The Megayacht market: Increased scrutiny from H&M Underwriters when it comes to maintenance and yard works performed by subcontractors
It is common practice to find a clause in Hull & Machinery policies that states that coverage will remain in full force during routine maintenance and the annual refit.
Notwithstanding the foregoing it is a condition precedent that if a vessel is under major repair/alteration – including hot works – where the yard has requested a waiver of subrogation from the Owner or his legal representatives – then prior agreement must be obtained from Underwriters at terms and conditions to be agreed. Furthermore, the Owner needs to provide documentational proof of the shipyard´s Ship Repairers´ Liability (SRL) limit and full details of the works that are going to be carried out.
Lately there have been some changes on the above-mentioned requirements that are becoming a standard practice in the H&M market.
What happens when the works are carried out by Subcontractors and not by the shipyard?
One of the main changes that are now becoming common in the market is the need for all subcontractors to have a Ship Repairers/Professional Liability policy in place. The main reason being:
- Recently a number of large claims occurred involving subcontractors who had limited or no liability insurance in place
- The trend that shipyards increasingly rent out their facilities and where most works are performed by contractors other than the actual yard. Consequently, clients cannot claim under the shipyard´s policies which usually feature adequate liability insurance limits
- Actually, shipyards nowadays have the same requirement when contracting subcontractors and it forms part of their due diligence/ vetting process
If the subcontractors wording is not already included in the policy, it is now being included by endorsement, as a mere requirement or in form of a potential deductible.
By subcontractors one refers to “shipyard” and “non-yard” workers such as third-party companies performing works onboard the yacht not related to any class works, for instance aesthetic improvements or other minor works.
The requirement for subcontractor’s liability policy will be applicable for refit, repair and maintenance works.
The above seems to now become standard market practice for all vessels (both commercial vessels and large yachts) entering shipyards.