368 F. Supp. 3d 429
E.D.N.Y2018Background
- Coastal chartered Sterling's spud barge MIKE B (charter Apr 7–June 6, 2013) for repairs at the City-owned Steeplechase Pier; Atlantic issued Coastal a hull and P&I policy and, via brokers, bound MIKE B to the policy on April 5, 2013.
- A Meyerrose preliminary survey (Apr 8, 2013) rated the barge satisfactory for "inland/protected waters"; an on‑hire survey followed but was not completed before the loss.
- With spuds down at the Pier, the MIKE B was exposed to severe weather on Apr 12, 2013; spud-well failure led to water ingress and constructive total loss; salvage and pier-repair efforts followed.
- Atlantic reserved rights, funded wreck removal under reservation, then denied hull coverage (May 24, 2013) alleging unseaworthiness, misrepresentation/overvaluation, and absence of a named peril; Coastal sued for coverage and damages; bench trial decided coverage and damages.
- Court credited Coastal experts (Santos, Crivici, Dr. Dooley) over Atlantic's (Colletti, Bevens), finding weather-induced spud-well failure (peril of the sea); Atlantic failed to prove breach of uberrimae fide or unseaworthiness.
Issues
| Issue | Plaintiff's Argument (Atlantic) | Defendant's Argument (Coastal) | Held |
|---|---|---|---|
| Duty of utmost good faith (uberrimae fide) | Coastal withheld or mischaracterized material facts (use/location, condition, value) when securing coverage, voiding policy ab initio | Coastal disclosed Meyerrose preliminary survey and did not conceal material facts or delay surveys; valuation supported by surveyor | Atlantic failed to prove breach of duty; policy not voided |
| Seaworthiness (express and implied) | MIKE B was unseaworthy due to severe corrosion/wastage causing spud-well failure; insurer bears burden | Coastal: survey evidence showed vessel fit for intended inland use; failure due to weather forces, not preexisting unseaworthiness | Atlantic failed to prove unseaworthiness; court credits Coastal experts and finds vessel seaworthy for intended service |
| Covered peril / Inchmaree (named perils + negligence) | Loss not caused by a covered peril or named peril; insurer contends lack of a qualifying peril and faults crew | Coastal: loss was caused by a peril of the sea (fortuitous heavy weather); alternatively Inchmaree clause covers crew negligence in failing to pull spuds | Court finds loss caused by peril of the sea; also covered under Inchmaree for crew negligence; coverage established |
| Sterling's status / Certificate of Insurance (COI) | Sterling is an intended insured/loss payee under charter; COI evidence supports Sterling's rights | Atlantic: Sterling not named on endorsement; COI issued without Atlantic’s authority and disclaims coverage | Court: Sterling is NOT an insured or loss payee under the Policy; COI insufficient to create rights against Atlantic |
Key Cases Cited
- Knight v. U.S. Fire Ins. Co., 804 F.2d 9 (2d Cir.) (uberrimae fide duty in marine insurance)
- Contractors Realty Co. v. Ins. Co. of N. Am., 469 F. Supp. 1287 (S.D.N.Y.) (failure to volunteer material information permits avoidance)
- McAllister Lighterage Line v. Ins. Co. of N. Am., 244 F.2d 867 (2d Cir.) (implied warranty of seaworthiness in marine insurance)
- Continental Ins. Co. v. Lone Eagle Shipping (Liber.), 952 F. Supp. 1046 (S.D.N.Y.) (standards for "peril of the sea" and burden of proof)
- Continental Ins. Co. v. Hersent Offshore, Inc., 567 F.2d 533 (2d Cir.) (Inchmaree clause covers negligence of ship personnel)
- Fulton v. Ins. Co. of N.A., 136 F. 182 (2d Cir.) (geographic scope: inland/coastal waters)
- U-Haul Int'l, Inc. v. Lumbermens Mut. Cas. Co., 576 F.3d 1040 (9th Cir.) (Rule 1006 and originals vs. summaries)