5th Circuit: Builder’s Risk Insurer May Recoup Payment for Damage to Docking Facility

By Claims Journal staff | June 14, 2022

A doctrine that prevents parties from seeking reimbursement for intangible economic losses caused by maritime negligence doesn’t prevent an insurer from recouping $1.7 million it paid to a policyholder for damage to a structure used to moor boats, a panel of the 5th Circuit Court of Appeals ruled.

The appellate panel reversed a decision by a federal judge in New Orleans to dismiss a lawsuit by XL Insurance America against a barge operator that pushed a vessel into a structure that was part of a docking facility on the Mississippi River.

XL sold a builder’s risk policy to Boh Brothers Construction Co., which had been hired by Plains Marketing, an oil distributor, to upgrade its docks in St. James, Louisiana. On Feb. 12, 2019, a tugboat called the M/V Affirmed pushed an empty tank barge into a mooring dolphin, which is a large pylon that extends from the river bottom.

XL reimbursed Boh Brothers for the $1,254,000 it spent repairing the mooring dolphin and $485,000 that the construction company paid to Plains for its for economic damages. To recoup the amount paid on the claim, the insurer filed a subrogation lawsuit against the owner and operator of the tugboat, Turn Services LLC and Associated Terminals, and the owner of the tanker that was being pushed, Kirby Inland Marine.

The defendants argued that a 1927 Supreme Court decision in Robins Dry Dock & Repair Co. v. Flint established that plaintiffs may not recover “purely economic claims” in maritime negligence suits. The purpose of the holding was to limit indirect economic repercussions and “the specter of runaway recovery,” the appellate panel explained.

U.S. District Judge Ivan L.R. Lemelle, with the US District Court for Eastern Louisiana, agreed that the Robins case prohibited XL from recovering its costs and granted a motion by Turn Services for summary judgment.

The 5th Circuit panel’s opinion says that the Robins case doesn’t go so far as Turn Services would like. Boh Brothers did not suffer a “pure economic loss” as was discussed in the Robins case, the panel said. The term is typically used to describe intangible losses, such as wages not earned because of an injury.

The 5th Circuit said Boh Brothers paid more than $1.2 million to replace the damaged mooring dolphin. The panels said the record isn’t clear on why Boh Brothers paid the additional $485,000, but it assumes that it was compensation for economic damages.

“We perceive no reason, then, that Robins Dry Dock bars recovery in this situation,” the panel opinion says. “It is clear, after all, that the doctrine would be inapplicable here if XL had paid the money directly to Plains, because Plains had a proprietary interest in the damaged dolphin.”

The panel vacated the decision to dismiss XL’s lawsuit and remanded the case to the trial court.

About the photo: The mooring dolphin allegedly damaged when it was struck by a tanker is shown. (Image copied from XL Insurance’s civil complaint.)

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