Chartis Property Casualty Co v. John Inganamort ( 2020 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 19-1903
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CHARTIS PROPERTY CASUALTY COMPANY
v.
JOHN INGANAMORT; JOAN INGANAMORT,
Appellants
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On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-12-cv-4075)
District Judge: Hon. William H. Walls
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Argued
January 15, 2020
Before: JORDAN, GREENAWAY, JR., and KRAUSE,
Circuit Judges.
(Filed: March 24, 2020)
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James Beagle [ARGUED]
12 South East 7th Street – Ste. 704
Fort Lauderdale, FL 33301
Counsel for Appellants
Neil V. Mody [ARGUED]
Thomas M. Wester
Connell Foley
56 Livingston Avenue
Roseland, NJ 07068
Counsel for Appellee
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OPINION OF THE COURT
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JORDAN, Circuit Judge.
Poems and books get written, songs sung, and movies
made about sinking ships.1 But there’s nothing stirring or awe-
inspiring about a yacht that partially sinks in calm waters while
docked. That, sadly, is the event at the center of this case. In
the insurance dispute that followed, the District Court granted
summary judgment in favor of the insurance company because
the yacht’s owners, Mr. and Mrs. Inganamort, did not carry
their burden of proving that the loss was a matter of chance –
1
See, e.g., Henry Wadsworth Longfellow, The Wreck of
the Hesperus, in Ballads and Other Poems (John Owen ed.,
1842); Gordon Lightfoot, The Wreck of the Edmund
Fitzgerald, on Summertime Dream (Reprise Records 1976);
Sebastian Junger, The Perfect Storm (1997); The Perfect Storm
(Warner Bros. 2000).
2
“fortuitous,” in the argot of insurance – which is a requirement
for coverage under the all-risk insurance policy the
Inganamorts had. Because we agree that an insured bears the
burden of proving fortuity, and that the Inganamorts did not
meet that burden here, we will affirm.
I. BACKGROUND
John and Joan Inganamort left their 65-foot fishing
vessel, Three Times a Lady, docked behind their part-time
residence in Boca Raton, Florida. In September 2011, when
they were at their home in New Jersey, the Inganamorts
received the sad news that Three Times a Lady had come to the
end of her rainbow,2 sinking enough to sustain serious damage.
They reported the loss to their insurance company, Chartis
Property Casualty Company, with whom they had an all-risk
policy.3 Chartis sent a claims specialist to conduct a
preliminary survey of the vessel on October 24, 2011. The
specialist reported three inches of standing water in the
starboard forward cabin bilge and multiple potential sources of
2
Hat tip to Lionel Richie, The Commodores, Three
Times a Lady, on Natural High (Motown Records 1978).
3
An all-risk insurance policy is one “that covers every
kind of insurable loss except what is specifically excluded.”
Insurance, Black’s Law Dictionary (11th ed. 2019). In marine
insurance, all-risk policies are “construed as covering all losses
that are ‘fortuitous.’” Goodman v. Fireman’s Fund Ins. Co.,
600 F.2d 1040, 1042 (4th Cir. 1979); see also Ingersoll Milling
Mach. Co. v. M/V Bodena, 829 F.2d 293, 307 (2d Cir. 1987)
(“All risk coverage covers all losses which are fortuitous ….”).
3
water ingress, including a hole in the hull the size of a screw.
He also found that the electrical breakers were “severely rust-
stained and blackened from an electrical failure[,]” and
subsequent testing “revealed obvious water intrusion[.]” (App.
at 171.) The final review of the vessel, completed June 28,
2012, confirmed the claim specialist’s initial findings and also
identified that the ship’s battery charger was not working, and
without a source of power, the ship’s bilge pumps had ceased
functioning. Despite that state of disrepair, the Inganamorts
pressed Chartis for payment on their insurance policy.
To settle the question of coverage, Chartis filed a
complaint in the United States District Court for the District of
New Jersey, setting forth three counts: a plea for declaratory
judgment that Chartis was not liable for the damage to Three
Times a Lady, a claim that the Inganamorts were liable for
material misrepresentations and rescission of contract, and a
reservation of rights to assert additional grounds for
declaratory judgment, misrepresentation and rescission. No
one disputes that an insurance policy was in place at the time
of the loss, so the question was, and remains, whether the
vessel’s partial submersion was a loss of the kind covered by
an all-risk policy, specifically, whether it was a fortuitous loss.
After prolonged discovery, the parties filed cross-
motions for summary judgment. The District Court’s Local
Rule 56.1 requires parties to file a statement of undisputed facts
with a motion for summary judgment, and it also requires
parties responding to a motion for summary judgment to
respond to the moving party’s Rule 56.1 Statement. In the
absence of a response, the local rules declare that the facts in
the movant’s Rule 56.1 Statement will be deemed undisputed.
Chartis sought summary judgment only on its declaratory
4
judgment claim, while the Inganamorts did not specify which
of the counts in Chartis’s complaint they thought warranted
summary judgment in their favor. They neither filed a
statement of undisputed facts nor opposed Chartis’s statement
of undisputed facts. The District Court thus treated Chartis’s
statement of facts as being undisputed. In further consequence,
the Court granted summary judgment for Chartis because the
Inganamorts “ha[d] no evidence to demonstrate a fortuitous
loss[.]” (App. at 19.)
The Inganamorts have timely appealed.
II. DISCUSSION4
We address a simple question of federal maritime law:
Who bears the burden of proving a fortuitous loss? Every
circuit to decide the issue has determined that the insured bears
that burden, and we agree. The Inganamorts did not carry it,
so we will affirm the decision of the District Court.5
4
The District Court had jurisdiction under 28 U.S.C.
§ 1333. We have jurisdiction under 28 U.S.C. § 1291. We
review a motion for summary judgment de novo, applying the
same standard the district court applied. Blunt v. Lower
Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir. 2014). Under
that standard, we will affirm a grant of summary judgment only
if there is no dispute as to any material fact and the moving
party is entitled to judgment as a matter of law. Id.
5
Chartis also argued in its Answering Brief that, if we
were to decide that the Inganamorts did carry their burden of
proving the loss was fortuitous, we should still affirm because
several exceptions to coverage apply. Since we conclude that
5
As already noted, when Three Times a Lady sank, it was
covered by an all-risk insurance policy, which protects against
fortuitous losses, meaning losses that are unexplainable or
“dependent on chance.” Intermetal Mexicana, S.A. v. Ins. Co.
of N. Am., 866 F.2d 71, 77 (3d Cir. 1989) (citation omitted).
All-risk policies “arose for the very purpose of protecting the
insured in those cases where difficulties of logical explanation
or some mystery surround the (loss of or damage to) property.”
Morrison Grain Co., Inc. v. Utica Mut. Ins. Co., 632 F.2d 424,
430 (5th Cir. 1980) (citation omitted). But just because an
insured need not “show the precise cause of loss to demonstrate
fortuity[,]” id. at 430, that does not mean an all-risk policy
covers all damage.6 “‘All-risk’ is not synonymous with ‘all
the Inganamorts did not carry the burden of proving fortuitous
loss, we need not address those exceptions.
6
The Inganamorts have misread Morrison Grain to
mean that an insured need only show that a loss occurred while
the policy was in effect. But that case did not dispense with
the insured’s burden to establish fortuity; rather, it concluded
the insured had impliedly met that burden by demonstrating the
ship’s cargo was in “good condition when the policy attached
and in damaged condition when unloaded from the vessel,” id.
at 432, leaving “no indication” that the loss was caused by
“anything but fortuitous circumstances.” Id. at 430. Likewise,
where cargo has simply disappeared without explanation from
ships’ hulls, courts have sometimes observed that all the
“insured need show is that the loss occurred.” See, e.g.,
Atlantic Lines Ltd. v. American Motorists Ins. Co., 547 F.2d
11, 13 (2d Cir. 1976) (citing Balogh v. Jewelers Mut. Ins. Co.,
167 F. Supp. 763, 769 (S.D. Fla. 1958), aff’d, 272 F.2d 889
6
loss.’” Intermetal Mexicana, 866 F.2d at 75. Despite the
Inganamorts’ argument, an insured must do more than prove
that there was a loss. To enjoy coverage, the insured must
prove that the loss was indeed fortuitous.
The First, Second, Fifth, and Eleventh Circuits have all
held that, for marine insurance policies, the insured bears the
burden of proving that the loss was fortuitous. See Banco
Nacional de Nicaragua v. Argonaut Ins. Co., 681 F.2d 1337,
1340 (11th Cir. 1982) (“The [insured] in a suit under an all-
risks insurance policy must show a relevant loss in order to
invoke the policy, and proof that the loss occurred within the
policy period is part and parcel of that showing of a loss.”);
Morrison Grain, 632 F.2d at 429 (“[T]he burden of proof
generally is upon the insured to show that a loss arose from a
covered peril.”); Atlantic Lines Ltd. V. American Motorists Ins.
Co., 547 F.2d 11, 12 (2d Cir. 1976) (“[F]or recovery under an
all risks policy, an insured need demonstrate only that a
fortuitous loss has occurred.”); Boston Ins. Co. v. Dehydrating
Process Co., 204 F.2d 441, 443 (1st Cir. 1953) (“Undoubtedly
… the owner of the barge and its cargo has the burden of
establishing … that its loss was caused by a risk insured
against[.]”). In the non-maritime context, we too have held that
an insured with an all-risk policy bears the burden of proving
that a loss was fortuitous and therefore covered by the policy.
See Intermetal Mexicana, 866 F.2d at 76-77 (describing what
the insurer showed to prove the event was fortuitous). We now
(5th Cir. 1959)). Again, however, where the record reflected
the cargo was previously present, those observations merely
reflect that it is unlikely “the average insured would not equate
a mysterious disappearance with a fortuitous loss” in those
circumstances. Id.
7
join our sister circuits in saying that, under a maritime all-risk
policy, the insured bears the burden of proving that a loss was
fortuitous.
That burden is not heavy, but it is more than negligible.
See id. at 77 (“[T]he ‘burden of demonstrating fortuity is not a
particularly onerous one[.]’” (quoting Morrison Grain, 632
F.2d at 430)); see also PECO Energy Co. v. Boden, 64 F.3d
852, 858 (3d Cir. 1995) (“Proving fortuity is not particularly
difficult.”). Since the nature of a fortuitous loss is that it may
not be easily explained, the insured need not point to an exact
cause of the loss. In re Balfour, 85 F.3d at 77 (“The insured …
need not prove the cause of the loss.”); Morrison Grain, 632
F.2d at 431 (“[C]ourts which have considered the question
have rejected the notion that the insured must show the precise
cause of loss to demonstrate fortuity.”). When a vessel sinks
in calm waters, for example, an insured may create a
presumption of fortuitous loss by establishing that the vessel
was seaworthy before sinking. See Ins. Co. of N. Am. v. Lanasa
Shrimp Co., 726 F.2d 688, 690 (11th Cir. 1984); Reisman v.
New Hampshire Fire Ins. Co., 312 F.2d 17, 20 (5th Cir. 1963);
Boston Ins. Co., 204 F.2d at 443. There must, in short, be some
showing that the loss occurred by chance.
Here, the Inganamorts’ primary argument was that they
were not required to prove fortuity, which, as the weight of
authority just cited proves, is incorrect as a matter of law.7
7
Counsel for the Inganamorts eventually admitted as
much at oral argument. See Oral Argument at 1:26-1:44,
https://www2.ca3.uscourts.gov/oralargument/audio/19-
1903ChartisPropertyCasualtyCov.Inganamortetal.mp3.
8
Secondarily, they attempted to show fortuity by asserting that
the loss was due to heavy rainfall. But Chartis’s statement of
undisputed facts notes that there is “no data to support [the]
theory that [Three Times a Lady] was subject to ‘heavy rains’
on any date.” (App. at 172.) Even if we were tempted to look
beyond the statement of undisputed facts, the evidence
elsewhere in the record does not support the assertion that the
loss was due to heavy rainfall. Not even the Inganamorts’ own
expert could say with assurance that there was heavy rainfall
in the area at the relevant time.8 Finally, while the Inganamorts
had initially claimed that the ship was seaworthy prior to
September 15th, they made no effort to present renewed
evidence of seaworthiness after the loss was backdated to
September 5th or 6th; nor did they press this argument before
the District Court or on appeal. Because there is nothing in the
record to support the argument that the loss was due to heavy
rainfall and there is no other indication of fortuity, the
Inganamorts did not carry their burden of proving a fortuitous
loss.9
8
The expert said that “[i]t had been reported in
September [2011] that two (2) or possibl[y] three (3 coastal)
events of heavy rains, lightning, and heavy thunderstorms did
drench South Florida with 5” to up to 15” of rain.” (App. at
217.) But he later backpedaled, saying he had looked at rainfall
for September 15th, the day the loss was reported, not
September 5th or 6th, the revised date of loss, and that, “you
know, weather records are extremely difficult to determine the
exact flow …[.]” (App. at 204.)
9
At oral argument, there was some discussion about
whether a loss resulting from negligent behavior, or
negligently failing to maintain a vessel, would qualify as a
9
fortuitous loss. See Oral Argument at 20:25-27:32
https://www2.ca3.uscourts.gov/oralargument/audio/19-
1903ChartisPropertyCasualtyCov.Inganamortetal.mp3.
Losses that result from negligent behavior can be considered
fortuitous, but losses caused by wear and tear typically cannot.
See Goodman, 600 F.2d at 1042 (“A loss is not considered
fortuitous if it results … from ordinary wear and tear ….
However, loss due to the negligence of the insured or his agents
has generally been held to be fortuitous and, absent express
exclusion, is covered by an all risks policy.”); see also Youell
v. Exxon Corp., 48 F.3d 105, 110 (2d Cir. 1995) (“The fortuity
rule excludes from coverage losses that arise from … wear and
tear …; losses that arise from … the insured’s negligence[ ] are
covered.” (vacated on other grounds, 516 U.S. 801 (1995)).
We question the suggestion that a loss caused by negligently
allowing a vessel to fall into disrepair would be considered
fortuitous, as it would seem to create perverse incentives if
damage resulting from failure to maintain a vessel were
considered as such. Indeed, this would effectively convert all-
risk insurance policies into general maintenance contracts or
“warrant[ies] of soundness,” leaving the insurer liable for all
maintenance costs except for those expressly excluded. Mellon
v. Federal Ins. Co., 14 F.2d 997, 1002 (S.D.N.Y. 1926). For
that reason, courts that have taken that tack and expanded
fortuity to include losses caused by the premature failure of a
ship’s mechanical components have been criticized. See
Michael I. Goldman, The Fortuity Rule of Federal Maritime
Law: The Scope of “All Risk” Coverage Under Policies of
Marine Insurance and the New Decision of the Eleventh
Circuit Court of Appeals, 46 J. Maritime L. & Com. 171
(2015). Expanding fortuity to include losses caused by
negligently allowing a vessel to fall into disrepair would appear
10
III. CONCLUSION
The Inganamorts having failed to carry their burden of
proof, we will affirm the District Court’s grant of summary
judgment against them.
equally ill-advised. But because neither party raised the issue
in briefing nor addressed it more than in passing at argument,
we do not need to decide the question.
11