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Lewis v. Aetna Insurance Co.

January 25, 1973


Appeal from Circuit Court, Multnomah County. Patrick E. Dooley, Judge.

Robert E. Nelson, Portland, argued the cause for appellants and cross-respondents. With him on the briefs were McCarty & Swindells, Portland.

Edwin J. Peterson, Portland, argued the cause for respondent and cross-appellant. With him on the brief were Tooze, Kerr & Peterson and Farrand M. Livingston, Portland.

In Banc. Denecke, J. Bryson, J., specially concurring. McAllister, J., joins in this opinion.


Plaintiffs are the owners of a 46-foot Chris-Craft, the Manatee. The defendant carried hull insurance on the Manatee which was evidenced by a "yacht policy." The boat was found sunk in its boat-house on the Columbia River. It was raised and repairs were commenced. Plaintiffs brought this action for the cost of repairs. The jury returned a verdict for the plaintiffs, but the trial court set it aside and entered judgment for defendant. Plaintiffs appeal.

Plaintiffs contend the damage was covered under the clause insuring against damage caused by the "Bursting of boilers, breakage of shafts or any latent defect in the machinery or hull * * *." This clause has been in hull policies for over 80 years and is referred to as the "Inchmaree Clause" after the vessel whose uninsured loss brought about the inclusion of such coverage in the hull policy. The plaintiffs contend a latent defect caused the loss.

The evidence is that the Manatee sunk because of leaks in the hull; however, the cause of the leaks is unknown. The issue is whether from this evidence the jury can infer that the leaks were caused by a "latent defect" within the meaning of the Inchmaree Clause.

A witness testified that leaks were in the seams on the sides of the keel; however, he could not determine why the leaks occurred. He could not find any rotten wood in this area. He put in some caulking, but not along the entire seam where it was leaking. The witness was of the opinion that the caulking was not deficient. The boat was put back in the water and each day less water came in until eventually she became tight without any repairs to the seam. The only possible explanation for her recovery was that the space between the seams filled with silt from the river or "gunk" from the bilge.

The Manatee was 21 years old but was an expensive boat, of good construction and in good condition. The expert called by plaintiffs testified: "* * * [W]ith a boat of this age, it would probably be not too common that something like this would happen." The Manatee's last cruise before she sank was on December twenty-seventh. About January first one of the plaintiffs showed the Manatee to friends and she appeared in good condition. The vessel was found sunk on January fourteenth.

In determining whether there was sufficient evidence we start with the premise that the insured has the burden of proving that the loss was caused by a peril insured against. Shaver Co. v. Eagle Star Ins. Co., 172 Or 91, 114, 139 P2d 769 (1943). In the instant case there is no direct evidence that a latent defect caused the loss. The problem, reduced to its fundamentals, is whether the circumstantial evidence raises a strong enough inference of loss because of latent defect that the issue should be submitted to the jury.

The problem is the same whether the insured is contending that the loss was caused solely by a latent

defect or by some other peril insured against in a hull policy such as the perils of the sea or of the rivers. In most of the cases the insured is claiming that the loss was caused by several perils, alternatively or cumulatively.

Massey S.S. Co. v. Importers' & Exporters' Ins. Co., 153 Minn 88, 189 NW 415, 31 ALR 1372 (1922), is a leading older case holding that if there is evidence that the ship is seaworthy, and there are no other apparent causes for the loss, the jury may infer that the loss was caused either by the perils of the sea or a latent defect. The vessel was a lake freighter with a wooden hull and was built in 1891. In 1918 it was thoroughly repaired, inspected by the American Bureau of Shipping in March 1919, and approved. On her second voyage thereafter she encountered a gale, but rode well. On the third, she sprang a leak which the pumps could not handle and she sank. There was a possibility she hit an underwater object when unloading at the end of her second trip; however, the plank that was possibly stove in did not admit water until the rougher water of Lake Superior was encountered. This later theory, however, the court stated, "rests on no substantial foundation of fact." 153 Minn at 92. The court held there was sufficient evidence for the jury to find the loss was covered.

This same reasoning was followed 35 years later by Judge John R. Brown, writing for the court in Tropical Marine Prod. v. Birmingham Fire Ins. Co. of Pa., 247 F2d 116 (5th Cir 1957). The Sea Pak was a wooden vessel, probably built during World War II. It was completely overhauled in the summer of 1953. She was fishing in ...

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