Insurance firm Travelers to pay $2m for sunken yacht

Insurance company Travelers has been ordered to pay Ocean Reef Charters $2m in damages for a superyacht that sunk during Hurricane Irma in 2017. After a lengthy legal dispute, a judge upheld a Florida court’s  ruling for the insurers to pay out.

Travelers was ordered to pay  Ocean Reef Charters for the loss of sunken 92ft My Lady, despite the charter company breaching the policy warranties. The 1998 Hatteras Yacht sank during the storm with no captain or crew on board at the time. One of the concrete pilings securing the yacht failed during Hurricane Irma, causing the yacht to strike the sea wall causing it to sink.

The insurance policy detailed a hull limit of $2m with all-risk coverage for accidental direct physical loss or damage to the vessel. Travelers denied liability based on Ocean Reef’s breach of the policy to have a captain and at least one member of crew on board at all times.

Ocean Reef recognised the potential danger to the yacht  two weeks before the hurricane hit Florida. The  operator offered its former captain, Michael McCall two weeks employment to sail the yacht to a safer location. McCall initially accepted the task and began to plan his route.

After studying the storm’s progression along the eastern seaboard however, he decided that there was no way to move the yacht safely. Ocean Reef then contacted Travelers seeking permission to move the yacht to refuge in the Intracoastal Waterway.

The Travelers’ agent instructed the yacht should not be moved without an approved captain. Based on this advice, the charter company instead made the vessel extra secure at the concrete piling. The category four hurricane, which caused damages of around $50bn in the US alone, ultimately sank the yacht.

Travelers filed a federal lawsuit against Ocean Reef in a New York court 16 days later in a bid to escape Florida state legislation that would require it to pay for the sunken vessel. The insurer claimed it was  not liable due to the absence of a professional crew and captain employed at the time of the damage.

The New York court ruled in Travelers’ favour, saying that federal maritime law requires strict compliance with warranties in an insurance policy. In 2019, this decision was reversed, and the case referred to a Florida court.

To avoid liability under Florida’s anti-technical statute, Travelers had to prove that Ocean Reef’s breach of the captain and crew warranties caused or contributed to the loss. This would typically be done by electing an expert, in this case a yacht captain, to give evidence in court.

In this trial, Travelers chose not to elect an expert to testify on its behalf . As a result, the district court ruled  Travelers could not prove  My Lady would not have sunk had the vessel been manned and relocated.

Since the insurance company was  unable to provide testimony from a licenced captain to prove the vessel would have remained safe if crewed, the court ruled in favour of Ocean Reef Charter. On May 5th, a judge upheld the Florida court’s final ruling that Travelers should pay  $2m in compensation  to Ocean Reef Charter for the loss of the vessel.