Do your marine clients really know what they’re signing up for?

At Geo, we typically see incidents where marine trades professionals sign contracts without realising that they’re accepting liabilities their insurance doesn’t cover. This means that, should it come to making a claim, they could be in for a nasty surprise. Sometimes, what might seem like the most inconsequential clause could lead to a whole claim being rejected.

As a broker, you are in a unique position to help your clients spot these risks before they present an issue further down the line. In this article, we explore what brokers, and their clients, should look out for when it comes to signing contracts in the marine trade industry. 

Ask for contracts up front

While having insurance in place can act as a safety net for your client, it can also provide false reassurance that they are protected against everything, which may not be the case. If your client signs terms holding them liable for damage beyond negligence – for example, agreeing to be responsible for any loss regardless of fault, their policy may not respond. This is particularly true for ship repairers’ liability cover, which usually excludes contractual liability.

To avoid your clients signing contracts without fully understanding the implications on their insurance, ask them to share it with you first. Even a quick review could prevent a costly gap in cover.

Align exclusions with your policy

Many marine liability policies include standard exclusions for common contractual liability exclusions. This means that they won’t cover any obligations that your client has voluntarily agreed to.

If a customer insists on a hold-harmless clause or unusual indemnity wording, it’s essential to check whether the insurer can endorse the policy to reflect those terms. Some insurers will match the terms, but only when consulted beforehand. Without this due diligence, your client could be left exposed. 

Care, custody, and control limits

Despite trades professionals often working on high-value vessels or equipment, many policies only reflect the average job value, which could be a lot lower than the maximum vessel value. If your client then needs to make a claim and the vessel in their care is worth more than the policy limit, they could be expected to make up any shortfall.

That’s why it’s important to ensure your clients’ care, custody, and control limits are sufficient. It’s also worth checking for exclusions tied to specific activities, like hot works, which could affect how much cover is available.

Legal liability limits

One of the most effective ways clients can manage risk is by capping their legal liability in contracts. This helps insurers assess and price the risk more accurately and makes it easier to secure cover.

As a broker, you should encourage clients to avoid accepting responsibility for consequential loss, which can be difficult to quantify and even harder to insure. These clauses are often red flags for underwriters, making the risk undesirable.

If your client isn’t confident with negotiating these terms, suggest they seek legal advice or use a standard contract template that’s been reviewed by their insurer.