Contrary to what its name suggests, the insurance of a pleasure craft is not marine insurance within the meaning of the French Insurance Code: Article L. 171-5 expressly excludes pleasure navigation from the title devoted to marine insurance and submits it to the ordinary law of non-marine insurance. It follows that a refusal of cover is judged by the general rules, which favour the insured: exclusions must be formal, limited and printed in very apparent characters (Articles L. 113-1 and L. 112-4); a misstatement entails nullity only where bad faith is proved, and otherwise a proportionate reduction of the indemnity (Articles L. 113-8 and L. 113-9); and clauses forfeiting cover for mere lateness in notification are void (Article L. 113-11). Limitation is two years from the event, or from the insured’s knowledge of it, and it is interrupted by a registered letter with acknowledgement of receipt sent to the insurer or by the appointment of an expert (Articles L. 114-1 and L. 114-2).
A dismasted sailing yacht, an engine drowned after a leak, a boat driven ashore by a storm at anchor, a fire in port: the insured notifies the loss, the insurer’s surveyor attends, and the answer arrives, sometimes months later, refusing cover for lack of maintenance, for navigation outside the agreed area, for absence of watchkeeping, for inherent vice, or offering an indemnity far below the value of the boat.
Pleasure craft insurance: ordinary law, not marine law
The Insurance Code devotes an entire title to marine insurance, with specific rules that are often severe on the insured: nullity for an omission diminishing the insurer’s opinion of the risk, a duty to declare any aggravation within three days, exclusion of inherent vice. But Article L. 171-5 provides that this title does not apply to insurance contracts covering the risks of pleasure navigation, which are subject to Titles I, II and III of Book I, that is, to the ordinary law of damage and liability insurance. Only the rules on applying the indemnity to the constitution of a limitation fund are reserved.
A pleasure boat owner, whether an individual or a company owning a privately used yacht, is therefore in the position of a motor or household insured, with the protections the legislature attached to that status. The boundary matters: a yacht operated commercially in crewed charter is no longer in pleasure navigation within the meaning of the provision, and its hull and liability insurance falls under the marine regime. A yacht in mixed use must be insured accordingly, and the characterisation of the activity on the day of the loss is the first point the insurer checks.
What a pleasure craft policy covers
Most policies contain third-party liability cover, the only compulsory cover in certain ports and for certain activities, covering damage caused to third parties by the boat, including collision, striking a harbour work or accidental pollution; hull cover, on an agreed value or a declared value basis, covering perils of the sea, fire, theft, striking and sometimes dismasting and machinery breakdown; and ancillary covers such as wreck removal costs, assistance, personal effects, legal expenses and personal accident. Agreed value is the essential point of hull cover: where it is stipulated, the indemnity on a total loss is that value, with no argument about market value at the date of loss; where the policy provides only a declared value, the insurer indemnifies the actual value, capped, and the argument about depreciation is open.
What the policy does not cover is written in the exclusions, and that is where the dispute is fought. The most common concern lack of maintenance and wear, inherent vice of the boat such as osmosis or corrosion, navigation outside the subscribed area or outside the navigation period, the boat left unattended at an open anchorage, handling by an unqualified person or under the influence of alcohol, participation in racing, and chartering the boat to third parties. Those exclusions are valid only if they are formal and limited (Article L. 113-1) and set out in very apparent characters (Article L. 112-4); an exclusion drafted in general terms, lack of maintenance or imprudence, or buried in the general conditions, is regularly set aside by the courts, which require the insured to have been able to know precisely the extent of what was not covered.
The grounds of refusal, and what they are worth
Lack of maintenance and seaworthiness. Insurers frequently refuse cover on the ground that the loss resulted from a lack of maintenance, a corroded seacock, tired rigging, a cracked skin fitting, or that the boat was not fit to go to sea. That defence succeeds only if the policy contains a formal and limited exclusion on the point and the insurer proves that the defect caused the loss. Failing a valid exclusion, losses caused by the insured’s unintentional fault remain the insurer’s liability (Article L. 113-1). The joint survey is decisive, and the insured should be assisted by his own surveyor from the first meeting.
Misstatement. The insurer relies on an inaccurate answer in the proposal form, the year of the boat, its power, value, use, home port or claims history, to avoid the contract. Nullity requires an intentional concealment or misstatement changing the subject of the risk or diminishing the insurer’s opinion of it (Article L. 113-8); where bad faith is not established, the insurance is not void and the indemnity is merely reduced in proportion to the premium paid against the premium that would have been due (Article L. 113-9). The insured is bound only to answer accurately the questions asked (Article L. 113-2), and an insurer who did not ask cannot complain of silence. An aggravation of the risk during the contract, a change of use, of area or of engine, must be declared within fifteen days of becoming known.
Late notification of the loss. The contract fixes a notification period, which may not be less than five working days (Article L. 113-2, 4°). But forfeiture for late notification is incurred only if the policy provides for it and the insurer proves that the delay caused him prejudice, and any clause forfeiting cover by reason of a mere delay in reporting to the authorities or in producing documents is void (Article L. 113-11). A theft not reported to the police within forty-eight hours, a loss notified after a month: those delays are arguable, they do not close the file.
The insured’s fault. Only intentional or fraudulent fault excludes cover as of right (Article L. 113-1). Negligence, an error of navigation, poor mooring, a seacock left open are ordinary faults and are covered, absent a formal exclusion. Marine policies also exclude inexcusable fault; in pleasure insurance that notion has no statutory basis and its insertion in the general conditions must satisfy the formal and precision requirements applying to exclusions.
The two-year limitation period: starting point and interruption
All actions arising from an insurance contract are time-barred after two years from the event giving rise to them (Article L. 114-1). In the case of a loss, time runs only from the day the insured became aware of it if he proves that he was unaware until then, and, where the insured’s action arises from a third party’s claim, only from the day that third party brought proceedings or was indemnified. Limitation is interrupted by the ordinary causes, a writ or an acknowledgement by the insurer, and, specifically, by the appointment of surveyors following a loss and by the sending of a registered letter with acknowledgement of receipt from the insured to the insurer concerning settlement of the indemnity (Article L. 114-2). These rules are mandatory and the insurer must set them out in the policy, failing which he cannot rely on limitation.
The trap is the negotiation that drags on: exchanges of emails, counter-surveys, an indemnity offer awaited, and the two years expire without the insured noticing. A registered letter with acknowledgement of receipt claiming settlement, renewed before each expiry, is enough to interrupt the period and start a fresh two years; it is the first step to take on receiving a file.
Agreed value, total loss and abandonment
In marine insurance, abandonment to the insurer is a statutory mechanism: the insured abandons the vessel to the insurer and receives the whole sum insured, in enumerated cases such as total loss, repairs exceeding three quarters of the agreed value, impossibility of repair, or absence of news for more than three months. In pleasure insurance that mechanism exists only if the policy stipulates it, and most hull policies do, in similar terms: where the cost of repairs exceeds a percentage of the agreed value, often 75 or 80 percent, the boat is deemed a total loss, the insurer pays the agreed value and takes the wreck or leaves its ownership to the insured against deduction of its salvage value.
The argument then turns on the repair estimate, which the insurer seeks to minimise in order to stay below the threshold and repair, and which the insured, who often prefers the indemnity, seeks to establish in full, with the costs of refloating, transport and replacement of equipment. On a partial loss, the indemnity covers the cost of repairs, less the deductible and, where the policy so provides, a depreciation allowance on certain items such as sails, engines and electronics. Costs incurred to limit the damage, towage, emergency lift-out, pumping, are in principle covered, and the insured is obliged to incur them where they are reasonable. An insurer who has paid is subrogated to the insured’s rights against the third party responsible (Article L. 121-12), so the insured must preserve those recourses, by a joint survey and by putting the yard or the port on notice, failing which part of the indemnity may be lost.
Challenging a refusal: the method
The challenge begins with reading the complete policy, particular and general conditions, in the version in force on the day of the loss, which the insurer must produce. It continues with verifying the three sets of conditions of the refusal: does the clause relied on exist, is it formal, limited and in very apparent characters, and does the insurer prove the link between the excluded fact and the loss. It then goes through the survey: the insured appoints his own surveyor, a joint survey is organised, and where disagreement persists a third surveyor or a court-appointed expert in summary proceedings decides the technical questions, the appointment of an expert interrupting limitation.
A reasoned formal demand, sent by registered letter, precedes referral to the insurance ombudsman, which is free but not binding, and then to the judicial court, which has jurisdiction over insurance disputes, with the possibility of an interim payment where the insurer’s obligation is not seriously disputable. Throughout, the two-year period must be interrupted in writing at regular intervals, because a negotiation that has lasted twenty-five months has extinguished the claim it was meant to settle.
How the firm works
The firm acts from the refusal or from an indemnity offer that is too low. The first step is always to interrupt limitation in writing, because a file arriving twenty months after the loss has very little margin left. It then obtains the complete policy in the version in force at the date of loss, tests each ground of refusal against the formal requirements of Articles L. 112-4 and L. 113-1, and assesses whether the insurer can prove the causal link he asserts.
It then organises the technical side: appointment of the insured’s surveyor, joint survey, and where necessary an application for a court-appointed expert, which also interrupts limitation. Where the argument is about the amount rather than the principle, it builds the repair estimate in full so that the total loss threshold is assessed on real figures. Proceedings are brought before the judicial court, with an application for an interim payment where the obligation is not seriously disputable. A file can normally be assessed within a few days on the strength of the policy, the survey report and the refusal letter.
Your insurer has refused cover or offered far less than the boat is worth? The two-year period runs from the loss, and a negotiation does not stop it. The firm interrupts it and challenges the refusal.
Abandoning a sunken yacht to the insurer does not extinguish the duty to remove it: see our wreck removal page; on the insurer’s coverage of salvage costs, our marine salvage page.
Frequently asked questions
Is pleasure craft insurance marine insurance?
No. Article L. 171-5 of the Insurance Code expressly excludes pleasure navigation from the title on marine insurance and submits it to the ordinary law of damage and liability insurance. The insured therefore benefits from the protections of ordinary law: formal and limited exclusions, proportionate reduction rather than nullity absent bad faith, and void forfeiture clauses for mere delay. A commercially chartered yacht, by contrast, falls under the marine regime.
How long is there to sue a pleasure craft insurer?
Two years from the event giving rise to the action (Article L. 114-1), running from the insured’s knowledge of the loss where he proves he was unaware of it. The period is interrupted by a writ, by an acknowledgement from the insurer, by the appointment of surveyors following the loss, and by a registered letter with acknowledgement of receipt concerning settlement of the indemnity (Article L. 114-2). The insurer must set these rules out in the policy, failing which he cannot rely on limitation.
Can the insurer refuse cover for lack of maintenance?
Only if the policy contains a formal and limited exclusion on that point, set out in very apparent characters, and only if the insurer proves that the defect caused the loss. An exclusion drafted in general terms is regularly set aside. Absent a valid exclusion, losses caused by the insured’s unintentional fault remain the insurer’s liability under Article L. 113-1; only intentional or fraudulent fault excludes cover as of right.
Does an error in the proposal form void the contract?
Not by itself. Nullity under Article L. 113-8 requires an intentional concealment or misstatement changing the subject of the risk or diminishing the insurer’s opinion of it. Where bad faith is not established, Article L. 113-9 provides only for a proportionate reduction of the indemnity according to the premium paid against the premium that would have been due. And the insured is bound only to answer accurately the questions actually asked (Article L. 113-2).
What is abandonment in pleasure craft insurance?
It is the mechanism by which the insured abandons the boat to the insurer against payment of the agreed value. In marine insurance it is statutory; in pleasure insurance it exists only where the policy stipulates it, which most hull policies do: where the cost of repairs exceeds a percentage of the agreed value, often 75 or 80 percent, the boat is deemed a total loss. The argument then turns on the repair estimate, which decides which side of the threshold the file falls.
Further reading: ten checks before buying a yacht abroad, francisation and registration of a vessel, the firm’s yacht practice.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and is no substitute for advice on your own matter.