Yacht Policies & Latent Defect Clauses
Most yacht policies have a latent defect clause
, which provides specific coverage for latent defects, while others specifically exclude latent defects from coverage. The term latent defect in maritime use is widely misunderstood, since it is not the same thing as with common law usage:
1.A latent defect is an unknown defect not discoverable by such inspection or test, as the law reasonably requires under the circumstances, such as a reasonable and prudent inspection.
2.A defect that has not become manifest yet; that is, a fault may exist within a material or component which, short of destructive testing, cannot be discovered, but which as time goes on will eventually become apparent as the part begins to fail or fails.
A basic tenet in insurance is that property is not covered if it is in any way defective, because, to do so, would be providing a warranty for the defective product. That is generally the responsibility of the manufacturer. However, marine insurance policies have long provided coverage for loss and damage caused to a vessel as aresultof a latent defect.
How to determine a latent defect
For example, a member of a yacht club discovers an error in the lamination of a vessel hull that results in the hull breaking open, causing it to sink. If the policy had a latent defect clause, under that clause the insurance would cover the resultant damage, but not the defect itself. Typical coverage wordings are: latent defects, excluding the cost of repairing or replacing the defective part, and any latent defect thus becomes a patent defect.
The kind of inspection necessary would be the one that any reasonable and prudent person or entity would be expected to carry out in order to ensure that the thing in question would not harm the vessels seaworthiness. What the courts have determined does not constitute a latent defect is: any kind of wear and tear, normal stress, or
deterioration. In other words, the natural tendency of nearly every material to age, deteriorate and wear out.
Latent defect includes faulty material and faulty workmanship, but does it include faulty design? The answer is yes, but only if damage results from faulty design; it does not cover correction of the faulty design.
Limitations on claims
The only limitation for making a latent defect damage claim is that the claimant must be able to demonstrate that the damage, and not the latent defect, occurred during the period that the policy was in force. It does not matter whether one is the first owner or the tenth owner of the boat.
Be sure to discuss the clauses in a
yacht policy with an independent agent to be sure about what is and isnt covered.
by: Roger R. Minnick
Thornton Braces Providers The Perfect Shape Notations On Monetary Inflation How Long Can Bulk Document Scanning What To Do If You Get A Speeding Ticket Great Littleton Pediatric Dentist Dynamics Gp For Brazilian Subsidiary Of Multinational Company A Look At Buy Here Pay Here Financing- What Is It Exactly? Great Braces Colorado Springs For You Buy Diamonds With Knowledge A Consomme Recipe That Youll Never Try Are You Aware Of These Bat Facts? Find A Good Driving School For Your Teen