Yacht Owner Failed to Show Sinking Due to Accident and Not General Disrepair

The United States Court of Appeals for the Third Circuit, applying federal maritime law, affirmed the decision of the United States District Court for the District of New Jersey and held that the insured did not satisfy its burden of proving a fortuitous loss to establish coverage.

The insureds, John and Joan Inganamort (the “Inganamorts”), owned a 65-foot fishing yacht that was docked behind their part-time residence in Florida. The Inganamorts’ yacht was insured by Chartis Property Casualty Company (“Chartis”), under an all-risk insurance policy. In September 2011, the Inganamorts yacht sank enough to sustain serious damage while docked in Florida, and the Inganamorts reported the incident to Chartis. Chartis sent a claim specialist to survey the vessel multiple times. The claim specialist’s report indicated multiple issues with the vessel, including “three inches of standing water in the starboard forward cabin bilge,” “multiple potential sources of water ingress, including a hole in the hull the size of a screw,” electrical breakers that were rusted from an electrical failure as a result of an “obvious water intrusion,” and that “the ship’s battery charger was not working, and without a source of power, the ship’s bilge pumps had ceased functioning.” The claim specialist indicated that these findings led to the yacht’s “state of disrepair.” Despite the specialist’s findings, the Inganamorts requested coverage under the Chartis policy

In response, Chartis filed a complaint in the United States District Court for the District of New Jersey seeking a declaration that damage to the yacht was not covered under the Chartis policy. Chartis filed a motion for summary judgment and included a statement of undisputed facts in accordance with local rule 56.1. The Inganamorts did not respond with their own statement of undisputed facts or oppose the statement Chartis submitted, thus under local rule 56.1, Chartis’ statement was deemed undisputed. The District Court granted summary judgment in favor of Chartis, and the Inganamorts appealed.

The issue before the Third Circuit 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 Third Circuit explained that an all-risk insurance policy, “covers every kind of insurable loss except what is specifically excluded,” and traditionally, these policies are interpreted to cover “all losses that are fortuitous.” The Third Circuit held, similar to every other circuit that has addressed this issue before, that “under a maritime all-risk policy, the insured party bears the burden of proving that a loss was fortuitous.” This requires the insured to prove that not only has a loss occurred but also that the loss was fortuitous – meaning “unexplainable or dependent on chance.” The Third Circuit went on to explain that proving fortuity is not particularly hard, there just needs to be “some showing that the loss occurred by chance.”

The Inganamorts tried to assert that the loss was due to heavy rainfall but after reviewing the undisputed statement of facts submitted by Chartis and the record as a whole, the Third Circuit determined that “there [was] nothing in the record to support the argument that the loss was due to heavy rainfall and there is no other indication of fortuity.” Because the Inganamorts made no effort to present evidence that the loss was “unexplainable or dependent on chance,” the Third Circuit determined that “the Inganamorts did not carry their burden of proving a fortuitous loss.” As such, the Third Circuit affirmed the District Court’s grant of summary judgment in Chartis’ favor. Chartis Prop. Cas. Co. v. Inganamort, 953 F.3d 231 (3d Cir. Mar. 24, 2020).