Indiana Court Reverses Ruling on Watercraft Insurance Coverage

An Indiana Court of Appeals has reversed a prior trial court ruling concerning an insurance coverage dispute centered on watercraft exclusion. The case, Starr Indem. & Liab. Ins. Co. v. Am. Commer. Barge Line, LLC, revolved around historical operations at a barge cleaning facility managed by SBA in Jennings, Louisiana. Barges owned by National Marine were commonly serviced at this location between 1965 and 1993.

Over the years, the Environmental Protection Agency (EPA) identified the site as a Superfund due to extensive environmental contamination. As a successor of National Marine, ACBL was designated by the EPA as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 2015. This designation imparted liability for cleanup costs on ACBL, even though they did not directly cause the pollution.

In 2016, ACBL, along with other PRPs, entered into an agreement with the EPA regarding these obligations. Then, in 2020, ACBL sought a declaratory judgment for insurance coverage under four excess liability policies issued by Starr Insurers. ACBL argued that the policies, particularly those falling under Insuring Agreement C, which provided umbrella liability coverage for personal injury and property damage, should cover the cleanup expenses. Starr Insurers opposed this claim, citing the watercraft limitation provision in the policy, which excluded liabilities connected to the ownership or maintenance of any watercraft.

The trial court originally ruled in favor of ACBL, interpreting that the claims were not precluded by the watercraft limitation. However, Starr Insurers challenged this determination, contesting the policy’s interpretation of "liability arising out of.” ACBL suggested this phrase indicated direct causation, stressing the damages originated from hazardous waste handling at the shipyard, not from watercraft activities. In contrast, Starr Insurers contended for a broader interpretation, attributing liability to ACBL's predecessor’s involvement with hazardous substance-laden barges.

The appellate court ultimately concluded that CERCLA's strict liability provisions applied to the case. Under this legal framework, proving that ACBL directly caused contamination was unnecessary. The court found that the liability indeed arose from the ownership or maintenance of the watercraft, thereby activating the watercraft exclusion clause. This ruling overturns the trial court's initial decision, which had erroneously applied a negligence standard instead of the strict liability mandated by CERCLA.