In May 2008 my wife and I bought a new 50’catamaran. After a lifetime of working and saving responsibly we thought we had finally earned our dream of retiring to the sea. The plan was to sell our stuff, including the house our kids grew up in, so that we could retire doing what we love most - exploring the reefs of the Caribbean.
We did our homework, read all the books and eventually found a boat that seemed perfect. We had it professionally surveyed and after an extensive inspection the boat was found to be seaworthy and in good working order. We purchased insurance from RLI Corp. The day we took possession of the boat and set sail from Fort Lauderdale, Florida for our home in Virginia was one of the happiest of our lives.
We did our homework, read all the books and eventually found a boat that seemed perfect. We had it professionally surveyed and after an extensive inspection the boat was found to be seaworthy and in good working order. We purchased insurance from RLI Corp. The day we took possession of the boat and set sail from Fort Lauderdale, Florida for our home in Virginia was one of the happiest of our lives.
Three days later, off the coast of Georgia, on a calm sea, the boat began to take on water. We didn't know why, but quickly discovered there was nothing we could do. As the boat's nose dove toward the water, I tried accelerating, but the boat would not right itself. My stomach lurched with panic and fear as the happiest time of my life turned to the grimmest in an instant. The boat was going down, and fast. We were rescued by the Coast Guard responding to our Mayday call -- something I never thought I would have the misfortune of experiencing. I wondered if I had done something wrong, if somehow I had caused the boat to take on water with a piloting error. The events of the day swam in my mind, a sea of confusion and shock, as we headed for dock. Our boat, completely submerged, was towed to a salvage yard.
When we got the boat above water, it became apparent what had happened. There was a large hole in the hull where a safety hatch used to be. The hatch had failed, delaminating from inside, allowing water to gush into the boat's cabin. I felt some relief at learning it wasn't my fault -- there was nothing we could have done. I was shaken, but felt sure at that point that we would be compensated for our financial losses. We'd done everything right -- inspection, insurance, responsible sailing. We weren't hurt. It would all be okay. We would get another boat. We would find the nerve to go back out on the water. We would live our dream.
Then our insurance company RLI Corp. denied coverage, claiming the sinking was due to a manufacturer’s defect. They refused to honor an exclusion in the policy that states they will pay for all damages resulting from a “latent defect.” As defined by the policy, a latent defect is a flaw in the material which is existing at the time of building, but is not discoverable by the “Insured.” Sounds like our situation exactly: How could we possibly have discovered the defective hatch when even a professional surveyor believed the boat was sound?
Over the past two years we have spent a fortune on boat storage and preservation, mortgage payments, and significant legal fees, having been forced to sue both the boat builder and the insurance company. In addition to the financial impact caused by the RLI insurance company’s actions, our emotional and physical stresses have been debilitating.
On October 18, 2010, we received an unfavorable ruling from the United States District Court for the Southern District of Georgia, stating that the insurance company does not need to honor their contract. We are appealing the finding, but we will be forced to sell the boat hull for almost nothing and pay the full mortgage value to the finance company.
I was required to insure my boat under laws that protect banks from financial risk. As a responsible person, I also thought I was protecting my investment and life savings and would have an ally in RLI Corp. should the unthinkable happen. Instead, when our dream turned into a nightmare, RLI Corp. focused their boundless resources on ruining my life and avoiding their contractual responsibilities.
Throughout this ordeal, I have renewed my policy with RLI, honoring my legal responsibility to insure the boat while it sits in storage in a boatyard. No other company will sell me insurance for an inoperable hull. RLI continues to charge us the same premium for a ruined boat that they did originally. We are currently funding RLI Corp's army of lawyers as they destroy our dreams and avoid their legal responsibilities.
In my opinion, RLI Corp. is not really an insurance company -- it is a litigation factory run by lawyers raking in the profits. Their position, supported by a justice system rigged in their favor, is that if any of the 16 exclusions in their policy relieves them of responsibility, then that exclusion is the only one that applies. Under this interpretation they could argue that nothing is ever actually insured. That seems to be exactly the legal precedent RLI Corp strives to establish with our claim.
The CEO of RLI Corp. Jonathan E. Michael took home over $5 million in 2008[1], the year our boat sank. "In 2009, Jonathan E. Michael received $3,038,292 in total compensation. By comparison, the average worker made $32,048 in 2009. Jonathan E. Michael made 94 times the average worker's pay."[2] Clearly Jonathan E. Michael has established a culture where the greed of a few corporate sociopaths is pursued at the expense of all else. In Michael's own words, "The way we [RLI] make money is by not paying out as much in expenses and claims as the premiums we take in. We have been able to do this year in and year out.”[3]
Our experience has made it clear that boat insurance is just another scam where corporations have rigged the system to their advantage, requiring boat owners to purchase their product and using the profits to avoid ever honoring their agreements. I would advise anyone who is thinking of getting a boat to start by finding a good lawyer because you will need one if anything goes wrong.
[1] http://blog.thecorporatelibrary.com/blog/axis-capital/
[2] http://www.aflcio.org/corporatewatch/paywatch/ceou/database.cfm?tkr=RLI&pg=1
[3] http://www.rlicorp.com/rlinews/Articles/JEMWSCR.pdf
