Whilst a yacht is in build, there are two areas of insurance to consider – Builder’s Risk Insurance for the physical entity and the Pre-Delivery Liabilities of the owner. During the build, a yacht is usually covered by the shipyard’s own insurance policy but it is important to understand the extent of that cover and to be sure it is sufficient for your needs. There may be contractual obligations that an owner should consider as the yacht progresses through the build stages.
If it is a large build, the owner may also face financial exposure for the proportion of the yacht belonging to him. At each build milestone, as payment instalments are made, ownership of the yacht may be transferred from shipyard to owner and at that point, an owner will need to insure and protect his or her investment. Often the yard will propose this additional cover via a partner, but owners are entitled to choose their own preferred insurer.
With smaller build projects, although the yard will likely take on full liability for the construction, until the yacht is handed over an owner should check that payments made to the yard are protected with watertight contracts and possibly even a bank guarantee, in case of a default on behalf of the shipyard. In this article, we highlight those extra considerations and explore owner’s liability.
Before The Build Begins
Even before the construction materials are ordered, insurance liabilities come into play.
Contractors: The owner will have a liability to any contractors, whether the owner directly employs those contractors or not. Consider the role of the naval architect, designer, project manager and captain.
Contractors visiting the shipyard, such as the project manager or build captain, will require sufficient medical and accident insurance cover, and this should be detailed in their employment contracts.
Also be aware here whether MLC legislation is applicable.
The Build Process
As construction commences, the build process will track through various stages; the laying of the keel, the hull construction, joining of the superstructure, machinery and electrical implementation and interior/exterior fit out. As the build progresses, additional staff will be employed and further items will be sourced such as tenders, water toys, artwork and interior items.
Crew: As completion nears and crew are hired, joining the later stages of the build process, the owner will need to ensure there is adequate liability cover in place and that the crew have sufficient medical and accident insurance both on and off site.
The employed crew will have a liability to others whilst at the shipyard too. They may be held responsible for damage to property or personal injury - shipyards can be dangerous places!
Ancillary items: Items purchased and delivered to the shipyard on the owner’s behalf such as tenders, toys, art work, antiques, linen and china – items which can be of significant value and importance, will need to be insured whilst in transport and in storage. Tenders and toys will be subject to testing and possibly used for crew training prior to launch. Insurable risks to consider here include their possible damage or injury to the user.
Launch, Sea Trials and Delivery
With the yacht in the water you will be impatient to head for the horizon but don’t forget:
Pre-Delivery: At this final stage, be sure that the shipyard’s insurance policies have been updated to cover the yacht for the completed on-the-water value whilst she undergoes launch and sea trials.
Handover: Prior to final handover, the yacht’s full Navigating Insurance Policy should be arranged. Often the Pre-delivery Liability Policy will have a caveat that the Navigating Policy is placed with the same insurer, or it will state that the intention is to insure with the same insurer once the yacht is delivered.
Pantaenius has a comprehensive Pre-Delivery Insurance package that covers all of the above risks, including a Pre-delivery Liability policy that provides liability cover for employees, liabilities to contractors and liability of employees to others, as well as the owner’s contractual liabilities and use of tenders prior to delivery. Builder’s Risk Insurance can be taken out via our Lloyds facility at any stage of the building process.
We also offer 24/7 full Crew Medical and Accident insurance for employed crew during the build process, including 100% income protection for 16 weeks, 52 weeks or 104 weeks.
And of course, the cover we provide is MLC compliant.