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Munich Re OK to deny cover for marine vessel’s failed engine

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Munich Re

A federal appeals court on Wednesday affirmed a lower court ruling in favor of a Munich Re unit in litigation over its coverage denial for a marine vessel’s failed engine.  

Coral Gables, Florda-based Wave Cruiser LLC purchased a marine all-risks insurance policy from Munich Re unit Great Lakes Insurance SE that provided $310,000 in coverage for a marine vessel it purchased, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Great Lakes Insurance SE v. Wave Cruiser LLC

Under an exclusion, the policy did not provide coverage for damage to the vessel’s engines unless it was caused by an “accidental external event,” such as a collision. 

A few months after its purchase, the vessel’s port engine suffered a catastrophic engine failure, the ruling said. Its engines had operated for 17 hours between a surveyor’s prepurchase inspection and the port engine failure, and its captain did not report rough weather or anything unusual before the failure, the ruling said. 

Great Lakes denied coverage, stating its policy only covered an accidental external event. It filed suit in U.S. District Court in Miami, seeking a declaratory judgment the policy did not cover the vessel’s damaged engine.  

Wave Cruiser filed a counterclaim charging Great Lakes with failing to investigate the claim fully and breaching its duty of good faith and fair dealing. 

The district court ruled in Great Lakes’ favor and was affirmed by a unanimous three-judge appeals court panel. 

“Wave Cruiser bore the burden to prove at trial that an external event caused the engine failure, and it failed to come forward at summary judgment with evidence to meet this burden,” the ruling said. 

Attorneys in the case did not respond to requests for comment. 

In May, a federal appeals court affirmed a lower court and ruled Great Lakes did not have to indemnify a bar and its owner for negligence stemming from a bar employee’s attack in the lounge’s parking lot because its policy’s assault-and-battery exclusion applies.