Fortuity Doctrine Prevented Coverage for Known Loss Following Boating Accident

The Fifth Circuit recently issued an unpublished decision discussing the application of the “fortuity doctrine” under Texas Law.  The underlying lawsuit involved a boating injury.  Plaintiffs suffered serious injuries when their fishing boat collided with a utility boat in a canal near Venice, LA.  In the lower court, the defendants won on summary judgment, with the court concluding that coverage was not available under two Marine Protection & Indemnity policies issued in 2006 and 2008.  On appeal, the Fifth Circuit affirmed the grant of summary judgment, and the district court’s straightforward application of the fortuity doctrine:

Fortuity is an inherent requirement of all risk insurance policies.  “The concept of insurance is that the parties, in effect, wager against the occurrence or non-occurrence of a specified event; the carrier insures against a risk, not a certainty.”  “The fortuity doctrine precludes coverage for two categories of losses: known losses and losses in progress.”  The “known loss” aspect of the fortuity doctrine precludes coverage “where the insured is, or should be, aware of . . . [a] known loss at the time the policy is purchased.”  “A ‘known loss’ is one that the insured knew had occurred before the insured entered into the contract for insurance.”

The 2008 policy provided coverage from May 18, 2008, until May 18, 2009.  The accident in this case occurred on May 1, 2008, more than two weeks before the effective date of the policy.   The fortuity doctrine bars coverage for the accident in this case because it was a known loss at the time the policy took effect.

Sosebee v. Certain Underwriters at Lloyds London, No. 13-30738, slip op. (5th Cir. Apr. 30, 2014).