New Maritime Insurance Case from Seventh Circuit - Egan Marine Corp. v. Great American Insur. Co.

New maritime insurance case from the Seventh Circuit Court of Appeals.  The case involves a pollution insurance policy and coverage for an oil spill following a vessel explosion in Chicago.  The case is Egan Marine Corp. v. Great American Insur. Co., 2011 U.S. App. LEXIS 23369 and the original opinion can be found here.

The facts underlying the original incident are simple.  A barge laden with oil exploded resulting in a salvage and cleanup effort.  An insurance policy provided the insured with coverage for pollution cleanup activities. 

The first part of the opinion addressed the insured's appeal.  The insured was hired by the insurance company to coordinate the cleanup activities at an agreed upon 80% of normal rates, presumably to only pay for costs not profit.  The parties disagreed as to whether the remaining 20% constituted an agreement as to the amount of cost (vs. profit) or whether the carrier had the ability to review and approve only the actual cost.  The opinion continues to analyze the policy language in light of claims for costs after federal liability ended, then briefly discussing a bad faith allegation against the insurer.

On cross-appeal, the insurer argued that its policy only covered the tug vessel and not the barge carrying the oil, ergo no coverage.  The appeals court found that since the barge was not capable of propulsion without the tug, treating them as distinct vessels would lead to a "curious result."  The remaining issues on appeal dealt with specific reimbursements for costs and the oral contract regarding the 20% reduction.

Interesting case involving oil spills and oil pollution policies.  Definitely one to keep handy for mishaps.