Admiralty/Marine Insurance

In Reliance Insurance Company v. Keystone Shipping Company, 102 F. Supp. 2d 181 (S.D.N.Y. June 22, 2000), aff'd 2001 U.S. App. LEXIS 6047 (2d Cir. April 5, 2001) we were successful, on behalf of four underwriters subscribing to a standard form Bumbershoot policy, in establishing that the Bumbershoot policy does not require Underwriters to indemnify the insured for the approximately $6,000,000 it paid to defend and settle a claim by the purchaser of one of its vessels who claimed that the vessel had been sold in a state of disrepair. At trial in the United States District Court, the insured claimed that corrosion to the steel hull of a vessel it sold was not the result of normal wear and tear or lack of maintenance, but had occurred over a four-month period due to a phenomenon known as microbially-influenced corrosion ("MIC"). The court, however, agreed with our clients' position that the theory that MIC corroded the vessel was based on unreliable and unrecognized scientific analysis and testing. The court also agreed with our clients' position that Clause (1)(c) of the standard form Bumbershoot policy does not, despite its all encompassing language, cover damage to property while the insured owns the property even if a third party suffers damage as a result of the subsequent sale of the property. The decision of the District Court was unanimously affirmed by the Second Circuit.