A High-Stakes Dispute Over Modern Tugs and Broken Promises
A major legal battle is unfolding in the maritime industry as vessel operator Foss Maritime has taken the extraordinary step of suing its own insurance providers, transforming a claims dispute into a public legal challenge. At the heart of the conflict is a federal lawsuit alleging that Navigators Insurance Company, Zurich American Insurance Company, and Ascot Insurance Company failed to honor their contractual duties. The insurers have allegedly delayed a coverage decision for years, leaving Foss to foot a multimillion-dollar bill for catastrophic mechanical failures on four of its new, state-of-the-art tugboats. This timeline breaks down the key events that led to the lawsuit, shedding light on a complex case that touches upon issues of builder negligence, equipment defects, and the fundamental responsibilities of an insurer to its policyholder. The outcome of this high-stakes case could have significant implications for marine insurance standards and contract law for years to come.
From Delivery to Lawsuit: A Timeline of Mechanical Failures and Insurance Delays
The journey from the launch of a new fleet to a bitter legal feud was marked by critical equipment failures, escalating costs, and a prolonged silence from the very companies hired to manage risk. This sequence of events illustrates how a promising investment in modern maritime technology soured, forcing Foss to fight a two-front battle not only against its suppliers but also against the insurers it had paid to protect its assets.
2020-2021 – A New Fleet Encounters Critical Defects
Between April 2020 and June 2021, Foss Maritime celebrated the delivery of four new tugs built by Nichols Brothers Boat Builders. These powerful vessels were equipped with advanced azimuth stern drive propulsion units supplied by Kongsberg Maritime. However, the optimism was short-lived. Soon after entering service, the tugs began experiencing severe and systemic mechanical issues. Critical internal components within the thrusters, including essential bearings and O-rings, started to prematurely fail and, as described in the legal complaint, effectively “destroy themselves.” This internal breakdown caused significant consequential fatigue damage to the installation frameworks where the thrusters attach to the tugs’ hulls, jeopardizing the structural integrity of the entire fleet.
2021-2022 – Foss Files Claims and Awaits a Decision
Faced with mounting problems and costly repairs, Foss formally notified its lead insurer, Navigators, of the extensive damage. The first notice of a claim, which covered three of the four affected tugs, was dispatched on January 25, 2021. As the fourth tug began exhibiting the same destructive failures, a subsequent notice was filed on July 28, 2022. According to Foss, these claims meticulously detailed the damages and pointed to what it believed were covered perils under its comprehensive “Marine Hull / Liability Package” policies. This period marked the beginning of a long wait, which Foss alleges became a systematic and prolonged failure by the insurers to properly investigate, evaluate, and render a decision on the claims.
March-June 2023 – Seeking Accountability from the Builder and Manufacturer
While awaiting a substantive response from its insurers, Foss Maritime took direct action against the parties it deemed responsible for the faulty equipment. The company contends that the catastrophic failures stemmed from two distinct root causes. First, it alleges the builder installed a single-bearing thruster instead of the specified double-bearing model without making the necessary structural modifications to support it. Second, it claims there were latent design defects within the Kongsberg-manufactured thrusters themselves. Consequently, Foss initiated separate arbitration proceedings against Nichols Brothers Boat Builders in March 2023 and against Kongsberg in June 2023, seeking to recover damages for the flawed construction and design.
December 2023 – The Breaking Point: A Federal Lawsuit Is Filed
After years of alleged inaction and silence from its insurance providers, Foss Maritime reached a breaking point. On December 11, 2023, the company filed a federal lawsuit against Navigators, Zurich, and Ascot. The complaint forcefully accuses the insurers of breaching their contract and their common-law duty of good faith. Specifically, the lawsuit alleges they failed to accept or reject the claim, refused to reimburse Foss for over $2.5 million in past repair costs, and declined to indemnify the company for future repairs or the legal fees associated with its arbitration efforts. This legal action officially escalated the dispute from a frustrating claims-handling issue to a public court battle.
Key Turning Points and Emerging Patterns in the Dispute
The timeline of the Foss Maritime case revealed several critical moments that shaped its trajectory. The first major turning point was the discovery that the failures were not isolated incidents but a systemic problem across a new class of vessels, pointing toward fundamental design or construction flaws rather than simple wear and tear. The second was the insurers’ protracted silence, which transformed what could have been a standard insurance claim into a potential bad-faith dispute. This alleged inaction forced Foss into a complex two-front legal strategy: pursuing the manufacturer and builder in arbitration while simultaneously suing its own insurers to compel them to honor the policy. An overarching theme that emerged was the inherent tension surrounding an insurer’s subrogation rights; Foss argued that Navigators stood to benefit financially from any recovery in the arbitrations, making its failure to support those efforts all the more egregious.
Navigating the Complexities of Marine Insurance and Bad-Faith Claims
This case delved deep into the nuances of marine insurance contracts. Foss’s claims hinged on broad protections offered by an “Additional Perils” clause, which covered damage from negligence or latent defects, and a “Liner Negligence Clause.” While these clauses contained narrow exclusions for replacing a part condemned solely due to a latent defect, Foss argued this did not apply to the extensive consequential damage that cascaded through its vessels. By bringing claims under Washington state’s Insurance Fair Conduct Act and Consumer Protection Act, Foss raised the stakes beyond simple contract damages. These statutes allowed for the recovery of attorney fees and treble damages, adding a punitive element intended to deter what it framed as unfair or deceptive insurance practices. This legal strategy effectively reframed the conflict, moving it from a disagreement over policy interpretation to a powerful accusation of systemic bad faith.
