Last month my boat was struck by another boat while at anchor at Catalina Island. The damage was substantial, and the repair estimate prepared by a local boat yard came in at around $50,000. The other boat’s insurance company sent someone to evaluate the damage 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 step. 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 cover expenses that their client is likely to be responsible for. This means that we need to evaluate the obligations of the other boat owner, not their 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 may occur when the injured party or their property end up in much better shape after the incident as a result of the repairs. Our reader actually raised this point when he complained that his boat may not be returned to its “original” condition. We may differ on the definition of “original” but he is not entitled to a better boat than he had prior to the incident.
In our reader’s case, the insurance representative disagreed with the yard’s recommendations. This is not unusual – the insurance company and the yard will each consider their own economic interests, 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.
The solution to these disputes is typically for the damaged party to hire his or her own marine surveyor who is experienced in insurance claim investigation. We actually recommend this approach, which will lead to the hiring of a marine surveyor by the boat owner before he or she retains 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, the boat owner will then need to hire an attorney, who 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 impractical 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 may be viewed as “betterment.” This would probably reduce the amount paid to the boat owner if he were making a claim under his own policy, because the contractual terms of a marine insurance policy typically require a depreciation factor to be applied to a claim such as this. But our reader in this case is not making a claim under his own insurance policy. He is making a claim against the other boat owner, and our reader is not bound to the terms of the other boat owner’s insurance policy. Under these circumstances he may be able to collect for a new swim step.
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.
As usual, the best advice I can give in a case like this is to contact an attorney experienced in representing boat owners in marine insurance claims.
David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, a former adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com, or via email at firstname.lastname@example.org.