BizLawBuz …. The Power of Know

Launching a boat in Michigan waters during the month of April is not very common. Boat insurance policies, however, generally begin to provide coverage on April 15. If you’ve not given much thought to your boat insurance policy, this spring might be a good time to review your policy and determine if you need more protection as you navigate the Great Lakes or Michigan’s inland lakes.

Although many homeowner and automobile companies offer boat insurance, the coverage your existing policy provides may not be adequate. Many policies provide a list of “named perils” outlining situations the policy covers, such as fire, vandalism and malicious mischief. If you need more coverage, look for an “all risks” policy that covers more predicaments in which you might find yourself.

The valuation clause in the policy is what determines the calculation the insurance company uses to arrive at the amount to pay in the event of a loss. Actual cash value policies take into account depreciation, where other policies are written on the basis of “agreed value.” If the boat is a total loss, the policy holder of an “agreed value” policy receives the amount as provided in the policy, rather than the actual cash value. This coverage is not available from every insurance company.

Do you travel throughout the state, towing your boat to various lakes? Review your policy for any navigation limits. Some policies are only effective within 100 miles of your home.

Towing, salvage, and wreck removal are other important considerations and they are defined differently. Some policies cover only towage, which is usually determined by the state of the vessel. Distinguishing between whether a distressed boat is in a tow situation or a salvage situation is often difficult. If the situation was not reported timely or weather conditions worsened over time, these can affect whether your policy will cover your situation. Some broader policies cover salvage and wreck removal up to the full amount, but most insurers limit this coverage and some omit it all together.

Consider liability and bodily injury coverage that provides you with liability insurance coverage when there is damage to something owned by someone else or injury to someone else. Medical payments coverage pays for bills that may arise from an accident on a boat. Additional coverages may be available: uninsured boater’s insurance, roadside assistance (when towing your boat), trailer insurance, and coverage if you travel to Canada.

Boat insurance policies are available from many insurance companies; however, a real maritime insurance policy will likely offer you the best protection.

Heather Brenneman Miles

As weather in Michigan becomes warmer signaling the approach of summer, waterfront property owners begin thinking about boats, docks, jet skis, etc. Every summer, unfortunate accidents occur that are related to water and recreational activities: swimmers make a wrong judgment regarding the depth of the water and dive into shallow water resulting in severe neck injuries, boaters and those driving personal watercraft can be blinded by the sun and fail to see someone skiing or tubing behind a boat resulting in a catastrophic accident, a “slip and fall” during a game of volleyball played on the beach or in shallow water can cause unexpected and long-lasting injuries.

In 1987 the Michigan Supreme Court consolidated two cases, one involving an individual who was injured while slipping on logs that property owners installed at the edge of a lake to prevent erosion. The resulting neck injury caused paralysis from the shoulders down. Three neighborhood associations and individual subdivision lot owners were sued for damages. The defendants included over 200 individuals. The other case involved a child who drowned while she and her mother were visiting relatives. The child died in the shallow part of a pond owned by her aunt and uncle. The Supreme Court determined that the cases could proceed to trial despite the protections afforded property owners in the Michigan Recreational Land Use Act (RUA). The Court determined that the RUA was only applicable to large, undeveloped tracts of land.

The RUA, Michigan Compiled Law 324.73301(1) states: “[A] cause of action shall not arise for injuries to a person who is on the land of another without paying the owner . . . for the purpose of fishing, hunting, trapping, camping, hiking, sightseeing, motorcycling, snowmobiling, or any other outdoor recreational use . . . unless the injuries were caused by gross negligence [i.e., intentional misconduct] or willful and wanton misconduct of the owner.” In 2004, the Michigan Supreme Court reversed itself and determined that the RUA will, in fact, operate pursuant to its plain language. Therefore, unless a property owner acts with the intent to harm another, the RUA can protect a property owner from liability for injuries sustained by a third party who is performing recreational activities on the land irrespective of whether the land is undeveloped, developed, vacant, occupied, urban, suburban, rural, subdivided or unsubdivided.

The 2004 case involved a passenger on an ATV who injured her back after being bounced off the ATV as a result of the driver driving over an uneven area of the lawn. The Court determined that the RUA is limited in application to certain activities, i.e. outdoor recreational activities, but it is not limited in application to particular types of land. “Therefore, an owner is not liable to a nonpaying outdoor recreational user of his land, unless the user’s injuries are caused by the owner’s gross negligence or willful and wanton misconduct.” Neal v. Wilkes, 470 Mich 661, 670; 658 N.W.2d 648, 653 (Jul 20 2004). Thus, pursuant to the RUA, a landowner cannot be held liable for injuries suffered by a person while using the landowner’s land for an outdoor recreational activity, provided that

• (1) the person has not paid the landowner to use the land, and
• (2) that the injuries were not caused by the landowner’s gross negligence or willful and wanton misconduct.

Although property owners may breathe a little easier, the RUA does not protect a property owner from a lawsuit. It does, however, provide the property owner a defense if the facts of the case satisfy the provisions of the statute.

Heather Brenneman Miles

New Blog Added to Our Cottage Law & Cottage Succession Planning Website!

We’ve added a new blog to our cottage law website to post additional information about cottage succession planning, and for cottage family members to post their favorite memories of time spent at the family cottage. Please stop by and share your own favorite cottage memories!

Visit our new Cottage Law website at www.Cottage-Law.com for important information on sale, purchase, tax and succession planning issues for cottages, second homes and similar properties.

Visit www.Cottage-Law.com Today!

We’d love to know what you think of the new cottage law website and value your comments and input of additional information that would be of value to you to add to our new Cottage Law website!

Dan A. Penning

You’re invited!

Please visit our new Cottage Law website at www.Cottage-Law.com for important information on sale, purchase, tax and succession planning issues for cottages, second homes and similar properties.

Visit www.Cottage-Law.com Today!

We’d love to know what you think of the website and value your comments and input of additional information you would like added to our new Cottage Law website!

Thanks,

Dan Penning

Important events require careful planning. For example, what happens to your assets, who will care for your children, will your business survive or will your children be able to protect a legacy asset such as a cottage or vacation property in the event of your incapacity or death all involve critical decisions. Planning “in time” does not necessarily mean that the planning is “on time.” Any ambulance driver will tell you that lying on a stretcher on your way to the hospital is not the time to begin working on your estate plan or business succession plan. On a number of occasions, the importance of timely planning has been dramatically presented to me. In each situation, clients with entirely different types of estates and needs had one thing in common, they waited to plan until it was almost too late. Sometimes the risk of delayed planning “on time” becomes “in time”.

Each of these examples involve critical decisions and require careful planning.

One such client was a mother of two minor children, a business owner and estranged from her husband who suffered from a substance abuse problem. In this article, I will give her the assumed name of Sarah. Sarah cared for her children on a full-time basis, was the sole means of financial support and was self-employed in her own business. Tragically, Sarah was diagnosed with cancer two years ago. She was losing a valiant battle with her illness and had been hospitalized on several occasions prior to the day we met at my office. A mutual friend suggested Sarah contact me to develop and establish an estate plan and business succession plan to protect Sarah, her children and to preserve her business that employed several people.

I first met Sarah on a Thursday morning. She came to my office in a wheelchair accompanied by her sister. This same sister was also caring for Sarah and her children during Sarah’s illness.

After listening to Sarah’s explanation of her situation, I recommended to Sarah that she establish an estate plan to protect Sarah’s assets, provide for the appointment of her sister as Sarah’s children’s legal guardian and adopt a succession plan for her business to give a key employee the chance to purchase the business in the event of Sarah’s death. This planning would insure that Sarah’s assets would not be subject to a claim by her estranged, addicted husband, and that the assets be managed and support her children so that their lives, as much as possible in her absence, would remain stable and financially supported into the future. The business succession plan, notably, provided additional proceeds to be paid over time to support Sarah’s children, but also protected the jobs of her employees who relied on Sarah’s business to support their families.

I copied and collected all the information I needed from Sarah to draft her estate and business plan documents. I advised Sarah that although the process of completing these plans typically can take weeks or even months, given her declining health, I would draft her documents right away. I sked if she could return the following day to review and sign her plans. Sarah responded that she might not live to sign the planning documents the next day. Based on my observations of Sarah during the initial part of our meeting, I had no reason to doubt that possibility.

Together with my staff, I proceeded to prepare her estate and business succession plans for her signature that day. We also coordinated with her financial advisor the transfer of assets into a Trust created by Sarah for her children’s benefit. It was quite an emotional day. My staff and I raced against each precious moment that passed to consolidate Sarah’s planning process into one day. Sadly, Sarah died the next day. Fortunately, Sarah’s plan continues to govern and support her children and business as well.

During the span of my career, I’ve drafted estate and business plans solving various issues for clients to avoid significant problems. I have reviewed and obtained signatures in critical care units of hospitals, nursing home rooms and literally, in one case, we obtained a client’s signature on his estate planning documents while walking beside his hospital gurney as he was being wheeled to the operating room for emergency heart surgery. While I have many success stories for people who planned “in time”, there are extraordinary risks involved in not planning “on time”.

Dan A. Penning