A mother of two who was severely injured after a tragic boating accident on Lake Michigan has filed a lawsuit against the boat rental company, its owner and the boat’s captain. According to a recent report in the Chicago Sun-Times, Lana Batochir was floating on a raft with her friends at Chicago’s popular “Playpen” boating area on Aug. 13, 2022, when a rented yacht drifted and smashed into them.
“It is really devastating that tragedy struck this woman,” said John Dewart, Senior Broker, Casualty, Burns & Wilcox, Chicago, Illinois. “There could be negligence on the part of the company that authorized that individual to captain the ship.”
It is really devastating that tragedy struck this woman. There could be negligence on the part of the company that authorized that individual to captain the ship.
The accident reinforces the importance of stringent safety measures for boat rental companies and the need for Marine Insurance, particularly Protection and Indemnity (P&I) Insurance, said Noah Wheeler, Inside Broker, Marine, Burns & Wilcox, Miami, Florida.
“This was a horrible accident. You never want that to happen to anyone,” Wheeler said. “Ultimately, these businesses are risky. P&I Insurance can cover third-party personal injury liability and physical damage to other boats.”
Risks multiplied at ‘Playpen’ boating area
According to the Chicago Tribune, the “Playpen” is a no-wake boating area near Oak Street Beach in Chicago that is popular for water sports and parties. After last summer’s accident, the manager of another boat rental company told NBC Chicago that the small area’s popularity “multiplies the danger” there due to crowds and “so much boat movement.” It is located in federal waters, making it more difficult for the city to regulate.
According to reports, the Aug. 13 incident was one of a cluster of incidents within a short time frame in that area. Just days after the accident, News Channel 8 reported that three individuals died on the water and another was missing.
Ultimately, these businesses are risky. P&I Insurance can cover third-party personal injury liability and physical damage to other boats.
“I have been there and have seen close calls myself,” Dewart said. “It is full of young individuals, many of whom are intoxicated, and there are many boat motorists who may not be properly trained. Injuries can happen at any point and affect anybody. This incident just speaks to the fact that you really have to protect yourself and be aware of your surroundings.”
In 2021, 658 individuals were killed in recreational boating accidents in the U.S., according to the National Safe Boating Council. With boating accidents, “the injuries and damages can be really devastating,” Dewart said.
Marine Insurance can be tailored to a boat owner or boat rental company’s specific needs, but generally includes Hull Insurance to cover physical damage to the boat itself and P&I Insurance for third-party property damage and bodily injury coverage. This liability coverage usually extends to third parties outside of the boat and those on the boat, with the exception of any crew. In the case of a serious accident that leads to a lawsuit, covered expenses could include legal defense, medical bills and settlements, Wheeler said.
When obtaining insurance, companies would need to specify whether they offer captained charters or bareboat charters. “With a bareboat charter, there is no captain involved besides the renter,” Wheeler explained. “They basically give you the keys to the boat and the renter takes the boat out as the captain.”
Obtaining insurance in a high-risk industry
For individuals or businesses that rent out boats to the general public, “you can imagine the hesitation of the insurance market to get involved in a situation like that,” Dewart said.
“A boat is unlike a car, where there is a whole ordeal to become licensed,” he said. “In a situation like this, the keys are handed out to someone who may or may not have had any experience boating at all, and suddenly they are at the helm of captaining a boat that at any turn can cause significant injuries and damages.”
That can make accessing insurance more challenging, especially if proper precautions are not in place. “There is a propensity to have injuries — and injuries that can be very grave,” Dewart said. “When you are injured in the water, it can be more dangerous. More accidents happen on land vs. sea, but in the water, you are potentially dealing with individuals who cannot swim, choppy conditions, and weather from above that can also have an effect.”
Insurance needs could also vary depending on where a charter boat company is located. In Florida, for example, a statute went into effect Jan. 1 that sets specific insurance standards for bareboat charter businesses and their passengers. The new rules have left some business owners concerned about being underinsured. “The carriers are actively working on a solution, and, for the moment, insureds are fearful of being underinsured,” Wheeler said.
These changes could be in response to an increase in boat purchases — powerboat retail sales have remained strong after reaching record highs in 2020, Business Wire reported last year. It could also have to do with more individuals moving into Southern states like Florida, Wheeler said. “There have been more boats purchased in Florida since COVID-19, and a lot of accidents have been occurring,” he said.
Training protocols, waivers recommended
Alcohol is a contributing factor in many boating accidents, according to the U.S. Coast Guard’s 2021 Recreational Boating Statistics Report, with alcohol use listed as the leading factor in 16% of U.S. fatal boating accidents where the primary cause was known. In addition to the risk of severe injury and death, boating accidents can also cause significant property damage. In 2021, 4,439 boating accidents led to a combined $67.5 million in property damage, the report noted.
“It is risky,” Wheeler said of the industry, particularly when it comes to renting out boats. “You can have signed waivers and make sure that renters are properly trained — either the day of or that they have prior experience — but at the end of the day, you just met that individual and you do not know how responsible they are going to be, or if they are going to let someone else drive.”
If you do not have adequate insurance, what happens when you are on the hook for seven figures, potentially? Your doors could certainly be closed as a result.
Boat rental companies should emphasize the need for spotters, along with proper training, certifications and licensing, Dewart said. In the event of an accident, businesses that are uninsured or underinsured could face insurmountable losses. In an area like Chicago with a limited boating season, watercraft companies may be operating on slim margins. “You are really trying to collect enough money to sustain yourself with that seasonality,” Dewart said. “If you do not have adequate insurance, what happens when you are on the hook for seven figures, potentially? Your doors could certainly be closed as a result. You really have to prepare yourself.”
Given the risk of severe losses, Excess Liability Insurance is often recommended for these companies. “At a minimum, a company would have $200,000 in liability limits up to $1 million or $2 million. Sometimes policies can exclude punitive damages, as well,” Dewart said. “We always encourage our insureds to get as much coverage as they feel is adequate, given what they can afford and what their risk tolerance is.”
Standard Commercial General Liability (CGL) Insurance policies may have a lot of marine exclusions that are often overlooked.
Business owners in this industry should have their rental agreements and liability waivers reviewed by an expert, Wheeler suggested, and they should work with an insurance broker who specializes in Marine Insurance.
“Standard Commercial General Liability (CGL) Insurance policies may have a lot of marine exclusions that are often overlooked,” Wheeler said. “Another important thing to consider is that when you are insured with a proper Marine Insurance carrier, those carriers are experienced and used to working with ocean marine claims.”
These insurance carriers will also be prepared to address the unique risks involved in different types of boating operations. “The operator of the boat has to be aware of the potential for negligence and lawsuits against them. Even if they are not at fault, they have to be prepared and have the proper insurance limits,” Dewart added. “What happened in Chicago is a really tragic story. A lot of the policies I write day to day would not cover an operation like this because it is just so dangerous. Things can go awry at any moment.”