United States: Insurance Recovery Law: History's Best Decisions: Fountain Powerboat

Last Updated: August 17 2016
Article by Mark Miller

Today we present the first part of our series, Insurance Recovery Law: History's Best Decisions. The topic of this video is perhaps the most important business interruption insurance decision of all time, Fountain Powerboat Indus. v Reliance Ins. Co., 19 F Supp 2d 552, (ED NC 2000). In this case, The Fountain Powerboat company of North Carolina had a work slow down as the result of hurricane Floyd. They pursued relief under their property insurance policy pursuant to an "ingress egress" provision. Their insurance carrier denied coverage based on an all to common insurance industry custom and practice — denying coverage because there was no physical damage to insured property. The Court flatly rejected insurance industry custom and practice in favor of insurance policy language.

Watch the video find out what happened, and to find out why this is one of the most important insurance recovery law decisions of all time.

We have included a transcript of today's video below:

Insurance Recovery Law

History's Best Decisions: Fountain Powerboats Decision

First up, the Fountain Powerboats decision out of North Carolina. Fountain Powerboats, if you're into the motor boating, so to speak industry and you have a boat or you've ever had a friend that had a boat, people know Fountain Powerboats is one of the premium brands and they're headquartered in North Carolina.

What happened here? Well this is an insurance case, a business interruption type of insurance case, so it's a property damage case. Fountain Powerboat has manufacturing facilities which are located off of, and get this, the road is Whichards Beach Road. Whenever you hear of a beach road, it's one of those things that runs through the sand dunes and it's kind of like on the barrier islands or it's right on the coast. Just by the name of that, you're thinking, well that's probably right on the water. Well sure enough it is right on the water. What happened was Hurricane Floyd struck in 1999. Hurricane Floyd hits in 1999 and it floods. It floods Whichards Beach Road which is right on the beach and for 10 days they couldn't get people into their facility. There was only one way in and out and it was flooded.

What happened? Well over those 10 days, Fountain Powerboats lost about $1 million. What's interesting here is some people got in so what did they do to minimize their loss? Well they got people with a bunch of trucks and they brought people in. They were big trucks, and they tried to bring their people into the factory to work, which is a great thing to do because you don't want to completely shut down. They put as many people as they could on the trucks and they tried to bring them in through the flooded waters over that 9 or 10 day period and they got them in there and their production was down 33%, so it wasn't a complete shutdown. It's just like, "Hey, we lost $1 million because we were a third off in our production because of this flood."

What happened? They tender to their insurance company, Reliance Insurance Company, and Reliance says, "Nah, we're not going to pay that." They said, "Well here, here, here. We want this covered." Fountain Powerboats was very smart here. They specified exactly what they wanted they wanted to cover under what provision. That provision was called a loss of ingress or egress provision, and those are in property policies. I'll just read what that provision says. It says, "This policy covers loss sustained during the period of time as a result of a peril not excluded." Here, the peril not excluded was the hurricane. That was covered. The flooding was covered. "As a result of a peril not excluded, ingress to or egress from real or personal property is thereby prevented." Basically. I shortened it a tiny bit.

By it's terms, it says, "Hey. If you got a covered peril, and ingress or egress is to a facility or property is hindered, we're going to pay for that." It was very clear. The language was exceedingly clear, but nonetheless the insurance company said, "Hold on. Hold on. It's not what the policy says, it's the way we do things and the way we do things here is we don't cover that unless you had physical damage to the facility." They're like, "But the facility was on high ground. It wasn't flooded. We had no problem at the facility. We had no property that was damaged. Nothing was physically damaged. The building is standing, there were no boats that were harmed. There was none of that. We just couldn't get in or out." The insurance said, "The way we do these things, we're not covering it."

What happened? Brought to court and the court, of course, held in favor of Fountain Powerboats. They said, "Look. Read the provision. It's not what the insurance company does that matters. It's what the policy says and if you read the provision, it's perfectly clear. Loss of ingress or egress in the policy. It's very clear," the court said. The court said, "If there's any sort of preventing of getting into or out of the property by a covered peril, the insurance company has to cover the loss." Great decision. The insurance company had to cover the loss.

This decision is huge for at least 3 important reasons. 1, you don't have to have property damage to your facilities to recover lost income. Insurance companies have been arguing that you need some sort of property damage to your facility or to your property for any of the coverage grants to be triggered. This is flat out wrong and this decision holds that. You don't need property damage to trigger coverage, especially under ingress or egress coverage. You don't need a complete shutdown of the facility to cover business interruption coverage. Again, insurance industry has been arguing for years, if you have a slow down we're not going to cover it, but you have to completely close. Well that's a bit counterintuitive. Why would a business want to completely shut down and lose 100% of their revenues. If they're partially shutdown, they should still get coverage and the court also said, "Yeah, you get covered for a partial shutdown." Again, industry custom and practice is different from policy language and the courts corrected the insurance industry on this.

The third reason why this decision is hugely important is because there was a provision in the policy that covered expenses that the policy holder incurs to present a claim to the insurance company. That provision, the court held, covered lawyers' fees. i.e. In our case, it would be our lawyers' fees pursuing a claim against the insurance company. This is something that we hear again and again. These provisions are standard, they're in the policy, they cover costs and fees that the client incurs to present a claim to the insurance company. They're in every policy and what the insurance company will say, "Well they cover accounting fees and things, but they certainly don't cover lawyers." This court rejected that and said, "They cover the lawyers' fees. If the insurance company doesn't pay a claim under a property policy, the lawyers' fees, when you have to hire a lawyer to go after that claim, those are covered as well."

The reason why this Fountain Powerboats case makes our top list of insurance cases of all time is because it shows industry custom and practice can vary considerably from what the policy says and it's important not to rely on what an insurance broker says they understand the policy to mean. What's important is to rely on what the policy says and what the caselaw says that interprets that language because 9 times out of 10, policy language and caselaw is more favorable than what the industry custom and practice in dealing with claim is. Look at the caselaw, look at the policy language, and hold to your guns.

It's also interesting because this case, a million dollar case is not necessarily a case that you want to litigate because it's expensive to litigate but it shows that yes, you can litigate these property cases if you have to. $1 million may not be enough for a policy holder to say, "Well I want to go into some really difficult litigation with my insurance company," but $1 million, along with the policy provision that says we'll pay for lawyers' fees pursuing these claims is enough. An understanding of these provisions, and there's many of them, many of these different provisions and there's many cases that relate to these different provisions, but having that knowledge allows you to put forth a better argument to the insurance company.

Insurance Recovery Law: History's Best Decisions: Fountain Powerboat

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions