When Hurricanes hit, residential and commercial property are commonly considered when you think of the insurance losses. But in coastal states hurricanes can also have a devastating impact on commercial and recreational marine losses.
As with residential and commercial property, you need to be sure you review and understand your boat’s insurance policy. It is likely that a boat owner or captain has taken special consideration with a Hurricane or Tropical Storm because part of the application requires a written plan for the boat when a Hurricane comes to town.
Taking a look at one policy, the amount of the vessel’s insurance was for an agreed value but there is still a depreciation schedule in this policy. The way this policy was written, partial losses would be paid at replacement cost with a few exceptions but one of the exceptions applies to outboard motors. On a smaller vessel the engine can be the most valuable component.
Looking at the language for partial loss and the depreciation schedule below, it indicates that depreciation is taken on the vessels for certain age motors—the year implication changes depending on whether the engine is an inboard and an outboard.
Therefore is important to understand the age of your motor and the age of your boat and you may have to do some real research.
Several years ago, I remember a debate within the boating community because boats and outboard motors had significantly different birthdays but both were considered BRAND NEW and being sold to customers from dealerships. The born-on dates of outboard engines were not always matching up with the year of the new boat. How did this happen? When the recession was beginning, boat dealerships were not selling as many box motors and had left over box motors that they could put on the next model year’s haul. When a dealer made an order, they looked in the backroom and saw they had more engines (people were re-powering less often), and the dealer used those new already in-stock motors and put it on a new haul.
New boat dealers are required to purchase so many motors under their contract but when the market started to plummet, dealers were slow to order and had brand new engines they wanted to clear out before ordering more. Thus a buyer could get a brand new boat, motor and trailer in June of 2008, but the engine year could have been a 2007 or even a 2006 and yet the vessel package was a 2008. The buyer had purchased a brand new motor never sold or registered and a brand new boat, but the years of manufacture were different. The boat will be registered as a 2008 even with the different motor manufacturer date but the purchase and sale agreement will list all the ages. These differences made it so buyers wanted a discount on their brand new boats because it did not boast the matching year on its face. Dealers knew the boat’s engine (boxed and only 14 months old) was just as new as one that could be ordered from the manufacturer with a 2008 stamp.
When engine manufacturers were contacted by customers they also agreed the engines were to be considered brand new for several reasons:
- The engines were not changing every year
- The engines did not start to work or lose valuable until they were registered and used.
- The engine could be sold as new several months after it was built.
The reason this is very interesting is because the major manufacturers are no longer giving birthdays to their motors. There is an alphacode that allows for information on the year of manufacturer, but considering the manufacturing years are a thing of the past, it is interesting to look at section c below that depreciates based on the third year of manufacture for the outboard engine. Due to the fact that Yamaha, Mercury, and other major manufacturers don’t stamp the year on the engines anymore. Insureds should be adamant that the insurance company has accurate information when evaluating the age of the motor. Because the year is no longer stamped on the engines, when you put a new motor on an older haul, you need to make sure the insurance company knows that you have re-powered or that the engine is newer. Before you just take the insurance company’s “age” of your engine, it is important to do your homework and contact the manufacturer and/or dealer for more information on the month and year of make.
In addition, it is critical that the starting value be accurate before depreciation is taken. Make sure that the company has the proper information for the Replacement Cost Value to begin with before the 10% depreciation is subtracted, if it is applicable.
Considering the changes in the industry, I would have expected a more detailed provision in this 2016 policy, but this is what one policy lists:
