Marine industry's long-sought insurance relief rides the economic stimulus package into reality
Buried on Page 830 of the 1,424-page American Recovery and Reinvestment Act is a plum Kristina Hebert has been trying to wrangle from Congress for eight years -an insurance break for companies whose employees service boats 65 feet and over.
No longer will businesses that repair and service these larger yachts (or replace and install equipment on them) have to pay for on-the-job accident insurance under the Longshoremen's and Harbor Workers' Compensation Act. That is the same act that covers workers in shipyards that build aircraft carriers and oil tankers and container ships.
Longshoremen's insurance is expensive. The stimulus act allows these companies to cover their employees with much cheaper state workers' compensation insurance instead of the longshoremen's coverage.
"This is a celebration," says Hebert, vice president of Ward's Marine Electric in Fort Lauderdale. "Hundreds and thousands of boatyards and marinas and dealers across this country" are effectively removed from the longshoreman requirements.
Hebert, a past president of the Marine Industries Association of South Florida, began working for the change eight years to the day - Feb. 17 - before President Obama signed the stimulus package into law. "The first meeting we had on this was during the Miami boat show in 2001," she recalls.
Not for builders
The bill took effect the day it was signed. It does not change the insurance requirements for manufacturers and builders of boats 65 feet and over, repairers and builders of commercial vessels of any size, marine contractors, dock builders or dredgers. Those businesses still must buy longshoremen's coverage. Nor does it affect the exclusion from longshoremen's coverage that already existed for builders and repairers of boats less than 65 feet.
The companies it does affect are those that repair, service or "dismantle" (take apart and put back together any part of) a recreational vessel 65 feet or larger - "recreational" defined as a yacht operated principally for the owner's benefit.
Hebert, who surveyed marine businesses, found that on average they expect to save $100,000 annually by switching from longshoremen's to state workers' compensation insurance.
This bill costs the federal government nothing, it strengthens marine businesses financially, helps keep them in business in these tough times and enables them to hire more workers, says U.S. Rep. Ron Klein, a Boca Raton, Fla., Democrat who, with U.S. Rep. Debbie Wasserman-Schultz, another Florida Democrat (Weston), shepherded the legislation into the stimulus package. By those measures, the bill is an "economic stimulus," Klein says.
A costly duplication
The longshoreman's insurance "was an extreme expense that was not providing any benefit to people who work in marine businesses," Klein told a packed room at a Feb. 18 information session hosted by MIASF. "It was a duplication of what already was covered by workmen's compensation."
To qualify for an exemption from longshoremen's insurance, a business must provide state workers' compensation coverage for all its employees, including officers, says Ian Greenway, president and CEO of LIG Marine Managers, an insurance underwriter headquartered in St. Petersburg, Fla.
Greenway says a company paying $14,430 in longshoremen's insurance on a $50,000 payroll for carpenters would pay less than half -$6,257 - for Florida workers' compensation. He recommends, however, that a company switching to workers' comp consider keeping incidental longshoremen's insurance, which typically costs about $100 per person. Incidental insurance covers workers on those occasions when a police boat or other commercial vessel comes in for repair, Greenway says, and will pay for hiring an attorney if the company is drawn into litigation challenging its choice to go with workers' comp rather than longshoremen's insurance.
Greenway says the incidental longshoremen's insurance is worth it for the peace of mind and the flexibility it offers to take on the occasional commercial job.
"You don't want to be turning down business," he says.
Coast Guard and other government boats, Sea Tow or similar assist boats, head, excursion or sightseeing boats, commercial shrimp or fishboats, water taxis, county or city vessels, private security boats, cargo or passenger vessels are all commercial vessels for purposes of the longshoremen's act.
A gray area
Are the yards or businesses that specialize in refits or hull extensions of yachts 65 feet and larger considered builders or repairers under the new bill? Greenway says this is a gray area for now. "That is an [issue] that will be tested down the road," he says.
Generally, sole proprietors without any employees are exempt from workers' compensation requirements, but Greenway says in the marine industry, "You can't be a sole proprietor." Singleton operators are subcontractors working for a yard or a boat owner and are required to carry workers' compensation, he says.
Hebert says businesses should be able to make midterm changes in their policies today to reflect changes in the law. "This is money back now," she says, and a shot in the arm for the marine industry.
This article originally appeared in the April 2009 issue.