The hull insurers, who will want to have been involved in investigating the incident from the outset, might then pursue subrogated claims against any third party (such as manufacturers or surveyors) who might seem to hold ultimate responsibility.
Similarly third-party liability insurance may cover damage to the nearby yachts provided no policy terms have been breached. In the absence of such coverage, the owners could face significant personal liability, particularly if their ownership structure does not afford corporate protection.
The recent increase of fires appears to be pushing up premiums for yacht owners.
Inadequate guidance and lack of legislation in place for battery systems on yachts makes it harder for insurers to manage their risk exposure.
In response, insurers have had to re- evaluate their underwriting practices and many are starting to offer loss control surveys which involve an audit of the relevant yacht by a technical expert, thereby introducing coverage subjectivities. Any related claims can result in complex and costly disputes.
Preventative measures and protection for yacht owners Yacht owners can mitigate the risks of fire-related claims through a combination of measures.
Crew Training
Yacht owners should ensure that all crew members have received comprehensive training on the risks associated with lithium-ion batteries including the management of charging protocols and cell- balancing procedures. The risk
develops over time, and it is understood that the more this type of equipment is used or ages, the more it degrades and carries a higher risk of igniting.
Regulatory
compliance Over the past few years Class and Flag states have started to produce guidance notes on the use of lithium-ion batteries aboard yachts but most still appear to take a non-prescriptive approach. That’s expected to change over the next few years, resulting in a more streamlined approach. There is already an increase in guidelines on the early detection of battery degradation, with entities such as the MCA recommending battery management systems which supervise cell temperatures as well as the state of charge and health (MGN 681). Yacht owners are advised to consult with their Flag state or classification society administrators on the necessary measures if anything is unclear.
Insurance
Owners should maintain robust hull and liability insurance coverage to safeguard against potential losses and to ensure that routine checks are undertaken to confirm coverage. Additionally, the law offers some further protection to yacht owners by permitting them to establish a limitation fund, to limit their liability based on the certified gross tonnage of the yacht, where the damage was not caused by their actual fault or privity. Similarly, the Convention on Civil Liability for Oil Pollution Damage (CLC) and other contractual agreements, may provide further opportunities to cap liability and limit their financial exposure.
Lester Aldridge website:
https://www.lesteraldridge.com
This article first appeared on MINs website and is reproduced with our thanks.
https://marineindustrynews.co.uk
80 | ISSUE 111 | MAR 2025 | THE REPORT
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