Boat and Rig Construction Insurance Options – What You Need to Know
Website design By BotEap.comBuilder’s All Risk (BAR):
Website design By BotEap.com What is it? BAR coverage is first-person coverage that is essentially an all-risk property policy, plus extensions of liability and protection and indemnity (P&I).
Website design By BotEap.com Who will be included among the Named Insureds? The parties to be included in the named Secured Clause include the builder, subcontractors, owners, lenders, if applicable, and other parties with insurable interests, if applicable.
Website design By BotEap.com Who will be waived subrogation rights? All parties with whom the Named Insureds have agreed in their negotiations, whether in a written or verbal contract, to waive the rights of subrogation should benefit from the waiver of subrogation. Generally, heavy equipment manufacturers are not among the parties that benefit from this subrogation exemption; instead, they are responsible for their product and uphold the warranties provided to the shipyard and are prepared to allow recourse against them for faults or defects in their product / equipment.
Website design By BotEap.com What is the period? We recommend that the BAR cover be in place throughout the course of the boat / platform construction; that is, coverage begins with the signing of the contract, remains in place during the design and engineering phase, throughout construction, and ceases upon delivery to the owner, either in the yard or at the final site after a transit.
Website design By BotEap.com What is the Insured Sum? This sum is generally specified in the construction contract between the Builder and the Owner, and must include the Estimated Final Contract Value (FCV) plus the Owner Supplied Equipment (OFE). [plus it can include the value of the incoming hull in the event of a conversion].
Website design By BotEap.comThe inclusion of an escalation clause allows coverage up to a certain percentage above the total estimated sum insured, with the standard provision being an increase of 25%.
Website design By BotEap.comIn theory, the builder’s all-risk insurers reserve their ability to ensure that they can pay four times (4x) the limit multiplied by the escalation provision. With an escalation provision of 25%, this means that Insurers would require the ability to pay a claim of 500% of the Estimated Sum Insured, or 125% four times, that is, once for physical damage, once for collision liability. , once for protection and compensation, and finally once for lawsuit and labor expenses. We say “in theory” because in practical application, insurers would likely go to the point of failing to pay claim and labor charges and instead pay the full amount of physical damage / replacement costs.
Website design By BotEap.com An example where each coverage section is used is this:
Website design By BotEap.comDuring construction, an oily rag falls into the engine room causing a fire that burns uncontrollably and burns the lines that tie the ship to the dock. The vessel breaks free from its moorings and then collides with another vessel in an adjacent shipyard causing damage to the hulls of both vessels. The insured vessel then continues to float out of control. Shipyard personnel quickly hired a nearby tugboat in an attempt to slow the vessel down and get close enough to fight the fire. The fire is not controlled and the ship eventually sinks in a shipping channel. What is recoverable under a broad builder risk policy?
- First party physical damage will be recovered in the main All Risks section.
- Damage to the other vessel in the adjacent shipyard will be recoverable under the Collision Liability section
- Wreck removal costs will be recoverable under the P&I section
- Lawsuit and labor costs incurred for the rental of the tugboat and firefighting expenses will be recoverable according to the demand and labor section
- Loss or damage to any other vessel or property on it
- Delay or loss of use of any other boat or property on it
- General average, salvage, salvage under contract of any other vessel or property on it.
- Loss or damage of any fixed property, personal property, or any other thing or interest.
- Any attempt or actual to lift, remove, destroy any fixed moving object or property or other thing, including the wreck of a ship, or any negligence to lift, remove or destroy the same.
- Liability assumed by the Shipyard under customary towing contracts for the purpose of entering or leaving the port or maneuvering within a port
- Loss of life, personal injury, illness, and payments made to save life.
- In the event of any loss or misfortune, it is the duty of the Insured and its servants and agents to take reasonable measures in order to warn or minimize a loss that would be recoverable under this insurance.
- Subject to the provisions of this clause, the Insurers will contribute to the charges that are adequately and reasonably incurred by the Insured, its servants or agents for such measures. Overall average, salvage charges, collision defense or attack costs and costs incurred by the Insured to avoid, minimize or contest liability.
- The measures taken by the Insured or the Insurers in order to save, protect or recover the insured object will not be considered as a waiver or acceptance of abandonment or otherwise harm the rights of any of the parties.
- Deductibles – Are they at levels that Insureds can comfortably absorb? Are they applied by occurrence and / or together?
- Complete and detailed list of security and ratings of insurance companies and / or Unions involved in the risk.
- Detailed wording, including endorsements, exclusions, ratings, subjectivities, sub-limits, guarantees (conditions precedent), adjustment factors applicable to premium, cancellation provisions.
- Confirmation that accurate and adequate underwriting information, including loss histories, was presented to underwriters providing coverage for risks.