In September of 2011, a 65-foot yacht partially sank in Boca Raton, Florida. The yacht was not a casualty of an enormous rogue wave, but rather its demise occurred uneventfully in calm waters while docked behind its owners’ residence.
While the yacht only partially sank, it sustained serious damage. The owners reported a claim to their insurance company, with whom they had an “all-risk” policy.1 The insurance company conducted a survey of the vessel that found:
- Multiple obvious potential sources of water ingress.
- Electrical breakers were severely rust-stained and blackened from an electrical failure.
- The ship’s bilge pumps had ceased functioning because the battery charger was not working.
A lawsuit was filed after the insureds and insurer disputed coverage for the loss. Specifically, the issue was whether the vessel’s partial submersion was a loss of the kind covered by the all-risk policy, i.e., a fortuitous2 loss. After the trial court granted summary judgment to the insurer because the insureds failed to demonstrate any evidence of a fortuitous loss, the insureds appealed.
On appeal, the Third Circuit Court of Appeals initially addressed the question of who bears the burden of proving a fortuitous loss under federal maritime law. Similar to other federal appellate courts that had addressed the issue, the Third Circuit held that under a maritime all-risk policy, the insured bears the burden of proving that a loss was fortuitous. The Third Circuit found that the insureds had not met their burden because there was nothing in the record to support an indication of fortuity. In holding so, the appellate court noted there was no evidence the vessel was even seaworthy prior to the loss. Thus, similar to their yacht, the insureds’ lawsuit had sunk.3
1 An all-risk insurance policy is one “that covers every kind of insurable loss except what is specifically excluded.” In marine insurance, all-risk policies are construed as covering all losses that are “fortuitous.”
2 “Fortuitous” means the loss was unexplainable or occurred by chance.
3 Chartis Prop. Cas. Co., v. Inganamort, No. 19-1903 (3rd Cir. Mar. 24, 2020).