“All-Risk” is not Synonymous with “All Loss.”

The District Court granted summary judgment in favor of the insurance company after a yacht sunk in calm waters at its dock because the yacht’s owners, Mr. and Mrs. Inganamort, did not carry their burden of proving that the loss was a matter of chance, “fortuitous,” in the argot of insurance, which is a requirement for coverage under the all-risk insurance policy the Inganamorts had.

In Chartis Property Casualty Company v.  John Inganamort; Joan Inganamort, No. 19-1903, United States Court Of Appeals For The Third Circuit (March 24, 2020) the Third Circuit was asked to reverse because the yacht sank because of heavy rain.

BACKGROUND

John and Joan Inganamort left their 65-foot fishing vessel, Three Times a Lady, docked behind their part-time residence in Boca Raton, Florida. In September 2011, when they were at their home in New Jersey, the Inganamorts received the sad news that Three Times a Lady had sunk enough to sustain serious damage.

They reported the loss to their insurance company, Chartis Property Casualty Company, with whom they had an all-risk policy.  Chartis sent a claims specialist to conduct a preliminary survey of the vessel. The specialist reported three inches of standing water in the starboard forward cabin bilge and multiple potential sources of water ingress, including a hole in the hull the size of a screw. He also found that the electrical breakers were “severely rust-stained and blackened from an electrical failure[,]” and subsequent testing “revealed obvious water intrusion[.]” The final review of the vessel confirmed the claim specialist’s initial findings and also identified that the ship’s battery charger was not working, and without a source of power, the ship’s bilge pumps had ceased functioning.

Chartis filed a complaint in the United States District Court seeking a declaratory judgment that Chartis was not liable for the damage to Three Times a Lady. No one disputed that an insurance policy was in place at the time of the loss, so the question was whether the vessel’s partial submersion was a loss of the kind covered by an all-risk policy, specifically, whether it was a fortuitous loss.

The Inganamorts neither filed a statement of undisputed facts nor opposed Chartis’s statement of undisputed facts. In further consequence, the District Court granted summary judgment for Chartis because the Inganamorts “ha[d] no evidence to demonstrate a fortuitous loss[.]”

DISCUSSION

Every circuit who was asked to decide the issue has determined that the insured bears that burden to prove a loss was fortuitous and the Third Circuit concluded that the Inganamorts did not carry it. When Three Times a Lady sank, it was covered by an all-risk insurance policy, which protects against fortuitous losses, meaning losses that are unexplainable or “dependent on chance.” Just because an insured need not show the precise cause of loss to demonstrate fortuity, that does not mean an all-risk policy covers all damage. “All-risk” is not synonymous with “all loss.”

Despite the Inganamorts’ argument, an insured must do more than prove that there was a loss. To enjoy coverage, the insured must prove that the loss was indeed fortuitous.

The Third Circuit joined its sister circuits in saying that, under a maritime all-risk policy, the insured bears the burden of proving that a loss was fortuitous. That burden is not heavy nor is it onerous. When a vessel sinks in calm waters, however, an insured may create a presumption of fortuitous loss by establishing that the vessel was seaworthy before sinking.

While the Inganamorts had initially claimed that the ship was seaworthy prior to the discovery of the loss nor did they press this argument before the District Court or on appeal. Because there is nothing in the record to support the argument that the loss was due to heavy rainfall and there is no other indication of fortuity, the Inganamorts did not carry their burden of proving a fortuitous loss.

The Third Circuit, feeling creative, noted that “Poems and books get written, songs sung, and movies made about sinking ships. But there’s nothing stirring or awe-inspiring about a yacht that partially sinks in calm waters while docked. That, sadly, is the event at the center of this case.”

Since Mr. and Mrs. Inganamort did not carry their burden of proving that the loss was a matter of chance the Third Circuit affirmed the judgment of the District Court

ZALMA OPINION

Yachts, like the Three Times a Lady are abused by their owners who fail to keep them seaworthy. The work of the claims expert’s survey revealed that the yacht did not sink as a matter of chance but was in such bad condition before the sinking that there bilges did not work, the electricity was not available, and the parts of the Three Times a Lady that protected it against water intrusion and sinking while docked in good weather, were not available. The loss, therefore, was not fortuitous. Rather, it was certain, since it was not even seaworthy enough to stay safe while docked in good weather.

---

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here