For the want of a working fuse, a bilge pump failed and a motor yacht sank. The insurer filed a declaratory judgment lawsuit (yes, just like the kind Trump thinks Cruz should file except for the admiralty flavoring) asking the court to decide whether it had to pay out under the insurance policy.
The insurer argued it didn’t have to pay because there was no “accidental” or “fortuitous” loss and because an exclusion barred coverage (more on that later). However, the trial court found the blown fuse was an “accidental” or “fortuitous” loss under the policy, and that the exclusion was ambiguous. Yacht owner wins. Insurer runs to the 11th Circuit Court of Appeals.
The appeal was issued in late January. In the sort of succinct language every appellate court should strive for, the 11th Circuit explained that with an all risk marine insurance policy (like the one at issue), the owner had to show that it was a (1) fortuitous loss and that the (2) loss occurred during the coverage period. Once that’s established, the burden shifts to the insurer to prove the loss is excluded by some language in the policy.
With the owner clearing the pretty low hurdle required to kick the ball back to the insurer, the insurer argued that language in its policy excluded coverage. Specifically, language that talked about coverage for certain things only existing where it was caused by an “accidental external event.” Um …
And how did it turn out? The 11th Circuit concluded there wasn’t an ambiguity in the way the owner was arguing and kicked the issues back to the trial court. In practical speak, the owner won the war, but lost a battle meaning the exclusion will work to exclude some aspects of the damages claim.
Too bad for this owner because it’s precisely the sort of situation that probably inspires one to buy insurance coverage in the first place. My advice? Read your policy – and maybe even read it with your admiralty attorney by your side.
Underway and making way.