Four out of 10 sunken boat claims rejected by insurers

Published: Saturday, 08 January 2022

RIVER Canal Rescue (RCR) is warning boat owners about the perils of buying third-party insurance on price alone after finding some insurers will not pay out if a boat sinks. (This is an update of the previous such published warning—Editor.)

The breakdown and assistance firm estimates around four out of 10 sunken boat claims are being rejected and says it’s due to a lack of definition in the policy small print, misleading wording referring to ‘wreck removal’ rather than ‘salvage ’, exclusions for salvage cover and salvage costs being rejected unless the peril is covered.

Neither fair nor transparent

RCR managing director, Stephanie Horton, believes ‘low cost’ insurers are selling policies that are neither fair nor transparent, and likely to break Financial Conduct Authority guidelines, she explaining:

“We’re not insurance experts, but we have many years of experience and some of the clauses and reasons used to reject claims are not made clear at the outset. In many cases the small print is shocking and full of ambiguities, meaning people don’t know what they’re covered for when buying the policy.

“The definition of ‘wreck’ for example, varies between companies and while we regularly undertake salvage for customers under this clause, an insurer recently rejected a salvage claim stating ‘wreck removal was for vessels that had broken up and required disposal’.

One with salvage and one without

“The most important reason for third-party cover is it’s required when mooring in a marina/boat yard. Should the vessel sink, insurance is in place to cover the refloat. When buying cover, the assumption is a refloat is included, however I know of one insurer offering two third-party policies—one with salvage and one without. So unless you look at both policies in detail, and know what you’re looking for, you could end up with sub-standard cover.”

RCR is authorised to handle claims for most of the UK’s leading boat insurers and has in the past reminded boaters about the importance of understanding what they’re covered for in their policies, and Stephanie continues:

“Those with a basic third-party liability policy could face crippling costs if a major incident occurs as it will only cover the cost of a claim against you if you hit another boat, cause damage to someone else’s property or injure someone. And while the majority of third-party policies automatically include the raising, attempted raising, removing or destroying the wreck of your boat as standard, not all do.

Cost only met if causing obstruction

“These costs will only be met if the vessel’s causing an obstruction to navigation or potential damage to a third-party property. And with sinking and under-water damage the biggest risks on the inland waterways, prudent boaters should ensure they’re covered for this, as well as personal accident and medical expenses.”

“When it comes to paying recovery costs, some insurers may only do this once the cause of the sinking is identified. To assess the claim, they’ll want a clear understanding of what happened, before deciding to accept or reject it. If a sinking is due to poor winterisation, a lack of maintenance or a failure to check when the river/canal is in flood, the claim may be rejected, unless there’s clear evidence the incident could not have been prevented. In contrast, some insurers cover salvage under the third-party agreement as standard, no matter what the cause.

Check it meets your exact needs

“It’s important to check your policy meets your exact needs, pay close attention to third- party liability sections and ask about exclusions and how a potential claim will be handled. Is there a 24/7 claims hotline, are their approved inland waterway repairers and if so, who and where are they? How a claim is handled should take equal priority alongside cost and cover options.

“Cheapest is not always best; if in doubt, consider an ‘all-risks’ policy or swap insurers.”
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