Does insurance really not pay up?

[sailingharry]

So, a few threads recently (most recently, the discussion about anchor balls) coupled with other threads over and over, and some discussions about LFP, and well, I have to ask.


There is a strong sentiment you hear a lot about insurance not paying "if this." This can be many things. Replacing your incandescent running light blubs with LED. Using running lights rated for <12M when your boat is >12M (most aren't rated >12M). Failure to fly the anchor ball. Failure to keep a proper watch (this makes any single hander guaranteed out of compliance, and almost every double hander, and probably anyone driving in an enclosed pilothouse). Using welding cable (I am pretty sure there is still some OEM welding cable on my boat). Installing drop-in LFP (I don't have LFP yet, but an insurance broker told me at the boat show that a drop in LFP can cause insurance to deny a claim for running into a bridge). Rigging 10 years and one day old. An out of date fire extinguisher. Etc, etc, etc.


Me, I've just settled a claim for $30K (20% of boat value!), for failure to properly line up my fuel valves (causing my boat to lose propulsion outside of Montreal in 6tks of current, crash into a concrete wall, and destroy my arch and a bit of other stuff). I clearly and honestly stated the cirucmstances of the incident, and they didn't even send an adjuster to look at it -- they simply paid it. What happens at renewal is still open.....


It seems to me that ALL liability claims, and a substantial number of property claims, are a direct result of owner culpability. If you hadn't done THIS specific bit of illegal or immoral action (or inaction), the accident wouldn't have happened. In liability, if you aren't "guilty" you aren't liable!


So, after all that. Do folks here have examples of accidents caused by some negligence of the owner that resulted in denial of claim? I'm not talking about disagreements on coverage (a friend had issues, but won, where the insurance claimed the water intrusion occurred over a period of time and therefore wasn't "sudden.").


In cars, or houses, it's almost a given that the insurance pays when you screw up. Run a red light, kill someone, insurance pays. Drive on bald tires, slide off the road, insurance fixes your car. Read a text, hit a telephone pole, insurance pays. Leave your gate open, kid drowns in your pool, ditto. Don't shovel the snow, granny breaks her hip, covered. Even DUI has you covered (but maybe never again!).

[SailingHarmonie]

Marine insurance in the USA (and the UK, I believe, but not sure) are covered by a completely different set of rules than ANY other insurance. Many of the rules are part of "common law" that is not actually written down as such, but is formed by centuries of court cases. Since marine insurance is the oldest kind of insurance, many of the common law rules are a bit archaic.

One of the things that is the "gotcha" is the "warranty of seaworthiness." In other words the entire policy is based on the warranty by the boat owner that the boat will be kept is "seaworthy" condition. If that warranty is violated, the entire policy is null and void. This is part of your policy ANY TIME other law is not applicable. It does not have to be written into the policy, it is just part of the common law that the courts use to evaluated disputed claims. There was ONE policy that I was aware of that specifically DISCLAIMED that as a condition, but they don't write policies any more.

Some states DO regulate marine insurance and disallow denial of claims based on unrelated faults, but that is the exception. The law here is complex and convoluted, with different rules in different states, and Federal rules, and common law, all smashed together. the link above gives you a clue...

This is the rule that allows an insurance company to deny a claim for grounding damage because the fire suppression system was not serviced in a timely manner (actual current case).

You are extending this incorrectly, claims are not denied because you made a mistake driving the boat. If you crash your boat into shore (or another boat), your insurance will (or should) pay. UNLESS they can show that the boat was not in seaworthy condition, in which case they will retroactively cancel your hull insurance policy and return your premiums. I am not sure how this applies to liability insurance--if at all. Maybe an admiralty lawyer can chime in...

The kinds of auto insurance payouts you describe are a quite modern thing, with the advent of "no-fault" insurance rules in the 70's. Before that any accident would require a finding a which driver was at fault, to figure out which insurance company would pay. That only is economically feasible if you require everybody to have insurance.

[Chotu]

I hear the exact opposite on the forum. every story I have read on here it goes just like yours. people who talk about having insurance claims on here typically say they got paid out and it was easy and it was no problem.

people who haven’t had insurance claims say the other stuff.

[wholybee]

My only experience with an almost claim. I had some rigging damage the rigger suggested would be covered by insurance. This was leading up to my participating in the Pacific Cup, and subsequently my circumnavigation. I opened the claim. Before the claim was settled, I was told that I could not obtain insurance for the Pacific Cup. I was uninsurable by any company I called for 3 years. I had to cancel the original claim before they paid out first.
Even 4 years later, when I returned from my circumnavigation, I was questioned about it and had to provide a letter stating that the claim was never paid out before I could get a new policy.

So, at least from my experience, insurance is a scam that you can't ever use, unless you intend to not own a boat afterwards, or are prepared to be uninsured. Unless the boat sinks, whether or not they pay out seems a non issue.

[floater88]

Insurance, Politics and Religion. Three of the biggest scams forced on the world. Something my old man used to say. Always made me laugh

[Shanachie]

It really depends on the company.


I had a sailboat wrecked in Hurricane Wilma in 2005. Progressive paid out and salvaged the wreck with no problem.


My current Allstate policy, which I probably am dropping when it runs out, deducts salvage from the overall settlement of hull value. Found that in the fine print. Not cool.


Geico, I believe, has a depreciation clause. After a set number of years, items such as the mast have no value. Big damage can equal no settlement. These are the folks who do BoatUS now.


I dropped Geico after a beef over a minor claim. My boat was being kept at a friend's dock when a tropical storm hit. The boat pulled out two pilings that were not covered by insurance.


The boat obviously caused the damage. There was no fault from me. It should have been covered by my liability insurance, but they decided to be a pain over the $2,500 claim.


So now Geico sends me emails trying to get me back. It cost them many thousands in premiums to be difficult over a small claim, the only one I ever made with them over many years.


I believe there are some overseas companies that provide cheap insurance so people can get into marinas with the tacit understanding that you will never collect on a claim.


These companies have been discussed previously on CF.

[sailingharry]

Harmonie,


I get the gist of your comments, and we hear it often. But the question is how does that play out in real life. You did mention a specific case (the damage from a grounding being denied due to expired fire extinguisers). Here's the problem. Even if it is technically possible to deny ANY claim based on an battery fuse being more than 7" from the battery, the routine application of this approach (any claim over $x or x% of hull value gets a survey to find any non-ABYC or non-legal equipment and the claim is denied) would rapidly render insurance pointless (I'd wager that well over 90% of boats over 12M do not have a legal fog horn -- the standard is hard to meet).


Do you have any more details on that case? US pleasure boats do not have a requirement for any servicing, or date-specific rules (until the recent change that gives fire extinguishers a finite -- 8 year?? -- life span).

Originally Posted by SailingHarmonie

Marine insurance in the USA (and the UK, I believe, but not sure) are covered by a completely different set of rules than ANY other insurance. Many of the rules are part of "common law" that is not actually written down as such, but is formed by centuries of court cases. Since marine insurance is the oldest kind of insurance, many of the common law rules are a bit archaic.

One of the things that is the "gotcha" is the "warranty of seaworthiness." In other words the entire policy is based on the warranty by the boat owner that the boat will be kept is "seaworthy" condition. If that warranty is violated, the entire policy is null and void. This is part of your policy ANY TIME other law is not applicable. It does not have to be written into the policy, it is just part of the common law that the courts use to evaluated disputed claims. There was ONE policy that I was aware of that specifically DISCLAIMED that as a condition, but they don't write policies any more.

Some states DO regulate marine insurance and disallow denial of claims based on unrelated faults, but that is the exception. The law here is complex and convoluted, with different rules in different states, and Federal rules, and common law, all smashed together. the link above gives you a clue...

This is the rule that allows an insurance company to deny a claim for grounding damage because the fire suppression system was not serviced in a timely manner (actual current case).

You are extending this incorrectly, claims are not denied because you made a mistake driving the boat. If you crash your boat into shore (or another boat), your insurance will (or should) pay. UNLESS they can show that the boat was not in seaworthy condition, in which case they will retroactively cancel your hull insurance policy and return your premiums. I am not sure how this applies to liability insurance--if at all. Maybe an admiralty lawyer can chime in...

The kinds of auto insurance payouts you describe are a quite modern thing, with the advent of "no-fault" insurance rules in the 70's. Before that any accident would require a finding a which driver was at fault, to figure out which insurance company would pay. That only is economically feasible if you require everybody to have insurance.

[sailingharry]

Originally Posted by Shanachie

Geico, I believe, has a depreciation clause. After a set number of years, items such as the mast have no value. Big damage can equal no settlement. These are the folks who do BoatUS now.

First, I agree with your concern about depreciation. Loss of a 30 year old mast can approach totaling the boat! But a 30 year old mast has 30 years left in it -- it does not "in fact" depreciate.


But as a humorous incident, my accident badly shredded my tired old bimini. Because we had 3 months and 3,000 miles to go that summer, I had it repaired in Quebec City, for about $700, and submitted the bill. BoatUS (Geico) paid the entire labor bill. Unfortunately, the sailmaker also billed me about $40 in materials (a strip of Sunbrella) which was depreciated 80% -- or $32! LOL.

Originally Posted by Shanachie

I dropped Geico after a beef over a minor claim. My boat was being kept at a friend's dock when a tropical storm hit. The boat pulled out two pilings that were not covered by insurance.


The boat obviously caused the damage. There was no fault from me. It should have been covered by my liability insurance, but they decided to be a pain over the $2,500 claim.

I believe the issue here is that you/the boat were NOT "at fault." Your boat pulled the piling out, for sure -- but it was an "act of God." A friend of mine had his boat (C&C 38) in a marina. A very nasty storm came through, a lot of boats broke loose. His boat somehow (no idea how!) broke all lines but one, and turned around and was hanging out in the fairway. On the way, it damaged the boat beside him. His insurance said "you aren't at fault, he'll have to talk to his insurance." I think the same thing applies if a boat drags down on yours. Or if your tree falls on your neighbor's house.

[dannc]

Originally Posted by Shanachie

It really depends on the company.

...

Yep. Once upon a time I had Nationwide coverage of my car, which was stolen, and all but destroyed. Nationwide's slogan at the time was Nationwide is on your slide. That was a lie. They were up my back side though. They did not follow the policy and paid out pennies on the dollar. It was not just me either, they were doing this to other people as well.

Unfortunately, I have had other claims with other insurance companies and I can't say one bad thing about how those companies handled the claims. They were more than fair and responsive. They performed as expected and were simply excellent. Night a day difference compared to Nationwide.

The cost o the premiums and what is covered is very important but one really has to investigate if the company will pay the claim as expected.

[sailingharry]

Originally Posted by dannc

one really has to investigate if the company will pay the claim as expected.

So, to this point. My $30K claim for damage directly attributable to user error, on a boat with multiple non compliant systems (I'm about 95% sure my factory original masthead light -- universally but incorrectly called a steaming light -- is not legal for vessels over 12M. Upgrading is on my list, but way down) was paid out in under 2 weeks from date of filing a complete claim by.... drum roll.... BoatUS/Geico.


So there is one insurer that seems to pay when a plain language reading of the policy would imply that payment is due.


Note, my BoatUS/Geico policy also does not have the words Lithium or ABYC anywhere in it, making it at least seem to cover LFP batteries.

[Shanachie]

Originally Posted by sailingharry

I believe the issue here is that you/the boat were NOT "at fault." Your boat pulled the piling out, for sure -- but it was an "act of God."

That application of "act of god" is nothing but insurance company B.S.


The fact is that the pilings would not have been pulled out except that my sailboat was battered by large waves for 10 hours. That makes it the fault of me and my sailboat.


It reinforces my belief that you only insure for losses that you can not afford to cover out of pocket. The largest possible deductible and large maximum coverage.



Insurance companies are the only businesses that collect money without providing you with a valued good or service. It's extremely profitable as long as you have ways to avoid paying claims.


Geico is a great investment through Warren Buffett's Berkshire Hathaway, but a bad place to buy insurance. The reason is that if Berkshire is making a lot of money, customers are not being paid their claims.

[goeasy123]

Originally Posted by floater88

Insurance, Politics and Religion. Three of the biggest scams forced on the world. Something my old man used to say. Always made me laugh

I'm with you floater88. Although your comment might be tongue-in-cheek. The logical answer to 'Does insurance really not pay out?' is bound to be "yes". Otherwise the insurance business would not be viable. Collectively all pay outs must be less that all paid premiums. This means there is a very high probability that an individual insured looses over their total insured period. Pleasure marine asset insurance is particularly poor value for money with returns being 106% of value.


On the otherhand marine liability insurance is good value for money as there is no industry network complicit in inflating the costs of providing cover.

[mvweebles]

I always love insurance threads. So many chest-thumpers about how insurance companies avoid paying legitimate claims. No facts, no direct and credible experience, just a lot of hot air pontificating about how an insurance company can't make money unless they deny legitimate claims. As if they could stay in business for long with that type of reputation.

Insurance companies have legions id actuarials to evaluate and manage risk. They don't need to deny legitimate claims because the risk is baked into their premiums. If you believe you've been low-balled, there is a process to appeal.

My guess is the scorned-lover complaints about insurance companies are from people who either don't know diddly, or they didn't read their policy until they needed it and then found out their issue was excluded from the start.

[skipperpete]

Insurance companies have a variety of perfectly legitimate ways to dismiss a claim, here in Australia the “seaworthiness “ requirement covers a lot of territory from the 10 year rigging replacement( don’t forget the rigging screws) to the gas installation certificate. Alcohol or drugs is another, I was in the whitsunday fun race some years ago when one of the competitors hit the yard of the start line vessel.... the Golden Plover.... and took the top off his mast at the lower spreaders, not only was he arrested after a high blood alcohol test at the scene and taken to the police station but his insurance claim was later enthusiastically rejected. Using a private vessel ( un surveyed) for charter will give the insurer reason to deny a claim if an accident occurs and they suspect commercial use. Multiple insurance policies, while not illegal , means only one insurer pays out ....and that discussion between the underwriters could go on for years before settlement. I worked as an engineer for a salvage company and the first part of any salvage was forensic, occasionally we had an appointed surveyor on board with a list of things to be established before any attempted recovery or refloat got underway then a more thorough inspection after the vessel was refloated.... mostly commercial vessels , trawlers were frequent jobs but also passenger vessels and a few private yachts.

[thinwater]

I had storm damamge once while in the hard. No problem.


Related to seaworthiness is damamge caused by wear and tear. In a way, this also extends to houses, though not as obvious. The most common example is a boat that sinks at the dock because something (seal, valve, bellows, hose ...) let go, the sump pump failed or was too small, and it sank. Think how impossible it would be to insure old boats. It does not have to be a complete sinking, just water damage.



In the case of a home, you are probably covered for storm damamge, but if you have water damamge because the roof just got old and leaked, or because the basement walls have cracks and the sump pump is poor, no coverage.


Obviously, an engine that seizes up is not covered, except warranty. A mast that falls over in plain sailing conditions because the stays are 40 years old may no be covered, or the damamge it does to the boat.


If your car gets a flat it does not sink. If your water heater leaks it normally just goes down the drain. If a pipe leaks on a boat it will likely sink. So yes, it is common for people to be disappointed in their insurance. If sinking at the dock makes you nervous, either do careful maintenance or take up golf. Many people pull their boats in the off season specifically so that they don't have to worry about this.



Me, I have a trimaran with a very limited electrical system. and interior. The slip is also very shallow. And I have no through hulls.