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AIG wins cover fight over dinner cruiser sunk in Sandy


A federal appeals court has affirmed a $750,000 judgment in favor of an American International Group Inc. unit in connection with a dinner cruise ship that sank at a marina after being hit by Superstorm Sandy.

Owners of the dinner-cruise ship, Star of America, had made a repair agreement with Staten Island, New York-based Garpo Marine Services Inc., a marine and commercial ship repair business, under which Star would be delivered on Sunday, Oct. 28, 2012, and hauled to dry land before Superstorm Sandy hit on Monday evening, Oct. 29, according to Thursday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in National Union Fire Insurance Co. of Pittsburgh, Pa. v. Garpo Marine Services Inc.

“The boat was not hauled to land before the storm arrived and, during the ensuing high winds and rains, the boat battered the staging dock to which it was tied, and ultimately sank,” according to the ruling.

AIG unit National Union, as a subrogee of the boat’s owners, filed suit in U.S. District Court in Brooklyn, N.Y., on charges including breach of contract, breach of bailment and negligence. The court ruled in AIG’s favor and awarded it $750,000.

The ruling was upheld by a unanimous three-judge appeals court panel.  The decision focused on the breach of bailment claim, defining bailment as “the delivery of goods by their owner to another for a specific purpose, …with the express or implied promise that the goods will be returned after the purpose of the delivery has been fulfilled.”

“The district court correctly articulated the law of bailments….found that Garpo made an ‘oral (agreement) to repair the Star’ and that this ‘created a bailment when the vessel was delivered to the marina,’ giving rise to a presumption of negligence against Garpo when it returned the Star destroyed,” said the ruling.

Garpo does not dispute it was aware of the storm, and in the days preceding it allowed other vessels to berth at its safer pontoon dock to weather the storm, the ruling said. 

“Ultimately, none of these vessels sustained serious damage,” said the ruling. However, “no Garpo personnel made any attempt to better secure the Star.”

When the Star’s owners contacted Garpo on Monday morning, rather than warning them the staging dock where the ship was located was unsafe, “Garpo’s owner and the company’s office manager both simply advised the owners not to worry and told them that Garpo would take precautions. This was insufficient,” said the ruling, in affirming the lower court’s judgment.

Attorneys in the case could not immediately be reached for comment.

In March, a federal appeals court upheld lower court rulings in favor of Lloyd’s of London and a boatyard in litigation filed by the owner of a submerged yacht.







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