Reader disagrees on boat insurance

To the editor: I love your magazines. I found the 2017 Ocean Voyager issue particularly wonderful and was reading it cover-to-cover, making mental and physical notes and deciding to preserve the entire thing on file for future reference — that’s how valuable and useful I think it is — until I got to the final article by Eric Sanford about boat insurance (“Boat insurance: an evaluation,” Ocean Voyager 2017). I’d like to respond to the many fallacies, misunderstandings and, I believe, downright dangerous errors in this piece because if it encourages others to do as the author says he’s done, it will be genuinely hazardous to their financial health. Let me note up front that I do not work for, own stock in or have any relationship whatsoever with any insurance company other than as an informed customer.

First of all, he clearly has no concept of what “self-insurance” means or, if so, doesn’t display it here. The idea of it is not “don’t spend the money until you have a problem,” but rather “put the money aside yourself instead of having the insurance company do it.” The mythical 10-car owner doesn’t just say, “Well, if the one I’m driving crashes, I guess I’ll just fix it or buy another.” He says “I’d better have a big 10-car nest egg in a very safe account to pay for things just in case.” And the only difference between you holding the “insurance fund” and the insurance company doing it is that you can’t spend it or invest it in anything other than very low-return, very safe things, while they can.

Let me cut to the major problem: Liability. What Mr. Sanford doesn’t seem to understand is the business model of insurance, which is not “profit from premiums,” but rather “profit from investment on premiums and make enough on that to still profit after paying claims.” Big difference, bigger statistical problem and big error on Mr. Sanford’s part. The whole liability issue becomes a critical and dangerous flaw in his piece.

Let’s say you’re willing to write off your $300,000 boat if it sinks. Let’s say you’re willing to spend the money you would have spent on insurance on fun, fuel and fandangos. Let’s say you’re the kind of 10-car owner who can afford to throw them away when they crash, let alone when the ashtrays are full. Fine. You’re now in a percentage of the population that is smaller than your magic 5 percent of course, but fine if that’s your choice. It is a free country … but as with everything else, “free” doesn’t mean free in a place where lawyers, ambulance-chasers, shysters and greed abound.

Liability: If your boat “hits something” and sinks and you want to walk away, you’re probably going to be stopped by the folks in the crash area (and potentially the Coast Guard and other authorities) and told “Not so fast — get that wreck out of here!” And even if what you hit was a log that, presumably, doesn’t have a lawyer to sue on its behalf, there’s still the folks whose property is impacted by the leaking fuel, or the tow/salvage folks you hire who drop a piece on somebody’s toe, or if you were unlucky enough to get outside your mythical 95 percent safety zone and hit or be hit by another boat, a pier, a swimmer or a pet dog, you can expect a lawsuit. A huge one. For which you will probably have to hire a lawyer that will cost you more than your insurance premiums.

Folks, people sue everyone and everything for reasons that seem to have none of that “common sense” Mr. Sanford seems to think he’s got. And they do it for life-changing amounts (not even counting the time away from your work or your boating fun that is necessary to defend yourself in the equation). The idea that you can blissfully cruise along, or even be happy with your well-tied-down on-the-hard hurricane-season storage, let alone with driving a random one of your 10 cars as your whim decides and NOT have liability insurance is not just dumb, not just cavalier, but potentially financially suicidal.

—Dan Fendel is a TV writer and director, a writer/editor in the fields of food, wine, travel and hospitality, as well as a playwright, sailor and boat owner living in Los Angeles.

Eric Sanford responds:

I know what self-insurance is, and I agree with Mr. Fendel’s understanding of the term. What I don’t agree with is that the insurance companies can handle “my money” better than I can. I have a 40-year history of double-digit returns on my investments.

I also understand the insurance company model of taking the premiums, putting aside a government-mandated percentage to pay claims and investing the rest to make a profit. I talked to several insurance agents before I wrote the piece. I didn’t go into the insurance business model since I didn’t feel those details were necessary.

Yes, there is always liability involved no matter what we do in life. My decision to not have insurance is based more on the way I use my boat. Generally, we anchor out in remote places (as opposed to crowded anchorages), avoid other boats whenever possible and sail or cruise at 6 to 8 knots.

Not having insurance is no more irresponsible than not having radar. If you cruise in areas where fog is common, it is advisable to have and use radar. Radar isn’t mandatory, however, and with reasonable planning and caution you can do fine without it. For me it’s a willingness to accept the consequences. 

I’m sorry if my article misled anyone into the idea that they should drop their insurance. I never suggested, and I DO NOT suggest that anyone do what I do. I am no authority on anything. My point is that boat owners should analyze all the hazards involved and make an informed decision as to where to spend their money.

By Ocean Navigator