Navigation Committee 4 June 2009 Agenda Item No 13 (ii)(a)
Implementation of Provisions in the Broads Bill: Introduction of Compulsory Third Party Insurance Report by Head of Waterways Strategy and Safety
Summary:
This report sets out the proposed minimum level of insurance relating to “Vessels: Insurance Requirements” within the Broads Authority Bill. The Committee’s views are sought on the minimum level of cover required for third party insurance liability.
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Introduction Although Royal Assent is not expected until the summer of this year officers have been considering the process for implementing the various provisions in the Broads Authority Bill. The Committee will be comprehensively consulted on the introduction of the various powers and of the procedures to be followed. This report is part of this process. Background The Committee were consulted on 4 September 2008 regarding the proposed implementation date and the minimum level of third party liability insurance. The meeting agreed the implementation timetable but did not reach a consensus on the minimum level of insurance that the Authority would require, requesting that further research should be undertaken following responses from the Inland Waterways Association and the Royal Yachting Association. Consultations The IWA stated that they had no objection to the introduction of compulsory third party insurance, however, they did have concerns over the level of cover. They stated that the Authority should set the level of cover at a level which would provide adequate compensation in the event of an incident on the Authority’s waters and not on the basis of what cover is offered as industry standard. The IWA stated also that if they were to support a level higher than that set by British Waterways, currently £1m, they would ask for evidence that the level of
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cover asked by British waterways was inadequate and if there was none, what evidence that there were special circumstances on Broads Authority waters which would result in substantially higher levels of compensation. 3.3 The IWA opposed the original proposal to set the level of cover at £3m, believing the correct level should be £1m. The RYA agreed with the comments made by the IWA that £3m is unreasonably high to be set as a minimum requirement and advised that the minimum level of cover should be set at a level that is readily available by all craft to which the requirement is to be applied. Current Position Insurance is required for two reasons, damage to property and incidents resulting in injury or death of persons. Officers have reviewed the likely cost of repairing or replacing Authority owned assets and third party assets following an incident and conclude that it is highly unlikely that costs would exceed £1,000,000. However personal injury claims costs can be extremely expensive, and have a very broad range - from a few hundred pounds for minor injury to millions of pounds for permanent disability and long-term care. The courts calculate costs awarded on the basis of an award for the injury, compensation for loss of earnings, and any medical care that may be needed. Research into the costs of personal injury claims has been difficult due to confidentiality in the insurance industry and the lack of desire to make public what typically claims cost. Therefore finding evidence of personal injury claims to support the setting of a minimum level of third party liability insurance has been difficult and inconclusive. In the case of the accident where a person is injured through the negligence of a boat owner, they will be liable in law in any case, whether insurance is present or not. The Association of British Insurers have advised that, as the risk of loss of life and disability suffered through drowning, etc is certainly present, their advice would be to go for the £5m minimum level however they temper this by advising that insurance should be at an affordable price to the boat owner. This level of insurance has not been borne out by research into standard products that are available in the insurance market place. Typically standard policies for third party only insurance limit the liability to either £2m, £3m with only one provider found offering £5m cover as standard. Table 1 shows some typical costs.
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Table 1 Insurance provider A A B B C C C C 4.9 Vessel up to 60ft speed up to 17 Knts up to 60ft speed over 17 Knts Speed up to 17 Knts inland only Speed Over 17Knts inland and Coastal Cruiser up to 17Knts inland only Dayboat up to 35 Knts inland only Dinghy Small Inflatable Dinghy Cost £69.00 £79.00 £57.75 £78.75 £39 £39 £26.63 £26.63 Liability Limit £5m £5m £3m £3m £3m £3m £2m £2m
Comprehensive insurance policies include an element relating to Third Party Liability which is typically set under these types of policies to a limit of £3m. Conclusions The Authority needs to set a level of insurance cover at a level which would provide adequate compensation in the event of an incident on the Authority’s waters. This must include an incident where claims could be both on a personal injury and damage to third party assets, balanced with a sympathetic approach to the potential increased cost to the boat owners of the Broads. It is clear from the advice from the Association of British Insurers and the specialist insurance providers that they consider a limit of £1m as insufficient. The officer view is that the minimum level of Third Party Liability cover required by the Authority for boat owners should be set at £2,000,000. The views of the Committee are sought on the matter.
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Background papers: Implementation of Provisions in the Broads Bill: Introduction of Compulsory Third Party Insurance 4 September 2008 Author: Date of report: Appendices: Steve Birtles / Keir Hounsome 19 May 2009 Appendix 1- Broads Authority Bill Schedule 3 Requirements as to Insurance Policies,
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APPENDIX 1
SCHEDULE 3 Sections 14(2) and 28(6)(a) REQUIREMENTS AS TO INSURANCE POLICIES 1. A policy required under section 14(2) shall insure the owner of the vessel and such other person, persons or classes of persons (if any) as is or as are authorised by the owner to have control of the vessel, in respect of any liability (other than a liability specified in paragraph 4) which may be incurred by the owner, or any such other person, resulting from the presence of the vessel in the navigation area or on adjacent waters, in respect of death of, or bodily injury to, any person or any damage to property. A policy required under section 28(6)(a) shall insure the holder of the policy in respect of any liability (other than a liability specified in paragraph 4) which may be incurred by the holder in respect of the death of, or bodily injury to, any other person or any damage to property, resulting from the carrying out by the holder of water skiing or wake boarding. A policy required under section 14(2) or section 28(6)(a) shall be issued by an insurer authorised under the Financial Services and Markets Act 2000 (c.8) to carry on in Great Britain or in Northern Ireland insurance business of a relevant class or who has corresponding permission under the law of another member state of the European Community. A policy shall not by virtue of this Schedule be required— (a) to cover liability in respect of the death, arising out of and in the course of his employment, of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; in the case of a policy required under section 14(2), to cover liability in respect of— (i) (ii) (c) damage to the vessel to which the policy relates; goods carried on or in the vessel to which the policy relates, or any vessel drawn or propelled by such vessel;
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in the case of a policy required under section 28(6)(a), to cover liability in respect of damage to any water skis, wake board or other equipment used in connection with water skiing or wake boarding; to cover any liability of a person in respect of damage to property in his custody or under his control; to cover any contractual liability; or to provide cover in respect of any one accident for a sum in excess of such sum as may for the time being be prescribed by the Authority for the purposes of this paragraph.
(d) (e) (f)
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