Insurance again...

[ancora]

Actual event: boat has an engine room fire. Owner wants to total the boat, insurance company says no, due to the boat bein' over-insured. Cheaper for them to fix the boat than total it. Questions: Did over-insurin' the boat come back to bite the owner in the butt or is it worth over-insurin' ? Can there be repercussions from the insurance company?

 

[Chrisjs]

Seems simple enough to me. Insurance company has the option to do whichever is least expensive for them. That is business the American way!!! Mind you, the owner has the right to ensure the boat is back in original condition before the fire. Perhaps somewhere in between there is room to negotiate for the cash in lieu of boat repair, then owner's option what to do with the boat.

 

[Pau Hana]

Need more info- details on how the vessel is overinsured. Is this an actual cash value policy or agreed value (which I doubt)? Who is the carrier?

Basic- if the policy is Agreed Value, then it's a simple calculation of loss amount vs insured amount. If the fire damage repair estimate is less than the agreed policy value, then the vessel gets repaired unless the insuring company decides to declare it a Total Constructive Loss- the details of how the insured's policy cover this is in the policy language.

 

[BandB]

There are generally points at which if the repairs exceed that percentage then insurers will total the boat. Certainly if there is an agreed value on the policy that is on the high side, this is easy to see happen. As to "overinsured," obviously the insurer didn't feel that way and while it might be more than paid, it might be worth that amount. Regardless, what chrisjs suggested is the other option.

i wouldn't say though it has bitten the owner if it gets repaired completely, he may well have a better boat than he had before the fire with a lot of new parts where he had old parts. What bit the owner was having the fire.

 

[GFC]

Seems to me if the insurance company settles on a cash payment in exchange for repairing the boat they would be able to take possession of the boat.

 

[psneeld]

Many owners have no clue what it takes to put a boat back together....or cars or houses for ghat matter.

While the owner wants a new boat.....why should he get one if it can be made as before? Whether it was over insured or not?

Is the guy a type who wants a new boat because a coke exploded in the freezer?

 

[BandB]

Seems to me if the insurance company settles on a cash payment in exchange for repairing the boat they would be able to take possession of the boat.

Not if a cash payment for the cost of repairs. Then the owner keeps the boat. If they total it, the insurer gets the boat.

 

[BruceK]

Seems to me if the insurance company settles on a cash payment in exchange for repairing the boat they would be able to take possession of the boat.

Perhaps you intended "in lieu of repairing", if the full value of insurance cover on a total loss basis is paid,insurer takes boat.

 

[Shrew]

This comes down to the difference between who is now responsible for disposing of the boat. The description from the PO is brief. It doesn't sound like the argument is the amount being offered but whether the boat is being totaled.

A totaled bought would transfer ownership to the insurance company, who would now be responsible for yard storage and disposal costs as well.

If the owner is happy with the amount the check is written for, then he should move it to lost cost, long term storage and offer the boat for sales 'as is'. Some will buy the boat at hull value. Then the owner can deposit both of the checks and buy what they want, or walk away.

 

[Chrisjs]

Seems to me that there are 2 different issues here. The insurance company will presumably pay to put the boat back in "as good" condition. The owner wants a new boat. Owner should get boat repaired per insurance company and sell the boat in the usual way. Owner's desire for new boat is not insurance company's problem. Otherwise we all end up paying even more for insurance!!!

 

[BandB]

The owner wants a new boat. Owner should get boat repaired per insurance company and sell the boat in the usual way. Owner's desire for new boat is not insurance company's problem.

That is likely what I would do in a similar situation. There is one catch and that is that the value of the boat in the market has been greatly reduced. Now, the owner is saying it wasn't ever what they claimed. Well, now it's a boat repaired after a fire. Although it might be better than it was before the fire, it's worth less.

One other thing from an insurer's standpoint. If the owner is pushing too hard for it to be totaled then I get a bit suspicious and do a little more investigation into the fire and it's cause. I've offered quickly to repair and restore the boat and the owner doesn't want that as the solution, then I wonder if he wanted not to have the boat before.

A lot of boats on the "for sale" market have fires or sink. A disproportionate percentage compared to the general population. If the losses are sizable they get investigated. Now, there's a logical reason for the losses, having nothing to do with anything untoward, and that is simply the owners are not as diligent about maintaining and taking care of and checking on a boat they intend to get rid of.

 

[ancora]

Insurance company takes boat to yard for repairs, returns boat to owner. Insurance company pays yard directly. In effect, the insurance company chose to pay almost what the boat was worth (Blue Book) sendin' a clear message to anyone contemplatin' insurance fraud. Does that sound right?

 

[ancora]

Correction: "Does that sound right?" should have been, "Have I got it right?" Got no dog in this hunt.

 

[BandB]

Insurance company takes boat to yard for repairs, returns boat to owner. Insurance company pays yard directly. In effect, the insurance company chose to pay almost what the boat was worth (Blue Book) sendin' a clear message to anyone contemplatin' insurance fraud. Does that sound right?

That may be a side benefit but not their primary reason. They're doing what is cheapest for them. In the case you set up, you said it was an agreed value policy for more than the boat was worth.

As to the insurer dealing directly with the yard, that's often to the owner's benefit as if the yard finds additional work to be done, the insurer then approves it. Also, insurer responsible for work being done properly as they're still responsible for returning boat to previous condition.

 

[Chrisjs]

I guess I do not see why the boat has been devalued if repaired properly, Plus how much was it worth in the first place??? Might end up looking better than before.

 

[BandB]

I guess I do not see why the boat has been devalued if repaired properly, Plus how much was it worth in the first place??? Might end up looking better than before.

When people know a boat has been severely damaged, they look for a bargain. I agree it might be better than before. I was discussing only in a sale. We have at least one forum member who got a great deal on a boat that had been in an accident. If the owner were to put it up for sale shortly after the repairs, people would just be leary of the boat.

Plus the OP says it wasn't worth as much as it was insured for.

 

[jskinner30PII]

Depending on the intensity of the fire I would think that the fiberglass integrity in and around the engine room would be compromised. I'd want to know how the insurance company would address this concern.

 

[Chrisjs]

If owner really wants to total the boat, he should accept the insurance company's valuation which presumably is more than they would intend to pay for the repairs. Over-insuring may help with getting the best realistic valuation, but beyond that it verges on insurance fraud. Lesson is: no point in over-insuring and paying excess premiums for something you will never get!!!

 

[BandB]

I've known of claims on autos where the insurer chose to repair rather than total based on the initial estimates plus time, as rental car figured into the cost. Then there was a huge delay in the work, adding an extra three weeks of rental car which was all at high rate as unplanned. So, the repair ended up costing more than the value of the car, but that just wasn't known going in. So, car was repaired and actually owner was very happy as the owner doesn't think they could have found the same car very easily.

We don't get to choose what we want or wish had happened. If I had a boat 70% destroyed, I'd sure wish it had been 100%. It's like auto theft. Car gets stolen and not found for 48 hours. Do you want it found now? I don't as by now it's either wrecked badly somewhere or work started in a chop shop. I have a friend who has his car found off the road and into a tree. So, first, car was held as part of the investigation, then he had to wait for repairs, then traded it in and got far less than it's pre-theft value.

One thing insurance seldom covers is loss of value.

 

[ancora]

Correct me if I'm wrong: "full disclosure" does not apply to boats.

 

[BandB]

Correct me if I'm wrong: "full disclosure" does not apply to boats.

Yes and no. There is no specific law as such. However, when asked, must answer honestly or run the risk of fraud. Generally a buyer is going to want to know the history of a boat and find it one way or another. Not many secrets around. Just asking for all maintenance records will tell them, if all are supplied.

Now, if a buyer finds out and it's not been previously disclosed, that buyer will definitely get more suspicious and likely run, wondering what else wasn't disclosed.

I love what real estate has done, at least in some places, with a form they require the seller to fill out and it has many pages covering every aspect of a house.

Full disclosure is also a moral element to many that they will do without any specific law.

 

[garrobito]

Very educative post, thanks you..
I'm one of that guys who pays insurance "just in case"... never, ever use it (until now) so find the "fine letter" is a good educational process..
Thanks you for sharing!!

 

[BruceK]

In Australia the Insurance Contracts Act raises a duty of disclosure. Some things only the "insured" can know. Classic example is proposing house insurance, forest fire at the back fence, wind towards the house. The insurer won`t know, the property owner does, the insurer needs to properly assess the risk.

 

[Robster_in_edmonds]

Most yacht policies are agreed value policies. If you bought a new boat 10-15 years ago for, say, $500,000 and have paid the premiums all along, an agreed value policy will pay out $500,000 for a total loss. That boat may well only be worth $220,000 today. So you have an engine room fire and it will cost $200,000 to repair the boat, but $500,000 if it is declared a total loss. The insurance company will choose to repair it. The math is easy.

 

[Simi 60]

I could only get market value on ours, market value being the price we paid. (Depressed market and desperate seller)
Sad part is it would cost 4x what I paid to replace her and no amount of arguing or providing comparable examples, not that there are any, would help.

 

[BruceK]

"Comparables" don`t have to be exact matches. Valuers can take something similar, and apply a percentage, + or -,to make it "comparable" to another boat. Yours might be rated as 20% better, 10% worse,etc, if you have 3 or 4 "comparables" you get a figure, even without an identical boat being sold. It works in real estate.
Several years ago, Club Marine said I could take my boat to one of their nominated valuers, and they would accept the valuation to change the sum insured. Can`t say if it still applies,or know your insurer`s identity.

 

[Insequent]

I doubt you will get replacement cost cover for a boat. Market value is OK if you know the real market value, and to get that you should use a valuer that the insurer has on their approved list. Once you have it you ought to be able to get an agreed value policy.

Simi, you ought to consider doing this. You might not like the valuation, it could well be less than you paid, but best to know that up front. Currently you are paying a premium calculated on what you paid for the boat. If the market value is less then you are over-paying your premium. You would be like the OP: have an over-insured boat.

Further, with a market value cover if there is a loss it will likely be paid out on the market value adjusted for its location at time of loss. If the loss is in a remote area you could end up with a total loss settlement that is much less than what you think it should be based on what you paid for the boat. There is no point in being over-insured - you are paying a higher premium than need be, and get no benefit at all.

 

[FoxtrotCharlie]

When I was in banking I financed many ships/boats in the oil patch in Louisiana - during a downturn in the industry there would always be many suspicious fires - I always referred to them as friction fires - ie when the mortgage rubs up against the insurance policy

 

[Simi 60]

Simi, you ought to consider doing this. You might not like the valuation, it could well be less than you paid, but best to know that up front. Currently you are paying a premium calculated on what you paid for the boat. If the market value is less then you are over-paying your premium. You would be like the OP: have an over-insured boat.
.

Before we bought her I had a well respected boat builder who specialises in trawlers and did his time at the yard where she was built go through her with me.

Rest assured, we did not pay to much and we are not OVER insured, far from it.
He was gobsmacked at how little we paid, we pretty much stole her.

 

[BruceK]

Before we bought her I had a well respected boat builder who specialises in trawlers and did his time at the yard where she was built go through her with me.

Rest assured, we did not pay to much and we are not OVER insured, far from it.
He was gobsmacked at how little we paid, we pretty much stole her.

In the case of a purchase way below market value, depending on the insurer, there must be a fair chance taking the valuation > a revised sum insured method of increasing the sum insured. Though, it is odd the seller took a low amount when market value was much higher.