Court Rules that Sunken Barge Damage Must Be Covered by Insurer

During repairs to the Coney Island Steeplechase Pier, a spud barge sank and damaged the pier further. The court had to decide if the insurer was responsible for the barge's damages.
By: | February 7, 2020

Hurricane Sandy battered the East Coast in late 2012, causing billions of dollars in damage.

The Coney Island Steeplechase Pier, which sits on the southern side of the island, was substantially damaged from the hurricane. The City of New York sought to repair the damage, and Coastal Environmental Group was subcontracted to complete the repairs.

When Coastal began its work, the company-chartered MIKE B, a spud barge, from Sterling Equipment Inc. was used to lower spuds into the sea floor. These spuds would then be welded onto the barge’s deck and the bottom of the barge to prevent the structure from moving horizontally.

By chartering the MIKE B, Coastal was obligated to secure both hull insurance and protection and indemnity insurance covering third-party claims. Coastal looked to add the MIKE B to its preexisting coverage, held through Atlantic Specialty Insurance Company.

Within a few hours of requesting this, Coastal received a quote from its insurer showing that if it assumed a higher deductible, Coastal could have the premiums for the additional coverages. There was also an understanding that the MIKE B would be held in protected waters, not in the ocean, while doing repairs.

Once all was said and done, Coastal took control of the MIKE B and placed it on the sea floor.

Then a storm hit.

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The MIKE B failed, and water soon entered the barge. The incoming water shifted the machinery, striking the pier in the process and damaging it further. Coastal turned to its insurer, but Atlantic denied coverage.

Coastal persisted, claiming over $1.2 million under the policy. When at Atlantic still refused, the two entities took the fight to court.

A district judge ruled in favor of Coastal, stating that Atlantic improperly denied coverage under both the hull insurance policy for the loss of the MIKE B and the barge salvage costs, and the protection and indemnity policy for pier damage.

Atlantic appealed the ruling. It argued that the MIKE B was only damaged because of ‘unexpected sea conditions.’ But the court said that was a named peril.

Scorecard: Appeals court sided with Coastal, solidifying the district judge’s ruling. Atlantic will cover the damages to the MIKE B.

Takeaway: Policy wording is crucial when it comes to determining if something is covered or not. &

Autumn Heisler is the digital producer at Risk & Insurance®. She can be reached at [email protected]

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