Tuesday, October 16, 2018

In the current issue of The Ensign, the magazine of the United
States Power Squadron, Tim covers the subject of wear and tear.  
If
a steering gear failure leads to a boating accident, or a failed hose
leads to a boat sinking at the mooring, are these events considered
spontaneous, or are they the result of something known as "wear
and tear?"


Wear and Tear - A Tricky Term in the Realm of Boat Damage

Wear and tear can be a tricky issue when it comes to examining
damage to a boat. It’s not so much the general concept of wear and
tear that’s confusing. The notion of a boat and its machinery being
worn away with use is straightforward enough. Inside an engine,
piston rings wear away as they slide up and down cylinder walls.
Below the waterline, propeller blades rotating at high speed wear
away as a result of cavitation. Boat owners accept this basic
premise.

The tricky part comes when “wear and tear” arises in the realm of
insurance claims. In this context, it is sometimes used as a legal
defense in denying property loss claims. Here’s an example. Let’s
say a boat sinks. The owner is likely to view the sinking as a single
catastrophic event, which could appear to be a covered loss in an
insurance policy. It seems like an open and shut case.

The owner of that boat expects a check to cover the loss. But the
insurance carrier sends out a surveyor to examine the boat after it is
raised. Based on the surveyor’s report, the carrier argues that the
sinking is the result of wear and tear of some component in the
chain of events. In other words, the boat didn’t merely sink out of the
blue. An actual case heard in federal court might illustrate how this
works.

The matter involved a 56-foot yacht that sank at a Fort Lauderdale
dock in calm weather. The root cause of the sinking was
determined to be the failure of a raw water intake hose. The vessel
had just completed a voyage from Virginia to Florida. Along the way,
it encountered severe weather, including twenty-foot seas. Things
were so bad that the crew feared the boat would break in half as it
was violently tossed about by the storm.

The insurance carrier denied payment for the loss, arguing that the
sinking was the result of wear and tear. Their survey indicated that
water entered through a failed raw water intake hose. The carrier’s
position was that the owner could have taken steps to ascertain the
poor condition of the 27-year-old hose.

The matter made its way to court, where both the insurance carrier
and the boat owner brought in their experts. The boat owner was in
a difficult position because sinking at dockside on a calm day could
suggest a boat that isn’t seaworthy. The insurance carrier’s expert
was a professional engineer with expertise in marine and
mechanical engineering, naval architecture, and failure analysis.

This expert described the hose as being soft and pliable. His report
noted signs of wear and tear and deterioration, with the hose being
about 90% severed. He added that a hose in such a state doesn’t
typically burst open. Rather, it develops small leaks that eventually
become larger leaks. According to the engineer, the cause of failure
was long-term degradation, wear and tear, and corrosion. He also
indicated that the hose looked old and was paper thin, exhibiting
cracks and rust stains. According to the carrier, this was proof that
the hose had not been maintained or inspected.  
In response to these compelling points, the yacht owner presented
evidence demonstrating that he was very diligent when it came to
maintenance. In the three-plus years he owned the vessel, he
spent around $75,000 on maintenance, repairs, and improvements.

The owner argued that he maintained an inventory of hoses that
could have provided a suitable replacement. He also raised the
point that he replaced fuel filters numerous times during the
voyage, placing him in a good position to observe any problems
with the hose that had failed.

One of the things that made the case difficult was that there were no
set guidelines for establishing the useful life of such a hose. In the
end, after hearing extensive testimony from both sides, the court
awarded $151,694.26 plus interest and attorney fees to the vessel
owner. What is the lesson here? This business of “wear and tear”
can be a contentious and complex issue. It also shows that such
cases can be costly to pursue or to defend because they often
require the testimony of expert witnesses with specialized technical
knowledge.

Reference: Markel American Insurance Company v. Olsen, Case
No. 10-11667, U.S. District Court, Eastern District of Michigan, 2013




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