From the December 3-10, 2012 issue of National Underwriter Property & Casualty • Subscribe!

Classic-Car Owners Face Sandy Heartbreak

Collector-auto claims mount in what is being called the hobby’s ‘single most devastating loss’

Superstorm Sandy has claimed its share of property and sentimental personal belongings—and in some cases, the damage left in the storm’s wake has been enough to make grown men cry.

“Guys come in and they’re in tears,” says Kevin J. Mackay, owner of Corvette Repair Inc. in Valley Stream, N.Y. on Long Island. “They didn’t expect a storm surge to wipe out their work, their investment, their prized family heirloom.”

Mackay, a specialist in Corvettes, says he has 15 flooded cars in his shop. 

When Sandy made landfall in southern New Jersey on Oct. 29, it struck a concentrated area of car collectors, says Laura Packard, vice president of sales and marketing for American Collectors of Cherry Hill, N.J. New York and New Jersey are two of the company’s larger states for business. 

Several experts say many classic and expensive modern cars are stored right on the coast. Fact is, many owners are affluent—collecting and/or restoring classic cars is an expensive hobby—and many of them like to live close to water.  

“A lot of business is concentrated [in the Northeast] because that’s just where [the vehicles are],” says Packard. “There is a strong car-collector culture here.” 

Car owners did the best they could to “fight a losing battle” against the surge, she adds: “These are people who go to great lengths to protect their vehicles, and they did as much as they could do. They put cars up on jack stands and hydraulic lifts, but too much water came. No one had experienced anything like it, so they couldn’t expect it.”

The stories are heartbreaking, say agents, restorers and insurance executives, and now collectors are fighting a battle against salt—racing against corrosion. Salt water is among a car’s worst enemies: Every gauge, headlight, leather seat and carburetor—every sought-after, hard-to-find mechanical part and trim—is likely trash, ruined by the intruding sea. Mackay says exhaust pipes are already rotting through. 

And when car owners were lucky enough to avoid the water, sometimes fallen trees crushed their four-wheeled gems. Packard says one policyholder lifted his two prized Corvettes and avoided the surge, but a tree fell on the garage to claim both. 

The overall result is the “single most devastating loss to collector cars ever,” declares McKeel Hagerty, CEO of Hagerty Insurance Agency, a leading provider of classic-vehicle insurance. 

SENTIMENT, HISTORY OFF THE ROAD 

Hagerty says the agency has 1,000 total losses. He predicts about 8,000 to 10,000 vehicles—each with its own story and personal connection—will be taken off the road, totaled, perhaps for good.  

“And they aren’t making any more ’57 Chevys,” says Jeffrey Walker, senior collector and vehicle-insurance specialist for Chubb. “Owners have personal attachments to these vehicles, and they each have a sense that they are charged with owning a piece of history.”

And within the classic-car niche, a lot of that history is personal. 

“One guy brought in a car he bought with money he saved as a 16-year-old doing a paper route,” says Phil Brazer, owner of Netcong Auto Restoration in Landing, N.J. “We have a 1972 Pontiac LeMans that belonged to the owner’s dad. Another is the car [in which] the owner proposed to his wife. There is a deep love for these cars, and we’re doing everything possible we can for them.”

Brazer’s shop has a few Sandy-damaged cars, and he’s expanding to accommodate damaged boats as well. He says the shop is getting a lot of calls and even more clicks on its website from classic-car and boat owners he assumes are looking for repairs.  

“I don’t think we’ve come close to seeing what’s coming [in] from this storm,” Brazer says. “Adjusters are overwhelmed, and you have to figure they understandably have other priorities. People are without homes.”

Shop manager Hal Haley handles the insurance aspect for customers and says insurers have thus far been “very cooperative” despite being so bogged down.

Walker says policyholders should at least start the drying-out process and wash the entire vehicle, outside and under the hood, to get the salt off. Drain every fluid in the car. Carefully remove every part that may still be salvageable.

BIG ISSUE: OBJECTIVE VS. SUBJECTIVE VALUE

The claims process, says Hagerty, involves assessing two sets of values: objective and subjective. 

There are multiple scenarios for these insureds: payment for repairs, payment for a “total,” payment for some of the total with the owner buying back the salvage. It’s not as simple a decision as totaling a surge-submerged Hyundai. 

These vehicles are personified; they’re “like family,” says Hagerty.

Owners can take the payout from a totaled car (these are agreed-value policies), or they can take a portion of the payout to basically buy back the salvage—to likely take the vehicle down to its frame and build it back up again. 

“It’s happening already,” says Brazer. “Some of these guys are going to spend more money than the car is worth to restore it because it has such sentimental value.”

Hagerty says his agency has been working with claimants to find towing or storage and is already working with its network of parts suppliers and car clubs to find replacement pieces. 

Chubb gives policyholders the control of choosing a body shop or towing carrier, says Walker: “The customer is in the driver’s seat. We want to do what is best for them, and we’ll work with them through the process to try and come to the best outcome.” 

Indeed, the process of handling classic-car claims is different because more personal attention is given, agents say. American Collectors, for example, called each policyholder personally.  

“There’s a lot of thinking going on right now,” explains Mackay, the Corvette specialist. “We look at the damage. We look at the insurance payout. We look at the parts and labor—maybe how many corners we can cut to make it work and get [the car] back on the road. It’s so much work. In some cases it’s a complete rebuild because of the salt.”

But “all hope is not lost,” says Walker. After all, the classic-car community is used to restoring rusted-out cars found in barns and fields and junkyards. Older cars don’t have the computer electronics of a newer vehicle. The bodies of Corvettes are fiberglass, so they, at least, won’t corrode.

FOR SOME, AN INEVITABLE REBOUND

Hagerty says about 50 percent of car owners are choosing to salvage their vehicles. 

“They will absolutely come back,” Packard says of the Northeast classic-car community. “It may take some time to do that, but this is a resilient, close-knit group.”

Hagerty says the superstorm will have a “long-ranging effect” on the classic-car world. “People will be talking about Sandy for many, many years,” he adds, because so many cars are going to carry the “Flooded in Sandy” label. 

It’s unknown whether a restored classic car that’s been through Sandy will hold its pre-storm value, or whether it might be worth even more because it likely went through a complete rebuild. 

“Take pictures and keep receipts,” says Haley of Netcong Auto. “If you sell, I’m guessing buyers will want a lot of proof because it’s easier to track cars these days. They’ll know it was in Sandy.”

Conveying a feeling shared by the insurance industry, Packard of American Collectors says it will be back to insure the vehicles in the Northeast. 

“You have to think this a freak accident that hopefully will not happen again,” says Packard. “And if so, people learn. They’ll know what to do next time.” 

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