observations and comments about all things insurance (with some other fun topics thrown in to keep it fresh)

Courtesy Associated Press- Photo By Gregorio Borgia

Unless you’ve been living under a rock, the recent sinking of the Costa Concordia cruise ship after running aground off the coast of Tuscany (Isola del Giglio, Italy to be exact) has been THE topic of conversation.

It’s impossible to imagine this- and even more so since I’ve been on a cruise before. Simply beyond comprehension. And utterly heart-wrenching. In a nutshell, here’s what is reported to have happened (courtesy The Associated Press via Yahoo News):

The cruise operator has said Capt. Francesco Schettino strayed from the ship’s authorized course into waters too close to the perilous reef. The navigational version of a “fly by” was apparently a favor to the chief waiter who is from Giglio and whose parents live on the island, local media reported.

My first thought upon hearing the news was “Oh.My.God.” My second thought?  ”How will the insurance respond?” Because that IS how I’m hard-wired after all…….

Carnival Corporation., which owns the company that operates the Concordia, estimated that preliminary losses from having the Concordia out of operation at least through 2012 would be between $85 million and $95 million, along with other costs.

Read that previous paragraph again- $85-95 million in lost income & extra expense! 

Thankfully, there is an insurance solution for this- a loss of business income and extra expense policy. These policies are designed to replace/supplement lack of income and additional expenses incurred for salvaging the ship, outfitting another ship, etc…..

But what about the other losses suffered?

If the cruise ship is determined to be legally liable, then commercial general liability coverage would kick in to pay for bodily injury and property damage suffered by the passengers. We’re talking approximately 4,200 people.

Here’s a quick list of other possible losses suffered (and this is by no means exhaustive):

• Employees injuries- Worker’s Comp would certainly have to come into play here.
• Employee damages beyond what Worker’s Comp will pay- perhaps the employee is allowed to sue for an unsafe work environment?
• Employees possessions- Perhaps General Liability, but maybe also Property of others on the Business Property policy.
• Pollution- fuel and other potentially toxic fluids dumping into the water. Excluded on the General Liability policy by the way.
• Punitive damages such as mental anguish, loss of life, loss of companionship- usually not covered on the General Liability policy.
• The cruise ship itself and it’s contents.

And if the cruise ship company is smart, they will have a commercial umbrella policy, which adds another layer of liability coverage and may even pay for things not covered on the underlying policies.

Please note I am by no means an expert in insuring cruise ships. In fact, I’m sure there’s some fancy cruise ship-type policy out there in the marketplace that may account for some or all of the above.

My point is this: Even if you think you’ve got TOO much insurance, answer this question- “How big is the claim going to be?”  

Buy as much as you can possibly afford, because when your cruise ship runs aground, it’s better to have some coverage to help pay the expenses and damages. There will never be enough insurance to pay for this tragedy and yes, some losses will be uninsured (insurance doesn’t pay for EVERYTHING. EVER.)

But, perhaps the insurance will help the cruise line recover and regroup. Get back to a semblance of square one. And isn’t that what insurance is designed to do?

What are your thoughts on this tragedy? How does the cruise line seem to be dealing with the situation? Any added news tidbits you want to share?

Above all, my thoughts and prayers are with the survivors, and the family and friends of those lost.