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Maritime Law--11th Circuit Again Finds Exclusion Applicable in Marine Insurance Policy

In Miele v. Certain Underwriters at Lloyd’s of London, Case No. 13-14166 (11th Cir. Mar. 17, 2014), the Eleventh Circuit in another unpublished decision has found that exclusion for:

"The cost of repairs or replacing any part of Your Boat by reason of wear and tear, gradual deterioration, osmosis, wet or dry rot, corrosion, weathering, marring, scratching, denting, vermin, pets or marine life, or electrolytic or galvanic action"
is not ambiguous.
In Miele, an insured’s 32-foot vessel sank while docked because water entered through what a surveyor concluded was a “degraded and rotten” air conditioning hose, which cause was not disputed.  Underwriters denied coverage under the insured’s yacht insurance policy based upon the exclusion. In the insured’s suit against the insurers, the United States District Court for the Southern District of Florida granted summary judgment to the insurers.
 
On appeal, the insured argued that the exclusion was ambiguous and should be limited to excluding only the cost of replacing the air conditioning hose and not the cost of replacing the entire boat if a part failed and caused a sinking.  The Eleventh Circuit disagreed, concluding that the exclusion was unambiguous and broader than the insured argued.  In the court's view, the exclusion applied to all damages arising from the need to replace a single part due to wear and tear. The appellate court agreed with the district court’s reasoning that a vessel is nothing but a sum of all its parts and that the exclusion bars coverage for any single part or collection of parts where the damages are caused by wear and tear of any part.  In the case at hand, “the need to replace one part due to wear and tear indirectly gave rise to a need to replace all parts.”  Unfortunately for the insured, the fact that the entire vessel was damaged made no difference in the application of the exclusion.

This case is reminiscent of my case of St. Paul Fire & Marine Ins. Co. v. Lago Canyon, Inc., where the district court found no coverage for losses due to sinking at the vessel's mooring where the cause of the flooding was corrosion of a brass hose fitting to the air conditioning hose. The difference in Lago Canyon was that there was a separate allegation that the brass hose fitting was inappropriate for the use. Lago Canyon appealed that decision. On remand by the Eleventh Circuit, the district court found that although the "yellow brass" in the salt water installation may be a "manufacturer's defect", the proximate cause of the loss was corrosion, which was clearly excluded under the policy. 2009 U.S. Dist. LEXIS 114568 (S.D. Fla. 2009). Thus, the result in Miele is the correct one under the circumstances.

If you are interested in receiving a copy of either the Miele decision or the Lago Canyon decision, you may write to me at mov@chaloslaw.com.

Comments

  1. Two very clear examples of the duty of the insured to not only read the entire policy but to understand it as well. Good stuff.

    ReplyDelete

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