Living in a coastal community such as Mount Pleasant or Charleston, water is everywhere. We have some of the most beautiful views and sunrises/sunsets in the entire world. It is nearly inevitable that you will either own a boat or rent a boat at some point during your lifetime of living or vacationing here. When renting a boat, whether you are entertaining family in town for their summer vacation, entertaining customers, or just want to take your buddies out on the water for the day to go fishing, you pick up some liability exposures. But have you considered these liability exposures associated with partial boat ownership or boat rentals and how you might be exposed?
In this blog, we will focus on renting a boat or being a part of a boat club; boat clubs are becoming extremely popular across the country and only getting larger. In terms of insurance, in my interpretation, a partial boat ownership is viewed the same as renting a boat.
I strongly urge you to read on if you are a part of a boat club or considering joining a boat club.
What are the Liability Risks Associated with Boat Clubs and Rentals?
When becoming a part of a boat club or renting a boat in Charleston you are going to be asked to sign an agreement; but what exactly are you agreeing to in terms of liability?
There are three basic elements that you are agreeing to in terms of taking on liability. Those three elements are:
- Liability for injuring someone or causing property damage (another boat or dock most likely)
- Damage to the boat itself that you are renting (damage caused by you)
- Damage to the boat you are renting (not caused by you) yet you agree to be liable for in the agreement you sign
You are probably asking yourself, “How do I protect myself against these exposures?”
Great question! Your homeowners and umbrella policies should cover you in the event of number one (injury to someone or property damage to other property). However, make sure you run this by your insurance advisor to make sure you have adequate coverage and make sure there are no specific exclusion related to renting of boats, the size of the engine, or the length of the boat.
In regards to number two, your homeowner’s policy will most likely not cover damage to the boat itself that is caused by you. Typically, this will be specifically excluded. However, you umbrella policy should pick up this exposure if it is a true umbrella and not a “following form” policy type.
Again, talk to your insurance advisor about this because every homeowner and umbrella policy is different. If your umbrella policy does cover you then be sure to make sure the policy “drops down” properly to provide “first dollar” coverage (less any deductible of course). If your umbrella policy does not “drop down” but still provides coverage, it could leave you with a gap in coverage before the umbrella kicks in (i.e. $300,000 gap).
In number three, this can be a little tricky. You will have to read the agreement very closely to see how the wording is stated with your responsibility for damage not caused by you. Typically, the agreement will state that you are still responsible. In this situation, the other “at fault” party would be responsible for the damage they cause but now you are relying on a third party to have the proper insurance coverage.
Most homeowner’s policies are going to exclude this coverage, but again, your umbrella policy should be able to pick up the coverage. As mentioned previously, discuss this with you insurance advisor to make 100% sure how your policy will respond.
Lastly, some (most, and all certainly should) boat clubs or boat rental companies will offer some sort of insurance coverage or maybe a “waiver” for an additional premium. Before you say no, be sure that you understand your options, your coverage, and exposure you are taking on.
In conclusion, renting a boat or being a partial owner in a boat club can be very fun and can create great memories. Be sure to make sure you don’t turn your summer fun into a nightmare. Discuss these issues with your insurance advisor before you get into any agreement like the one mentioned above.
If you would like to discuss your situation with one of the advisors at Mappus Insurance, click below.