The owner of a 48-foot yacht had a solid insurance plan in place. But when disaster struck, he found that his insurance coverage was void because of his failure to disclose sufficient details to the insurance company. This unfortunate case illustrates the absolute necessity of full disclosure and utmost good faith when contracting with yacht insurance companies.
The omissions that voided his coverage
When Carlos Morales-Vásquez was filling out his insurance application for Optima Insurance Company, he was asked about any past yachting accidents he had been a part of, as well as a full list of previous vessels he had owned.
Although he mentioned one past accident on his application – a propeller strike accident – he failed to disclose a different accident in which he grounded his yacht. When listing his previously owned vessels, he only disclosed two of the seven boats he had owned in the past.
These two omissions proved to be fatal to his insurance coverage. When a fire broke out on his 48-foot yacht, he sought compensation for the damage. The 1st Circuit Court of Appeals affirmed that the insurance company was not bound to pay, because Mr. Morales-Vásquez had voided his insurance contract by failing to disclose all requested details in his application.
Make sure this doesn’t happen to you
U.S. Admiralty Law abides by the legal principle of “uberrimae fidei” (utmost good faith) when it comes to insurance contracts. This means that a court will side with an insurance company in a dispute such as Mr. Morales-Vásquez’s if the insured party doesn’t exercise absolute transparency and honesty when entering into the insurance contract.
When you apply for insurance for your yacht, make sure that you disclose all past accidents you have had, as well as all previous boats you have owned. Also make sure that you are complying with all other requirements that the insurance company may ask of you during the application process.
If you want to be certain that you are in compliance with your insurance contract, it is a good idea to consult an attorney who has extensive experience in maritime transactions and litigation. They will be able to walk you through the application process to reduce the risk of you being left high and dry if you someday end up needing that insurance compensation.