Your Dive Boat Sinks Before You Get There

In the early morning of May 31, the Majestic Explorer ran aground and sank near the northern coast of Santiago Island in the Galapagos. The Ecuadorian Coast Guard safely rescued the 26 divers and crew, but divers booked for future trips aboard the Majestic Explorer had nowhere to go. Explorer Ventures, which owned the boat, scrambled to book them on other liveaboards, offered them land-based alternatives, or refunded the cost of their liveaboard trip.

However, their refund did not cover already booked airline flights and hotels. That is where travel insurance comes in. For Undercurrent subscriber Neil Sheridan (Dallas, TX) -- not his real name -- it did not, though he bears responsibility, and his plight shows that dive travel insurance has lots of exclusions -- and subsequently lots of confusion.

A Diver's Tale about DAN Travel Insurance

Sheridan wrote us, "Having purchased Diver Alert Network's top-of-the-line Elite policy, I was comforted that I would be reimbursed and covered for this catastrophic event. You can imagine my surprise when I was informed that the incident was in fact not covered under the terms of the policy, leaving me approximately $3,000 out of pocket. I was told by the representative that she's unaware of any policy covering boat sinking."

Sheridan had paid $1,800 for the Elite policy to cover both him and his wife, but was denied reimbursement for his claim of $1,100 in lost airfare and hotel costs (Explorer Adventures reimbursed him for the liveaboard trip), but AIG did not explain the specific reason, citing Section II: Benefits" and "Section IV: Exclusion and Limitations. The closest AIG got to explaining was by stating, "It has been verified your trip was canceled due to the dive ship you were scheduled to sail on being damaged beyond repair. Based on the documentation included in your claim file, we have determined that the expenses being claimed are not covered under the terms of your policy."

On its website, DAN states that its Elite plan covers 100 percent of trip cancellation costs, up to $100,000, and 75 percent of costs under the optional "Trip Cancellation for Any Reason" coverage. It's a policy that DAN markets under its name, but it is, in fact, a policy offered by AIG Travel Guard, which also manages the claims.

In pursuing his claim, Sheridan spoke with an AIG representative who told him he might have been covered had he purchased additional coverage specifically for mechanical or equipment failure of a common carrier. To buy the cancel-for-any reason policy would have cost him an additional 50 percent, so he skipped it, figuring he'd be safe with DAN's Elite policy, but the devil's details lie in the small print.

A Policy Purchased After the Sinking

So we called Rochelle Deal, DAN's vice-president of marketing, to learn more. Imagine our surprise when she told us that Sheridan had purchased the DAN policy on June 4, four days after the Majestic Explorer had sunk.

We contacted Sheridan again, who told us he had booked the trip through a travel agent, and told us "while agents were notified, and those who booked directly may have been informed, I was not. Hence, it was not until the day after I purchased the policy that I was aware of any sinking. Ironically, it was through a June article in Undercurrent, after which I made my own inquiries and discovered the situation."

With the policy purchased after the sinking, we figured that was the end of the story; however, we learned that had Sheridan purchased the policy before the sinking, his claim against the DAN policy still would have been refused. On the "Exclusions and Limitations" list, the closest reasons stated, "Benefits will not be provided for any loss resulting (in whole or in part) from: (a) travel arrangements canceled by a tour operator, except as provided elsewhere in the plan; and (g) failure of any tour operator to provide the bargained-for travel arrangements or to refund money due the insured."

Since the "grounding" was due to crew error, the liability rested with the boat or trip operator, which, Deal told us, is required to provide compensation. "Travel insurance does not typically cover mechanical breakdowns and/or equipment failures. This responsibility usually lies with the operator, and it is up to them to offer refunds to travelers in the event their boats are unfit to sail and/or support proper diving operations.

DAN Sells the Policy of Insurer AIG

As divers, we find it odd that a DAN Policy would not cover a boat sinking or a resort burning, but's it's not a DAN policy: it's an AIG policy, sold under the DAN name. And, that's the insurance business for you.

That sort of exclusion is the industry standard, says Steven Benna, content director at Squaremouth, a website that compares and sells big company policies online. Trip cancellation reimburses people who can't take the trip due to reasons like illness, injury, or death. Inclement weather is also a reason, if it affects the "common carrier," i.e., the plane you're flying to the destination.

"However, if you can get to your destination safely and don't have a covered reason to cancel, or something impacts your plans while you're there, the insurance company considers that a 'loss of enjoyment,' and that's not covered," says Benna. "If the destination has weather issues and the boat is re-routed, trip cancellation isn't covered. If the boat sinks while you're there -- that's not covered either, because it's a loss of enjoyment." It's assumed you can find something else to do to pass the time before you fly home.

Benna says coverage chances are better if the inclement weather makes your destination uninhabitable, and evacuation is required. "The boat itself being damaged wouldn't be covered, but if you can't fly there because of a hurricane warning or an evacuation, your policy may cover you depending on its weather stipulations."

If you can arrive at your destination, but your boat sinks, your insurer assumes the boat operator will offer you a refund or trip voucher, and there's your reimbursement. If he doesn't, you're still not covered.

"Cancel for any reason" is an option for canceling a trip before you depart and getting reimbursed, but that cost might go as high as 20 percent of the trip cost, depending on your age. And there are other downsides, Benna says. "It's a time-sensitive benefit. Depending on the policy, it's only available 14 to 21 days after you make the initial trip payment. Say you book a flight to the dive site -- that flight purchase counts as the initial deposit date -- you only have 14 to 21 days after that date to cancel. So it is something you have to act on relatively early."

You also have to insure 100 percent of your prepaid, nonrefundable trip costs, like airfare, hotel, tour excursions, and liveaboard costs. "And you would need to cancel your entire trip at least two days before the departure date," says Benna. "If it were to happen the day before the departure date, that would, unfortunately, be too late for the 'cancel for any reason' coverage. So because of those stipulations and costly premium, we only recommend it if you have a big concern about something not covered in the policy."

Dive Assure Has a Costly Answer

Roy Pargament, vice-president of dive trip insurer Dive Assure, agrees that it's not common for travel insurers to cover sinking boats. That's why his firm launched a "Liveaboard Rider" four years ago. "We examined liveaboard-unique trip issues that weren't covered, and created this rider to allow people to be fully covered by tacking this on to their dive travel policy."

When adding the rider to their Deluxe or Elite policy -- which costs an additional 20 percent of the premium -- you're covered for trip cancellations due to sinking liveaboards and also for a missed connection or airline delays causing you to miss the liveaboard and pay extra to join it. "Trip insurance may only cover you for $1,500 of flight costs, while the liveaboard may have cost you north of $10,000," says Pargament.

The rider also has coverage for lost diving days, so if a couple of days of rough weather prevent diving, Dive Assure offers some compensation. The same goes for medical issues (the boat aborts the trip to return you or another diver to shore), and mechanical breakdowns of the boat's engine or compressor.

Pargament says Dive Assure also may provide some recompense if the boat's compensation offerings don't work for you. "If the operator offers a voucher for another trip, and you use it, there's no coverage. But we take into consideration that people can't always change their travel destination or dates. So, say the operator offers a voucher valid for just one year to another destination and you can't use it, then we would pay co-insurance or a deductible of 20 percent of the cost."

Forget 100 percent Insurance Coverage

Liveaboards don't sink every day, but it's not uncommon. The tragedy aboard the Conception may make travel insurance firms look more closely at liveaboard boat-specific incidents. Rochelle Deal at DAN says the Conception incident has the company reviewing its dive travel policies.

In the meantime, keep in mind there is no such thing as 100 percent insurance coverage. Many of us overlook the fine print and take it for granted, leading to a costly disappointment in the end.

The best thing to do is know all the details, definitions, and exclusions before you buy, says Pergament. "Call the insurance company beforehand for assistance, give them your dive trip information, and ask about all the potential scenarios, so that you know what you're covered for and how much it'll cost you for the things that aren't covered.

And, as Sheridan's tale shows, before you click on "Purchase" to buy trip insurance, contact the travel operator one last time to confirm your boat is still floating and everything is good to go, so that you do get some kind of coverage in case something bad happens later.

-- Vanessa Richardson