11th Circuit Finds No Coverage for Shipbuilder under Marine Engineering Firm’s A&E Policy

On December 24, 2014, the United States Court of Appeals for the Eleventh Circuit published an opinion finding no coverage for a shipbuilder under a marine engineering firm’s Architect’s and Engineer’s professional liability insurance policy.  Atlantic Marine Florida, LLC, et al. v. Evanston Ins. Co., et al., No. 13-11342 (to view the opinion please click here).

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The litigation stemmed from a tragic accident resulting in the death of a ship’s captain who became trapped in the forward bulkhead door when it automatically shut as the captain turned off the ship’s power.  Due to the position of the door, rescuers were unable to access the door’s emergency release mechanism and as a result the captain tragically died.

The coverage dispute arose when the captain’s personal representative brought a wrongful-death action against the engineering firm, the shipbuilder and the bulkhead door manufacturer in claiming all three were independently at fault for the accident.  The relevant claims were: (1) the negligence claim against the shipbuilder alleging that it negligently manufactured and installed the door and (2) the negligence claim against the engineering firm alleging that it negligently designed the door and system in a manner which permitted a person to get trapped in the door without the ability to activate the release mechanism or disengage the door.

During the wrongful-death action, the shipbuilder demanded that the engineering firm and/or its insurers provide it with a defense.  The A&E policy covered the engineering firm for its liability to third parties for personal injuries caused by its negligence in performing professional services.   The engineering firm and its insurers rejected the shipbuilder’s demand.  The A&E insurer denied coverage because the shipbuilder was not designated as an “additional insured” and because the shipbuilder was being sued for its own negligence, not the engineering firm’s negligence in performing professional services.

The shipbuilder and engineering firm’s respective insurers separately settled the tort claim.  Subsequently, the shipbuilder and its insurer brought a declaratory action in the Middle District of Florida against the engineering firm’s insurers.  The Middle District found that the A&E insurer was obligated to provide the shipbuilder a defense and awarded the shipbuilder’s insurer the amount it paid toward the settlement as well as attorneys’ fees, prejudgment interest and costs.  The A&E insurer appealed.

In reversing the District Court’s findings, the Eleventh Circuit analyzed the A&E policy in connection with the wrongful-death complaint.  Because the claims against the shipbuilder arose out of allegations of the shipbuilder’s own tortious conduct and because the shipbuilder was never adjudged liable to the captain’s personal representative due to the engineer’s negligent design, the Eleventh Circuit found that the facts alleged in the wrongful-death action did not fall within the ambit of the A&E policy’s coverage.  Accordingly, the Eleventh Circuit reversed the District Court’s judgment and directed a judgment to be entered in favor of the A&E insurer.

It is important to remember the general rule in Florida that a carrier’s duty to defend arises solely out of the allegations of the complaint. Here, since the only allegations against the shipbuilder were improper installation, which is not a professional service, it would not be covered under a professional liability policy.

We look forward to continuing to update you on recent opinions rendered that impact the construction industry.

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