36 F.4th 1346
11th Cir.2022Background
- Wave Cruiser purchased an "all risks" marine policy that expressly excluded engine damage unless caused by an "accidental external event" (Exclusion r).
- Pre-purchase survey and a 2,500-hour service found the vessel and engines in good condition; the port engine then suffered a sudden, catastrophic failure after 17 hours of operation.
- Great Lakes retained surveyor Capt. Ian Allen; his inspection reported internal engine damage (elongated connecting rod, excess friction) and no identifiable external cause; Great Lakes denied the claim under Exclusion r.
- District court applied a burden-shifting framework: insured must show a fortuitous loss; insurer must show an exclusion applies; insured must then prove an exception to the exclusion. The court held Wave Cruiser failed to prove an external event and granted summary judgment to Great Lakes.
- Wave Cruiser appealed, arguing the district court misallocated the burden and improperly considered Allen’s expert-like opinions after Great Lakes withdrew him as an expert.
- The Eleventh Circuit affirmed: it held Wave Cruiser bore the burden to prove the external-event exception (applying admiralty law then New York law) and failed to produce evidence of an external cause; the court also found the district court erred in admitting expert-style lay testimony from Allen but deemed the error harmless.
Issues
| Issue | Wave Cruiser's Argument | Great Lakes' Argument | Held |
|---|---|---|---|
| Who bears burden to prove cause of engine failure | Insured need not prove cause; insurer must prove internal cause to trigger exclusion | Once insurer shows exclusion, insured must prove exception (external cause) | Insured (Wave Cruiser) bears the burden to prove the external-event exception (apply admiralty; when silent, apply New York law) |
| Whether summary judgment was proper | Evidence of fortuitous loss and good maintenance suffices to defeat summary judgment | Wave Cruiser produced no evidence of any external event | Wave Cruiser met initial fortuitous-loss showing but failed to produce evidence of an external event, so summary judgment for Great Lakes affirmed |
| Admissibility of Allen’s opinion testimony | Allen’s cause opinions were expert in substance and inadmissible because he was not disclosed as an expert | Allen’s statements may be considered lay testimony after withdrawal as expert | District court abused discretion by treating Allen’s causal opinions as admissible lay opinion, but the error was harmless |
| Enforceability and effect of the policy’s choice-of-law clause | Clause should not shift governing principles away from maritime norms protecting insureds | Clause is enforceable; apply federal admiralty law first, then New York if federal law is silent | Choice-of-law clause enforced: apply admiralty; where admiralty silent on burden for exclusion exceptions, apply New York law (placing burden on insured) |
Key Cases Cited
- Morrison Grain Co., Inc. v. Utica Mut. Ins. Co., 632 F.2d 424 (5th Cir. 1980) (under all‑risk policy insured need only show fortuitous loss; burden then shifts to insurer to prove exclusions)
- Banco Nacional De Nicaragua v. Argonaut Ins. Co., 681 F.2d 1337 (11th Cir. 1982) (reiterating burden‑shifting framework for all‑risk maritime policies)
- Northville Indus. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 679 N.E.2d 1044 (N.Y. 1997) (once insurer proves an exclusion, insured must prove applicability of an exception)
- Great Lakes Re‑Ins. (UK) PLC v. Durham Auctions, Inc., 585 F.3d 236 (5th Cir. 2009) (upholding enforcement of similar choice‑of‑law clause in marine insurance)
- AGF Marine Aviation & Transp. v. Cassin, 544 F.3d 255 (3d Cir. 2008) (enforcing parties’ choice‑of‑law provision in maritime insurance)