Our Old Boat

The old Lionheart   Our O'Day 39-

Destroyed in a boatyard building collapse on March 7, 2001


Of all the perils a vessel faces...Of all the perils you might list on a boat’s insurance policy;  grounding, flooding, capsize,  one of the hazards least likely to be found on the list is having a building fall on her.   So I was more than surprised when the yard manager called one bright Monday in March to tell me that my O’Day 39, Lionheart had suffered this somewhat odd fate. Damage1

Mondays are always hard, and as CEO of an ill fated dot com, I was having enough problems, focused only on two day brightening events; celebrating my 50th birthday sailing in the Grenadines, and the launch of our  boat three weeks later  on May 15th.  I had spent the past 5 years rebuilding Lionheart with the greatest care.  She had had an engine rebuild the previous year, new sails the year before, and I’d taken great care to insure that she had absolutely “state of the art” electronics including a linked radar and chartplotter with fully integrated electronics including everything I could think of adding. She was, without question, one of the finest equipped 39 foot boats I’d ever seen. Lionheart

Seeing sailboats all lined up on the snow covered boatyards of New Hampshire and Maine has always pained me, so keeping Lionheart  indoors seemed to make great sense. She was protected from the harsh sun, winter snow, and I could work on her over the winter, not having to clean her off and crawl through the plastic wrap so common on boats here.   It seemed like the ideal situation.  I shared the building with more than 15 other boats and these owners, like me, seemed to spend a great deal of time in the winter working on their crafts.     I really never gave any thought to the building itself,  sort of a shed really, open on one end, several hundred feet in length with a corrugated tin roof supported by telephone poles.  Once all the boats were snuggled in their respective slots, a large plastic “front” was added to the building to keep out the cold New Hampshire winter.  It wasn’t heated, but a propane heater aboard our boats kept the chill off while we rewired,  rebuilt, and generally improved the comfort and safety of our boats.

 Have you hugged your policy today

I had already received the voicemail message from the yard manager when my wife called.  “I think you better sit down” she began.  “ I’ve got a little shock for you”.  “Too late, I already heard” , I replied.   “Did I pay the boat’s insurance ?” I asked, not quite remembering if I’d seen the bill over the winter.  “Don’t know… that’s your department” was the answer.  I’d been preoccupied with work over the past year and sometimes things slipped thought the cracks.  I hoped this wasn’t one of them.  My first call was to Sandy the yard manager.  “What’s the situation ? “ I asked.  “ That storm Sunday night really put down some snow, and the building couldn’t handle it.” He said. “ How bad is the damage” I asked. “We really can’t tell, the building sheared at your boat, and it’s simply too dangerous to send anyone in to assess the situation.  We’re trying to find a contractor who can remove the building off your boat, but we’ve got to get the building inspector here and an adjuster from our insurance company.  It’s going to take a couple of days before we’ll know how bad it is” he continued.  “It doesn’t look good though,  there’s a big section of roof that collapsed right on your boat, the lifelines are gone, the pulpit is gone, and I just don’t know how much hull and deck damage there is” he added.   My heart sank,  this was bad.  “Call me when you know something” I said just before hanging up. LIONHEART at Dock

My next call was to my insurance company, Allstate.  I had previously insured the house, car and boat with them, but the boat was the only thing left on the policy.  Unfortunately my agent had decided to leave the insurance business, and my policy had been transferred to another agency in the city which I had never worked with, in fact I’d never even spoken to them.  I just got a notice of the policy change and thought nothing of it.  Two years earlier I had had some slight misgivings about insuring with a carrier not known for it’s marine coverage.  I’d made a few calls to other insurance companies, but each wanted a new survey, and I wasn’t willing to part with the money, even though I’d done hundreds of upgrades to the boat, everything from a new electrical system to interior cabinets.  I’d added thousands of dollars of electronics, Maxprop, new sails and too much really to keep track of.  My wife said I was putting lipstick on a pig.  “The boat is beautiful, and sails like a dream, but you’ll never be able to get your money out of this boat” she chided me.  I knew she was right.  Sorta like putting in a swimming pool, nice to have, but it doesn’t add to the resale value of the house.

Lipstick on a Pig ?

Where is that shoebox?  Over the past couple of years I had had the foresight to at least save every receipt I’d had for every item I’d installed onLionheart.  They were all stuffed into a plastic box.   When I first bought the boat I’d tried to keep the upgrades all entered on a computer spreadsheet, with classification on type, cost, and vendor.  It had quickly gotten out of hand, and I’d been reduced to stuffing wrinkled receipts into the plastic box as a sort of crude substitute.  Well… at least I’d saved them, or at least most of them. There were hundreds of them, and it was time to go back to the original spreadsheet and update it, but that was three laptops ago, so finding the spreadsheet was going to be some work.  Not that I really needed it since, at least theoretically, I had all the receipts, but I had a nagging feeling that I’d entered something on the sheet and forgotten to keep the corresponding paper.    The spreadsheet was eventually tracked down on a laptop I’d given my daughter.  It didn’t have anything important on it, but since I found it I thought I’d use it as  starting point.

Alternator, ampmeter, barbeque, all the receipts dribbled into the spreadsheet.   “You’re a compulsive amasser” my wife scolded.  “You need help”.  As I pored over the receipts I had to agree, I had spent more than $73,000 on upgrades and additions,  Sideband radio, liferaft, new sails, 406 Mhz EPIRB, engine rebuild, it added up quickly.  She wasn’t quite right about the lipstick on a pig, Lionheart was no pig, but I’d certainly not been thinking of resale or value when I completely redid the electrical system, or added the latest Raytheon radar systems.  It’s easy to overlook the value of upgrades, particularly when you consider the insured value.  How do you account for these things unless you have another survey and renegotiate with your carrier.

Agreed value versus Actual Cash Value 

I’d had the foresight to contact my carrier two years before, and sent them the earlier version of the spreadsheet, and asked to change the value of the boat.  I’d also asked for a policy without depreciation, an “agreed value” policy.  What I received was a policy which specified repairs without depreciation, and not an agreement on the hull value, but I didn’t know that then.  I was about to find out.    There are two types of insurance policies I learned.  One is called the “actual cash value” policy, which is a policy which will pay you what the property is worth on the open market, less the depreciation.  In general this is what most standard boat policies contain.  The value of the boat is usually taken from a “blue book” of boat values, or the adjuster will survey the marketplace and find out what boats of your type and age are selling for.  This will work against you if you have an exceptional boat in great shape.   I found that the current process involves checking the Internet and doing a search for the specific boat type and age.    Usually the adjuster will select the lowest price that the boat has sold for.   There is not usually an allowance for exceptional gear or condition.  It is usually a starting point for some hard negotiations.

The other policy is an “agreed value” policy.  This is usually more expensive, but you agree on the value of the boat.  Unless you specifically ask for this type of policy you will not get it.  I’d go check your policy now.

Hire your own experts

Luckily my situation was not really “boating” related. Had it been, I would have fallen under admiralty law, a Byzantine set of laws more rooted in the 19ththan 21st century.  It would no longer have fallen under state jurisdiction, but rather federal.  This was a straightforward case.    Or at least so I thought.   When I called the yard manager, he was as helpful as he could be, but in the end he referred me to his insurance company.   They were very polite, and explained how they could not be responsible for an “act of God”.  It, of course, sent me over the edge.   “I paid extra for my boat to be stored indoors. I delivered it to you in excellent condition, I expect that you will deliver it back to me in time for the boating season and in the condition I gave it to you” I said in the calmest tone I could muster, which unfortunately was not too calm.     They suggested I contact my own company, which I’d already done.     Time to pull out the big guns…  “Maybe I need to speak to a lawyer” I salvoed.  “Well you certainly are within your rights to do that”  the yard’s insurance representative said,  “but let me tell you that if you do, it will be our of our hands, it will go to our legal department, and it will take months if not years, so you decide”  was his not so veiled threat.

I called our adjuster, who was very calm.  “Don’t worry” he said.  “You’re better off filing the claim with us anyways, you have a policy which specifies no depreciation, and we’ll take care of going after the yard’s insurance”  Maybe, I thought, but it didn’t seem fair that they weren’t living up to what I saw as their obligation.   I decided I’d better get my ducks in a row, and hire my own surveyor and a structural engineer to assess the condition of the building.   My next two calls were to a Marine surveyor I knew, and one of the best structural engineers I knew.   Both would produce reports which would later be essential to the quick settlement of the case.

A week later I had a detailed report of the boat’s damage which I forwarded to the yard for a repair estimate.  I’d also indicated to the yard that the surveyor would vet the final repairs as professionally done, so they should take this into account in the estimate.  The structural engineering report was a “big gun” though.  It contained unequivocal evidence of structural deficiencies in the design, and more importantly in the maintenance of the building, including major dry rot in the main structural supports.

When I called the yard’s insurance company for a second time, they started the “act of God” routine almost right away.  “Well you say it’s an act of God” I countered, “ but I’ve got a structural engineering from a registered engineer which says that the building was “an accident waiting to  happen” and that there was major dry rot in the support timbers”   “Ah…. you do?” was the response, and the entire tenor of the conversation changed.  “ Well we really want to get this resolved quickly” was his new direction.   Let’s see what I can do.  In the end it didn’t make much difference since I had claimed against my own policy, but it was amazing to hear the change in the tone of the conversation.

Two weeks later I had the estimate from the yard,  around $85,000 to bring it to the previous condition.  New stainless all around, deck non skid replacement and a hull and deck paint job.    I forwarded the estimate to my insurance company.   Their adjuster called the next day.  You’ve got a choice he said.  I can send you a check for the repairs, or we can total the boat.  You decide.    There was only a 13,000 difference between the two.   “Total it” I said, knowing that I wasn’t going to sink that amount of money into a 19 year old boat.  Send me a check and let me know when you want to move the boat from the boatyard so I can let them know.  “No problem, you’ll have your check on Monday” he closed.

So it was done,  or so I thought.   On Wednesday of the next week I started checking for the check, by Friday I had a premonition that things were about to hit another speed bump.  I was right.  I left a message for the adjuster.  Three hours he called back, “we’ve got a little problem…” he opened.  “ I signed off on the claim, as did my boss, but it had to go up to the regional vice president, and he thinks that the boat isn’t worth what we’re paying” .  “ I thought we had an agreement, I said, exasperated.  “Well so did I” he said.

Speak to the decision makers

“Give me his phone number” I asked.  We need to get this resolved before the season ends.”  He gave me his cell phone, which I dialed as soon as we finished.   The vice president was polite, but explained that they were paying more than they felt a 1982 O’Day 39 was worth.  “ Well that may be, I countered, but it my policy says that you will pay for repairs, without depreciation, up to the limits of the policy, so I don’t see that you have any options but to do that”    “Well, you’re right there” he replied.  “Then I suggest that you send me a check for the repairs, and I’ll handle the rest” I said. “ OK, but what if you find that the repairs cost more than we paid” he added.  “I’ll take that responsibility” I closed.  “OK , we’ll get you a check out by 4 P.M. today”   Three days later the check arrived in the mail.    Prior to the final wrinkle, the insurance company had hired a local marine surveyor to sell t he boat for salvage, thinking that the boat would be totaled, and I would be paid off.  I decided I’d give him a call to see where it stood.

He told me that the boat had already been put out to bid, and that he expected to receive the bids the following Monday.   “Will you handle the sale of the boat as salvage for me”, I asked.   Sure, he replied, he’d already been paid by the insurance company anyways, and for a token amount he’d finish the deal.     A week later the bids were in, and the top bid was $18,000, or $5,000 more than I would have received from the insurance company had they totaled the boat.

In the end, it work out to our favor, but it was a combination of luck and hard work that lead us there.  Had we not changed our policy two  years earlier, it might have been different.

In the end our insurance company saved our necks.  The yard refused to pay for the damage, and we are currently (actually our insurance company) involved in suing the yard.