Last month, my boat was struck by another boat while in the slip. The damage was substantial, and the repair estimate prepared by the boatyard came in at around $50,000. The adjuster for the other boat’s insurance company sent out an investigator, and they came back with a proposal to pay $11,000 for the repairs. They wanted to repair many of the items that the yard said needed to be replaced, and they listed depreciated values for some of the items, like the swim platform. This amounts to extremely small compensation that won’t come close to restoring the boat to its original condition. What are my rights against the insurance company? Am I entitled to compensation for my loss of use of the boat?
The first thing to understand when dealing with someone else’s insurance company is that it is someone else’s insurance company. You have certain rights with your own insurance company, based upon various provisions of state law and upon the language of your policy (which is basically your contract with them). Those rights do not, however, extend to your relationship with someone else’s insurance company.
We purchase insurance to protect us from unexpected peril. We do not buy it to protect someone else from unexpected peril, and the obligations of an insurance company in the event of a claim reflect this relationship.
In an accident such as our reader has described, the role of the other boat owner’s insurance company is basically to protect their client from a lawsuit. This is usually accomplished by working with the damaged or injured party to provide the minimum compensation that their client is likely to be responsible for. In other words, we need to evaluate the obligations of the other boat owner, not his insurance company.
With that in mind, let’s look at the rules for assessing property damage in a maritime incident. The goal in such a case is always to return the damaged party as nearly as possible to the position he or she was in immediately prior to the incident.
This sounds simple enough, but it is rarely a simple equation — and it often leads to disputes. The disputes are often over the question of “betterment,” which goes to one of our reader’s other points. He complains that his boat may not be returned to its “original” condition, but he is not entitled to a better boat than he had prior to the incident.
In our reader’s case, the insurance investigator disagreed with a lot of the yard’s recommendations. By itself, there is nothing surprising about this. The insurance company and the yard each have their own economic interests at stake, and the fact that one disagrees with the other says nothing about who may be right.
For example, the first issue raised by our reader is that the insurance company wants to pay for repairs to items that the yard would like to replace. The insurance company may feel that replacing the damaged components with new parts would actually put our reader in a better position. But the yard may believe that the damaged component cannot realistically be repaired.
Often, the only solution to these disputes is for the damaged party to hire a marine surveyor who is experienced in insurance claim investigation. In fact, in disputes such as this one, we usually recommend that the damaged party hire an experienced marine investigator before retaining an attorney.
The surveyor/investigator will act as an on-site expert on behalf of the boat owner, and if disputes arise that can’t be resolved through negotiations between the experts, an attorney would need to bring an expert witness into the case anyway.
Our reader had two other questions. The first involved the assignment of a “depreciated value” to the swim platform.
A damaged swim platform may be difficult or impossible to repair. As such, it may need to be replaced with a newly fabricated swim platform.
If the old structure was already worn and damaged, a new platform would improve our reader’s boat, which — as noted above — is not required. He may, therefore, be entitled only to a partial payment toward a brand-new swim platform. This may seem unfair, since he would be required to come out of pocket for some of the overall replacement cost, but he will end up with a better boat in the end.
Finally, our reader asks about compensation for his loss of use of the boat. Unfortunately, the U.S. Supreme Court has ruled that no compensation is owed for loss of use of a recreational vessel. Recreational vessels do not generate income for their owners, and since leisure time has no measurable value, a damaged party may not recover for the loss of use of a leisure asset.
I generally close these articles by noting that there is no substitute for expert maritime legal advice in these cases, and that a maritime attorney should be consulted to answer questions unique to each reader’s circumstance. However, as noted above, an experienced and qualified marine surveyor should be consulted at the beginning of any marine insurance dispute, and this consultation should typically take place before an attorney is retained.
Consultation with an attorney may, nonetheless, be helpful, since boat owners may not be acquainted with surveyors who are experienced marine accident investigators.