Upon receiving a claim notice, it is often times a marine insurance company’s knee jerk reaction to tell the yacht owner to take all reasonable precautions to mitigate and lessen the damages or the claim will be denied. The yacht owner, wanting the marine insurance company to pay the claim, will hire various contractors to care for the damaged vessel and to undertake work designed to prevent additional damage from occurring. After the insurance company “investigates” the claim, the owner receives a letter stating coverage is denied because the owner breached one of the several warranties buried in the policy. If this happened to you, maritime law may provide recourse.
Can the Marine Insurance Company Deny My Claim After Requiring Me to Mitigate the Damage?
The answer depends upon whether the marine insurance company required you to mitigate the damage after it knew of the warranty breach. Nearly every yacht insurance policy requires the owner to minimize or prevent further damages after an accident. This is to protect the marine insurance company from having to pay more money associated with additional post-loss damage which could have been prevented. However, if the underlying claim is not covered by the policy because the owner breached a warranty, there is no obligation on the part of the yacht owner to mitigate the damage.
Many times, however, the insurance company becomes aware of the breach of warranty but, while in the process of deciding whether or not to pay the claim, requires the yacht owner to mitigate the loss. Sometimes this happens because you are a good customer and the insurance company is struggling with whether to deny the claim and risk you sending your business elsewhere. Other times the investigation report revealing the breach simply gets lost on the insurance adjuster’s desk – this happens more often than you think! No matter why it happens, maritime law is in your favor. Courts routinely find if the marine insurance company knows of a reason to deny the claim and still requires the yacht owner to undertake actions to minimize or prevent further loss, the marine insurance company cannot later deny the claim. Instead, courts find that the marine insurance company waives its defenses and must pay the claim!
If your marine insurance company wrongly denied your claim and would like to discuss your situation further, please contact our board certified maritime attorneys.