverage under all three of AAIS’s watercraft programs can be provided as a stand-alone policy or as an endorsement to a policy based on the AAIS Homeowners Program.
“The range of watercraft coverage programs offered by AAIS lets a company offer a complete complement of solutions for writing recreational watercraft, from a small canoe to a large yacht,” says Pam Nykaza, AAIS senior product development specialist for inland marine, and the principal developer of AAIS’s current watercraft programs.
“A single policyholder could own several watercraft that would be appropriately insured under different AAIS-based policies,” Nykaza continues. “If a carrier uses AAIS forms, agents and policyholders will see consistency in policy structure, coverages, exclusions, limitations, and other conditions.
“For carriers, a key benefit to using these programs is in the consistency of the manual rules and loss cost rating information,” Nykaza adds. “This is especially beneficial to companies writing watercraft as an accommodation for their personal lines accounts.”
The AAIS Yacht Program is modeled, in part, after the Boatowners Program, which was the first standardized program developed for insuring private watercraft used for personal pleasure.
Property coverage under both programs applies to eligible boats and trailers described on the declarations and for which a limit is shown. Coverage is provided on an open-perils basis, and extends to newly-acquired boats or yachts up to 30 days after acquisition.
Additional or supplemental coverages are broader in the Yacht base form than in its PIM and Boatowners counterparts, however.
While the PIM and Boatowners base forms include additional coverage for boating equipment and emergency towing service, the Yacht base form also provides additional coverage for equipment on shore, recharging of fire extinguishing equipment, boating-related personal property, and storm protection.
Both base forms also exclude coverage for loss arising from use of a craft for business purposes, as a primary residence, or in racing and stunt activities.
Among the perils excluded, in addition to common property exclusions, are perils that uniquely affect watercraft, including “marine life”, under each program’s base forms, plus “bubbling and delamination” under the Boatowners base form, and its counterpart, “osmosis, blistering, or electrolysis,” under the Yacht base form.
There are two forms of liability coverage provided under the Boatowners and Yacht programs:
- Personal liability coverage for bodily injury and property damage arising out of the ownership or use of the insured craft and/or its trailer(s); and
- Medical payments coverage for relatively minor injuries to insureds and permissive users of insured craft.
When liability coverage is selected under a policy, uninsured boaters coverage is available to provide coverage for bodily injury to passengers of an insured craft by another boater who is uninsured for the loss, has exhausted his/her insurance limits, or whose insurer cannot pay because of insolvency.
The personal liability coverage provided under each base form extends to the use of nonowned boats or yachts, provided the boats fall within the size and speed limitations for owned boats insured under each respective program.
The AAIS watercraft programs are among the best indications in the industry of how watercraft coverage is becoming standardized.
“In the past, watercraft was typically insured under a range of disparate policies, often built on a property-type base,” Nykaza says. “Watercraft shares many of the characteristics of autos, however, and today’s watercraft policies, both AAIS’s and others, are structured similarly to auto policies.
“Coverage is provided for liability as well as property, and risk assessment is based not only on the property insured, but on the characteristics of the operator,” she says. “Driving history, experience, and training in navigation should all be taken into account.”
Among other things, the medical payments coverage in the AAIS Boatowners and Yacht programs operate similarly to med pay in auto policies. That is, medical payments are covered for insureds, which includes permitted occupants of an insured vessel, rather than for third parties.
In contrast, medical payments provisions of homeowners and other personal liability policies typically exclude coverage for insureds, and pay only such costs as are incurred by third parties.
Boatowners and Yacht coverage for medical payments and uninsured boaters are not available, however, unless the insured elects to insure for liability.
The option whether to choose liability coverage is an important distinction between standardized boat and auto policies.
Auto policies provide liability coverage as their primary purpose; first-party property coverage is usually offered as an option. The AAIS Boatowners and Yacht programs offer three options for writing coverage: property only, liability only, or property and liability.
The principal reasons for offering a wider range of alternatives for covering watercraft, according to Nykaza, are the greater ranges of vessels compared to autos, and the greater range of operator skill between boaters and drivers.
“The contrast between a canoe or a rowboat and a large yacht is greater even than that between a small compact car and a large pickup truck,” she says. “Along the same line, the range of watercraft operator skill, from novices to genuine, well-trained navigators, is much greater than the range of drivers on public roads.
“Also, unlike autos, some boats can be covered for liability under homeowners policies” Nykaza says, “either through limited coverage available under base policies or by adding a watercraft endorsement. †
“While there are a variety of ways to provide liability coverage for watercraft, it is
important for agents and insureds to examine their options and not presume their coverage is adequate.”
The AAIS PIM and Boatowners Programs are both filed countrywide and approved in most states, but AAIS is taking a different tack with the Yacht Program, which is being offered on an advisory basis; companies would take filing action on their own.
As stated above, the AAIS Yacht Program appeared previously as a section of the AAIS Inland Marine Guide. Given that, filing requirements for yacht forms are not clear in all states.
As a program rooted in inland marine and insuring transit-related exposures, one could argue that it should still be regarded as inland marine and written using nonfiled forms and rates.
But, as a personal line developed to be used in conjunction with homeowners and personal umbrella policies, companies are likely to see some states require filing.
The Yacht Program provides a sample manual complete with rules and loss cost rating information for 11 navigational territories encompassing all inland and coastal waters of the U.S., including the U.S. and Canadian areas of the Great Lakes.
For information on affiliating with AAIS for use of its watercraft programs, contact rick Maka, director of marketing, at rickm@AAISonline.com, or by calling 800-564-AAIS, ext. 222.
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