Insurers Left To Foot a “RIVER RAT’s” Bill

Insurers Left To Foot a “RIVER RAT’s” Bill

By: Helen Burnett

Edited by: Bryan O’Neill

Fed. Ins. Co. v. Mathews Bros., 2015 U.S. Dist. LEXIS 107049, 2015 WL 4879194, Civil Action No. RDB-14-3794 D. Md. Aug. 14, 2015, Bennett, J.

            Plaintiff, Federal Insurance Company, provided insurance for the pleasure yacht RIVER RAT when it sank while stationed in a Maryland harbor. The original owner commissioned defendant Mathew Brothers, along with subcontractor defendant Alban Tractor Company, to construct the RIVER RAT, which was completed in 2009. It passed to only one other owner, Mr. Radin, who had the vessel insured by plaintiff prior to it sinking in 2012. The cause of the vessel’s sinking was found to be “the improper installation of the fuel cooler discharge line to the engine exhaust elbow which cause the nipple fitting to break and consequential leakage of seawater into the boat.” After the plaintiff paid out over $750,000 to cover damages sustained by the RIVER RAT, it filed the following suit to recover those costs from defendants.Plaintiff filed a ten-count complaint, five against each defendant, for breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, negligence, and breach of warranty of workmanlike performance. Defendants responded by filing a 12(b)(6) motion to dismiss all claims.As a contract to construct a vessel and a contract to sell a vessel are not maritime contracts, the court applied Maryland state law. First, the court decided that the Maryland Uniform Commercial Code (UCC) controls the breach of warranty claims and not the Courts and Judicial Proceedings Code (CJPC) which the plaintiff asserted.   The court found because the contracts between the parties were a mix of contracts for goods and services, the UCC applies. Unlike the three –year discovery rule under the CJPC, the UCC has a four-year statute of limitations, which starts to run from the moment the good is delivered. Therefore, the plaintiff is barred from recovery under UCC’s statute of limitations.Next, the court addressed the plaintiff’s negligence claim that defendant’s failed to use reasonable care when constructing the RIVER RAT.   Defendant’s countered that the economic loss rule under maritime law prevents recovery. Maritime law only allows for recovery under tort negligence claims when the defective product injures a person, not itself. As such, the court dismissed the plaintiff’s negligence claims.Lastly, the court addressed and dismissed the plaintiff’s complaint of breach of warranty of workmanlike performance.   Breach of warranty of workmanlike performance only applies to maritime contracts. Contracts to construct vessels are non-maritime contract. The services provided by defendants in the in the installation of engine and construction of the RIVER RAT occurred when the vessel was on land, therefore, it was not a contract governed by maritime law. The court granted all of defendant’s 12(b)(6) motions.