Summer is a season of recreational fun and personal relaxation; a blissful stretch blessed with balmy weather to enjoy long weekends with friends and family, the children and grandchildren off from school. Unfortunately, summer is also the riskiest season of the year.
Automobile accidents and related fatality rates alarmingly rise during summer months, particularly among teen drivers. Summer is also when people are more likely to become injured or ill due to heat stroke and water-related accidents. It's also the riskiest period for someone ill or injured to have to go to a hospital.
Summer brings us all a range of wonderful activities, but many of these pursuits are fraught with liability exposures — particularly for high-net-worth families and individuals. Summer may entail long vacations to far-flung locales, backyard parties by the pool and outdoor bar, guests staying at one's homes and pleasure-seeking jaunts on diverse watercraft. But the warm weather also invites fire threats at mountain cabins, and hurricane winds and floods at coastal homes.
“Summer should be a season of stress-free fun with the family and friends,” said Dale Krupowicz, COO at Personal Risk Management Solutions, a New York-based insurance agency that serves a predominantly HNW clientele. “It can be, but only if the various hazards that tend to occur during this season are understood and addressed.”
Watercraft and Water Sports
Krupowicz noted a few atypical risks her high-net-worth clients confront during summer months. The first hazard is in watercraft and water sports.
“The risk with jet skis is that they’re often operated by teenagers and even younger children,” Krupowicz explained. “Typically, the kids have friends they’ve brought along who have no experience or training in how to safely ride these vehicles. If they’re injured, assuming the friends’ parents have given permission to ride the jet ski, the homeowner is usually covered by insurance. Nevertheless, there are still other coverage nuances that have to be considered.”
Krupowicz pointed out that routine homeowners insurance policies only absorb the owner's liability if the jet ski is powered by a 50-horsepower engine or less. Many luxury jet skis like the Sea-Doo GTX 215 have twice that horsepower and more, with the capacity to reach speeds approaching 60 mph. “Hitting the water at that speed is like hitting cement,” she said.
With faster jet skis, the sleep-easy solution is to acquire personal watercraft insurance, which covers first-party and third-party liabilities involving a family's sailboats, yachts and jet skis. It is important to note that typical watercraft insurance does not cover liabilities emanating from parasailing or hydro-powered jet packs. “It's critical that customers talk to their agent or broker to determine if this coverage can be scheduled to help absorb these risks,” Krupowicz said. “If not, you’re on your own.”
Big Boats, Big Worries
Yacht ownership comes with a range of unique risks. More than 100 yachts today are as long as 225 feet, double the length of what was considered a “mega-yacht” a generation ago. These boats require the hiring of captains and crews. Much smaller yachts also need specialized professionals at the helm, but often people who have sailed their whole lives disagree with this.
Krupowicz explained, “We just had a situation with one of our clients who had never operated a large watercraft, [and] only had experience with smaller boats. We explained that […] as you upgrade, the experience level of the operator is extremely important. In this case, we told him that he needed to hire a full-time paid captain. If this condition was not complied with, the carrier would not provide coverage for his new yacht.”
Other watercraft risks involve worker injuries and illnesses, as well as first- and third-party bodily injuries and property damage. There are also stringent insurance coverage requirements based on maritime law. With regard to the latter, owners of vessels with a captain and crew are required to have Jones Act coverage, which is similar in some respects to workers compensation insurance.
Most insurance policies forbid the racing of both powered and sailed watercraft, although such coverage can be acquired from specialized insurers. There are also territorial limitations on where owners can pilot their vessels. Venture beyond the geographic limits in the policy and the insurance may be nullified.
Clearly, anyone taking a yacht off the coast of Somalia is making a dangerous decision given the severe risk of pirates. But even hot travel destinations like Cuba remain largely off limits. Although longstanding trade and travel restrictions formerly in place with that country are being lifted, American boat owners cannot simply sail into local ports without proper authorization.
First, the owner, passengers and crew must qualify under one of the 12 general licenses or a specific license issued by the U.S. Treasury Department's Office of Foreign Asset Control authorizing travel to Cuba. However, the license alone does not allow someone to take a yacht to the island. Additional licenses are required, including an export license from the U.S. Commerce Department and permission from the Coast Guard to enter Cuban territorial waters. Absent these permissions, a maritime insurance policy may not be worth the paper it's printed on.
For many people, summer is a time of travel, and many affluent families indulge in extraordinary trips to faraway places. Krupowicz mentioned a client of hers that went on safari with his family in Africa where, regrettably, the health care infrastructure is well below the standards of more industrialized nations.
We all hope if we are injured or become ill in a foreign country that we will receive immediate, quality medical care. This is not the case across much of the globe. “Fortunately, there are a few insurers that will evacuate an injured policyholder to a hospital in another country that has first-rate health care equipment, doctors and services,” Krupowicz said. “The same insurers often will provide ancillary services, such as contacting the policyholder about the growing risk of civil commotion in a country or an imminent storm that is en route.”
Many HNW families and individuals host outdoor parties in summertime — as do we all. If the home has a swimming pool, the risk of injury or death from drowning to children and adults gives deep pause for consideration. For children under age 5, drowning is the leading cause of accidental death, with rates exceeding those of traffic accident fatalities. Most of these deaths occur in home swimming pools.
For adults, a swimming pool and alcoholic beverages are a combustible mix. At a 2015 dinner party at a Beverly Hills house, a young man was found floating dead in the pool. The victim was reportedly intoxicated and did not know how to swim. He appeared to have slipped and fallen into the pool when the party's guests were not present.
To limit this devastating possibility occurring at a house party, Krupowicz offered a simple solution — hire a lifeguard. She also advised that all of us, but particularly high-net-worth people, should buy an umbrella liability insurance policy with high limits of financial protection. “What's great about this insurance is that it resides on top of all your other liability coverages, helping ease the family's financial concerns over watercraft, vacation travel, parties — you name it,” she said.
Absent such concerns, summer can be enjoyed to the fullest.