Most Minnesotans are probably familiar with the story of Courtney Godfrey, a television news reporter, who was injured in a boating accident that occurred on Christmas Lake on September 15, 2017. Courtney’s husband, Ryan Novaczyk, was the driver of the vessel. According to news reports he made a sharp turn. Courtney was thrown into the water and her leg became tangled in the boat’s propeller. Her lower leg was amputated. Courtney believed the policy purchased to cover liability for the operation of the boat would pay for her injuries, but soon learned about the “family exclusion” contained in boat policies.
Soon after her accident Courtney began campaigning for legislative changes that would prohibit such exclusions in boat policies. Most policies sold to cover watercraft liability exclude coverage for the spouse, children and other resident relatives. With much publicity and sympathy, and after consideration in several legislative sessions, the mandate to include liability coverage for family members passed in the 2023 session. Family members injured in boating accidents due to the negligence of an insured, will be entitled to payment for their injuries under the bodily injury portion of the boat policy. Beginning on May 1, 2024, the start of Minnesota’s boating season, policies issued may no longer contain the “family exclusion”, although applicants will have the option to decline the benefit in exchange for a reduced premium.
Without coverage from the boat policy, an injured family member would rely on personal insurance purchased, such as life, health, and disability. As a news reporter, Courtney likely had coverage through employer provided policies. You may ask, what additional coverage would the boat’s liability coverage provide? Tort liability includes damages for medical, future medical, loss of income, disfigurement, along with pain and suffering. Medical policies do not cover all expenses incurred. This can include the additional sums payable for out-of-network care, certain formularies, and even the cost of air ambulance transportation. In addition, pain and suffering and permanent disfigurement are also compensable.
Statute 60A.0812 – Property and Casualty Policy Exclusions
Short Title: Family Protection Act
A link to the statute and the bulletin published by the Minnesota Dept. of Commerce are linked to this article. Below are the definitions that frame the scope and applicability of this statute.
(b) “Boat” means a motorized or nonmotorized vessel that floats and is used for personal, noncommercial use on waters in Minnesota.
(c) “Boat insurance policy” means an insurance policy that provides liability coverage for bodily injury resulting from the ownership, maintenance, or use of a boat, although the policy may also provide for property insurance coverage for the boat for noncommercial use
(d) “Insured” means an insured under a policy specified in subdivision 3, clauses (1) to (4), including the named insured and the following persons not identified by name as an insured while residing in the same household with the named insured:
(1) a spouse of a named insured;
(2) a relative of a named insured; or
(3) a minor in the custody of a named insured, spouse of a named insured, or of a relative residing in the same household with a named insured.
For purposes of this section, a person resides in or is a member of the same household with the named insured if the person’s home is usually in the same family unit, even if the person is temporarily living elsewhere.
Based on the definition of “Boat” the intent is to include Family Protection for ALL watercraft.
“Boat insurance policies” include ANY policy that provides bodily injury liability coverage for a “Boat”. This could include coverage provided by a homeowner policy watercraft endorsement.
Insured includes ALL resident relatives, even if they are temporarily residing elsewhere and minor children in the insured’s custody
New Business
Effective May 1, 2024, at the time of sale, the applicant must be given the opportunity to decline coverage for family members. If declined, applicants must be given an updated quote with a premium reduction. The process, in this order, allows an applicant to see the cost of including coverage for family members before being presented with the less costly option. The section of the statute pertaining to coverage declination and the required disclaimer is shown below.
Subd. 6.Election of coverage for boat insurance policies.
(a) An insurer issuing bodily injury liability coverage for a boat insurance policy under this section must notify a person at the time of sale of the person’s rights under this section to decline coverage for insureds and be provided an updated quote reflecting the appropriate premium for the coverage provided.
(b) Named insureds must affirmatively make an election to decline coverage, in a form approved by the commissioner, after being informed that an updated quote will be provided. The election must be signed and dated, and is binding on all persons insured under the policy and to any renewal of the policy.
(c) An insurer offering an election of coverage under this subdivision must have the disclosure approved by the commissioner. The notice must be in 14-point bold type, in a conspicuous location of the notice document, and contain at least the following:
ELECTION TO DECLINE COVERAGE: YOU HAVE THE RIGHT TO DECLINE BODILY INJURY COVERAGE FOR INJURIES TO YOUR FAMILY AND HOUSEHOLD MEMBERS FOR WHICH YOU WOULD OTHERWISE BE ENTITLED TO UNDER MINNESOTA LAW. IF YOU ELECT TO DECLINE THIS COVERAGE, YOU WILL RECEIVE AN UPDATED PREMIUM QUOTE BASED ON THE COVERAGE YOU ARE ELECTING TO PURCHASE. READ YOUR POLICY CAREFULLY TO DETERMINE WHICH FAMILY AND HOUSEHOLD MEMBERS WOULD NOT BE COVERED FOR BODILY INJURY IF YOU ELECT TO DECLINE COVERAGE.
Renewal Watercraft Policies
It is still too soon to tell how the new law will impact the overall appetite of companies to provide watercraft coverage in Minnesota, the liability limits offered or the additional forms that will require completion for the purpose of documenting coverage rejection. Will carriers be willing to schedule watercraft liability as underlying insurance on the umbrella/excess form? Those that own boats considered to be fast or fun will likely have difficulty finding coverage and overall underwriting will be robust. The response will be different for each carrier. Some may choose not to write watercraft policies entirely. Stricter underwriting of individual operators is likely. The “Do Not Bind” and “Prohibited” watercraft lists will lengthen based on the carrier’s appetite, claims experience and reinsurance available.
Impact on Homeowner/Watercraft Liability
Homeowner policyholders with endorsed watercraft coverage may already be receiving notices from their insurers, removing this coverage at renewal. In the future, owned boats, motors, and accessories will be covered under watercraft policies. The personal liability section of most homeowner contracts provides coverage for low hazard watercraft. (Non-motorized, 25hp outboard, 50hp inboard) Will insurers amend homeowner policy forms to exclude coverage automatically provided for watercraft? Time will tell.
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- Agency Processes and Procedures
- Renewal checklists will need to be adapted to inquire about all watercraft exposures
- List carriers writing watercraft specific coverage and include the underwriting guide
- List carriers excluding watercraft or removing endorsements from home policies
- An agency procedure will need to be developed, in accordance with company underwriting, assuring signed coverage rejections for new and existing watercraft policies when appropriate
- Develop an agency procedure to efficiently migrate coverage previously provided by endorsement on the home policy to a watercraft policy form
- Quote the coverage with family liability protection
- Provide a quote with reduced premium if coverage is rejected
- Document, Document, Document
Unlike auto insurance, boat liability coverage is not mandated in Minnesota. Coverage placements for airboats, hovercraft and jet skis can be challenging. Depending on the evolving watercraft market some boat owners may find themselves without coverage options or the coverage offered may lack sufficient limits or be cost prohibitive. Thoroughly document all attempts made to place coverage and include your written communication informing the applicant that the agency was unsuccessful in attempts to secure a quote or coverage.
Worth Noting
The Minnesota Department of Commerce Bulletin calls out a requirement for “family protection” coverage applicable to auto insurance as well. Previously, many auto insurers did provide coverage for family members injured at the fault of the insured, but many limited coverage to the state minimum automobile liability limits; 30,000 each person and 60,000 each accident. Drop down limits will no longer be permitted on personal auto policies. The statement below is included in the Department’s bulletin.
Impact on Automobile Insurance
Effective January 1, 2024, automobile policies may not include a prohibited exclusion, including drop down or household exclusions. Additional insureds, residents, and members of the insured’s household, and those related to the insured by blood or marriage must be covered for the same limits as the named insured, unless the named insured is covered at lower limits than the other individuals covered under the policy.
Automobile policies that currently include prohibited exclusions will need to be revised upon renewal. Insurers will need to submit revised form, rate, and rule filings to the Department prior to January 1, 2024. For members of rate service organizations (RSO), it will not be acceptable for them to simply non-adopt the RSO filing. Their filing to the Department to non-adopt the RSO filing will need to be accompanied by a compliant independent filing.
Reference Documents
