No coverage under hull policy when vessel owner failed to overcome presumption of unseaworthiness when vessel sinks at berth in calm water
June, 2006
By
Marilyn Raia
J & A Fleeting, Inc. v. Fireman's Fund McGee Marine Underwriters
2006 A.M.C. 535 (E.D. Ky 2006)
The AHLEY W sank at her dock in calm water. The sinking resulted from the failure of a pump in the vessel's shaft alley. The vessel owner knew of a problem with the propellor shaft that was allowing more water to enter the shaft alley than was usual. Although he monitored the situation and had ordered a new part, he continued to use the vessel every day pending receipt of the new part.
The vessel owner submitted a claim to Fireman's Fund for the total loss of the vessel. Fireman's Fund declined the claim on the ground that the loss resulted from wear and tear and lack of maintenance, not from a covered peril. The vessel owner sued. The District Court invited the parties to file cross motions for summary judgment.
In its motion, Fireman's Fund asserted that the vessel owner allowed the vessel to deteriorate while continuing to use it and that the deterioration constituted non-covered wear and tear. It also asserted that the continued use of the vessel when in a state of disrepair breached a warranty of seaworthiness implied in the hull policy. In its motion, the vessel owner argued that he and his pilot had monitored the pump during the week before the sinking and had ordered a new part but could not drydock the vessel at that time. Further, the vessel owner argued that a computer failure and a power surge at the terminal caused the sinking and were superceding and unforeseeable causes that were covered by the policy.
The District Court granted Fireman's Fund's motion and denied the vessel owner's motion. It noted that the vessel owner had a duty to exercise due diligence to make the vessel seaworthy as a condition of payment under the policy and that such duty could be found in the policy's Inchmaree Clause. Under usual circumstances, the burden of proof would be on the insurer to establish a breach of the warranty of seaworthiness implied in the policy. However, in this case, the burden would be on the vessel owner to rebut the presumption of unseaworthiness that was created when the vessel sank at the dock in calm water. Once the vessel owner rebutted the presumption of unseaworthiness, the burden of proof would shift back to Fireman's Fund. The District Court held that the vessel owner did not carry its burden of rebutting the presumption of unseaworthiness. Other than the statements of the vessel owner and pilot, there was no proof "to establish any kind of preservative maintenance had ever been done on this boat."