The United States Court of Appeals for the Third Circuit Court recently handed down an impactful ruling that will effect insureds. In Chartis Prop. Cas. Co. v. Inganamort, 953 F.3d 231 (3d Cir. 2020), the Third Circuit considered whether the insureds met their burden of proof in establishing a “fortuitous loss" under an all-risk insurance policy issued to them by their insurance carrier.

In this matter, the insureds' fishing vessel sustained damage, in 2011, when it was partially sunk while docked at their residence. After the insureds filed a claim under their all-risk policy, the insurance carrier sent a claims representative to conduct a preliminary survey of the vessel. After conducting several tests, the representative ultimately surmised that there was “obvious water intrusion”, caused by multiple potential avenues of water ingress. The insurance carrier stated that the insureds' loss was not covered by the applicable policy and filed a declaratory judgment action in the United States District Court for the District of New Jersey to affirm its stance that it was not liable for the damage to the insureds' vessel. The insurance carrier was successful in its summary judgment motion at the trial level, with the District Court holding that the insureds did not provide any evidence to show a fortuitous response.

The insureds subsequently appealed to the Third Circuit. The insureds argued, to the Third Circuit, that it was not required to prove the loss was fortuitous. Additionally, the insureds argued that the vessel sustained damage from “heavy rainfall”, which should be constituted a fortuitous loss as a matter of law. Id. at 235.

This issue before the Third Circuit was, "[w]ho bears the burden of proving a fortuitous loss?" Id. at 234. The Third Circuit concurred with the District Court, noting that "[e]very circuit to decide the issue has determined that the insured bears that burden" Id. The Third Circuit agreed with the other circuits, opining that a “fortuitous loss” – in the context of an all-risk insurance policy – was like an unexplainable loss or something that was “dependent on chance”. Id. (citing Intermetal Mexicana, S.A. v. Ins. Co. of N. Am., 866 F.2d 71, 77 (3d Cir. 1989) (citation omitted)). The Third Circuit noted that while an insured is not tasked with showing the exact cause of a loss, it does bear the burden of proving that the loss was fortuitous.

The Third Circuit then considered whether “heavy rain” equated to a “fortuitous loss”. In considering this, the Third Circuit relied on the insurance carrier's statement of undisputed facts, which did not contain any evidence backing up the insured's arguments that there were “heavy rainfalls” on or around the alleged incident date. The Third Circuit therefore held that the insured failed to show that the damage to its vessel was caused by a fortuitous loss.

Contact us if you have any questions or would like discuss this important decision and how it affects a potential claim against your insurance carrier.