Insurance Choices: It Pays to Research
A number of years ago, I wrote about the demise of a 1986 Ferrari 328 GTS. The owner had spun it into a wall at high speed, totaling it in the process. This, in and of itself, wasn’t so unusual: Many Ferraris have met their deaths in high-speed rendezvous with immovable objects over the years. Instead, what was unique was that the owner wasn’t insured for collision damage – and was resultantly out the $40,000 he had paid for the car only six weeks earlier.
This matter presented itself only shortly after I learned of a Ferrari Testarossa (or “tree-a-rossa” as we called it) which was destroyed when a tree fell on the upstate N.Y. barn in which it was stored during an ice storm. This car was completely uninsured as it was “off the road” for winter and that owner as well was left writing off the entire value of the car. Both of these cases surprised me, as insurance has always seemed like a “no-brainer” to me: Buy it, buy a lot of it, and don’t let it lapse. But in each case a fundamental misunderstanding led to the loss of tens of thousands of dollars for each owner.
The potential for misunderstanding was reinforced recently when I learned of another rare vehicle that met an untimely death. I received a call from a rather distraught sounding gentlemen who explained to me that he had been proceeding at a “sporting” rate of speed in his 1976 Porsche 911 Turbo (930) when he entered a curve somewhat too fast and lost control, bouncing off a tree and coming to rest partially in a duck pond. To call the car “totaled” would be an understatement. To make matters worse, when he called his (major, national, full service) insurance carrier he was informed they would not be paying his claim. Needless to say, the owner was beside himself. He asked how, as he had been insured with this carrier for five vehicles including daily drivers, as well as for home owners and liability umbrella insurance for a decade without a claim, and had owned the Porsche for over five years, it could be possible that they wouldn’t be paying for his loss. Their answer was as shocking as it was direct: He had carried only “liability” coverage on the Porsche.
Liability insurance covers the insured (up to the policy limits) for damage or injury done to other people or other peoples’ property. It does not provide any coverage for damage to the insured vehicle resulting from accidents or other causes: This is provided by “collision” and “comprehensive” coverage. Collision insurance covers the insured for damage to their vehicle or property resulting from a collision, such as damage to a vehicle resulting from a single car accident, (e.g. spinning a Porsche turbo into a duck pond). Comprehensive or “Other Than Collision” insurance covers damage to the insured vehicle resulting from interaction with objects or persons which are not in motion, such as a tree falling on car’s storage facility.
Of course, the hapless Porsche owner immediately demanded to know how it had come to be that he had only liability coverage on a vehicle of this value – surely a foolhardy choice. His insurer responded that when they first wrote the policy for this vehicle, they had written it without collision or comprehensive coverage, that they had felt that because it was such an “old car,” it wouldn’t make sense to spend “hundreds of dollars” on collision or comprehensive coverage. The insurer’s agent was somewhat indignant in response to the owner’s anger: She felt that the insurer had been “saving [him] money for years” buy not keeping collision coverage on a “cheap car.” Needless to say she changed her tune when informed its value was actually in the neighborhood of $40,000.
In this case, the insurer does insist that the owner was aware of, and assented to, the lack of collision coverage when the policy was written. The owner swears this was not the case, but it is indisputable that the coverage types and limits were clearly delineated on the renewal notice and bill each year (“Who reads the bill? – I just pay it” says the owner) and as such, he has no case with respect to the insurer. In short, he is out one fairly rare Porsche – period.
While it is clear that the insurance agent didn’t understand the value of the car, and as a result didn’t serve the customer appropriately, much of the blame should be laid at the feet of the owner: It behooves any owner of an asset with this level of value to independently verify that it is properly insured (or at least read the bill when it comes). Certainly, no vehicle of any significant value should ever be driven without full coverage (and preferably agreed value coverage). Further, this case illustrates that while the major, national, full service carrier that insurers all of your other cars, homes, etc., may be very good at what they do, they don’t have the market or collector automobile knowledge necessary to adequately serve the collector community. A specialty collector car insurance company would have never allowed this type of tragedy to occur. The best way to avoid such an event is, when in doubt, to purchase as much insurance coverage as possible, of each relevant type, and preferably to purchase it from a carrier that specializes in the unique asset you’re insuring. Feel free to leave the minivan with the national full service carrier, but choose a specialty collector carrier for the 1976 Porsche 930.
Alex Leventhal is an attorney and car collector living in New York City. His early practice experience included the representation of new-car dealers and dealer groups engaged in complex transactions, as well as other merger and acquisition business. Alex currently owns a Ferrari Berlinetta Boxer 365 GT4 and a Dino 308 GT4, along with an Aston Martin V-8 Vantage and other European collector cars. He’s also director of the Aston Martin Club of North America.