When yachts need routine maintenance or a scheduled refit, they are generally brought into shipyards or marinas for extended yard periods. Liability may not be the first thing that marine contractors think of but it is certainly one of the most important pieces when planning ship repair because of the care, custody and control responsibilities. Hot work, welding, workers moving around and equipment set up on the yacht make hazards plenty.

Service agreements with worksites generally shift or have limitations on negligence causing property damage between the two parties. So who is actually responsible for an accident during a refit? Is it the yacht owner, shipyard (or marina), marine contractor or marine subcontracting company?

Well, the answer depends on the terms and conditions of the service agreement between the marine contractor and the shipyard or marina.

Consider this example: your business is planning to haul out a customer’s $25-million yacht for refit. Your workers will complete routine maintenance and hot-work repairs, so you schedule the project at a local shipyard. Signing their service agreement for the repair work is required to use the space. Further, their terms and conditions specifically outline that they require to be added as an additional insured to your marine general liability (MGL) policy, and that they are not liable for any claims of property damage to the yacht in excess of $500,000. During welding repairs, the yacht is completely destroyed, at a total loss, after it catches fire.

The shipyard would look to the liability policy of the marine contractor for recovery of damages; however, their recovery would be limited to the terms of the service agreement between the pair. The marine contractor’s MGL designates a worksite they are working at as an additional insured on their policy by way of an endorsement. This allows the shipyard or marina to seek damages from the marine contractor’s insurance policy if they are identified in a claim related to the work. But what happens when the work is carried out by the marine contractor’s subcontractor and not by the marine contractor themselves?

The trend that shipyards rent out their facilities and contract work to be performed by marine contractors who then further subcontract the work is increasing. Recent reports of claims involving marine subcontractors who had inadequate or non-existent liability insurance in place are growing. On a marine subcontractor’s MGL insurance policy, they designate a marine contractor they are working for as additional insured on their policy by way of an endorsement, allowing the marine contractor to look at the marine subcontractor’s insurance policy if they are identified in a claim related to the work.

The legal liabilities of a marine contractor are quite substantial when yachts undergo refits, even if a marine subcontractor was hired to actually complete the work. Always make it a habit to keep signed contracts between you and third parties you note for additional insured endorsement, as it may be required to confirm additional insured status in the event of a claim. Additionally, obtain and store a certificate of insurance from each of your marine subcontractors listing you as an additional insured on their policy, with coverage limits greater than or equal to your own before performing work. In case of a claim related to your marine subcontractor, you will not be covered without this documentation!

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Harris, Reed & Seiferth Insurance Group

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