In the case of New Hampshire Ins. Co. v. Dagnone 2007 WL 293068, (C.A.1 R.I.,2007) No. 06-1048, decided Feb. 2, 2007, Dagnone purchased marine insurance on his yacht from NHIC, and renewed the policy every year from 1997 through 2003. In 2003, Dagnone renewed the policy so that the yacht would be covered from September 18, 2003 until September 18, 2004. The policy contained a general exclusion which stated:
1. RESTRICTIONS ON THE USE OF YOUR YACHT: There are certain restrictions on the use of your yacht under this policy. We shall not cover losses that occur while your yacht is being used in any way that is prohibited by this policy.
The applicable restrictions stated: “(d) Your yacht must be laid-up and out of commission during the period shown on the declarations.” Additionally, the dec page included: “Lay-up Warranty: Waranteed [sic] that the described yacht shall be laid up and out of commission and not used by the insured for any purpose during the period from 10/31 (at 12:01 am) to 4/15 (12:01 am).”
Dagnone contracted with a local captain, to winterize his yacht and take it to Hinckley Yacht Services. On November 22, 2003, the yacht was docked and the keys were left in it, per Hinckley's instructions. At this point, the captain had performed all of the procedures for winterizing the yacht except for anti-freezing the engines. Hinckley informed Dagnone that there were other boats to be hauled out for dry storage and that the boats would be hauled in the order in which they arrived. The captain stated that he would finish winterizing the yacht once it was hauled out. Dagnone's yacht remained docked from November 22 until December 6, 2003, when a storm struck the marina. During the storm, Dagnone's yacht broke loose from the dock and suffered $38,327 of damage. After the storm, Hinckley hauled out the yacht, and the winterization procedures were completed.
Dagnone promptly filed a claim with NHIC for the damage. On April 7, 2004, NHIC denied the claim, asserting that Dagnone had failed to comply with the provisions in the policy requiring the yacht to be “laid up and out of commission“ between October 31 and April 15.
On April 9, 2004, NHIC filed a complaint against Dagnone, seeking a declaratory judgment that Dagnone's claim was not covered by the policy. Dagnone filed a counterclaim against NHIC seeking coverage under the policy. NHIC and Dagnone both moved for summary judgment. The district court denied Dagnone's motion and granted summary judgment in favor of NHIC.
The court stated that the contract is clear: the policy does not cover damage to the yacht if it is “being used in any way that is prohibited by th[e] policy.“ It is true that Dagnone was not taking the yacht out for a brisk December cruise on the night it was damaged, however, the vessel was still fully operable. The yacht was still being used in the sense that it was in the water, having just been motored to the marina, and awaiting hauling out, rather than being laid up and out of commission, as required, i.e., being inoperable. To require some higher degree of use for the exclusion to apply would be contrary to the unambiguous meaning of the provision and would also defeat its clear intent: to encourage owners not just to stop using their boats during the winter, but to take affirmative steps to winterize their boats so that they are laid up and out of commission. Thus, we find that the policy's exclusions clause is susceptible of only one reasonable interpretation: the policy will not cover losses during the specified months if the boat is not laid up and out of commission.