Pleasure yacht insurance: navigating without up-todate charts and proper voyage plan

03.07.2019

Introduction

On 7 July 2011 the Celle Court of Appeal dismissed an action brought by an assured pleasure yacht owner who had been sailing on the Baltic Sea and ran aground (8 U 86/11).(1) Although the case concerned a significant question – namely, what are the consequences if an assured shipowner has no up-to-date navigation charts on board – the decision does not seem to have garnered much attention in either legal literature or German sailing magazines.

The case facts suggest that assureds are often unaware of the impact that outdated chart materials can have on hull insurance and liability cover.

Facts
An assured holder of a sport boat licence had been sailing his pleasure yacht on the Baltic Sea when he realised that he was running out of bunker. As the nearest bunker station was closed, the owner took a shortcut to another bunker station. However, the assured had no up-to-date charts on board for this area. In addition, he had not planned the voyage, but only estimated the course based on his plotter. He navigated the area at a speed of 20 knots and ran aground.

The assured claimed compensation from his hull insurer for the damages. However, the insurer denied cover on the basis that the grounding and the resulting hull damages had been caused by the assured’s gross negligence.

Decision
The Celle Court of Appeal ruled that the assured owner had caused the damage due to gross negligence bordering on intent. Under German law, gross negligence requires an assured owner to behave in a way that the occurrence of an event insured against it is very likely while the assured hopes that the occurrence can be avoided. However, if the assured does not care whether the insured event occurs, they are considered to have acted intentionally. The test to determine whether an assured has acted with gross negligence or intent incorporates objective and subjective elements. Further, in order for an insurer to be able to deny cover, the behaviour must have been causative for the damage.(2)

In the case at hand, the objective misbehaviour of the assured was not just the fact that he had used outdated charts, but also that he had:

  • failed to plan the voyage correctly; and
  • sailed at a speed of 20 knots.

The court held that the assured had violated good seafaring practice and Chapter V, Regulations 27 and 34 of the International Convention for the Safety of Life at Sea (SOLAS).(3) Further, the court stated that the violation of good seafaring practice constitutes an administrative offence.(4)

Under SOLAS, shipowners are responsible for having up-to-date charts on board for each voyage and for making a voyage plan based on these charts. The court further held that SOLAS permits the use of plotters to assist with making voyage plans, but could not be the only means of doing so.(5)

The subjective level of misbehaviour was essentially concluded on the grounds that the assured had

held a licence to sail the boat and therefore must have had knowledge that:

  • the charts must be up to date; and
  • a proper voyage plan is required.

Further, the assured could not identify the exact position of the grounding which, the court opined, underlined the fact that he did not care about his exact position.

With regard to the causative link of the misbehaviour, the court ruled that due to the various objective breaches committed by the assured, it was not decisive whether the outdated charts had in fact been causative. In the appeal proceedings, the assured argued that the outdated chart material was not causative because no changes had been inserted in the chart material for the region where the grounding occurred. The appeal court did not consider this new submission because, at least, the missing voyage plan and the assured’s carelessness with regard to his position were causative for the damage.

Lastly, the appeal court rejected the cover claim fully, despite the stipulation in Article 81 of the Insurance Act which provides that in cases of gross negligence, claim deductions depend on the assessment of the gravity of the fault.(6) According to the court, the starting point in gross negligence cases is generally a 50% deduction. However, in the case at hand, the claim was deducted by 100% because the court held the assured’s acts to be grossly negligent and bordering on intent.

Comment
The Celle Court of Appeal’s ruling that the assured pleasure yacht owner had fully forfeited his rights under the hull insurance seems correct.

However, it is surprising that the court did not discuss whether the Insurance Act’s inland transportation rules could apply.(7) If these rules applied to pleasure yacht insurance, a further question would be whether the assured would already have lost cover because the pleasure yacht was unseaworthy due to the out-of-date chart material.

Whether the Insurance Act’s inland transportation rules apply to pleasure yacht insurance has been debated by legal scholars since the Supreme Court’s 1988 decision (II ZR 210/87) that pleasure boat insurance could qualify as inland transportation insurance.(8) However, the correct view seems to be that these rules do not apply because they are drafted for business assureds and not private persons.(9) That said, assured pleasure yacht owners are generally private persons and therefore the inland transportation insurance rules should not apply.

Even though this case dealt exclusively with hull insurance, the same rules would generally apply to separate liability insurance for pleasure boat owners. The difference is that in order to forfeit coverage under liability insurance, an assured must have acted intentionally and not only with gross negligence. In the case at hand, the court of appeal held that the assured’s behavior could qualify as an intentional act just as easily. Therefore, if an insured knowingly and repeatedly navigates a yacht with outdated chart materials and subsequently damages both the yacht and third-party property (eg, an offshore windmill, buoy or pier), such damage is caused not only with gross negligence but also with intent, as the assured simply does not care about the consequences of their actions.

According to German legislation and contrary to Chapter V, Regulation 2.2 of SOLAS, private (ie, non-commercial) pleasure boat charts need not be officially issued by or on the authority of a government; typically, the more user-friendly private provider charts are sufficient.(10) Further, unlike Chapter V, Regulation 27 of SOLAS, the German legislation on pleasure boats does not expressly stipulate that charts must be „up to date“. Rather, owners must have the „required“ charts for a voyage on board their vessel;(11) however, they should (of course) be up to date.

Importantly, plotters are only navigational aids and do not replace voyage plans. This rule should apply at least where the SOLAS and International Maritime Organisation requirements for electronic chart display and information systems are not met.(12)

ILO Intarnationl Law Office, 02.07.2019
This article was originally edited by, and first published on, www.internationallawoffice.com.

For further information on this topic please contact Maximilian Guth at ARNECKE SIBETH DABELSTEIN
by telephone (+49 40 31 779 70) or email (m.guth@asd-law.com).

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