The Takeaways:
- The deaths of five passengers in the tourist submersible searching for the Titanic teach us a lesson about how important it is to have liability insurance. Asking people to sign liability waiver may or may not work in terms of absolving the OceanGate Expedition in case it is proven this is a wrongful-death case.
- The makers of the submersible might also be liable if they caused any malfunction.
- Signing liability waiver is not a silver bullet, and liability waivers must be clearly worded and unambiguous in their intent to relieve any and all legal liability, even liability for negligence, which is unusual and unlikely to be a part of the insurance contract. If the waiver is buried inside other provisions and hard to find, it may not be enforceable. Finally, Waivers contrary to public policies are also not enforceable.
- We don’t know who the insurer is for the OceanGate but we can assume the company pays a high premium due to the nature of submersible business.
I don’t know about you, but I can’t stop thinking about the five passengers in the tourist submersible who have been declared dead by the Coast Guard today, as reported by USA Today. I know they did not want to die, as they had made an effort to make regular underwater noises on Tuesday and Wednesday, presumably trying to let the outside world know their dire situation. I can fully imagine how desperate they were in the last minutes of their lives, knowing they could not do anything to save themselves, even with all the financial resources they now left behind on the land.
The story is not over yet, as the vessel would have to be lifted out of the water and by then we will know more about what happened. But what can the insurance business learn from this catastrophic event?
What the AI Engine Has to Say
I asked the question to Perplexity.AI (Copilot 5) and here are what the AI engine has to say:
“From an insurance perspective, the missing tourist submarine searching for the Titanic teaches us that being adequately insured is the best way to prepare for unexpected losses. It is important for high-risk businesses to have liability insurance to cover any potential losses or damages. Liability waivers may not always absolve the company in a wrongful-death case, so it is important to have insurance coverage.”
” Most operators buy liability insurance anyway because the waiver forms they ask clients to sign may not ultimately be enforceable. It is important for high-risk businesses to have liability insurance to cover any potential losses or damage.”
” There is also a question of liability that goes back to not just OceanGate but the operator of the parent vessel, Polar Prince, as that vessel is Canadian flagged and based.”
In other words, liability insurance is needed for all three entities involved: The operator OceanGate, the manufacturer of the submersible, and the operator of the parent vessel.
The Insurability of Entities and Individuals
Just because entities need liability insurance does not necessarily mean they can get it. Even if they can find insurers to write policies for them, they (OceanGate and the manufacturer of submersible) may have paid high premiums because they are in a highly risky business and many insurers may not be willing to cover them.
The same is true for individual passengers on their personal lines of insurance: Many insurers may not be willing to cover them after finding out their plan to travel down to the ocean. This is insurers’ way of selecting good risks and avoiding bad ones. Even if they agree to offer a policy, they may specify riders or endorsements to ask for higher premiums to compensate for the extra risk they must take.
The Public Cost from the Catastrophe
The cost will be high, and not all costs will be covered by insurers. For one thing, the cost involving the Coast Guard can be millions of dollars but according to the USA Today report, Coast Guard won’t charge people for search and rescue. as fear of costs could deter people from seeking lifesaving help. This means taxpayers will have to pick up a part of the bill.
I wonder if the insurers knew this before they issued a policy to OceanGate, although it is highly likely for any insurers who did the due diligence before issuing a policy to know this. It may even be a part of the contract that any rescue effort by the Coast Guard is to be excluded from insurance coverage.
Lawsuits Possible
As with many insurance cases, there are likely lawsuit(s) following the deaths of people and after more is learned about what exactly happened under the water in the near future. It doesn’t help that the submersible had previous battery problems. People may argue that the company had a negligent problem, which may be enough to weaken the power of any liability waivers the firm asked passengers to sign. Nonetheless, the AI is right that the importance of liability insurance can’t be denied, even for some of the richest people in the world.
