If I charter my boat, and a renter sinks it, what happens?

[jsc7]

I am looking at getting a 33' pilot house and potentially putting it out to charter (bare boat).

If I charter my boat, and a renter sinks it, what happens?

If the answer to that is "my insurance willl pay me", my concern is (1) the insurance company will not reimburse me for the full value of the boat, and (2) if the renter takes no risk and knows that my insurance will pay for everything, they will be reckless with my boat.

How are these situations handled in real life?

jurisdiction: Massachusetts, United States

[belizesailor]

Google up "Agreed Value Policy". Basically this means that in the (unlikely) event of a total loss the insurer pays the agreed amount. You of course need to have a commercial use policy allowing bareboat use or the insurer wont pay zip.

Regarding loss/damage to boat by renters. In my experience (around the charter biz since 1994), the renters are not the primary issue...poor maintenance practices by the charter company are far worse and harder on the boat than the actual use.

Renters do have risk, typically charter companies require a damage deposit.

[svHyLyte]

Further to belizesailor's comments, you'd also better have a sizable Personal Liability Insurance Policy as I suspect a charterer that's aboard a boat that sinks for whatever reason--short of his/her own gross negligence--will sue the poop out of you for any injury, loss, and/or emotional pain and suffering as a consequence of the event (and don't hang your hopes on a "hold harmless" provision in a Charter Agreement!).

[belizesailor]

Liability limitation: why charter/commercial boats are typically owned by corporate entities, not individuals. Typically liability is limited to the corp's assets (which should ONLY be the boat) except in case of gross/criminal negligence. Having the boat managed by a separate entity, like a charter company, also further limits your liability as its pretty easy to prove you personally had nothing to do with it. So worst case the defendant/govt gets the boat...which they likely dont want anyway...so attorney goes away in search of easier prey.

Liability waivers are usually not very affective, any moderately competent attorney can probably get around it, but no harm in having it...and hoping for a lazy/incompent opposing councel (fortunately the world is full of those...just make sure they arent yours!).

[Calif.Ted]

Your current insurance policy probably covers anyone using the boat with your permission but probably will not cover "commercial" use. You'll need to get some "charter" insurance, you might want to price it out. The people I know who used to do occasional charters to help pay for the boat have either quit or gone full time because of the increased insurance and other costs.Also most marinas prohibit commercial use without their consent, they want to wet their beaks. This webpage from an insurance brokerage may be helpful.
How to Buy Charter Boat Insurance

[hellosailor]

Beware "Agreed Value". Some insurers, like Progressive, write in a clause that sneaks in "Agreed value or market value whichever is less" so that if you've agreed on $100k, but they claim they can find others on the market now sell for $80k, you're only getting $80k.

It is that devil in the details, their AVP only sounds like a real AVP if you don't look closely.

But there's no reason an insurer should buy you a new boat. Your boat ain't new. Same thing with a new car: They don't replace it, they don't make you whole, there are special extra-cost policies that come closer to that, but that's not how insurance generally works.

And no one will pay your lost sales tax and other expenses.

Then you might also want "business continuity" or "loss of use" coverage, which pays you the income you're losing because your vessel is out of service for repairs. Anything is negotiable with someone.

In real life? Sometimes a business takes a loss and fails. A good independent *business* broker in your state should be able to give you detailed options. If you're putting the boat in charter through a management company, ask them too. Although they may well "accidentally" omit some risks.

[akprb]

What is the market for a 33’ pilothouse for bareboat charter in Massachusetts?

[meirriba]

Your insurancy policy must allow comnercial use.
Your boat should be covered for 'agreed value' this value must be sensible, i.e. close to your boat's actual market value.
As to the charterer - the charter contract should specify their contribution to payment for any damage they caused (first $500 or first $1,000) of any damage that can be linked to their negligence.

[PappysSailing]

Assuming that you plan to put your boat in a charter fleet, they will probably require, or at least prefer, that your vessel is insured, both hull and liability, under their fleet policy. This may sound like it's going to be a 'good deal' and it can be under the right arrangement. But I was offered this deal once and declined after speaking w the charter fleet's insurance agent (which I recommend you do). I discovered that the fleet's annual rate was adjusted, up or down, from a baseline figure after each year's use/charter report for all boats was compiled and sent in to ins co. The owner of the charter co. declared that every year he would take the adjusted/updated total fleet ins premium and divide that by the number of boats in his fleet.
Problem: I knew from 'hanging around' that all boats did not go out/were not chartered equally. Not surprisingly, the owner's boat went out much more often then then boats owned by individuals. I surmised then that part of my role in the fleet was to subsidize the owner's insurance premiums.
Another problem: All boats were to be inspected upon return and the cost of any repairs caused by damage while out was to be paid promptly by charterer.
Problem: Every boat in that fleet had noticeable, ugly existing damage to stem and hull sides closest to pier, apparently from docking issues. My question was .. Why?
Best of luck sorting all of this (and other matters) out in order to make things go your way. Cheers, Pappy

[rfadler]

We had our boat in a charter fleet for quite a few years. It never sank but there was once a guest hit something that required a haul out and repair.

I was surprised to learn that the guest damage deposit primary purpose was to cover the insurance deductible. I discovered this because after the repairs, we needed to put new bottom paint on the area repaired and it wasn't covered by the insurance. When I asked the charter company about using the guest damage deposit for the bottom paint they said it was all spent on the deductible.

I guess my point is that there's lots of ways to lose money when you are chartering a boat. Many of which you don't think of ahead of time.

I agree with Belizesailor that poor maintenance is a bigger risk. I just took our boat out of the charter fleet for good. I'm amazed at the damage caused by lack of maintenance.

If you manage your boat yourself, make sure you schedule time between charters to make repairs. I think that's one of the biggest problems with charter fleets. The boat isn't making money if it isn't being chartered so they often have it turn around the same or next day.

[belizesailor]

Originally Posted by PappysSailing

Assuming that you plan to put your boat in a charter fleet, they will probably require, or at least prefer, that your vessel is insured, both hull and liability, under their fleet policy. This may sound like it's going to be a 'good deal' and it can be under the right arrangement. But I was offered this deal once and declined after speaking w the charter fleet's insurance agent (which I recommend you do). I discovered that the fleet's annual rate was adjusted, up or down, from a baseline figure after each year's use/charter report for all boats was compiled and sent in to ins co. The owner of the charter co. declared that every year he would take the adjusted/updated total fleet ins premium and divide that by the number of boats in his fleet.
Problem: I knew from 'hanging around' that all boats did not go out/were not chartered equally. Not surprisingly, the owner's boat went out much more often then then boats owned by individuals. I surmised then that part of my role in the fleet was to subsidize the owner's insurance premiums.
Another problem: All boats were to be inspected upon return and the cost of any repairs caused by damage while out was to be paid promptly by charterer.
Problem: Every boat in that fleet had noticeable, ugly existing damage to stem and hull sides closest to pier, apparently from docking issues. My question was .. Why?
Best of luck sorting all of this (and other matters) out in order to make things go your way. Cheers, Pappy

Yes, must keep a close eye on charter operators and fleet policies.

I used to have a boat in charter which was significantly more popular than the others in the fleet. When time came around to allocate fleet policy cost, guess who they tried to allocate the lions share to! The amount was well above what an individual commercial use policy would have cost.

And as you point out, its usually poor operational/maintenance practices by the charter operator which are harder on the boat than guest use. Like keeping a portion of their damage deposit for that new dock rash on your topsides...and then not repairing it...or trying to make a superficial cosmetic repair to hide the real damage from you. Or just simply never noticing or giving a flip in the first place.

[Var Korall]

Read your insurance policy carefully. Many AVP policies only pay AVP on total loss. Any partial loss is on a depreciated schedule, not replacement cost and not some prorated number based on agreed value. On an older boat your $15,000 engine could be worth only a couple of thousand after the depreciation. Same with running gear, masts, sails, electronics, etc.
And all insurance companies have different schedules.

[Cadence]

Originally Posted by jsc7

I am looking at getting a 33' pilot house and potentially putting it out to charter (bare boat).

If I charter my boat, and a renter sinks it, what happens?

If the answer to that is "my insurance willl pay me", my concern is (1) the insurance company will not reimburse me for the full value of the boat, and (2) if the renter takes no risk and knows that my insurance will pay for everything, they will be reckless with my boat.

How are these situations handled in real life?

jurisdiction: Massachusetts, United States

My guess would be you need to insure for her for bare boat charter. If not you are SOL

[flyingfin]

Oh, oh,oh,,,,,,better yet -- what happens if the renter slams into the brand new Hatteras at the fuel dock and you are on the hook for the fuel spill and the repairs to the new $2mil Hatteras. Maybe you should buy a house and rent it, less exposure

[John Drake]

Chartering your boat is a good way to make hundreds of dollars, at a cost of thousands while incurring millions in liability.