Question:
I am in the middle of a dispute with my insurance company. They denied coverage after my boat caught fire during a recent harbor cruise. They blamed the fire on a worn impeller on an engine raw-water pump, but the incident was really not that simple. My engine water temperature alarm kept sounding, but when I throttled down and looked into the engine room, I was unable to see any problem. This happened three or four times during our cruise before the fire started. Their insurance investigator said the fire was caused by a fiberglass exhaust riser that melted from the hot exhaust gasses which blew against the plywood floor of the salon. This whole story sounds unlikely, but I don’t understand how any of that can lead to an insurance denial for a catastrophic fire on my boat. Can you help?
Answer
Marine insurance policies tend to exclude more casualties than they actually cover. I would need to see our reader’s entire policy and review the casualty in question to render a solid opinion, but I’m happy to offer some general observations.
First, recreational marine insurance policies are generally “all risk” policies, which means they cover everything unless it’s expressly excluded. The exclusions tend to be lengthy, but they invariably include losses caused by corrosion, wear and tear or maintenance problems. It is easy to see where a worn pump impeller could be characterized as either a wear and tear problem or a maintenance failure.
The “caused by” language used by the investigator in our reader’s case is an essential part of every marine insurance policy. A marine insurance claim investigation starts by asking “what happened?” Marine insurance policies are not designed to protect a boat owner from every calamity imaginable. An insurance claim may be denied if the casualty was “caused by” a condition which is expressly excluded from coverage under the terms of the policy, or if the boat owner failed to comply with certain obligations set forth in the policy.
The claim investigation exercise is complicated when the loss was “caused by” multiple failures, some of which may lead to a covered claim while others might lead to a denial. The California Supreme Court has considered cases such as this, and they developed an “Efficient Proximate Cause” test, which calls for coverage decisions on property claims to look at the “predominating cause” of the loss. Under that test, if the loss could not have occurred without a part of the chain of events that would have been covered by insurance, that action is the predominating cause of the loss and the claim must be covered.
The exclusions in our reader’s insurance policy relating to wear and tear and maintenance will present a steep road to possible insurance coverage, but he may have another option if he can establish that the fire would not have occurred if it was cause by something else. One approach may be to claim that the fire was caused by his own negligence. In this case, he did nothing to investigate the engine overheating even though the alarm sounded multiple times. He indicated that, each time, he simply looked into the engine room and was unable to see any problem. His failure to investigate further may be found to have been negligent. We’ll save a discussion of the definition of negligence for another installment of this column, but if he can establish that the fire was caused by his negligence, and the negligence was the “Efficient Proximate Cause” of the loss, he might find coverage under his insurance policy.
In the end, insurance coverage questions can be complicated regardless of the cause of the loss. In our reader’s case, he will be facing an uphill battle since he basically needs to throw himself under the bus and admit that he messed up. We should add that, in any insurance coverage dispute, an independent surveyor should always be hired to bring a fresh set of eyes to the loss analysis, and an experienced maritime attorney should be contacted to evaluate the coverage provided under the insurance policy.
David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com, or via email at [email protected].
