Inexperienced boat buyers are being warned by marine and insurance officials on the Gulf Coast to avoid purchasing hurricane-damaged vessels at auction.
Robert Hartwig, the chief economist at the Insurance Information Institute, said Hurricane Katrina on Aug. 29 destroyed almost 75,000 boats and yachts, not including those used commercially, along the Gulf Coast.
The damage estimates hover slightly less than $2 billion. The total insured value lost, including working boats and petroleum rigs, could total around $5 billion. Auctions often come into the picture after an insurance company settles with the vessel’s owner.
“These boats are heavily damaged,” said Capt. John Ludwig with Seatow Services International, a boat towing and salvage company which has picked up 1,800 boats and sent them to auction since the storm.
“It is a Walt Disney fallacy that you can throw a sail up on them and go,” Ludwig said.
In many cases, claims adjusters chalked up as total losses damages to boats that had been flung, upended and scuttled in Katrina’s wind and surge.
Those boats that did not disintegrate either suffered damage to hulls, engines and wiring or sank into the muddy bottoms of area waterways. As soon as the adjuster calls the loss total and cuts a check to the owner, possession of the watercraft shifts over to the insurance company.
To cushion the blow of all of those checks coming out all at once, companies hire salvage firms to raise the boats on to dry land, clean them up and get whatever they can for them at public auction.
Boats going to auction could be used for parts or, in some cases, refurbished.
Hartwig said that insurers may be able to recoup as much as 30 to 40 percent of the value of the boat but, due to the nature of the damage, many could hardly be expected to sell for more than a few percent of their value before being swamped in the storm.
The boats are being sold at auctions on the coast. They are also showing up on Web sites, but marine and insurance officials say that auctions are no place for the inexperienced boat buyer.
“If you are a nautical novice, you need to have the boat professionally inspected,” Hartwig said. “The old adage that a boat is a hole in the water that you keep throwing money into could become, quite literally, true if sufficient attention is not paid by the buyer.”