Until the end of time, there will probably always be a friendly debate over which is better… sailboats or powerboats. Sailboat owners will argue that their day on the water is environmentally friendly, with only a small ‘carbon footprint’ from firing up a two-cylinder engine briefly to help with mooring. Sailing is quiet. Sailing does not burn $50/hour in fuel.
Powerboat owners will argue that you don’t always want to be at the whim of local winds. After returning to the mooring, it’s nice not to deal with climbing around the boat to furl sails. And sometimes, you want to go farther in a day than is possible doing five knots flat out.
In this epic contest of ideologies, there may be an advantage that powerboats have, which is sometimes overlooked. Their shallower draft arguably lessens the chances of hitting an underwater object, which could result in avoiding big headaches, such as losing a keel.
A recent lawsuit deals with such a legal headache unfolding when a performance sailboat hit an underwater rock and ultimately lost its keel. One could sympathize with the vessel owner since something like this is stressful enough without the element of going to court. The legal battle that ensued serves to highlight the significance of the term ‘occurrence’ in an insurance policy.
The lawsuit involved a 72′ custom yacht, which was designed by the renowned naval architect Eric Goetz, who in 1992 designed America, winner of the 1992 Americas Cup. The boat and her contents were insured under a policy that covered damages “caused by an occurrence which happens within the policy period.”
Shortly after the policy was renewed, the boat hit a submerged rock off the coast of St. Thomas in the U.S. Virgin Islands. This resulted in serious damage. She was towed to a shipyard in St. Thomas to be repaired. This claim was paid. In 2013, the vessel was moved to a yard in West Palm Beach, Florida. Before this voyage, the captain discovered a small hull crack toward the aft end of the keel. The boat set sail anyway.
On the voyage to Florida, the boat lost its rudder. The defendant’s insurance carrier picked up the tab for the rudder. After the boat arrived in a Florida yard, the insurance carrier had concerns about water intrusion into the hull. A company hired to examine the hull did find moisture and recommended removing a 6′ x 6′ hull section. This work was never done.
Although the defendant picked up the bill for the grounding and rudder, it canceled the policy in September 2013. The vessel was moved to a different shipyard toward the end of 2013, where repairs were ultimately completed.
Under a new insurance policy, the vessel was struck by lightning in October 2014 and moved to Savannah, Georgia for repairs. These were completed in early 2016. The sailboat then set off on its final voyage in March 2016, from Georgia to Charleston. Shortly into the voyage, the boat started to take on water. The captain dropped anchor and called the Coast Guard for assistance. Despite efforts to save her, the boat was knee-deep in water, at which point the Coast Guard ordered the captain and mate off the boat. The vessel sank in the Intracoastal Waterway and was later found several miles away with her keel missing.
The insurance policy excluded coverage for damage due to osmosis, blistering, electrolysis, delamination, rust, corrosion, oxidation, marine life, marine borers, and several similar sources that were destructive over time. It appeared these types of issues caused water to seep into the hull and moisture to accumulate. However, the hull was never replaced. When the vessel sank three years later, a jury determined that there was no ‘occurrence’ during the policy period that caused this loss. This decision was upheld on appeal, and coverage was denied on the claim. This shows that damage that occurs over a long period has the potential to lead to difficult claims, due to the absence of a clearly defined ‘occurrence.’
As we enter 2025, we wish all the best to our readers… health and happiness to all of you and your families for the year ahead. And as always, please let’s keep our local businesses in mind, for boating and everything else. Happy New Year! Tim, Erol
Ref: No. 15-CVS-20506 D&B Marine, LLC, Plaintiff v. AIG Property Casualty Company f/k/a Chartis Property, Defendant., Court of Appeals of North Carolina No. COA 22-546
Tim is a NY-based maritime attorney and has taught law at SUNY Maritime College. Erol is a graduate of CUNY School of Law and Farmingdale State College.