Constructive Total Loss?
The adjuster from my insurer called the other day. My boat was damaged during Irene. The total estimate to repair the boat is $22k. The main damage was a 3' section of my aluminum toe rail - it is bent and scarred.
The estimate to replace the rail on both sides is $16k ($3k materials, $13k labor). (We have been able to find a rail that matches - looked everywhere. I have a separate post on how to fix the rail).
I had the boat insured for $30k. Because the $22k represents more than 70% of the insured value, the insurer is considering declaring the boat a "constructive total loss." They would write me a check for the $30k and sell the boat at salvage. I would have a right of first refusal to buy at what the appraiser estimates at $3k.
With the exception of the damaged rail (which professionals I have spoken to consider cosmetic), the boat is in great shape.
I am not sure what to make of this situation, and would appreciate any advice.
I have read that it might be difficult to obtain insurance for a "salvage" boat. I wonder if an insurer would write the coverage, with an understanding that the rail is already damaged?
A different way to look at it would be to consider whether you could make your 3k back if it is a total loss.
If the boat is in great shape, and I wanted it, I'd talk to the insurer and see about skipping the whole scrap aspect and get it repaired.
Toe rails very seldom have to be a match for factory items, any suitable material that catches your fancy can be used.
I've never personally had trouble getting insurance with a salvage title, most often if it surveys good, they're happy.
something is not right,
if the toe rail damage is cosmetic...how can the labor be $13K to repair or replace aluminum? The adjuster is seeing something that the "pros" are not. Insurance companies are not in the business of writing checks, so I suspect there is more damage than the cosmetics you assume.
In my experience, whether boats/cars/motorcycles, it nigh impossible to get decent coverage on a "CTL" boat once repaired. They are ONLY going to pay ONCE for that boat, end of story. And they just did.
Unless you are going to do the repairs yourself, and have the tools/place/skills...I would take the check and move along to another boat.
You know the old expression, "Never look a gift horse in the mouth"? It might be time to apply said principle. Seriously, if the insurance company is willing to write the boat off, then it's time for you to decide would the boat sell for $30,000 (before the toe rail damage)? If not, take the money and run, to borrow old song lyrics. As you probably already know, this is a tough market as it applies to boat resale, especially with winter barrelling down. If you've ever considered "moving up" in boats, now's your chance.
You can buy a lot of boat for 30k, at least a lot of areas.
However, if you feel like the boat is worth a lot more than 30k, then take the check, buy it back for 3k and "self insure" going forward. There's really no logic in reinsuring it anyway as you will have already been paid out once on the boat. You'd have to verify with your insurance agent, but most companies won't reinsure the boat as salvage, and if you find one that does, obviously they won't insure for anywhere near that amount. The "salvage" moniker that get's added to the title greatly affects its value, even though you know it's really only minor damage. Banks, for instance, rarely would consider making a loan with that title.
I saw the picture of your toe rail in your other thread. It did not look that bad to me but maybe the picture does not show the damage very well. The rail looks a little bent, not broken just a bit bent out of shape in that one 3' section.
I've been through the CTL thing with our boat that suffered much worse damage. We bought our boat back from the Ins. co. and replaced our roller furler, genoa and bow pulpit with the insurance money left over. We were NOT able to get insurance coverage the next year because of the claim which was a hassle. Most marine insurance policies have (or had) a question right at the top that asked: "Have you suffered a CTL in the last 3 years?". If you answer 'yes' it is a red-flag and you will likely be denied coverage.
You have a few choices:
1- Do not file a claim, live with a bent toe rail and continue to be eligible for insurance coverage.
2- File a claim and
2A- pay $3K to buy the boat back and receive a check for $27K to fix the toe rail and have money left over for all new sails and whatnot. Do not expect finding marine insurance coverage for 3 years.
2B- let the Ins. co. salvage the boat and receive a check for $30K and buy a new(er) boat. Do not expect finding marine insurance coverage for 3 years.
If it were mine and I liked the boat I'd think about option #1 and just try to straighten out the damage.
They want to replace the whole toe rail on both sides for a 3ft bent section? No way I would do that. Take the $30k, get a savvy shipwright to give you a hand and repair it. We sectioned ours and repainted it black and it looks better than new (what with all the snatch block scratches and the like).
The ins. company cancelled us and we rang up BoatUSA and had a conversation which resulted a cheaper premium with more coverage and a lot more confidence in them than the Insurance company that used to be associated with a major department store chain. Guess I would call BoatUSA and solicit their opinion on this situation. They claim to give unbiased advice.
Remember it's our premiums (yours and mine) that is paying for this nonsense.
Not all bad though, if the boat is worth nothing then there is no need to pay replacement cost insurance moving forward, liability yes, but not replacement cost.
I don't know how marine insurers will treat this, but give you this as a place to start looking for information. Boats 9with engines) and cars are both often treated as "motor vehicles" under state laws. Each state obviously varies.
In some states, when the insurer "totals" a vehicle they are supposed to take your title (have it endorsed over to them) and then issue a new "salvage title" when they sell it for junk. That costs money and takes time, so sometimes they simply ignore the title laws and say "We'll sell you back the vehicle for $$$" and the title changes never get posted or made. In this case buying "back" your vehicle can be simple and good.
But when things are done properly and a salvage title is issued, EACH STATE has their own requirements for how, or IF, a salvage title can be cleared and a plain new title reissued, if at all. In some states they require an inspection at a special location, and with cars they require them to be flatbedded in and out of the inspection point so the process becomes expensive simply in transport fees. Ignoring the inspection fees.
With a boat? You would need to check your own state laws, see if they treat boats as "motor vehicles" or as boats. Whoever registers and titlesboats in your state (DMV? DMR?) should have this process documented on their web site. DO NOT TAKE THE WORD OF SOMEONE ON THE PHONE, you want to ask them "OK, what is the statute, where can I see the actual written laws" because often a clerk answering the phone misses a few fine points.
"Cosmetic" totals (i.e. lots of paint and cabinets) may be treated differently from structural or safety condemnations too. So...those are the things you need to look at.
And yes, my car was once stolen and stripped and the insurer said "Needs too much stuff, we're gonna total it." They did, I bought it back, there were no structural or safety issues and the title stayed with me the whole time. No problems reinsuring it, they just wanted to see that it was all back together again.
Why worry about insurance at all? if you don't owe anything on it? You might need a liability policy if you are in a marina though?
But, like all insurance, you take a chance. Seems like it paid off this time.
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