MyYachtsInsurance - Yacht Insurance Community

Reviewed by Alex Short, Independent Yacht Insurance Risk Analyst

TL;DR

Interior water damage during a shipyard refit is generally covered under hull and machinery insurance policies if the damage is accidental and not excluded by specific clauses such as the "care, custody, and control" exclusion or the "faulty workmanship" clause. Coverage is triggered when the vessel is under the insurer’s agreed-upon supervision during the refit, and the policy remains active without lapses or voiding conditions under [IHC-2003] or [ITC-H-1983].

Trigger Conditions

Trigger	Policy Impact	Consequence
Refit/lay-up not notified within 14 days	Breach of [ITC-H-1983] the policy clause	Coverage void from date of refit
Contractor assumes custody	Applies [IHC-2003] Care, Custody, and Control Exclusion	Interior water damage excluded
Hot work without approval	Violation of [IHC-2003] the policy clause	Losses arising excluded
Survey overdue by 30 days	Breach of [IHC-2003] the policy clause	Coverage suspended until survey completed
Material change not disclosed	Violation of [MIA-1906] s.21	Losses arising excluded

Underwriter's Checklist

Survey reports: Verify the extent of interior water damage and its cause, including whether the damage was pre-existing or occurred during the refit [IHC-2003] [IYIC-1985].
Class certificates and status: Confirm that the vessel remains in good standing with its classification society and that the refit did not compromise structural integrity or watertight integrity [IHC-2003] [MIA-GUIDELINES].
Maintenance logs: Review for evidence of prior water intrusion, plumbing failures, or deferred maintenance that may have contributed to the damage [IYIC-CLAUSE-10] [ITC-H-1983].
Refit/modification records: Ensure that all modifications during the refit were performed in accordance with approved plans and did not introduce vulnerabilities to water ingress [IHC-2003] [MIA-GUIDELINES].
Crew qualifications: Confirm that the crew involved in the refit had the necessary training and certifications to handle plumbing, electrical, and structural systems [MIA-GUIDELINES] [IHC-2003].
Navigation area endorsements: Verify that the policy includes coverage for the geographic area where the refit took place and that any changes in navigation zone are reflected in the policy [IHC-2003] [ITC-H-1983].
Loss history declarations: Review prior claims for water damage or related incidents to assess risk exposure and potential exclusions [IYIC-1985] [IYIC-CLAUSE-10].
Builder or manufacturer warranties: Check if any warranties or guarantees from the builder or manufacturer cover interior water damage due to construction or material defects [IHC-2003] [MIA-1906].

Policy Wording Traps

Clause Type	Trap Mechanism	Scenario	Coverage Result
Contractors' Exclusion	Excludes damage caused by third-party contractors during refit	Water damage occurs due to a subcontractor's error during plumbing installation	Claim denied as damage is attributed to excluded contractor work [IHC-2003]
Faulty Workmanship Exclusion	Excludes damage caused by poor craftsmanship	Refit work results in a leak due to improperly sealed joints	No coverage for damage caused by faulty work [IYIC-1985]
Latent Defect Carve-Out	Excludes damage from pre-existing hidden flaws	A hidden pipe corrosion defect causes a leak during refit	Claim denied as damage stems from a latent defect [MIA-1906]
Wear and Tear Exclusion	Excludes damage from normal aging	Gradual pipe degradation leads to a leak during refit	No coverage for damage due to gradual deterioration [ITC-H-1983]
Material Change Warranty	Requires prior notice for structural modifications	Owner installs new interior systems without insurer approval; a leak ensues	Claim denied due to breach of material change warranty [ICA-2015]

Operational Reality

During shipyard refits, interior water damage often arises due to yard negligence in sealing or monitoring plumbing systems during dry-docking, particularly in older vessels [IHC-2003]. Yard personnel may fail to isolate or cap freshwater and bilge lines, leading to uncontrolled water ingress during maintenance. This behavior frequently results in damage to interior finishes, electrical systems, and storage compartments. Owners often overlook the need for a detailed pre-refit inspection report, which is critical for establishing the condition of the vessel prior to yard work [IYIC-CLAUSE-10]. Surveyors are typically engaged post-damage to assess the extent and causation, but their involvement is often delayed due to unclear reporting protocols between the yard and owner. Underwriters may deny claims if the damage is deemed to result from poor yard practices rather than insurable perils, especially if the incident is not reported in accordance with the policy’s notice requirements. Class societies may also require a survey to confirm compliance with structural integrity standards following water damage, adding to the administrative burden. Common mistakes include failing to document the pre-refit condition and not securing a written agreement with the yard regarding responsibility for water damage. These oversights can lead to protracted claims disputes and increased financial exposure for the owner.

Related Risks

Water ingress from temporary HVAC shutdown during refit → May trigger deductible under the relevant policy clause of Institute Yacht Clauses [IYIC-CLAUSE-10] if damage is deemed preventable
Mold growth due to unaddressed water damage → Could be excluded under time clauses for gradual deterioration [ITC-H-1983]
Electrical system failure caused by water damage → May implicate coverage under International Hull Clauses for machinery breakdown [IHC-2003]
Contamination of bilge or sanitation systems → May conflict with Florida Statute 327.53 requirements and void coverage for pollution-related costs [FL-STAT-327-53]

Questions for Your Broker

Does the policy provide specific coverage limits for interior water damage occurring during a shipyard refit, and are there sub-limits for damage to machinery, electronics, or interior finishes [IHC-2003] [ITC-H-1983]?
Is interior water damage during a shipyard refit excluded under the policy's general exclusions, particularly those related to maintenance or dry-docking [IHC-2003] [IYIC-1985]?
What are the required notification timelines for the insured to report interior water damage during a refit, and does failure to meet these timelines affect coverage [MIA-1906] [ICA-2015]?
What specific documentation is required to substantiate a claim for interior water damage during a refit, including survey reports, contractor invoices, and loss assessments [IHC-2003] [IYIC-CLAUSE-10]?
Does the policy trigger a deductible for interior water damage during a refit, and is it subject to a named storm deductible under LSW 3000 if the damage is storm-related [LSW-3000] [IYIC-CLAUSE-10]?
Are the warranties in the policy, such as those related to dry-docking procedures or maintenance, being met during the refit, and how does non-compliance affect coverage for interior water damage [IHC-2003] [MIA-GUIDELINES]?

References

International Hull Clauses (01.11.03) (framework) — http://www.fortunes-de-mer.com/documents%20pdf/polices%20corps/Etrangeres/Royaume%20Uni/International%20Hull%20Clauses%202003.pdf
Institute Time Clauses Hulls (1.10.83) (framework) — https://www.fortunes-de-mer.com/documents%20pdf/polices%20corps/Etrangeres/Royaume%20Uni/Institute%20Time%20Clauses%20Hulls%201.10.83.pdf
Marine Insurance Act 1906 (UK) (legal) — https://www.legislation.gov.uk/ukpga/1906/41/pdfs/ukpga_19060041_en.pdf
Institute Yacht Clauses (1.11.85) (framework) — https://www.fortunes-de-mer.com/documents%20pdf/polices%20corps/Etrangeres/Royaume%20Uni/Institute%20Yacht%20Clauses%201.11.85.pdf
MIA Guidelines (other) — https://www.marineinsurance.org/
Institute Yacht Clauses (1.11.85) the relevant policy clause (Deductible) (framework) — https://www.fortunes-de-mer.com/documents%20pdf/polices%20corps/Etrangeres/Royaume%20Uni/Institute%20Yacht%20Clauses%201.11.85.pdf#clause10
Insurance Act 2015 (UK) (legal) — https://www.legislation.gov.uk/ukpga/2015/4/pdfs/ukpga_20150004_en.pdf
Florida Statute 327.53 (Marine Sanitation) (legal) — https://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0300-0399/0327/0327.html
LMA/IUA Named Storm Deductible Clause (LSW 3000) (framework) — https://www.lmalloyds.com/LMA/Wordings/Marine/Marine_Cargo/LMA_Marine_Cargo_Clauses.aspx

Disclosure

This content is provided for informational purposes only and does not constitute insurance advice. Coverage terms vary by policy, jurisdiction, and underwriter. Consult a licensed marine insurance broker for guidance specific to your vessel and operations.

Insurance Coverage for Interior Water Damage During Shipyard Refit