While slip rental agreements are a much drier read than the James M. Cain novel that inspired the movie, they pack plenty of anxiety-inducing content into their fine print, especially the indemnity clause that says something along the lines of, “The boat owner fully agrees and releases the marina from any liability for loss or damage to the boat, under any circumstances, including any negligent acts or omissions by the marina or its personnel [our emphasis].”

“Your agreement to such a clause may result in no coverage for that particular loss should the marina ever invoke the provision.” warns Carroll Robertson, vice president of the BoatU.S. Marine Insurance Claims division. “An indemnity clause in your slip contract may put you at odds with your own boat insurance company.”

So, even without a dictionary, the meaning of “indemnity” becomes as clear as the icy gaze of a peroxide blond staring down the barrel of a snub-nosed revolver. Sorry, we’re getting carried away... Slip contracts aren’t pulp fiction. The fact is, indemnity or hold-harmless clauses can make consumers do a slow burn when accidents occur. They release marinas of responsibility for all but the worst errors or negligence while they’re handling your boat.

“Marinas can be friendly places, but the management isn’t necessarily your friend at least when it comes to liability issues,” says Jim Nolan, director of BoatU.S. Marine Insurance Underwriting.

For example, one boat owner says he arrived at his marina just in time to watch his boat sink because a rookie yard hand neglected to install the drain plug before launching. The marina’s response? “File a claim with your insurance. You signed an agreement saying that we’re not responsible.”

The boat owner did file a claim for $2,500, which the insurance company paid, less a sizable chunk for the deductible. Had the claim been higher, the insurance company would have attempted to collect the damages back from the party responsible for the damage to the boat. When substantial damages are the fault of the marina, insurance companies that pay their customers’ claims may sue the marina or its insurer to recoup their losses.

This brings up a new trend in marina contracts about which consumers should be aware. More and more, marinas are requiring slip renters to waive the right of subrogation (recovery) by their insurance companies for damages caused by the marina.

Waiving subrogation rights means that the insurer can’t step into the shoes of their policyholder to recover what it paid out to him. Most insurance policies have provisions called “Our right to recover,” or something similar, and they create an obligation on the policyholder to protect these rights. When consumers waive subrogation rights, insurance companies may refuse to pay for that particular incident. Coverage for other claims not related to the marina would not be affected. Insurance companies warn against signing such waivers.

“The marina knows that every boat policy has language basically saying if the insured does anything to mess up the insurance company’s rights to recover the loss, then coverage from the policy is void,” says Nolan. “So when the marina damages your boat, the insured could be the only one without protection!”

Case in point: A number of Maryland boat owners were distressed last fall to find their marina was requiring them to sign an addendum to their regular slip agreements, waiving their right to subrogate while the marina was under renovation. To sweeten the deal, the marina reduced their slip fees by 10%, a $500 value for most, but hardly enough to pay for significant damage.

Like all business decisions, marina policies revolve around money. “It all has to do with cost,” says Dennis Nixon, professor of marine affairs and associate dean of environment and life sciences at the University of Rhode Island. “If the marina is expected to assume liability for vessels stored there, then the marina has to buy a fairly expensive insurance policy. That cost would have to passed on to the customer.”

If you’re thinking that a lawsuit could set marinas straight on what they can and can’t be held responsible for, the issue of the enforceability of marina indemnity clauses has already been heard by several U.S. Circuit Courts of Appeals, which have judged that they are valid, except in cases of gross negligence. “For example,” says Nixon, “the clauses are enforceable when a careless customer causes a fire that damages other boats (simple negligence), but aren’t valid when marina employees wreck a customer’s boat while joyriding, instead of hauling it out for repairs (gross negligence).” But, he adds, “when the marina does something stupid, the manager has a decision to make.”

“A professional marina manager will pay for those kinds of mistakes, particularly if it’s a good customer.” Nixon, who has been teaching marina law classes for 15 years, says it’s smart for marinas to pay for what he calls their own stupidity. “They have to take into consideration what impact their decision has on their other customers.”

Even if the marina seems willing to help, boat owners should immediately report the claim to their own insurance company, according to Robertson. “We have several claims every year where the marina initially says ‘we’ll take care of it,’ then changes their mind. If repairs are already started, it may prejudice the insurance company and result in a decline of coverage for reporting the damage late.”

Indemnity clauses and subrogation waivers won’t stand up in court when the marina is guilty of gross negligence — wanton and willful carelessness — but consumers and/or marinas still have to bear the burden of a lawsuit to prove their case.

Nixon says subrogation waivers in contracts of all types are becoming more common, although they vary in content and scope around the country.

“Like everything else, these clauses are negotiable,” says Nixon. “Some marinas will charge a higher slip fee if customers refuse to sign away their right to recover damages. The marinas then turn around and buy special insurance to cover that customer.”

Robertson agrees, “It may be possible that you can ‘buy back’ the coverage for an additional premium.”

Overall, her advice is simple. “You should definitely review these clauses with your insurance carrier so you know if you are in danger of a breach of the insurance contract — resulting in no coverage.”

About BoatU.S. Marine Insurance

All BoatU.S. insurance policies have coverage in their “liability” section for liability assumed under a written boat storage or slip rental contract. This will cover the indemnification problem.

However, there is also a provision, called “In Event of a Loss...Our Right to Recover,” which will void coverage if you sign a waiver of subrogation or take any action that has a negative impact on the insurance company’s right to recover.

New and renewal policies issued through BoatU.S. after February 1, 2004, will automatically include coverage for "waiver of subrogation" required under a written dock or boat storage contract. BoatU.S. policy holders who are asked to sign such a contract before their policy renews should contact the BoatU.S. Underwriting Department at 800-283-2883 to purchase this endorsement for their existing policy.

(c) Copyright BoatUS Magazine, January 2004