Fortuitous but is it Fortunate?

Great Lakes Ins. SE v. Wave Cruiser LLC, 2020 U.S. Dist. LEXIS 207827, 2020 WL 7135586

Before the United States District Court for the Southern District of Florida, came an issue of cross-motions for summary judgment. Great Lakes Insurance and Wave Cruiser entered into a policy for a twelve-month period in which Great Lakes Insurance would provide first-party property damage for a sportfish vessel. The policy covered against accidental physical loss or damage to the vessel, and expressly excluded coverage for damages to the vessel's engines, mechanical parts, and electric parts, unless such damage was caused by an accidental external event.

June 16, 2019, the engine suffered a catastrophic failure, with the cause undetermined. Some days later,  Captain Allen surveyed the engine and noted no evidence of  external causation. On the Captain’s second survey, he noted evidence of damage occurring over a long period of time, rather than a sudden failure. Great Lakes Insurance than filed action seeking judgment declaring that: (1) the policy does not afford coverage for the incident; (2) neither the incident of nor the damage resulting constitutes an accidental physical loss; and (3) coverage for the incident is excluded under the terms of clear and unambiguous exclusions set forth in the policy. Wave Cruiser responded by filing a counterclaim alleging (1) plaintiff breached the contract by failing to cover the loss and that plaintiff failed to timely and thoroughly investigate the claim; and (2) plaintiff breached the covenant of good faith and fair dealing by failing to act in good faith to settle.

 In order to recover under an all-risk insurance policy, the insured must show (1) a fortuitous loss; and (2) proof that the loss occurred during the policy period. The court found, through the Captain’s surveys, that Wave Cruiser met its burden of demonstrating a fortuitous loss, shifting the burden of proof to Great Lakes Insurance to establish the applicability of one of the policy exclusions. Wave Cruiser offered no evidence refuting the Captain’s report that there was no evidence that the damage to the engine was caused by an external event. Therefore, the court found that Great Lakes Insurance sufficiently proved that the exclusion applied, and thus, entitled to summary of judgment.