The long-standing rule of Robins Dry Dock is that in order to recover damages for economic loss, the plaintiff must have suffered some physical damage to property in which the plaintiff has a proprietary interest. Robins Dry Dock v. Flint, 275 U.S. 203 (1927). The Robins Dry Dock rule is rooted in the principle that there must be a tangible, more-than-fleeting connection between a defendant’s actions and the damages of which the plaintiff complains. Otherwise, there would be no limit to a defendant’s liability.

In XL Insurance America, Inc. v. Turn Services, L.L.C., 37 F.4th 204 (5th Cir. 2022), the US Court of Appeals for the Fifth Circuit reversed the district court and held that the Robins Dry Dock rule did not bar an insurer’s subrogated claim against a barge owner — a claim that included economic loss damages. XL Insurance America, Inc. (XL) issued a builder’s risk policy to Boh Bros. Construction Co., LLC (Boh Bros.), which had been hired by Plains Marketing LP (Plains) to install mooring dolphins owned by Plains in the Mississippi River. In February 2019, after the construction project had commenced, a vessel owned by Turn Services, LLC. (Turn) allided with and damaged one of the mooring dolphins. Boh Bros. subsequently repaired the dolphin at a cost of approximately $1.2 million. XL reimbursed Boh Bros. for the cost of repairs, less the deductible, and paid Boh Bros. an additional $485,000, which Boh Bros. then tendered to Plains. The record was unclear as to the reason for the $485,000 payment, but XL conceded it “was not for direct physical damage to the dock.”

XL filed suit against Turn to recover the funds that XL had paid to Boh Bros., but the district court dismissed XL’s suit after Turn filed a motion for summary judgment. Turn argued, and the district court agreed, that XL’s claims were barred by Robins Dry Dock because Boh Bros. had no proprietary interest in the damaged dolphin. The district court reasoned that allowing XL’s suit to proceed would “undoubtedly contradict the doctrine’s [policy against] limitless liability.” On appeal, however, the Fifth Circuit disagreed with the district court, concluding that Boh Bros.’ lack of ownership was irrelevant. The Fifth Circuit noted that XL’s $1.2 million payment went toward repairing physical damage and that there was no risk of “runaway recovery,” which was dispositive and rendered Robins Dry Dock inapplicable. With respect to the additional $485,000 payment, the Fifth Circuit similarly rejected Turn’s reliance on Robins Dry Dock. The Fifth Circuit reasoned that even if the $485,000 payment was for economic loss, it was immaterial that the payment passed through Turn as an intermediary, because the funds were ultimately paid to Plains as the owner of the dolphin. The Fifth Circuit thus vacated the district court’s decision and remanded the case for further proceedings.

The Fifth Circuit’s decision serves as an important reminder that the Robins Dry Dock rule is not a rigid doctrine that turns on a plaintiff’s ownership of the damaged property, particularly where allowing the plaintiff to recover for economic loss would not run afoul of the underlying policy mandate of avoiding runaway recoveries.