Tour Boat Operators Hit Hard by Insurance Increases

by Tom Ingram, President & CEO, DEMA, Diving Equipment & Marketing Association, www.DEMA.org

In late 2022, Congress passed a law that significantly increased the cost of liability insurance for a small subset of the small-passenger boating industry. The change primarily applied to dive and tour boats, but not to fishing boats or pleasure yachts.  The dive industry—of which I am a part—is a major source of both tourism and recreation dollars for the region, part of the multi-billion dollar U.S. scuba diving and snorkeling industries, which brings, thousands of jobs and tax revenue to the area. 

We have seen liability insurance premiums skyrocket and even withheld for these small business owners at a time when inflationary overhead costs for water related activities are at more than 38% and are already making it more difficult to do business. https://www.bea.gov/data/special-topics/outdoor-recreation

Congress did this behind closed doors, and we believe people need to hear about the impact this is having on the lives of the people in the local community.

We recently submitted a letter to Congress from dozens of impacted small businesses around the country. I would love to put you in touch with a local dive operator and small business owner in the area so you can hear more about the direct impact of this poorly considered provision. I’m also happy to share more information about what is happening if that would be helpful.  

A DEEPER DIVE

Congress included a new, significantly expanded liability requirement for certain small passenger vessel operators in the 2023 National Defense Authorization bill that passed in December 2022. The language was NOT considered through an open committee process, or by the Congressional Committees with primary jurisdiction over property and casualty insurance. The new law did not include safety standards (which we support). Instead, it broke the insurance market for the small businesses that comprise the American dive industry and is now threatening to put many U.S. dive operators out of business because of exponential cost increases for annual liability insurance coverage.

Like many small businesses, dive and tour boats operate on razor-thin margins. Most earnings are recommitted to staff wages or invested directly back into operations, safety inspections, and regular maintenance of the vessel and related equipment. These operators were already struggling in the wake of rising inflation and pandemic-related income losses. Now, because of Congress, they have seen exponential increases in annual insurance costs. We have heard directly from operators who have had to either pass the costs on to consumers or reduce staff hours/positions. Instead of making the dive industry safer, this provision punishes small businesses in the American dive and tour boat industry and redirects limited resources to increased insurance costs in case of a lawsuit. 

FALLOUT

Small vessel owners must now try to secure new liability coverage that extends a year beyond the scope of annual commercial insurance contracts. This new requirement only applies to a subset of small passenger-carrying vessels, and so it can be quite difficult and expensive to find an insurance company that offers this expanded liability. In fact, we have heard from members around the country who have seen five- and six-figure increases in their annual insurance premiums. 

For example, a dive shop/boat owner in South Florida reported that their long-time insurer will no longer provide coverage, and the owner has received denials from four other insurance companies. They do not know if they will be able to operate once the existing liability policy expires. We have heard from others in the same situation who may be forced out of business, or to consider running without liability insurance because they cannot afford or find an insurer willing to cover them. This puts their entire business and their employees at significant risk, and it certainly does nothing to protect passengers.

DEMA has supported Congressional efforts to improve safety for recreational boating. Through the efforts of associations like DEMA, various boating, fishing, and other recreation trade organizations, as well as the U.S. Coast Guard, boating safety in the U.S. is better than it has ever been.

Please let me know if you would like any additional information and we would also be happy to assist by putting you in contact with local boat owners, as possible. Additional resources are also listed below.

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RESOURCES

www.DEMA.org

News articles about legislation as introduced: 

Bill would change maritime liability rules after boat fire

Following Conception disaster, Carbajal introduces bill to strengthen boat safety rules

Carbajal, Feinstein Introduce Bill to Reform Liability Rules for Maritime Accident Compensation

Legal article regarding the impact of the new law: 

You're Gonna Need a Bigger Boat: Congress Amends the Limitation of Liability Act to Remove Small Passenger Vessels from Its Protection

Final Law:  Section 11503 (pages 1,736-1,737)

DEMA, the Diving Equipment & Marketing Association, is an international, non-profit trade association with the mission of bringing businesses together to grow the diving industry worldwide. DEMA owns and produces DEMA Show, an annual trade-only event for businesses in the scuba diving, action watersports, and adventure/dive travel industries. Funds raised through membership revenue, DEMA Show, and sponsorships support programs that directly benefit the recreational diving industry. DEMA Show 2023 will take place November 19-22 at the Las Vegas Convention Center in Las Vegas, NV. For more information on DEMA and affiliated programs, visit DEMA.org or contact (858) 616-6408. Stay updated by following “DEMAOrg” on Facebook, Twitter, LinkedIn, Instagram, and YouTube.