This insurance dispute arises from a marine allision involving multiple boats; one of which, sank. The P&I Underwriters insured L&L Marine Transportation under a protection and indemnity (P&I) policy. Atlantic Specialty also insures L&L, but under a hull and machinery policy. The sole question before the Court is whether Atlantic Specialty, under its hull policy, has a duty to defend L&L against the plaintiffs’ claims in the underlying lawsuit asserting L&L’s liability for the allision. In this dispute, P&I sought a judgment declaring that the Atlantic Specialty under the hull policy was obligated to defend L&L against the claims in the underlying property damage action.
The Court found a Hull and Machinery policy did not give rise to a “duty to defend.” The ruling confirmed long-standing precedent that an insurance policy is controlled by its terms and provisions. A Hull and Machinery policy, as an indemnity policy, requires only that the insurer reimburse the assured for defense costs which are properly covered under the policy and which erode the policy limits. Conversely, a traditional liability policy obligates the insurer to provide a defense for its assured pursuant to its “duty to defend” language, with the defense costs paid separately from the limits of liability.
Judge Feldman noted, “Precedent in this Circuit has consistently found that the language presented in the Atlantic Specialty hull policy does not create a duty to defend” “P&I has failed to point to any language in the hull policy that creates a duty to defend. Thus, absent any policy language to the contrary, the Court re-affirmed that a Hull and Machinery policy does not provide an obligation to defend the assured. (Continental Insurance Company, et al v. L&L Marine Transportation, Inc., et al, USDC EDLA, January 25, 2016)