Storm-Damaged Boats, Part 2: Untangling the Mess

What happens to storm-damaged boats? The initial answer depends on if you have your boat insured and the particulars of that policy. I’ll discuss what happens to storm-damaged boats down the line when they may be resold, but for now, let’s start by assuming your boat is storm-damaged and you have no coverage. Do you realize that you may be personally liable for salvaging your boat and paying associated costs and/or fines for fuel leaks and other hazards to the environment? Which is why, for those choosing insurance, you’ll want to pay particular attention to the “salvage” portion of the insurance contract.

storm-damaged boats
Over 100,000 boats were damaged across 19 states by Hurricane Sandy alone. Will you end up owning one? And how will you know?

I’ve been speaking with members of BoatUS’s Catastrophe Action Team, or CAT, to help me understand the intricate world of disaster recovery specific to boats. (See Storm-Damaged Boats, Part 1.) BoatUS insures over two million boats in the U.S. and since they mobilize for major storms they have a unique perspective. To quote CAT team member and BoatUS’s Director of Technical Services, Beth Leonard, “It is not for the faint of heart.”

They start by assembling a diverse group of subcontractors, from marine surveyors to transportation and logistics folks, as well as their own claims administrators, to dig through the piles of damage, literally and figuratively. At first they can’t tell an insured boat from any other and often they begin by providing a marina owner a salvage plan for all the boats that had been on their property. The CAT team is routinely on location for weeks on end, with no power in the community , surrounded by people dealing with catastrophic loss.

Once the boats are recovered from their far-flung storm-tossed destinations, they are identified, tagged, and examined for damage, and a report is written. Surprisingly, BoatUS was writing checks to some policy holders within a week of Sandy coming ashore in the mid-Atlantic states.

At this point, it should be pointed out that boat owners need to be able to prove ownership post-storm. Think about this for a minute:  All your paperwork proving ownership may be gone, as well as your home. In some cases boats are still missing — sunk or never located. In order for the insurance company to pay off a total loss, they will need to gain ownership of the boat and be able to transfer clear title. Being proactive and storing records and pictures safely, like in a safety deposit box, may save much trouble down the road.

Boats deemed a “total loss” may still be worth something; it’s just that the “agreed-on value” listed in the insurance policy is less than the estimate to repair the damage. For example your boat is worth $50,000, your insurance coverage has an agreed value of $25,000, and the damage is estimated at $35,000. The boat is totaled for insurance purposes, but, in this case, boat owners may buy back the boat  at a negotiated price (presumably less than $15,000  in this instance) and have it repaired themselves, or they are paid off completely and the boat is assigned to a “liquidator”.

Boat liquidators are something like a consignment shop. BoatUS gets a percentage of the money to defray their costs when the boat is finally sold or parted-out. The hard part for all concerned with storm-damaged boats is that there is no equivalent of a Carfax in the boating industry at this time, meaning that you don’t always know if you’re buying a boat that has been damaged. A case in point from Sandy: one of the boats was identified by a surveyor as having been previously damaged in Katrina. How it got to the mid-Atlantic coast from New Orleans is still a mystery. Read about how to avoid buying storm damaged boats.

Next blog I will talk about the national boat liquidators,  how to contact them and look at their inventory.  I’ll also discuss potential advantages to buying a storm-damaged boat.


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