Features July 1, 1999 Issue

New Boat Warranties: How To Work Them in Your Favor

The warranty for a new boat is a lot different than a new car. In most cases a boat’s rudder and gelcoat aren’t covered. And when seeking repairs for work that is covered, a buyer often gets caught between a tight-fisted builder and an indifferent dealer. We asked builders, dealers and owners how to ensure that the fine print doesn’t turn your love affair into a nightmare.

New construction methods and better raw materials have improved the general quality of boats. A byproduct, at least for some companies, is broader warranty coverage, extended warranty periods, and more aggressive factory support. But as would be expected in any industry, we hear the occasional horror story. To learn more about how new boat buyers are faring with their grand purchases, last fall we asked owners of new boats to complete a brief questionnaire concerning their warranties.

Eighty-eight percent of owners who responded said they ultimately received satisfaction regarding the disposition of warranty claims.

This jibes with what all of the manufacturers interviewed told us, who said “There’s always that ten percent who will never be happy.” And every manufacturer’s representative had at least one boat he wished the company hadn’t sold.

Claims ranged from major problems with refrigeration units, blistering and failure of autopilots to minor leaks and fading of gelcoat. The most common complaint was the time required to resolve claims because dealers were not responsive or there was foot-dragging by the builder.

What Can Go Wrong: Two Case Histories
The process of resolving a warranty claim can be anything from a straightforward, satisfying experience between a manufacturer and boat owner to a nightmare generating acrimony on all sides.

As an example, a boat buyer who lives in Colorado and sails on Rocky Mountain lakes ordered a Seaward 23 from Pollard’s Landing in Michigan, who had been representing the manufacturer for several years. The manufacturer, which is located in the southeast, has produced nearly 3,000 boats during the past 25 years.

After ordering the boat, the buyer forwarded a two-page letter to the dealer specifying the equipment and options to be installed, receipt of which was acknowledged in writing by the dealer. A copy was sent to the manufacturer. The purchase order indicated “three coats of Sikkens (teak oil) on all teak surfaces,” and specified that certain gear should be provided by specific manufacturers.

During the final stages of the construction process the buyer visited the factory to inspect the boat. The owner noted that interior bulkheads had been “varnished” sloppily, but, according to the builder, he requested only some minor repairs and returned home. The buyer made arrangements to have the boat transported; it was delivered two weeks after his trip to the factory.

The shouting began a month later.

In a two-page letter to the manufacturer, the buyer enumerated a laundry list of complaints, including the fact that the interior teak had been covered with three coats of varnish that had not been ordered and, worse, had been sloppily applied. He claimed to have spent 80 hours stripping the varnish and included a bill for $2,711.95 to cover the cost of materials and his labor, calculated at $18.63 per hour.

He also noted that the mast had been damaged during transport; substitutions had been made in boat equipment; and the surface of the hull-keel joint was abraded, so he provided an estimate for fairing at a nearby boatyard.

He followed that letter with a complaint to the Better Business Bureau in the cities of both the manufacturer and the dealer.

Months later, the dealer, builder and customer are still trying to resolve the matter, but in a decidedly chilly atmosphere. Could the breakdown in communications and ensuing conflict have been avoided?

Perhaps. After reviewing voluminous correspondence from all parties, it appeared that each party to the transaction may have erred.

The first line of the manufacturer’s warranty reads in bold capitalized type: “IN THE EVENT YOU HAVE A WARRANTY CLAIM WITH YOUR BOAT, FIRST CONTACT YOUR DEALER.”

Had the buyer worked with the dealer, rather than jumping in to perform his own work and forwarding bills for it, perhaps a speedier and more amicable settlement could have been reached. But the sailing season often is short. A recurring theme we heard was the buyer’s desire to get back on the water quickly, unwilling to wait for the dealer-builder to make a decision concerning the validity of their claim.

Playing by the rules doesn’t always result in a satisfactory conclusion, however, as one unhappy Beneteau owner discovered.

Six months after taking delivery of a new 1994 Oceanis 351 he found “significant bubbling on the keel which,” he said, “was immediately brought to the attention of the dealer.” The hull was repaired and repainted.

At the time of the second haulout a year later he discovered that the bubbling had continued, and “had expanded over the entire surface of the keel.” On the advice of the dealer, who thought the work would be covered by the builder’s warranty, the keel was refinished at a cost to the owner of $1,200. Both expected the owner to be reimbursed.

He said that the following year “several large bubbles were noticed in the fiberglass rudder. They were ground out and repaired at a cost of $323. Several fiberglass voids in the cockpit were repaired by the dealer, but more voids have become apparent and need to be repaired.”

When two years passed and the owner’s claims had not been paid, he wrote directly to Beneteau, only to learn that the company’s warranty specifically excludes the keel and rudder (as is the case with most manufacturers!). Apparently the dealer was unaware of the exclusion, or chose not to be the bearer of bad news.

Beneteau’s explanation: “The manufacturers of the keel coatings do not offer extended warranties on their products,” a fact that apparently escaped the attention of the dealer who authorized the repair.

Beneteau’s Joe Foss said that the problem with the rudder was attributable to a manufacturing defect. On older boats, the stainless steel rudder shaft was encased in a glass-skinned, foam-filled rudder; the seal where the metal stock enters the fiberglass rudder may fail under extended use in heavy winds and seas, allowing water to invade the core. Beneteau estimates that 3% to 4% of the rudders required a repair. The company now builds rudders with carbon fiber rudder stocks and vacuum bags the rudder during layout to prevent the problem.

After a lengthy delay, the owner’s $323 fiberglass repair costs were reimbursed by Beneteau, and the company assumed responsibility for repairs to the newly discovered voids.

The owner laments, “I had a bad dealer,” whose relationship with Beneteau has since been terminated, “and got bad advice, but the company is finally responding.”

Parties to the Sale
During the course of our research, we talked with eight major production boatbuilders: Hunter, Tartan, Sabre, MacGregor, Catalina, Pacific Seacraft and TPI Composites, Inc. We learned that their factories are all operating at or near full capacity, some with order backlogs extending into mid-2000. We also received comments from dozens of owners of boats built by these companies, and the dealers who represent them.

All of the manufacturers provided us with copies of their warranties; some also provided copies of their dealer procedure manual.

For any transaction, the parties are a builder, transportation company, dealer and the buyer.

(J Boats is something of an exception in that the company contracts with TPI Composites to build their products and to handle warranty issues, so J Boats is not directly in the warranty loop. Though Jim Johnstone of J Boats has responsibility for handling service issues within his company, claim resolution is the direct responsibility of Rich Moody, customer service manager at TPI.)

Successful builders factor into their manufacturing costs a reserve for repairs so that there is a fund from which to pay warranty claims.

However, dealers, despite having an implied post-sales responsibility to assist in solving warranty issues, don’t include a reserve for hard costs. Their 15%-20% commissions cover overhead, salesman fees and marketing costs, but not warranty claims. Many good dealers, however, do pay for small items without involving the factory.

In addition to the implied responsibility a dealer assumes when establishing a dealership, their responsibilities are clearly defined in agreements between them and the factory, though, as Sabre’s Bentley Collins said, “it’s a team deal done in concert with Sabre.”

The Beneteau owner’s manual, for example, includes a section that states “your dealer is responsible for providing customer support and parts after you take delivery, and any warranty service under the terms of the limited warranty.”

The J Boats dealer agreement contains a similar provision and further states that failure to perform may be a cause for termination of the relationship.

Technically, the warranty process begins when a completed boat leaves a factory’s doors and is entrusted to the custody of a transport company. Depending upon the manufacturer, ownership of a new boat may remain with the company until the boat is delivered and accepted by a dealer, who is then obligated to pay for it; or it becomes the dealer’s property when it is loaded onto a truck.

Therein lies the first opportunity for a warranty claim as the boat may be damaged enroute to the dealer.

Prior to accepting delivery, the first step a dealer is required to take is a careful inspection of both exterior and interior. Builders’ guidelines also stipulate that dealers are responsible for assuring that hatch seals installed before the boat left the factory are still intact and that parts and equipment have not been stolen or vandalized. Dealers are responsible for double checking shipping documents to confirm that the parts listed in the manifest are actually aboard. One pre-delivery checklist we saw includes inspection of gelcoat, spars, woodwork, floorboards and cleanliness.

Once a dealer accepts the boat, the transport company is no longer liable for damage that may have occurred in transit or for missing parts.

Following delivery, dealers are then expected to follow another checklist during the commissioning process. Beneteau’s checklist, for example, is three pages long and has a punch list of 87 items.

Warranty Basics
The warranties we reviewed are remarkably similar (see accompanying chart) and are divided into three sections: the General Limited Warranty; a Structural Limited Warranty; and a Limited Warranty covering underwater “deterioration” or “osmotic blistering.” Some extend beyond the first purchaser to a second owner if properly registered at the time ownership is transferred, a real advantage when buying a used boat.

The General Limited Warranty provides coverage for the entire vessel and covers hull, deck and cabinetry, exclusive of parts provided by other manufacturers. One warranty that is representative of the industry states: “The manufacturer warrants that the vessel will be free of defects in material and workmanship for a period of twelve months from the delivery to you by an authorized dealer.”

The Structural Warranty states that “The stringer systems, structural bulkheads and composite laminates will be free of defects in material and workmanship for a period of 60 months.”

The Extended Warranty against osmotic blistering warrants “That gelcoat surfaces of the vessel below the waterline will not blister when the vessel is properly used for a period of 120 months from delivery.”

The most dramatic difference between companies is that Catalina and Pacific Seacraft reduce the amount they’ll pay for a specific repair in successive years of the warranty. For blisters, Catalina reduces its contribution to the cost of repair by 20% in the second year and 10% more in each succeeding year so that in the last year of the warranty it pays only 50% of the total cost.

Beneteau’s warranty was an exception. It does not contain a specific section covering blisters, nor do the words “osmotic blistering” appear in the document. Joe Foss, Beneteau’s service manager, told us that blister coverage is implied in the General Warranty.

MacGregor Yachts has the simplest warranty we read; it is only 52 words in length and states that the company will “repair or replace any sailboat part or sailboat equipment manufactured by MacGregor which is proven to MacGregor’s satisfaction to be defective…”

Though all of the companies have a staff person at the factory who coordinates warranty work, all expect the dealer to be their prime contact. Some authorize dealers to personally solve problems costing less than $200 to $250, for which the builder will reimburse them.

Beyond that limit, claims must be pre-approved by the manufacturer, which provides dealers with a clearly stated procedure to follow.

Most builders say they attempt to process claims within 24 hours of receipt. But when major claims for structural work are at issue—amounts in excess of about $1,000—rest assured that a senior officer of the company will be involved in its resolution. And it could take longer.

If you own a boat produced by Catalina, don’t be surprised to find yourself on the receiving end of a telephone call from Frank Butler, president of the company, as Tod Herrick learned when he filed a warranty claim for his 1994 Catalina.

“My first problem occurred when I was 100 miles from home on a Chesapeake vacation and the freshwater pump failed. The water tank hadn’t been cleaned of fiberglass shavings at the factory and the dust eventually burned out the motor,” he told PS.

Unable to find a replacement part while on his journey, it was eventually replaced by the dealer in Annapolis after Herrick and his family spent several dry days in sweltering July temperatures.

“Then, when we hauled the boat that fall I discovered orange peeling on the bottom, and that’s when the difficulties occurred,” he continued.

“The dealer’s service manager said, ‘Can’t be. That’s a new boat’, and refused to travel an hour to inspect the boat. He blamed the paint.”

Herrick filed a warranty claim and started a paper trail; he was surprised “when Butler called out of the blue.”

“He became involved in the process, reviewed photos we provided and eventually authorized a $3,600 payment for the repair. I was satisfied with the outcome, but it took too long,” he said.

Exclusions
As with insurance contracts, the most important section of a warranty is often the list of excluded items. In our survey, we found that most companies have the same exclusions. Typical exclusions are for gelcoat (because of its natural porosity and tendency to fade), wood surfaces, upholstery, and parts not manufactured by the builder. As it turns out, this last category can include a lot of stuff such as engine, winches, cleats, portlights, etc.

In all warranties, one of the most severe exclusions are the costs of transporting the boat to the dealer or to the factory, if necessary, and for haulouts, launching or storage while processing a claim under the warranty.

“We expect owners to have warranty repairs made at the time of annual haulouts,” Butler told us, a sentiment echoed by most other builders. What builders are trying to avoid is the cost of an extra haulout.

Most manufacturers include in their warranty registration packet a list of suppliers of the boat’s gear (electronics, engine and winches, for example) with toll-free telephone numbers of service facilities. If there is a problem with any of this gear most warranty procedures still direct you to the dealer first, but you may be asked to resolve the problem with the supplier directly.

However, resolving problems with suppliers are often more complicated, as we learned from Bentley Collins of Sabre Yachts.

“In a Sabre you might have a Yanmar engine coupled to a shaft supplied by Essex Machine Works driving a propeller made by Michigan Wheel. The shaft passes through a dripless seal made by PSS. So, there’s vibration in the running gear, who’s responsible?”

“When the bilge pump fails during the warranty period we secure a replacement and often supervise and pay for its installation, though we’re technically not responsible for that,” Beneteau’s Joe Foss said.

What Builders and Dealers Say
Builders and dealers agree that problems fall into three major areas:

1. Owners who don’t read or fully comprehend their warranties or who don’t follow established procedures. This, say the builders, too often results in them facing unapproved repair bills that are substantially higher than necessary.

“Our biggest problem is with owners who discover problems, pay retail prices to have them repaired, and then send us the bill, expecting full payment,” said Tim Jackett of Tartan Yachts. “When we and our dealer are involved in the process we can typically negotiate yard labor rates that are lower than the customer will pay.”

TPI’s Rich Moody said, “The reason for our procedure is that, since we built the boat, we typically know how to diagnose a problem better than a boatyard, and can develop a solution. I can walk into our shop, talk to the person responsible for the failure, and come up with a remedy. A boatyard not familiar with the repairs can make a simple solution more complicated.”

A warranty issue involving Bob Knott, a homicide investigator and new owner of a Hunter 380, illustrates Moody’s point.

“Before we took delivery of our boat we discovered that the floorboards (a total of 15 pieces) didn’t fit the boat properly and the grooves were not in straight lines,” he said. “They looked like an improperly completed jigsaw puzzle.”

“The dealers suggestion was to remove the boards, recut some so they fit, and build new sections. Hunter’s response was to fly up the person who has built their floors for the last 18 years. He removed board #1, which was off 1/4 inch, and reinstalled the other 14 and the fit is perfect. While he was at it, he spent two days repairing other items I had on my punch list,” Knott said.

Catalina’s warranty specifically stipulates that repairs will be based on “Catalina’s standard hourly warranty labor rate,” which varies by region but is less than retail rates charged consumers.

“That’s why it is important to work with the dealer to resolve the problem,” Butler said.

2. Lack of a nationwide network of service providers. Unlike automakers, most boatbuilders have a limited number of dealers. Many owners are located miles from their dealer and are at a major disadvantage when warranty work arises.

“In that type of situation, we send our technician to the boat,” Catalina’s Butler said.

An owner isolated from his dealer said, “Don Kohlmann (president of Pacific Seacraft) flew to Texas with a new boom for my boat.”

“My refrigerator was repaired ten times and still didn’t perform properly. Hunter finally flew a technician out from Florida who completely replaced the system,” the owner of a Hunter 410 related.

Karl Schmitt in Missouri,who purchased a MacGregor 26 in 1990, told us: “Shortly after buying the boat I discovered what I thought were blisters in the cockpit,” he said. “When I popped them I discovered there was water under the gelcoat and the gelcoat and fiberglass had not bonded.”

Subsequently, he found a series of long cracks and crazing in other areas of the cockpit. Since he had been orphaned when his dealer relocated to Florida, he filed the claim with MacGregor; after a lengthy delay he was instructed to secure an estimate for repairs from a local yard.

“We had photos of what appeared to be gelcoat crazing; a minor problem,” Roger MacGregor said of his company’s action.

Unhappy with MacGregor’s position, the disgruntled owner eventually paid for a survey that indicated the boat suffered severe structural damage and was “irrepairable.” Schmitt feared for the ultimate resale value of the boat.

“We knew the surveyor was nuts,” MacGregor said. “But we didn’t have a yard in the area competent to effect the repair.”

Eventually, Schmitt threatened legal action unless the company provided him with a new boat. MacGregor yielded and the damaged boat was returned to the factory.

“We made a mistake,” MacGregor admitted. “He was more right about the problem than I thought, but we couldn’t tell that from the photos and didn’t have a local repair facility we felt was competent.”

Schmitt is still sailing the replacement, and says “I’m totally satisfied with the boat and the company.”

MacGregor said, “We repaired the boat in a day, resold it, and it’s new owner is totally satisfied.”

3. Dealers who don’t provide the post sales service to which a buyer is entitled. Owners agree. When we asked members of several owners associations to identify the biggest failure in the warranty system, the resounding reply was that dealers tend to shrug off problems.

The fact is, there are some good dealers and some bad and knowing the difference before buying isn’t easy.

When a dealership owns its own yard and has a service staff, however, at least it has the ability to perform repairs (whether he does or not is another matter). But if the dealer has to negotiate with independent contractors, the situation can become more complex.

When asked for advice on how to choose a reputable dealer, Bentley Collins said, “My advice is to get referrals from other owners and to contact the builder directly.”

Conclusions
Based on the results of our survey, and from manufacturers’ comments, you have a one in 10 chance of having an unsatisfactory experience attempting to resolve warranty problems. Here are some tips to improve your odds:

Do not perform work yourself or have an unauthorized yard perform the work and then expect the builder to reimburse you. If your schedule doesn’t allow you to wait for the builder to take action, be prepared to accept the consequences.

Because it’s easy to obtain copies of a builder’s warranty, read the paperwork before a boat purchase or loan arrangement is consummated.

If you assume financial responsibility for the boat when the dealer accepts it, request an opportunity to review the checklist with him before completing the purchase. Better yet, withhold some percentage of the purchase price until commissioning is completed, you’ve inspected all of the systems and done a sea trial with the dealer.

Follow the same procedure with the commissioning checklist and review every item with the dealer before accepting delivery.

Determine in advance what procedures have been established to effect repairs. For example, will the dealer perform the work or will it be subcontracted?

For the builder’s part, we think the industry certainly could improve its customer satisfaction ratings by changing elements of its warranties.

Most troubling are the exclusions of parts not manufactured by the builder. Beneteau’s refusal to accept responsibiliy for keel coatings seems to us ludicrous. If paint isn’t covered, does that mean that the resin and fibers used to make the hull are excluded, too? Of course not! It seems to us that a buyer should reasonably expect that the builder is responsible for any and all basic materials used in construction, including keel coatings.

And what of hardware such as cleats or mast fittings?

When an electric window on our Chevy failed, the local dealer replaced the motor under warranty and sent us out the door two hours later. We weren’t required to deal with whomever manufactured or sold the motor to General Motors.

We think it’s the builder’s responsibility to make it right for his customer. If he has to put out money to do this, then he should seek reimbursement from the supplier. After all, a yacht is a luxury item, costing far more than most cars. Buyers neither expect nor want to be burdened with the job of haggling with the builder’s vendors for replacement parts covered under warranty. How about adding a sentence that reads: “The manufacturer warrants that it will bear the expense of replacing and installing any equipment that fails, provided that the equipment was installed by the manufacturer during the boat’s construction and is still under its warranty period.”

When warranty work is necessary below the waterline that is related to safety or necessary for operation, we don’t think it should be delayed until the time of a regular annual haulout, unless that suits the owner. Because a summer cruise or race may be of paramount importance to an owner, a key to keeping him happy is enabling him to keep commitments.

On the other hand, postponing non-critical below-the-waterline work seems reasonable.

Other problems should be repaired as they occur.

Lastly, because hull blistering is such a concern, and so costly to repair, we prefer specific language in the warranty that covers the condition to general statements about freedom from defects.

When all of the parties to the purchase agreement—builder, dealer and purchaser—accept responsibility for their roles in the sale and purchase of a yacht, problems are few.

When they don’t, everyone loses—customers remain unsatisfied, reputations are damaged, and the only winners are the attorneys.

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