“All Risk” Marine Insurance Policy Covers All Fortuitous Losses Unless Specifically Excluded

August 14, 2014

Marine insurance policies are usually subject to Admiralty jurisdiction of federal courts and are governed by Federal maritime law. However, if there is no controlling rule of maritime law regarding a specific term of the policy, the court can look to State law in interpreting the marine policy.

In May of this year, the 11th Circuit Court of Appeals decided a case in which the insured vessel owner claimed an “all risk” marine policy covered all accidental and fortuitous losses, including breakdown of an engine by a stuck valve. The District Court ruled that the assured had to go further and prove the precise cause, i.e., why the valve got stuck.

The Appeals Court reversed, finding that the assured had presented expert testimony on the cause of the engine’s failure, i.e., the stuck valve, and had established that the unexplained loss occurred well before the end of the engine’s projected life. The Court said that an assured under the “all risk” marine policy did not have to prove “the cause of the cause.”

The Court ruled that the burden of proving a fortuitous loss under an “all risk” marine policy is “not an onerous one,” and that if the insurance company wanted to exclude losses resulting from the negligence of third parties, it could have done so very readily. Lamadrid Miami Yacht Charters, LLC v. National Union Fire Insurance Company of Pittsburg, PA (11th Cir. May 22, 2014).