As I sit in what is currently a frozen tundra (the New York/ New Jersey Metropolitan area) my dreams of the spring and summer boating season were aroused by a case out of Florida, currently before the Eleventh Circuit Court of Appeals.1
The case concerns a 60-foot yacht that sunk at its dock in St. Petersburg, Florida, in August 2010. It was determined that water had entered through holes in an air conditioning coil and that the bilge pumps failed to operate due to an interruption of the yacht’s power supply had left the batteries drained. National Union denied coverage on a policy exclusion for corrosion to the coil. The insured argued that it was failure of the bilge pumps, due to the loss of power, that led to the sinking, a covered cause of loss. The question for the trial court had to do with interpreting whether the policy included or excluded coverage. The question on appeal is whether the court used the proper test for determining the cause of loss.
When damages could be the result of two separate causes—one covered and one uncovered—it often takes more than just a thorough reading of the policy to determine whether the loss is covered. In this case, the trial court held that even though the water entered the yacht through holes in the tubing of the air conditioner coil, failure of the bilge pumps was the proximate cause of the sinking, because if the pumps had not failed, the boat would not have sunk.2
National Union’s appeal is based on the argument that under Maritime Law, coverage is to be determined by a “proximate cause” test (the water entering the boat), not a “but for” test, (but for the failure of the bilge pumps, the boat would not have sunk).
1 IAG LLC v. National Union Fire Ins. Co. of Pittsburgh, Pennsylvania, No. 16-10580 (11th Cir.).
2 IAG LLC v. National Union Fire Ins. Co. of Pittsburgh, Pennsylvania, No. 13-1675, *19 (M.D. Fla. Sept. 3, 2015).