The modern debates over fortuity in all-risk insurance often feel abstract, as if the concept emerged fully formed from mid-twentieth-century treatises or contemporary insurance coverage disputes. But the roots of American fortuity jurisprudence are far older and far more nautical than many realize. The earliest American court decision to squarely grapple with fortuity did not arise from a collapsing building or a defective product. It came from a bursting boiler aboard a steamship.

That case is Mellon v. Federal Insurance Company, 1 decided in 1926 by federal Judge Augustus Hand. It stands as the first American judicial opinion to expressly analyze fortuity as an essential prerequisite to coverage under an all-risk policy. My own research aligns with the conclusion later reached by two insurance defense lawyers writing in a prominent law review article, 2 who likewise identified Mellon as the earliest American decision to articulate the doctrine in any meaningful way.

Mellon involved damage to boilers on the steamship El Mundo. One boiler burst during a mandatory hydrostatic test. Another, though initially passing inspection, later developed extensive cracking. The insurer argued that the losses were not fortuitous because the test was deliberate, and the damage could be attributed to inherent defects or inevitable deterioration. Judge Hand rejected that argument as to the burst boiler and embraced a principle that is often repeated about all-risk coverage today. He found that insurance protects against risks, not certainties, and a loss may be fortuitous even when it arises from an intentional act, so long as the damaging result itself was accidental and unexpected.

What makes Mellon especially important is not just its holding, but how Judge Hand reached it. He did not invent the concept of fortuity. Instead, he looked to maritime insurance law and English admiralty jurisprudence for guidance. Drawing heavily on British & Foreign Marine Insurance Company v. Gaunt, 3 he explained that even the broadest “all risks” language does not transform an insurance policy into a warranty of soundness. Coverage requires a casualty, a fortuitous event, something that happens to the insured property, not the natural and inevitable behavior of the property itself.

That maritime lineage matters. All-risk insurance was born at sea with marine coverage. Maritime policies spoke in sweeping terms of “all other perils, losses, and misfortunes,” and courts were forced early on to distinguish between accidental misfortune and inevitable decay. Judge Hand carried that reasoning to more modern property insurance policies and embedded it into American insurance law. In doing so, he confirmed that fortuity is not a literal exclusion buried in policy fine print. It is inherent in the very concept of insurance.

Mellon also illustrates an important balance that modern courts sometimes lose sight of. Judge Hand found coverage for the burst boiler because it failed unexpectedly under a test designed to confirm safety, not to cause destruction. At the same time, he denied coverage for the other boiler because the evidence did not establish a fortuitous cause during the policy period. Insurance was not meant to guarantee that machinery will last forever, nor to pay for deterioration whose timing and cause cannot be tied to an accidental event.

The significance of Mellon has echoed ever since. The law review article, Fortuity: The Unnamed Exclusion, expressly traces the doctrine’s American origins to Mellon and its reliance on maritime precedent, noting that courts have accepted fortuity as a foundational principle for nearly a century. Yet, as my recent articles, The Basics of All Risk Insurance and Fortuity, and What does “Fortuitous” Mean? Why Is “Fortuity” So Important to Property Insurance, discuss that modern courts often recite the doctrine while finding that most losses become “fortuitous” from the standpoint of the insured. That tension between risk and certainty remains unresolved and still litigated, but it is impossible to understand this debate without appreciating where it began.

So, when American property insurance claims professionals and coverage lawyers argue about inherent vice, wear and tear, latent defects, or design flaws, they are sailing in waters charted long ago by maritime insurers and a federal judge who understood that insurance only works if chance, not certain inevitability, remains at its core. Correctly or incorrectly, the first American case to confront fortuity did not shy away from a discussion that the fortuitous nature of property insurance must be based on concepts borrowed from maritime insurance law.

Thought For The Day

“A ship in harbor is safe, but that is not what ships are built for.”
 — John A. Shedd

1 Mellon v. Federal Ins. Co., 14 F.2d 997 (S.D. N.Y. 1926).
2 Stepen A. Cozen and Richard C. Bennett, Fortuity: the Unnamed Exclusion, 20 Forum 222 (Jan. 1985).
3 British & Foreign Marine Ins. Co. v. Gaunt, (1921) 2 AC 41.