Boat Dealer Insurance: Liability, Programs, Costs & More
June 29, 2020
- Last edition
July 10, 2020
The market for boat dealer insurance in the U.S. is sizable. There are about 4,300 boat dealership establishments when adding the number of single-location companies with the units of multi-location operations. According to IBISWorld, the market size of the Boat Dealership and Repair industry in the U.S. in 2020, measured by revenue, is $24.1 billion.
Additionally, as also reported by IBISWorld, there about 11,000 marinas are operating in the U.S. with total annual revenue of $5.2 billion. The primary services of a marina are storage for recreational boats through the rental of slips and moorings and maintenance. Some offer sport and recreation equipment, rental, and food and beverage services.
Recreational boat dealers mainly operate to make boat sales of new and used watercraft, engines, parts, and a broad range of boating-related products. Most also provide boat maintenance and repair services. Some dealers also operate marinas and may also offer maintenance service contracts, (usually for out-of-warranty boats), boat financing, insurance, and boat brokerage services.
Prospects for various types of Boat Dealer insurance include:
Boat Builders & Manufacturers
Marine Artisan Contractors
Boat Dealer Liability Overview
Marina owners and boat dealers face a great deal of exposure to potential losses from perils of maintaining a marina to property damage or protecting a boat dealer's inventory. These conditions create a need for comprehensive risk management services for boat dealers. This report dives into many insurance coverages boat dealers need and what to expect from boat dealer program insurance.
Due to the diverse operations of boat dealers and marina operators, their insurance requirements will differ. Given the varied needs of boat dealers and marina operators, this report does not detail every insurance option prospects in this category may need. Nonetheless, the policies listed here are primary and worth knowing:
Title Errors & Omissions / Truth in Lending E&O
Engine Hours E&O
Protection & Liability
Boat Dealer Insurance Programs
The following is a look at the typical insurance requirements and potential other marine insurance coverages a boat dealership may need. Keep in mind, due to the complexities of boating operations and the services they provide; agents should expect to discover needs for coverages not included with this report. In other words, use your due diligence as an opportunity to find additional ways to protect your client's business and assets with appropriate insurance coverage.
General Liability is a broad contractual liability policy coverage that protects against losses to property, and inventory, and for damages that occur during maintenance, plus commercial automobile insurance for vehicles. Specifically, it covers third-party bodily injury and third-party property damage. It also protects for reputational harm occurring from lawsuits claiming libel or slander and advertising injury. And even against claims of stolen ideas, invasion of privacy, and copyright infringement related to advertising.
General Liability pays costs when your business has a claim for:
Legal teams to represent your small business
Judgments or settlements
Endorsements for optional coverages include:
Employee benefits liability
Hired and non-owned auto excess liability
Employers overhead liability
Limited coverage for sudden and accidental pollution incidents
This coverage is set to protect against losses due to damage to buildings or contents, employee tools, and business income losses occurring because of the damage. It also provides coverage for legal liability when boats are in the boat dealer's care for repairs or rental watercraft. Coverage will usually extend to damage or loss of electronic data.
Property Liability coverage will typically include:
Blanket limits with large in-house capacity
Special causes of loss coverage on buildings, contents, business income, and extra expense
Employee tools up to policy limits
Stock, including boats held for sale
Computer virus extraction up to policy limits
Sign coverage - attached or unattached up to policy limits
False Pretense coverage up to policy limits
Legal Liability coverage for boats in the insured's care, custody, or control
Boat dealer's inventory covers boats for sale, including new boats under the dealer's floor plan and used boats taken in trade. Dealership inventory expands Property Damage coverage by including boats and watercraft located on the dealer's property or at a storage warehouse or other insured locations owned or maintained by the boat dealer.
In general, boat dealers must insure 100 percent of the value of their inventories. For agents, it is essential to understand the nuances of co-insurance related to dealership inventory insurance and to explain them to their clients, so they have a clear understanding of how such claims are adjusted and paid in these circumstances.
If a policyholder insures for less than 100 percent, a policy will only pay a corresponding percentage of a claim. For example, if the value of a boat dealer's inventory is $200,000, and it is insured at $100,000, the insurance company is only required to pay 50 percent of claims. Clients are advised in these circumstances to check their limits each month.
Title Errors & Omissions / Truth in Lending E&O
Title E&O and Truth in Lending E&O are both forms of professional liability insurance. They pay to cover legal defense costs and for judgments resulting against the insured, including court costs, up to the policy's coverage limits. E&O insurance steps in to cover legal defense costs whether a firm or an individual who performs services improperly causes an economic loss to a customer. The policy protects against legal exposure even when plaintiffs bring baseless claims. Title Errors and Omissions insurance provides coverage for errors, contract performance disputes, or any other liability issues, including financial consequences of negligence or errors/omissions in the delivery of title-related services.
Truth in Lending E&O is insurance to protect against damages due to an error or omission causing a breach in the Truth in Lending Act portions of the Consumer Credit Protection Act. This federal law requires that the annual interest rate and loan term, and other information relating to a loan be factually and accurately disclosed to borrowers who are seeking to finance boats and watercraft.
Engine Hours Errors & Omissions
Engine Hours Errors & Omissions is a specific policy designed to cover legal claims relating to a boat's engine while under the care or maintenance of a boat dealer. It provides liability coverage to defend and indemnify against claims of deceptive business or trade practice allegations made regarding a boat's engine.
Protection & Indemnity
Protection and Indemnity Insurance (P&I) is specific to the marine industry. Commercial shipowners and yacht owners require it to cover liability risks associated with owning and operating vessels. They seek coverage for losses from third-party risks for damage caused to cargo during transit, risks of environmental damage such as oil spills and pollution, war, and political risks.
P&I insurance also covers:
Liability claims resulting from a collision
Removal of wreck
Stowaways and repatriation
Damages to or loss of cargo
Damages to fixed or floating objects
Civil liabilities imposed after pollution or oil spill
Liability under approved towage contracts
There's no standard underwriting form when it comes to P&I insurance. Instead, underwriters will write individual P&I coverage for each insured, based on the nature and character of the risk, and the amount of insurance desired.
Don't let the term "inland marine" confuse you. As opposed to "marine insurance," which covers products when transported over water, inland marine insurance covers products, materials, and equipment when transported over land—e.g., via truck or train—or while temporarily warehoused by a third party. Collisions and cargo theft are the two most frequent causes of inland marine losses.
Inland marine insurance is a type of business insurance designed to protect business property that is movable or used for transportation or communication purposes. As such, it is widely used by businesses unrelated to the boat dealer and marina markets.
Some of the ways boat dealers use inland marine protection are to cover:
Boat Show/Exhibition coverage
In some cases, inland marine insurance may be used to help cover high-value items or other risks excluded by the property coverage in a standard business owners policy.
Bumbershoot policies provide a broader level coverage specifically for marine risks. Bumbershoot covers losses due to collision and salvage work and provides the liability coverage required by the Longshoreman and Harbor Workers' Act. A Bumbershoot policy has use beyond international freight shippers. For instance, it also has applications for businesses such as shipyards and stevedores, charter vessels and marinas, and terminal operators.
The following are examples of risks a Bumbershoot policy may cover:
Worldwide coverage for acceptance and support around the globe
Environmental liability for spills or accidents either at the dock or at sea
Loss or damage of cargo during transportation
Pay expenses before the processing of a claim
Personal injury coverage for workers and passengers
Captive and hijacking situations
Marine CEO Sentiment of Current Conditions
A recent report from the National Marine Manufacturer's Association indicates business conditions were declining. Since the COVID-19 pandemic is still causing untold health and financial problems worldwide, this is not unexpected news. The report offers these statistics:
Market conditions 81% of marine manufacturers report that business conditions were declining in Q1 2020.
Expectations: 61% expect business conditions will worsen over the next six months, while 35% are optimistic that business conditions will improve.
Workforce: 25% of marine manufacturers reduced their workforce in Q1 2020 as a direct result of COVID-19 impacts.
While some weaker operations may shutter because of the pandemic, the remaining businesses are sure to be reviewing their business costs in detail, including their insurance coverages and the costs associated with them. As such, opportunities may arise with executives more open to having fresh eyes from insurance professionals on their businesses.
Boat Dealer Insurance Costs
As mentioned above, predicting boat dealer insurance costs at this time during a pandemic is to use educated guesses. According to attorney and insurance business writer, Audrey M. Jones, a boat dealer insurance program can cost up to $6,000 per year.
Boat Dealer Programs
Some of the best insurance programs for boat dealers are available from Maritime Program Group (MPG) and Merrimac Marine Insurance. Their combined watercraft insurance programs span all types and sizes of boats, yachts, and sailing ships. Their comprehensive programs, including deep coverage areas, and extended navigation solutions can answer to every client demand. As two of the leaders in maritime industry insurance, their expertise offers unmatched service, experience, insight, and answers.
MPG offers the ability to round out coverages for Recreational Marine Facilities, offering a comprehensive Package Policy, including the Property, Crime, Inland Marine, General Liability, and Auto. MPG offers a Marine Package that can include all the marine Liabilities, Dock Coverage, Hull and P&I for owned or rental watercraft, Bumbershoot (excess liability), and it also offers Workers Comp. Some coverages are available on a standalone basis.
Merrimac Marine Insurance offers Boat Dealer Liability insurance with property coverages that include boat shows/exhibitions, real and personal property, yacht dealerships, owned watercrafts, business income insurance, and many more.