Monday, April 4, 2016

In the April 2016 issue of
Long Island Boating World magazine,
Tim covers maritime law issues in a boating accident involving
the determination of total loss for marine insurance purposes. In
handling cases similar to this federal district court case, an
experienced maritime law firm will go to the findings of the
surveyors who acted as experts in the appraisal of the vessels,
as well as yacht brokers who have documentation as to the
selling prices of similar vessels.

The maritime lawyer on this lawsuit did follow that route of
examining the findings of marine surveyors and a yacht broker.
While boating accidents invariably introduce the issue of
property damage and possible determination of total loss, the
case at hand did introduce some complexity in terms of taking
into consideration modifications made to the motoryacht by the
current owner.

Here's the article...

Legal Dispute Involving Determination of Total Loss

An interesting lawsuit arose when a government vessel hit a
vessel tied up at a pier. The stationary vessel was a Bertram 58
built in 1982 that had been extended to 70 feet in length. There
really wasn’t a dispute as to whose fault the accident was. The
operator of the government vessel had fallen asleep at the helm.
Therefore, the government accepted blame for the accident.

However, there was a dispute as to how compensation for the
damaged motoryacht would be determined. The federal
government paid $682,500 on the Bertram. But the yacht’s owner
sought a higher figure, suing the government under the condition
that any recovery would be offset by $682,500, the settlement
already reached.

Sidebar: The Case is
F.C. Wheat Maritime Corp. v. United States,
Case No. 10-1906, which is an appeal from the U.S. District Court
for the Eastern District of Virginia, at Norfolk. Read a summary
and find a link to the Court's opinion at
South Carolina Law
Review , from the University of South Carolina School of Law.

At trial, the court determined the motoryacht to be a constructive
total loss. It came up with an award of $440,000, which was less
than the original settlement. The owner of the yacht appealed the
decision. The issue of constructive total loss is determined by
whether the cost of repairing a vessel exceeds the value of the
vessel before the accident. Under the doctrine of constructive
total loss, if the cost of repairing a vessel exceeds its pre-
casualty fair market value, the owner’s damages are limited to
the vessel’s fair market value.

To determine the fair market value of the vessel, the court looked
to the expertise of three parties. Two of them were surveyors
and one was a yacht broker. One surveyor concluded the vessel
was worth $440,000. This was based on the surveyor’s
inspection of the vessel, a review of a database on the sales of
comparable vessels, and the features that added or detracted
from the value. He felt some of the owner’s modifications
enhanced the value while some did not.

The second surveyor concluded the vessel was worth $470,000.
This was similarly based on an examination of the vessel and
review of sales figures from a database. The yacht broker’s
valuation differed markedly from those of the surveyors. The
broker came back with a figure of $900,000. This was based on a
review of the asking prices of 80-foot Hatterases, as well as one
Hatteras in particular, an 82-footer that had seen improvements
at the hand of its owner.

As mentioned earlier, there was the issue of the improvements
made to the Bertram by the owner. One of the surveyors went
through these line by line, determining that not all the
improvements raised the value. He felt that replumbing and
sanitation did not increase the value because of they were
required by law and expected on such a vessel. He also felt the
heating furnace was something one would expect to find on this
kind of vessel. Likewise, he did not see an enhancement of value
with the changes made to the electrical system. As to the
enlarged flybridge, the surveyor had issues with the implications
to the resulting stability. The Bertram also had a swim platform
that extended several feet aft from the transom. However, the
surveyor did not see this feature as being so unique as to
preclude comparison with other extended Bertrams.

The court applied the findings of the surveyors, noting that their
opinions were based on comprehensive physical examinations.
Additionally, the broker’s figures had utilized asking prices rather
than sales prices. The owner originally purchased the Bertram
for $875,000 back in 1998. However, the figures the court
deemed to be relevant were those provided by the surveyors.
The end result was that since the $440,000 valuation of the
vessel was less than the $682,500 already paid, the owner would
not receive additional money for damages to the Bertram. The
concept of total loss is not unique to maritime law. On TV, we see
many ads from insurance companies that talk about
reimbursement for a vehicle that was totaled in an accident. The
lawsuit at hand shows that when an owner makes extensive
modifications or improvements to a vessel, it can set the stage
for disagreements as to its value.

F.C. Wheat Maritime Corporation and Federal Insurance
Company v. United States of America
No. 10-1906, Appeal from
the United States District Court for the Eastern District of Virginia,
at Norfolk.

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