Imagine, a rigging snaps and the mast goes overboard. Or the boat fills up because the tunnel for the bow thruster has developed pitting around the propeller. A piece of cake, you think? That’s what Mr. Van Buren of the bow thruster installation thought too.
What do these two damages have in common? They are both so-called inherent defects. An inherent defect is an unfavourable or inferior property that items of the insured type should not have. Simply put: something breaks down “just like that” when it “shouldn’t” have. So there is no question of the damage always covered in the policy being caused by ‘external calamity’. These are causes that are beyond your control, such as a storm or a lightning strike. An inherent defect is sometimes confused with human error, damage caused by your own actions, but that is not the correct explanation.
So what was the inherent defect in the aforementioned examples? The rigging tensioner was strong enough for the tension of the stay, but still it snapped. In the bow thruster installation the transversely placed tunnel started to show pitting and as a result it started to leak. This is an inherent defect in the construction of the bow thruster. Mr. Van Buren reacted very swiftly when he noticed that the foreship was flooded with water. He made sure that the ship was brought to shore in time. Replacement of the leaking tunnel could only be done via the inside of the ship. Then, to get to the right spot, about half of the interior had to be demolished from the boat. The panelling of the foreship was lost in the process. The cost of replacement amounted to many thousands of euros. However, when it came to claiming these costs, Van Buren was disappointed.
No legal obligation.
The law states quite clearly: the insurer will not compensate damage to an insured good if it is caused by the nature or a defect of that good. So therein lies the rub. An insurer is not legally obliged to compensate these damages, even if you have comprehensive all-risk insurance. However, parties are allowed to deviate from this article of law. The insurer may therefore choose to include the damage caused by the inherent defect in the policy as covered. But that is not all. There is (almost always) consequential loss caused by this inherent defect. Because of the breaking of the rigging, the mast falls overboard with damage to the deck fittings and the sea rail. The leaky tunnel at the bow thruster causes the ship to sink. And even though this did not happen in this case because of Mr. Van Buren’s alertness, the tunnel had to be repaired anyway. And in order to do that, the interior of the ship had to be demolished. That too is consequential loss.
In insurance law, the so-called causal connection applies. The cause of the damage is examined. If it is covered, the damage is covered. Unfortunately, the reverse is also true: if the inherent defect is not covered, then the consequential loss caused by the inherent defect is not covered either. The insurer stated that the damage to the inside was not covered, because there was no coverage based on own defect. Very unsatisfactory, thought Mr. Van Buren, but unfortunately, that’s how it was included in the policy.
Freedom of contract.
What do we learn from this? It is very important to check carefully whether your policy conditions also include coverage for damage due to inherent defect and/or the damage resulting from the inherent defect, the consequential loss. The law gives insurers the contractual freedom to choose, for example, to only compensate the damage resulting from the own defect, or only the consequential damage and not the own defect, or both, or to exclude both. In addition, some policy conditions contain the provision that there may be coverage for an inherent defect, but that it applies, for example, up to five years from the launch of the vessel.
You almost have to be a scientist to assess all the contingencies in your policy terms and conditions. Again, however, prevention is better than cure, so do grab your policy and check whether there is a provision for inherent defect and/or consequential loss, it can prevent major disappointments
More information or download old articles: https://www.anwb.nl/kampioen/algemeen/digitaal-archief