Ask a Maritime Attorney: What does the “caused by” phrase in my insurance policy actually cover?

Question:

I recently reviewed my boat insurance policy and came across some troubling language that I was hoping you could explain. The policy defines the phrase “caused by” to mean “any loss that is contributed to, made worse by, or in any way results from that peril. The policy then goes on to exclude any loss “caused by” wear and tear, gradual deterioration, galvanic corrosion, lack of maintenance, fiberglass osmosis, blistering or marine life.  This definition of “caused by” appears to be an attempt to exclude the entire boat from a claim arising from the failure of a single part. As I read this, the failure of a corroded thru-hull fitting could sink the boat, and there would be no coverage at all for the entire loss. How would this actually work?

Answer

First, I want to complement our reader for actually reading his insurance policy and getting into the definitions that are set out in the policy.  The coverage provided by a marine insurance policy will vary from company to company, so it really is important to understand your coverage.

Marine insurance policies tend to exclude more casualties than they actually cover. I would need to see our reader’s entire policy and review the casualty in question to render a solid opinion, but I’m happy to offer some general observations.

First, it may be hard to believe but it is likely that the entire claim would be denied in the example provided by our reader.  Recreational marine insurance policies are generally “all risk” policies, which means they cover everything except claims that are expressly excluded. The exclusions tend to be lengthy. The language cited in his example is pretty broad but not

uncommon. The hypothetical example about a corroded thru-hull is on point and a good illustration.  Under his policy, corrosion damage is excluded along with any damage “caused by” the corrosion.  If the boat sank because of a corroded thru-hull fitting, the claim would clearly be excluded under the language of his policy.

The cause of the loss may not be immediately clear, and this is where the boat owner may find some relief on a disputed claim.  “Grey areas” can arise when evaluating policy exclusions.  A common complication is where the component in question failed because of a “latent defect.”  A latent defect is a problem that cannot be discovered under a reasonable and prudent inspection.  Common latent defect failures include components that are hidden from view or that show no external signs of pending failure and were thus undiscoverable under a reasonable inspection.  Latent defect coverage under a marine insurance policy may exclude coverage for the failed component itself if the loss was caused by an excluded peril but provide coverage for anything else that was damaged by the failure.

Evidence of the failure will need to be collected by a marine insurance investigator so the adjuster can determine the cause of the loss.  In the event of a disputed claim, I always recommend that a boat owner retain a marine surveyor who is experienced in claim investigation before he or she hires a lawyer.  The boat owner will then have his own investigator who will work with the insurance company investigator to determine the cause of the loss.  Be prepared for the investigation to take a while to complete. It may require forensic experts, such as metallurgists or accident reconstructionist to evaluate all of the evidence.  Yjis will take some time and it may be an expensive undertaking, but in the face of a denial of a large claim it will be worth it.

Marine insurance claims often involve an extensive investigation to determine the cause of the loss.  But boat owners will save time and money if they know and understand the coverage provisions of their policy before a claim arises.

David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.

David Weil is the managing attorney at Weil & Associates (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com,  or via email at dweil@weilmaritime.com.