Opinion
CIVIL ACTION NO. 01-3006, c/w 01-3211, c/w 02-0066, c/w 02-0095, SECTION "N" (2)
September 30, 2003
ORDER AND REASONS
Before the Court is the Motion for Summary Judgment on Coverage filed by Defendant Federal Insurance Company ("Federal") on March 18, 2003 (Rec. Doc. No. 218). After a number of continuances requested by the parties, the Court heard oral argument on the motion on July 9, 2003. For the reasons explained herein, Federal's motion is GRANTED.
Background
On August 22, 2001, a tugboat owned and operated by DL Marine Transportation, Inc. ("DL") undertook, on behalf of TLC Marine Services, Inc.("TLC"), to transport two barges owned by Suard Barge Service ("Suard") from Bayou Perot to Suard's facility in Lockport, Louisiana. En route, Suard's two barges capsized and DL's tugboat partially sank. Various lawsuits resulting from the incident have been consolidated in this Court. Federal filed the motion for summary judgment presently before the Court March 18, 2003.
Law and Analysis
With its motion, Federal seeks a declaration that the marine general liability policy that it issued to Suard, Policy Number 7318259, provides no coverage for the claims that DL has asserted against Suard arising out of the August 22, 2001 accident. Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is properly granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Fed.R.Civ.P. 56(c).Referencing Suard's two barges, Federal argues that the watercraft exclusion in its policy precludes coverage for property damage arising out of watercraft owned by the insured. It additionally contends that Suard forfeited any coverage provided by failing to comply with the policy's notice provisions. Disagreeing with these assertions, Suard also argues that (1) Federal's failure to deliver its policy to Suard in accordance with La.R.S. 22:634(A) precludes Federal's reliance on any of the policy's exclusion; (2) Federal waived reliance on the policy's notice provision and/or cannot establish prejudice as a result of Suard's delay in providing notice of the accident and DL's claims; (3) the ship repairer section of the Federal policy provides coverage; (4) other exclusions under the policy — Exclusions K and O and an exclusion for liability assumed under a contract — are not applicable and (5) pursuant to Endorsement Number 6, Suard's employees are named as additional insureds.
For the reasons explained below, the Court finds that coverage under the marine general liability section of the Federal policy is precluded by the watercraft exclusion, and that the coverage provided by the ship repairer section of that policy has not been triggered. Accordingly, the Court finds that Federal's motion for summary judgment should be granted.
Because the Court's decision rests on these grounds, the undersigned does not address Federal's argument that Suard forfeited any coverage under its policy by allegedly failing to timely notify Federal of the August 22, 2001 accident and of DL's claims. For the same reason, it does not find it necessary to address Suard's arguments regarding Exclusions K and O, the exclusion for liability assumed under a contract, and Suard's employees' possible status as additional insureds. See Suard's Memorandum in Opposition to Motion for Summary Judgment Filed by Federal Insurance Company ("Suard's Opposition") at 21.
I. Federal's Delivery Obligations Under La.R.S. 22:634(A) Do Not Nullify Policy Exclusions .
Louisiana Revised Statute 22:634(A) states that, "[s]ubject to the insurer's requirement as to payment of premium, every policy shall be delivered to the insured or to the person entitled thereto within a reasonable period of time after its issuance." Citing this statute, the Louisiana Supreme Court, in Louisiana Maintenance Servs., Inc. v. Certain Underwriters at Lloyd's of London, 616 So.2d 1250, 1253 (La. 1993), determined that Lloyd's could not rely on its policy exclusions when the policy had not been delivered to the insured or an agent for the insured. The Court reasoned that, without notice of exclusionary provisions, the insured assumes the desired coverage exists. Id. at 1252. Relying on these authorities, Suard argues that Federal may not assert any of the exclusionary provisions of its policy because, though the Federal policy became effective on November 2, 2000, Federal never sent a copy of the policy directly to Suard.
Regarding this issue, it is undisputed that, upon issuance, Federal sent Suard's policy to Axxiom Insurance Management, Ltd. Axxiom then sent the Federal policy to U.S. Risk Brokers, Inc., a wholesale broker for Suard's insurance agent, Laris Insurance Agency. On Thursday, December 27, 2000, U.S. Risk Brokers mailed the policy to Laris, whose records reflect its receipt of the policy on Friday, January 4, 2001. Laris, however, purportedly did not give the policy to Suard until October 2002. Although it does not dispute that Laris was its agent when Laris received a copy of the policy on January 4, 2001, Suard nevertheless argues that deli very of the policy to Laris was without effect, for purposes of La.R.S. 22:634(A), because Suard never authorized Federal to send the policy to anyone other than it.
Although Federal and Axxiom have some relationship, the Court is not completely certain of the exact nature of that relationship. The deposition of Federal Insurance Company suggests that Axxiom is Federal's agent. See August 9, 2002 Deposition of Federal Insurance Company at p. 52, Exhibit 35 to Suard's Opposition. The Court assumes that to be true for purposes of this motion.
The chain of companies through which the Federal policy was delivered to Laris is the same chain through which Suard's policy application was submitted to Federal.
See December 27, 2000 Letter, Exhibit 3 to Suard's Opposition; January 31, 2003 Deposition of Laris Insurance Agency at p. 102, Exhibit 34 to Suard's Opposition; June 16, 2003 Affidavit of Sidney Forrestier, Operation Manager for Suard Barge Service, Inc., at ¶, Exhibit 1 to Suard's Opposition.
The Court disagrees that delivery of the Federal policy to Laris did not constitute effective delivery under La.R.S. 22:634. That statute requires delivery of insurance policies to the insured or to the "person entitled thereto." In Pruitt v. Great Southern Life Ins. Co., 12 So.2d 261, 262 (La. 1942), the Louisiana Supreme Court explained that the test for sufficient delivery of an insurance policy is — "whether the company or its agent intentionally parts with control or dominion of the policy and places it in the control or dominion of [the] insured or some person acting for him with the purpose of thereby making a valid and binding contract of insurance." Actual delivery to the insured is not necessary, for purposes of La.R.S. 22:634(A), unless expressly made so by the terms of the agreement. See John v. Gourmet Pizzas, Inc., 778 So.2d 1223, 1226 (La.App. 4 Cir. 2001); see also Auster Oil Gas, Inc. v. Stream, 891 F.2d 570, 574-75 (5th Cir. 1990). To the contrary, delivery of the policy to the insured's agent amounts to constructive delivery in satisfaction of the statute. See John, 778 So.2d at 1226-27; see also Auster, 891 F.2d at 574-75 (citing Ryan v. Security Indus. Ins. Co., 386 So.2d 939, 942 (La.App. 3 Cir. 1980). Because Suard has cited no evidence of a restriction or condition on delivery imposed by the policy itself, or, at the time of the policy's issuance, by Suard, the Court finds that Laris' receipt of the Federal policy accomplished an effective delivery of the policy for purposes of La.R.S. 22:634(A).
Although the parties' submissions to the Court do not contain explicit instructions by Laris or Suard directing delivery of the Federal policy to Laris, the evidence shows that Laris undertook, and was charged with, responsibility for obtaining appropriate insurance coverage for Suard. Laris submitted the application forms for the policy on Suard's behalf. See Application Forms, Exhibit 3 to Suard's Opposition. Further, correspondence from Laris personnel to Laris' wholesale broker, U.S. Risk Brokers, requesting issuance of the Federal policy, instructs U.S. Risk Brokers to contact Laris with any questions regarding Suard's application. See November 13, 2000 Letter, Exhibit 3 to Suard's Opposition. In addition, the letter from U.S. Risk Brokers accompanying the Federal policy instructs Laris, as agent for the insured, to review and explain the provisions of the policy to Suard. See December 27, 2000 Letter, Exhibit 3 to Suard's Opposition. Deposition testimony by a Laris representative indicates, moreover, that, consistent with industry practice, all of the insurance companies and brokers with whom Laris did business would send insureds' policies to Laris rather than directly to the insureds. See August 6, 2002 Deposition of Laris Insurance Agency at p. 34, Exhibit 34 to Suard's Opposition; March 14, 2003 Deposition of Laris Insurance Agency at pp. 228-29, Exhibit A to Federal's Reply Memorandum in Support of its Motion for Summary Judgment. The Federal deposition likewise represents that it is typical for Federal and Axxiom to send policies to the wholesale broker, if there is a wholesale broker involved in the transaction. See August 9, 2002 Deposition of Federal Insurance Company at p. 52, Exhibit 35 to Suard's Opposition.
Notwithstanding its recognition that Laris did not receive Suard's Federal policy until approximately two months after its effective date, the Court does not have to decide whether La.R.S. 22:634(A)'s requirement of delivery "within a reasonable period of time after issuance" has been satisfied. Even if it has not, there is no dispute that Suard's agent received the Federal policy more than seven months prior to the August 22, 2001 accident. Thus, unlike the insured in Louisiana Maintenance, Suard had ample opportunity, prior to the accident, to review the policy, become familiar with its provisions, and object to or renegotiate any terms or conditions with which it was not satisfied, or that were inconsistent with its understanding of what the policy's provisions were to have been. Given this significant circumstance, the Court finds that any delay attributable to Federal in delivering Suard's policy does not prevent Federal from relying on any applicable exclusions in the policy. II. The Watercraft Exclusion Precludes Coverage Under the Marine General Liability Section of the Federal Policy .
As previously stated, although Laris' records indicate receipt of the policy on January 4, 2001, Laris' wholesale broker, U.S. Risk Brokers, received the policy from Axxiom on or before December 27, 2000. See December 27, 2000 Letter, Exhibit 3 to Suard's Opposition. In any event, whether the relevant date of receipt is viewed to be December 27, 2000, or January 4, 2001, Federal does not explain why it took approximately two months after the policy's effective date for the policy to reach Laris. The Court assumes that the occurrence of the Thanksgiving, Christmas, and New Year's holidays during this period accounts for some of the delay. In addition, Suard's submission to the Court reveals that at least one portion of the Suard application was not completed until November 13, 2000. See Ship Repairers Legal Liability Application, Exhibit 3 to Suard's Opposition.
Indeed, as noted in footnote 5, U.S. Risk Brokers urged Laris to review and explain the provisions of the Federal policy to Suard. See December 27, 2000 Letter, Exhibit 3 to Suard's Opposition.
Under these circumstances, the Court also does not have to consider whether the application documents and/or binder issued to the insured prior to delivery of the policy provided sufficient notice of the policy's terms and conditions. See Sims v. Insurance Unlimited, 669 So.2d 709, 711-12 (La.App. 2 Cir.), writ denied, 672 So.2d 689 (La. 1996) (policy exclusion not enforceable because accident occurred before delivery of policy, and neither the application nor the binder notified the insured that insurance purchased was subject to the terms and conditions of the written policy to be delivered). The Court does note that the application form dated November 2, 2000 references certain changes and endorsements to be made to the policy. The reference to the phrase "non-owned watercraft" arguably suggests some expectation of a watercraft exclusion. See November 2, 2000 Application, Exhibit 3 to Suard's Opposition.
Section I of the Federal Policy provides "marine general liability" coverage. Subsection I of that section provides, in pertinent part:
I. The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:
Coverage A — Bodily Injury
Coverage B — Property Damage
to which this insurance applies, caused by an occurrence. . . .
Among the exclusions to this coverage is Exclusion E, which the parties refer to as the "watercraft exclusion." The exclusion states:
II. Exclusions: The insurance afforded hereunder is subject to the following exclusions: . . .
E. Jo bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading, or unloading of:
1. any water craft owned or operated by or rented or loaned to any insured, or
2. any other water craft operated by any person in the course of his employment by any insured;
but this exclusion does not apply to water craft while ashore on premises owned by, rented to or controlled by the named insured. Notwithstanding anything contained above, this exclusion does not apply to operations covered under Section II [Ship Repairer Liability] of this Policy.
Another section of the policy provides additional marine general liability coverages by endorsement. With respect to the watercraft exclusion, Endorsement VIII "Non-Owned Water Craft Liability Coverage" states:
VIII. NON-OWNED WATER CRAFT LIABILITY COVERAGE (under 26 feet length)
Exclusion (E) does not apply to any water craft under 26 feet provided such water craft is neither owned by the named insured nor being used to carry persons or property for a charge.
Where the insured is, irrespective of this coverage, covered or protected against any loss or claim which would otherwise have been paid by the company under this endorsement, there shall be no contribution or participation by this company on the basis of excess, contributing, deficiency, concurrent, or double insurance or otherwise.
In the Federal policy issued to Suard, the phrase "THIS CLAUSE VOID" is typed over the parenthetical containing the language "under 26 feet in length." For clarity, a copy of this page of the policy is attached to this Order and Reasons as Exhibit A. Federal explains that the 26 feet limitation on the coverage provided by this endorsement was deleted during the underwriting process. See Federal's Memorandum in Support of its Motion for Summary Judgment on Coverage at n. 13.
Referring to the two Suard barges involved in the August 22, 2001 accident, the Suard 203 and Suard 204, DL's complaint alleges that Suard failed to provide seaworthy vessels for the DL tow, failed to advise DL of the barges' alleged instability, and/or failed to properly equip and prepare the barges for towage. The Court agrees with Federal that these claims undoubtedly "aris[e] out of the ownership, maintenance, operation, use, loading, or unloading of . . . any water craft owned . . . by . . . any insured" as stated in the watercraft exclusion. Contrary to Suard's argument, there has been no showing that these allegations arise out of a "separate and independent source of potential liability" to which the water craft exclusion does not apply. Compare Terra Resources, Inc. v. Lake Charles Dredging Towing, Inc., 695 F.2d 828, 831 (5th Cir. 1983) (although water craft exclusion would have precluded coverage based solely on ownership and use of barges, it did not preclude coverage based on party's ownership of mooring device to which barges were anchored).
See October 3, 2001 Complaint (Civil Action No. 01-3006, Rec.Doc. No. 1) at ¶¶ XII-XIII.
Relying on Endorsement VIII, Suard appears to argue that coverage nonetheless exists here, with respect to its barges, because the "under 26 feet in length" limitation in Endorsement VIII is voided. Suard also contends that Endorsement VIII provides coverage because it did not own DL's tugboat and neither DL's tugboat nor its barges were carrying persons or property for a charge. Finally, Suard maintains that Endorsement VIII is subject to more than one interpretation and, thus, is construed against the insurer.
Even with the "under 26 feet in length" limitation voided, the Court does not find Suard's arguments regarding Endorsement VIII persuasive. Endorsement VIII is hardly ambiguous. To the contrary, the language clearly indicates that the endorsement does not apply if the watercraft in question is "owned by the insured" or is "being used to carry persons or property for a charge." See Clark v. BD Inspection Serv., 896 F.2d 105, 106-07 (5th Cir. 1990) (watercraft exclusion applied because Bruce Marine's status as owner alone was sufficient to defeat the endorsement to the watercraft exclusion). Stated another way, Endorsement VIII applies only to watercrafts that are not "owned by the insured" and are not "used to carry persons or property or persons for hire." Id. Furthermore, for purposes of DL's claims against Suard, the relevant watercrafts are the two barges owned by Suard, not DL's tugboat. Thus, whether or not DL's tow of Suard's barges constitutes "being used to carry . . . property for a charge" is not pertinent to this issue. To the contrary, because Suard owned the two barges, Endorsement VIII is not applicable and does not provide coverage for claims stemming from these vessels. See Clark, 896 F.2d at 106-07. III. The Ship Repairer Liability Section of the Federal Policy Does Not Provide Coverage .
Suard also contends that Section II of the Policy, regarding "Ship Repairer Liability," provides coverage for the claims DL has asserted against it. The Court disagrees. That section states, in pertinent part:
To the extent that Suard might seek to have Federal pay for the damage suffered by its own barges as a result of the August 22, 2001 accident, Exclusion F of Subsection II of the Ship Repair Liability section of the policy excludes coverage for "[l]oss or damage to property owned [by] the Assured."
I. In consideration of payment of premium as hereinafter provided, and subject to the limits of liability, exclusions, conditions and other terms of this section, this company agrees to pay on behalf of the Assured all sums which the Assured, as Ship Repairer, shall become legally obligated to pay:
A. By reason of the liabilities imposed upon the Assured by law for physical loss of or damage to watercraft and their equipment, cargo or other interests on board occurring only while such watercraft are in the care, custody or control of the insured for the purpose of repair or alteration, or while such watercraft are being moved via inland waters, in connection with repairs or alteration;
B. By reason of the liabilities imposed upon the insured by law as damages because of property damage caused by a watercraft covered under "A" above while in the care, custody, or control of the Assured and while being navigated or operated away from premises within permitted waters by an employee or employee of the Assured or in tow of a tug not owned by or demise chartered to the Assured. It is a condition of this Clause IB that any employee of the Assured engaged in the navigation of a watercraft described herein shall possess such license as is required by the United States Coast Guard or any other applicable regulatory authority to perform the duties being carried out by said employee;
II. Notwithstanding the Foregoing, it is hereby expressly understood and agreed that this section does not cover against nor shall any liability attach hereunder for:
. . .
F. Loss of or damage to property owned, leased to, or in the possession of the Assured (other than watercraft which are in the custody of the insured for the purpose of repair or alteration) or utilized by the Assured in its business as a ship repairer.
Suard argues Subsection LA. provides it coverage because "Suard's watercraft was being moved" and Suard allegedly damaged DL's watercraft. A careful reading of that subsection however, reveals that the coverage provided therein requires that the damaged watercraft be the same watercraft that is "in the care, custody, or control of the Assured," or that is "being moved" in connection with repairs or alteration. Here, the damaged watercraft, DL's tugboat, was neither in Suard's care, custody, or control, nor was it "being moved." Thus, Paragraph LA. does not provide coverage for any liability Suard may have to DL for the damage suffered by DL's tugboat.
Subsection LB. also provides no assistance to Suard. If the watercraft to which that paragraph refers is DL's tugboat, that vessel was never in "the care, custody, or control of the Assured." If the relevant watercrafts instead are Suard's barges, those barges were not in the "care, custody, or control of the Assured" during the time that they were "in tow of a tug not owned by or demise chartered to the Assured." Thus, neither Subsections LA. or I.B. of the Ship Repairer Liability portion of the policy provides coverages for DL's claims against Suard.
Exclusion F of Subsection II precludes coverage for loss or damage to "property . . . utilized by the Assured in its business as a ship repairer." DL's tugboat arguably can be construed to be such property. The Court does not have to decide this issue, however, because it has determined that neither Subsection LA. or I.B., otherwise provide coverage for DL's claims against Suard.
Conclusion
Accordingly, as is more fully explained herein, IT IS ORDERED that the motion for summary judgment filed by Federal Insurance Company is GRANTED.
VIII. NON-OWNED WATER CRAFT LIABILITY COVERAGE
Exclusion (E) does not apply to any water craft under 26 feet in length provided such water craft is neither owned by the named insured nor being used to carry persons or property for a charge.
Where the insured is, irrespective of this coverage, covered or protected against any loss or claim which would otherwise have been paid by the company under this endorsement there shall be no contribution or participation by this company on the basis of excess, contributing, deficiency, concurrent or double insurance or otherwise.