May 13, 2019
The 2nd U.S. Circuit Court of Appeals in New York has affirmed the lower courts $750,000 judgment in favor of an American International Group Inc. unit in connection with a dinner-cruise ship that sank in a marina after suffering damages from Superstorm Sandy. The case is National Union Fire Insurance Co. of Pittsburgh, Pa. v. Garpo Marine Services Inc. No. 17-3286, 2019 U.S. App. LEXIS 13870 (2d Cir. May 9, 2019)
In 2012, the owners of the dinner-cruise ship, called Star of America, entered into a repair agreement with Garpo Marine Services, Inc., a marine and commercial ship repair business. Under the agreement, Star of America would be delivered on October 28, 2012, and hauled to dry land before Superstorm Sandy hit New York City on October 29th. Unfortunately, the boat was not hauled into land prior to the arrival of the storm and, during the high winds and rains the boat was battered against the dock to which it was tied, and ultimately sank. National Union, acting as a subrogee of the owners of Star of America, filed a lawsuit in the U.S. District Court in Brooklyn. Using a maritime law analysis the court ruled in favor of National Union and awarded it $750,000.
A unanimous three-judge appeals court panel upheld the ruling of the U.S. District Court, focusing on the breach of a bailment claim. In the suit, a bailment is defined as “the delivery of goods by their owner to another for a specific purpose, . . . with the express or implied promise that the goods will be returned after the purpose of the delivery has been fulfilled.” The ruling went on to say that “the district court correctly articulated the law of bailments.” And “found that Garpo made an 'oral (agreement) to repair the Star' and that this 'created a bailment when the vessel was delivered to the marina,' giving rise to a presumption of negligence against Garpo when it returned the Star destroyed”.
Garpo admits that it was aware that Superstorm Sandy was looming, and that it allowed other vessels to dock at a safer dock to weather the storm. None of those vessels sustained serious damage, and there is no evidence that any Garpo employee made an attempt to protect the Star from damage. Star's owners contacted Garpo on Monday, and were told not to worry, and that Garpo would take precautions, instead of warning the boat's owners that the dock where the ship was berthed was unsafe.
Editors Note: Litigation from Superstorm Sandy is ongoing and expensive for insurers. Although the agreement in the case at hand was an oral agreement between Garpo and the owners of Star, the owners of Star had an ongoing repair agreement with Garpo, and the oral agreement was a binding bailment, which gave rise to a presumption of negligence when the ship was destroyed. Had the two parties not entered into the oral agreement, there would likely have no presumption of negligence.