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Robins Dry Dock Rule Requiring Physical Damage to Recover Economic Losses Affirmed by Second Circuit Court of Appeals

In American Petroleum and Transport, Inc. v. City of New York and Department of Transportation of the City of New York, 12-4505 (December 6, 2013), the Second Circuit Court of Appeals affirmed a decision by the Southern District of New York finding that American Petroleum and Transport, Inc. (hereinafter "American") could not recover damages for economic loss from the City of New York and the Department of Transportation of the City of New York (collectively referred to as "the City"), in the absence of physical damage. 

American owned a barge and had chartered a tug that was scheduled to enter the Hutchinson River and cross under the Pelham Parkway Bridge in March 2011.  However, due to a mechanical malfunction, the City did not open the bridge, delaying the tug and barge for approximately two and a half days.  As a result of the delay, American suffered alleged economic damages in the amount of $28,828, but admittedly did not suffer any property damage (or any other physical injury).  American brought an action in the Southern District of New York alleging negligence and a violation of 33 U.S.C § 494, requiring that a drawbridge over navigable waters be opened promptly by the persons owning or operating such bridge upon reasonable signal for the passage of boats and other watercraft.   

In October 2012, the District Court, relying on Robins Dry Dock v. Flint, 275 U.S. 303 (1927), granted the City's motion to dismiss the complaint and found that recovery was barred for economic loss in the absence of physical harm.  The Second Circuit, after conducting a thoughtful and historical review of the cases (both in other Circuits and the Second Circuit) that have reviewed and relied on Robins Dry Dock in establishing the broad "bright line rule" barring economic losses in the absence of physical damage, affirmed the District Court's decision.   The Second Circuit for the first time stated it was explicitly accepting this broad rule outlined in Robins Dry Dock, on the basis of four main reasons: (1) that the rule has been accepted by a clear consensus of courts throughout the country, including many district courts within the Second Circuit; (2) Congress, possessing full authority to legislate on maritime matters, has neither altered the broad rule nor made any serious attempts to do so; (3) the rule has the virtue of certainty; and (4) the context in which the broad rule primarily applies – financial losses – is marked by the well recognized availability of first-party insurance to cover such losses.

The Second Circuit concluded that although in their opinion the Robins Dry Dock rule has generally been over read to establish this broad rule barring damages for economic loss in the absence of an owner's property damage; the rule has been so consistently applied in admiralty that it should continue to be applied unless and until such time as it is altered by Congress or the Supreme Court.

To read a copy of the Second Circuits decision, click here.

For more information about the Court's decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

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