If you've ever felt tricked by the fine print in an insurance policy, you'll find a little sympathy for Fisker Automotive. After 338 Fisker Karma electric vehicles were flooded and destroyed by superstorm Sandy, with many burned after their battery packs caught fire from immersion in salt water, Fisker did as any business would and filed a claim with its insurance company for $32 million, the value of the lost vehicles.
But the insurer denied the claim. Why? Because it found that Fisker had been using the low-lying New Jersey shipping terminal as a storage lot to fix the Karmas' defects for more than three months — which it claimed wasn't covered by the policy.
The denial has led to a pre-emptive lawsuit by XL Insurance America against Fisker, filed last week in New York, seeking to validate its decision to reject Fisker's claim. According to court documents, Fisker has two insurance policies; a general one from XL, and a shipping policy from National Union Fire Insurance of Pittsburgh that covers any damages to Karmas while they're en route from their factory in Finland.
XL claims the shipping policy would cover Fisker for anything that happened to its Karmas up to 15 days after the cars were unloaded. The XL policy would handle damage to Karmas "in transit" afterwards or kept on Fisker property in locations it insured. Yet the Karmas in the New Jersey lot had been sitting for a minimum of 80 days, with some having been parked there for as long as a year -- awaiting repairs for a defect in a cooling fan that led to fires in other Karmas. And Fisker had never told XL it was using the lot that way.
Fisker has yet to reply to the lawsuit, but has told XL the claim should be paid.
The legal fight comes as another blow for a start-up that can only take so many hits. With the bankruptcy of battery supplier A123 Systems, Karma production has stopped and Fisker doesn't have the capital yet to launch its proposed next model, the Atlantic. Founder Henrik Fisker has said the company was looking for a partner to share costs. For Fisker, any port in a storm will do.