Cruise port operators at risk from insurance pitfalls

Cruising on the Great Lakes is soaring in popularity with predictions of a record-breaking 2025 season, almost 10 percent up on last year.

More than 22,000 passengers from around the world are expected to cruise the Great Lakes with ships making more than 700 calls at ports as diverse as Chicago, Niagara Falls, Montreal, Milwaukee, Detroit, Mackinac Island and Muskegon, which in turn will generate more than 150,000 cruise passenger visits.

But the cruising boom brings added risk from greatly increased operations and the thousands of passengers disembarking for visits.

The scale and complexity of cruise port operations expose operators on the Great Lakes to significant financial and legal risks. From pollution and injuries to passengers and employees to operational disruptions and damage to property and equipment, these threats can lead to heavy financial losses and even put the future viability of a port at risk if adequate insurance is not in place.

Yet we often see cruise port operators unwilling to spend the necessary time to secure the right amount of insurance coverage.

While it is time-consuming to complete a comprehensive and accurate assessment of the value of your business, it is worth putting in the work because too many cruise port operators are under-insured simply because they refuse to devote the necessary time to it.

We also find some cruise port operators either neglecting - or refusing - to devote the necessary resources to put in place the internal processes essential to ensure claims can be made and followed through.

At risk is the crucial financial protection, business continuity guarantees, and ability to meet the requirements of stakeholders including employees, cruise lines and regulatory bodies that carefully tailored insurance policies can provide.

There are several important steps we recommend to secure the right coverage at the right price:

• Check your policies carefully. Exclusions and sub-limits matter.
• Manipulating and underinsuring business interruption coverage is often how costs are lowered. But you are left exposed.
• Ask 1) Is revenue accurately calculated 2) Have you completed a Business Interruption worksheet 3) Is port blockage covered 4) How long is your indemnity period as cruise ports often fail to cover full recovery cycles.
• Ensure your broker is shopping your policies every 2-4 years as competition provides leverage to improve and add coverages, lower premiums, manipulate deductibles, improve sub-limits.
• Establish an annual strategy meeting with your broker. Make sure they are working with you – and fighting for you.
• Invite insurance carriers, underwriters, and brokers to visit because they need to understand your business. A broker with cruise and maritime experience can tailor coverage appropriately.
• Insist on proper insurance from tenants and vendors with clear and unambiguous language. Never assume you are covered and always check if you are named as additional insured.
• Equally, there are a number of important and serious pitfalls to avoid:
• Do not wait until you have a claim to understand how your policy will cover it. You need to know where you are vulnerable and whether your broker is identifying coverage gaps. Conduct and regularly reassess comprehensive risk assessments.
• Do not wait until you have a claim to put internal processes in place. Create proper incident reports so that you reduce the risk of the same claim happening again.
• Do not delay reporting an incident as it can lead to claim denials. Put your carrier on notice if you are not sure if the incident will result in a claim.

Cruise port operations have additional specific risks given the large numbers of passengers and crew and the risk of personal injury legal claims from slip-and-fall accidents and port facility hazards. The ever-increasing size of cruise ships and the number of calls can lead to safety hazards in maneuvering and berthing and put strain on the port infrastructure creating expensive delays and inefficiencies.

It can also be easy to overlook some areas where insurance coverage is increasingly important, such as environmental damage from accidental leaks and spills and the unprecedented rise in sophisticated cyberattacks and ransomware incidents.

In response to the surging threat from cyberattacks, the insurance marketplace is changing its response with increased premiums and reduced coverage. We, therefore, recommend seeking out policies tailored for cruise port operators that cover a wide range of cyber risks.

It is important to select policy limits that best suit your risk profile with adequate cover for potential losses, including costs associated with breach response, recovery, operational downtime, third-party data exposure, incident response costs, and legal expenses.

Ultimately, Great Lakes cruise port operators will benefit from working with a skilled broker to help find the right insurance cover at the right price that safeguards their investments, ensures smooth operations, mitigates financial losses, and protects against environmental clean-up costs, and third-party liability claims.