Maritime law recognizes the right of the insurance carrier to investigate accidents without undue delay. This is sometimes addressed in the terms of the policy as a duty of the vessel owner. Failing to provide prompt notification of a collision, grounding, or injury could “prejudice the carrier’s rights.”
The term “prejudice” here has nothing to do with discrimination or bias. It simply means the insurance carrier’s rights are compromised by depriving them the opportunity to promptly investigate a claim at the time of an accident. This issue arose in a recent federal court case in the Eastern District of Louisiana. It involved a towing vessel losing control and running into a waterfront property in March 2020.
The vessel caused damage to the concrete erosion protection of a waterfront home in Houma, La. The homeowner filed suit against the vessel owner, operator, and the vessel itself. The vessel was “arrested” by the U.S. Marshall, pursuant to a warrant.
The process of “arrest” here is not quite the same as handcuffing a perpetrator at a crime scene. “Arrest” in maritime law means the vessel is detained to satisfy money claims. Unfortunately, the insurance carrier here had not learned of the accident until over a year went by. During that period, damages to the property worsened. Damages in the ballpark of $3,500 were discussed in early settlement negotiations. But payment was never made, and damages grew to around $200,000. The court sided with the insurance carrier that its rights had been prejudiced by delays in notifying them.
Whether a situation involves a hull damage claim after a storm or a Jones Act injury on a towboat, the same rules apply. Delays in notifying the carrier mean that surveyors lose the opportunity to inspect the vessel. Doctors lose the opportunity to examine the crewmember’s injuries. Eyewitnesses forgot details. Physical evidence deteriorates. Repairs are made. The list goes on.
Maybe the lesson here is that if a claim arises, it’s best to notify insurance carriers without delay. Otherwise, they could raise the argument that they lost the opportunity to promptly investigate the matter. And that could result in their refusing to defend the vessel owner in a lawsuit.
Re: Champagne v. M/V Uncle John, 634 F. Supp.3d 293, U.S. District Court, Eastern District of Louisiana
