A boat is a significant investment, so owners want to know that their vessel is protected in the event of an accident that results in damage to the hull, motor, cabin or other areas of a boat. While the greatest form of property damage that can be experienced by a boat owner involves a boat sinking, this type of claim is often denied under maritime insurance policies.
Insurance companies routinely assert that exclusions or limitations in coverage preclude payment of claims related to this penultimate type of disaster for boat owners. One of the most common rationales for denying such a claim involves the assertion that the policyholder’s boat was not subject to any “accidental physical loss”. The “fortuity rule” provides that maritime coverage requires proof of an “accident”. This principle of maritime insurance coverage is a longstanding and clearly established rule of federal maritime law.
A case decided by the Southern District of Florida, Great Lakes Reinsurance v. Soveral, provides an example of how this basic rule can impact coverage decisions. The policyholder’s boat was secured to a dock near the insured’s vacation home. The insured did not cover the vessel, so water from rain storms accumulated inside the boat. The constant drain of power from the bilge pump removing the water in the boat caused the boat batteries to fail. When the bilge pump stopped operating due to a lack of power, the boat filled with water and sank.
The insured brought a lawsuit against the maritime carrier for the full value of the policy in the amount of $125,000. The insurance carrier defended by contending that the loss was the result of “seasonable and foreseeable weather condition[s]”. The insurer argued both that the loss was not covered because it was not “accidental” and that the loss was the result of the insured’s failure to exercise due diligence.
With regard to the first defense regarding the loss not being accidental, the court observed that the policy contained specific exclusions for “losses due to wear and tear, gradual deterioration, lack of maintenance, inherent vice, weathering, insects, mold, animal and marine life”. While the court noted that the policy did not specifically define the term “accident”, the above quoted language was sufficient to exclude rain accumulation from failing to cover the boat.
The court noted that an accident means a fortuitous event, which the court further noted referred to unexpected, unforeseen, unavoidable, chance, and unintended events. However, the court also observed that a loss can be accidental even when the insured has been negligent. While the insured had checked the battery two days prior to the boat sinking, the court dismissed the sufficiency of the battery test because the insured merely started the engine. The court found that this was not an adequate way to determine that the battery had enough power to operate the bilge pump in tropical rains over a two day period. The court concluded that the “deterioration of the battery constitutes normal wear and tear and is not fortuitous”.
Water entering an uncovered boat during the rainy season in a tropical setting also was highly foreseeable according to the court. Based on this reasoning, the judge granted summary judgment for the maritime insurance company. The takeaway from this case is that boat owners need to take care of their boat or their maritime carrier may deny coverage based on inadequate maintenance, gradual degradation, or ordinary wear and tear.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].
