Clyde Co Guide to Superyacht Law - Sixth Edition

ARE THERE ANY INSURANCE CLAUSES THAT I NEED TO PAY PARTICULAR ATTENTION TO?

In addition to being aware of any exclusions in the insurance cover offered, careful attention needs to be paid to any terms in the policy described as ‘warranties’ or ‘conditions precedent’.

Conditions precedent are clauses that impose conditions on the insured that must be fulfilled either before the policy incepts, or before a claim can be made. A breach of a condition precedent may prevent an insured from claiming for a particular loss or may suspend the policy until the term is complied with. For example, if there is a requirement that a survey of the superyacht be carried before the insurance policy incepts and is not carried out, insurers might not be liable for any subsequent loss.

Recent UK legislation has sought to address the previously draconian remedies available to insurers in respect of breaches of such conditions; however, a breach can still have serious consequences. A warranty is a promise that certain facts are true and/or will continue to be true, or that the insured will do or not do certain things. Examples include warranties as to the use and cruising limits of the superyacht and the presence of a permanent and competent skipper. An insurer used to be automatically discharged from liability in the event of a breach. That will usually no longer be the case and the policy is usually now merely ‘suspended’ whilst the breach is in play. For example, an insurer is not liable for losses that occur whilst the superyacht is outside its stated cruising limits, but will be liable for losses that occur once the superyacht has returned within the stated limits.

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