Guam Indus. Servs. V. Zurich Am. Ins. Co., No. 13-17005 (9th Cir. 2015)
Annotate this CaseGuam Industrial owned a dry dock that sunk during a typhoon in Guam. Guam Industrial filed a claim under two insurance policies to cover the cost of damage to the dock and the clean up of oil barrels. The district court granted summary judgment in favor of the insurers. Whether derived from federal admiralty law or state law, the court concluded that the law requires strict compliance with marine insurance policy warranties, even when the breach of the warranty did not cause the loss. In this case, the policies required Guam Industrial to obtain and maintain Navy Certification and Guam Industrial breached the warranty because the dry dock was never Navy Certified. The court concluded that the district court correctly ruled that since there was no actual discharge of pollutants, even though the containers of oil were submerged after the sinking, Guam Industrial’s costs of retrieving the containers from the sea were not covered by the policy’s allowance of coverage for cleanup after the “discharge, dispersal, release, or escape” of pollutants. Accordingly, the court affirmed the judgment.
Court Description: Insurance Law. The panel affirmed the district court’s summary judgment in favor of defendant insurance companies concerning coverage under two policies issued to Guam Industrial Services, Inc., arising out of the sinking of a dry dock, loaded with barrels of oil, during a typhoon on Guam. The Hull and Machinery Policy covered damage to the dry dock, and required as a condition of coverage that Guam Industrial obtain and maintain Navy Certification for the dry dock. The panel held that strict compliance with marine insurance policy warranties was required, even when the breach of warranty did not cause the loss. The panel applied that law to the facts, and concluded that Guam Industrial failed to comply with the Navy Certification warranty. The Ocean Marine Policy covered liability for property damage caused by pollutants. It was undisputed that no oil leaked out of the containers and into the water in the harbor. The panel held that because there was no actual discharge of GUAM INDUS. SERVS. V. ZURICH AM. INS. CO. 3 pollutants, even though the containers of oil were submerged after the sinking of the dry dock, Guam Industrial’s costs of retrieving the containers from the sea were not covered by the policy’s allowance of coverage for cleanup after the “discharge, dispersal, release, or escape” of pollutants. Judge Kozinski dissented in part, and would find that pollutants were “discharged, dispersed, and released” from the dry dock under the Ocean Marine Policy.
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