Boat insurance isn't sexy or cool. In fact, most boat owners and captains
treat dealing with their insurance agent like they would a long-overdue
trip to the dentist: something that's uncomfortable (if not downright painful)
and to be put off for as long as possible. And then along comes a storm like
Hurricane Sandy. Second only to Katrina as the most costly in U.S. history, Sandy roared through the Northeast like a heavyweight prizefighter, bringing record storm surges in addition to high winds and torrential rain. Homes washed into the sea, iconic landmarks simply ceased to exist and boats were flung about like so many children's toys.
So what impact will this have on the rest of us? As it turns out, quite a bit. We went to a few experts in the marine insurance industry for their thoughts on Sandy's aftermath as well as for advice on how to better navigate our own insurance policies in the future what they had to say.
A Wakeup Call for the Northeast
President of Smith-Merritt Insurance, Capt. Skip Smith is one of those guys who's been there and done that. Since retiring from the helm of the Madam and Hooker operation in 1991, he's been involved in the insurance business. "Sandy was a huge wakeup call for the Northeast," he says. "They've historically had lower rates than Florida or the Gulf of Mexico because they have a shorter season and a lot of boats are laid up for the winter. But Sandy was different: many of the boats that were hauled out suffered damage from the storm surge while some that remained in the water were able to safely ride out the storm, which is the opposite of what we see here in Florida. So it raises the question about what is safe when you have both wind and a high storm surge." He feels that, along with rate increases, insurance providers will now field stricter underwriting guidelines in order to be better prepared for future storms. They may want to see more detail in an owner's hurricane plan or have more stringent requirements in what defines a safe harbor, for example.
Vanessa Darling, Vice President of Lucantha Marine Insurance, feels that rates will indeed be increasing. "For the last five years or so, the insurance rates in the Northeast have been dropping to the point where they were comparable with the rates on the Great Lakes," she reports. "Because of this, and the damage that Sandy caused, those rates will probably come up where they should be although nothing is etched in stone with any of our carriers at this point." Insurers may be adding more windstorm deductibles on new policies, for example. She also points out that Lucantha is an intermediary who works with insurance agents who may not have the contacts for specialized marine insurance.
Byrne Insurance's Marine Insurance Division specialist, Brooke Taylor, also feels that rates will be increasing, and not just in the Northeast. "As with any widespread storm with so many claims, the burden will be shared among everyone. We've heard that one company had as many as 3,000 claims to handle so I believe this will be a nationwide increase," she says. But on the bright side, Taylor also has heard of a few companies who are coming into the market with lower rates in order to be competitive. It may pay big dividends to shop around when it comes time to renew. She indicated that many policies in the Northeast did not cover haulouts in the event of an approaching hurricane but in Sandy's wake it's become a popular addition to many policies, and one that's available at a fairly low rate too.
So what can be done to better protect yourself in the future? Each of the experts felt that it was very important to deal with an experienced agency that specializes in marine insurance. Smith says, "When you go online or call a giant company for insurance, you deal with a data-entry person who has little or no experience with boats. When you have a claim, you deal with a claims department and a totally different group of people. But when you call an agent rather than a computer, you're dealing with someone who can work with you every step of the way."
Eric McDowell, Executive Vice President of Christi Insurance, relates a similar story about Hurricane Sandy. They had an owner incur over $400,000 in damage from the storm but the insurance company initially said that a $120,000 windstorm deductible would apply since it was due to damage from Hurricane Sandy. Rather than blindly accept the decision, McDowell disagreed and Christi Insurance went to bat for the client. By researching the storm's designation at the time the damage occurred, his team found that it was officially designated a "Post Tropical Cyclone" by the National Weather Service and since by definition it was not a Tropical Depression, Tropical Storm or Hurricane, the higher deductible should not apply. The carrier agreed and the standard $12,000 deductible was used instead. Christi Insurance saved their client over $108,000. As Smith says, "It's one thing to have a 20-foot Aquasport on a lift behind your house that you can throw on your homeowner's policy but it's entirely different for the owner of a $5 million dollar sportfisherman who's transiting the Panama Canal and refueling in Columbia. You need an expert hat's on your side." One area to pay special attention is crew coverage. "Lots of policies exclude coverage for any additional crew," Smith says. "Let's say you hire a local Bahamian to run your boat in a tournament and he gets hurt, or you pick up an occasional mate to help out with a delivery-are they going to be covered if they get injured? Those are the kinds of questions your agent should be able to answer for you."
Know What You Have
Each person also said it was very important to be familiar with your insurance policy so that you're clear on things like what's covered and what's not and what your deductibles are in different situations. Lucantha's Vanessa Darling used a post-grounding haulout as a good example. "You might hit something and not want to report it to your insurance company, fearing that you'll get hit with a rate increase or otherwise be held liable," she says. "So you hire a diver to replace a wheel without reporting it, but then down the road you find out that you have done more extensive damage than you first thought and because the insurance company was not aware of the problem it becomes an issue. It's always better to advise them of any problems-it's not held against you to report a claim but rather when they pay on a claim. It's always better to report any potential problems, especially on the higher-end boats, because then you're protected if it turns out the damage is worse than expected." She continues by saying, "Any time you have damage that may result in a claim, be sure to take photos of the damage before you begin removing any damaged components and also be sure to include the name of the boat or any identifying features of the vessel in the photos with the damage." Smith echoed the need to understand the policy, to the point of advising each of his clients to keep a policy onboard the boat at all times. "It serves two purposes," he says. "First, if you're ever involved in an accident, you've got the policy right there as a reference. And if you ever have trouble falling asleep and run out of Ambien, just break out the policy and start reading-you'll be snoring after the second or third page."
Christi Insurance's McDowell offered this advice in closing: never, ever try to stay aboard a docked boat during a storm. "It's just too dangerous, thinking that you'll stay behind and do something to try and save the boat," he says, "especially when you're dealing with a storm of this magnitude and the amount of surge and wind." He pointed out that most, if not all the coastal areas during Sandy were under mandatory evacuation notices so if you remain behind and became injured, there's no way for help to get to you. "You have insurance to repair or replace the boat. People are a different story. The risk just isn't worth it."