Opinion
Civ. No: 98-0779, SECTION: "R" (1).
February 16, 2000.
ORDER AND REASONS
Before the Court is the motion of third party defendant, Clarendon America Insurance Company, to dismiss the cross-claim of Crane Operators, Inc. and the third party demand of Ryan-Walsh, Inc. For the following reasons, Clarendon's motion is granted in part and denied in part.
I. BACKGROUND
This cases arises out of a personal injury claim filed in state court by Kevin M. Baye, Sr. against Crane Operators, Inc., Ryan-Walsh, Inc., and others for injuries Baye sustained while in the course and scope of his employment with Crane Operators. It is undisputed that the underlying accident occurred on April 4, 1996 while Baye worked as a crane operator aboard the D/B FRANK L in the Port of New Orleans, Louisiana. Ryan-Walsh operated the FRANK L at the time of the accident.
On March 11, 1998, Endeavor Marine, Inc. and Tako Towing, Inc., owners of the tugboat charged with positioning the FRANK L on the day of the accident, filed a Complaint for Exoneration From or Limitation of Liability with this Court pursuant to Rule 9(h) of the Federal Rules of Civil Procedure and the Supplemental Rules for Certain Admiralty and Maritime Claims. The Court subsequently stayed Baye's state court action. Crane and Ryan-Walsh have filed claims in the limitation proceeding, seeking a defense from Clarendon America Insurance Co. pursuant to a commercial general liability policy issued to Crane.
By contract, Crane agreed to provide crane operating services and/or equipment to Inland Services, Inc./Logistics Services, Inc., affiliated companies of Ryan-Walsh. ( See Mem. Supp. Summ. J. Ex. A, at 1.) The contract calls for Crane to defend, indemnify, and hold Ryan-Walsh harmless from all claims brought by employees of Crane for injuries sustained while working under the contract. ( See id. ¶ 9, at 5.) Furthermore, Crane agreed to obtain comprehensive general liability insurance, to have Ryan-Walsh named as an additional insured under the policy and to have the watercraft exclusion with respect to work performed under the contract removed from the policy. ( See id. ¶ 8C, at 3-4.) The contract states that it became effective April 1, 1996 and was executed May 17, 1996. ( Id. at 8.)
Clarendon issued a commercial general liability policy to Crane covering the period March 1, 1996 to March 1, 1997. Clarendon now moves for summary judgment on the grounds that the policy does not cover Crane's contractually-assumed obligation to defend and indemnify Ryan-Walsh because the policy excludes liability for damages occurring before the execution of the contract, and Baye's injury occurred six weeks before the contract was executed on May 17, 1996. Further, Clarendon argues that the policy does not cover Ryan-Walsh as an additional insured. Finally, Clarendon asserts that even if Ryan-Walsh were deemed an additional insured, coverage would be barred under the policy's watercraft exclusion. Crane and Ryan-Walsh both oppose summary judgment, arguing that a genuine issue exists as to whether the contract was "executed" on May 17, 1996. Additionally, Crane and Ryan-Walsh argue that Ryan-Walsh is an additional insured under the policy, and that the watercraft exclusion does not apply.
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. See FED. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552 (1986). A court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990) ( citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511 (1986)). The moving party bears the burden of establishing that there are no genuine issues of material fact.
If the dispositive issue is one for which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2554; see also Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. Summary judgment is mandated if the nonmovant fails to make a showing sufficient to establish the existence of an element essential of her case on which she bears the burden of proof at trial. See id. at 322, 106 S.Ct. at 2552. The nonmovant may not rest upon the pleadings but must identify specific facts that establish a genuine issue exists for trial. See id. at 325, 106 S.Ct. at 2553-54; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1996).
B. Contract Interpretation
1. Applicable Law
The Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1333 as an admiralty and maritime claim within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. The Court exercises pendent jurisdiction over Crane's and Ryan-Walsh's claims for indemnification and insurance coverage against Clarendon. See Loeber v. Bay Tankers, Inc., 924 F.2d 1340, 1345-47 (5th Cir. 1991); Joiner v. Diamond M Drilling Co., 677 F.2d 1035, 1040-41 (5th Cir. 1982). Because Crane Operators is a Louisiana resident, the policy was issued and delivered in Louisiana, the policy contains no choice-of-law provision, and the accident occurred in Louisiana, Louisiana state law applies. See Truehart v. Blandon, 884 F.2d 223, 226 (5th Cir. 1989); In re American Cyanamid Co., 1991 WL 197208, at *4 (E.D. La. Aug. 14, 1991).
Under Louisiana law, an insurance policy is a contract that constitutes the law between the parties, and it must be interpreted in accordance with the general rules of contract interpretation set forth in the Louisiana Civil Code. See Peterson v. Schimek, 729 So.2d 1024, 1028 (La. 1999) ( citing La. Civ. Code art. 1793; Ledbetter v. Concord Gen. Corp., 665 So.2d 1166, 1169 (La. 1996); Crabtree v. State Farm Ins. Co., 632 So.2d 736 (La. 1994)); Louisiana Ins. Guaranty Ass'n v. Interstate Fire Cas. Co., 630 So.2d 759, 762 (La. 1994) (citations omitted). The extent of insurance coverage is determined by the parties' intent as reflected by the words in the policy. See La. Civ. Code art. 2045; Peterson, 729 at 1028 ( citing Ledbetter, 665 So.2d at 1169). If the words of an insurance policy are clear and explicit and lead to no absurd consequences, the courts may not inquire further into the parties' intent. See La. Civ. Code art. 2046; Ducote v. Koch Pipeline Co., L.P., 730 So.2d 432, 435 (La. 1999); Peterson, 729 So.2d at 1028. The policy terms must be construed by reference to their ordinary and popular usage, unless they have acquired a technical meaning. See La. Civ. Code art. 2047; Peterson, 729 So.2d at 1028-29; Louisiana Ins. Guar. Ass'n, 630 So.2d at 763.
Ambiguity in an insurance policy must be resolved by construing the policy as a whole. See La. Civ. Code art. 2050; Jensen v. Snellings, 841 F.2d 600, 617 (5th Cir. 1988). An ambiguity exists if the insurance policy is subject to two or more reasonable interpretations. See Louisiana Ins. Guar. Ass'n, 630 So.2d at 770. If an ambiguity exists after applying the strict construction rule, that ambiguity must be construed against the insurer and in favor of coverage. See Peterson, 729 So.2d at 1029; Louisiana Ins. Guar. Ass'n, 630 So.2d at 764. This rule of "[s]trict construction against the insurer is especially appropriate when interpreting exclusionary clauses in insurance policies." Jensen, 841 F.2d at 615 ( citing Borden, Inc. v. Howard Trucking Co., Inc., 454 So.2d 1081, 1090 (La. 1983)); see also Garcia v. St. Bernard Parish School Board, 576 So.2d 975, 976 (La. 1991).
2. Liability Assumed in an Insured Contract
Applying these principles, the Court finds that an issue of fact exists as to whether Clarendon's policy covers Crane's contractual obligation to defend and indemnify Ryan-Walsh against Baye's personal injury claim. The commercial general liability policy issued to Crane provides in pertinent part:
2. Exclusions
This insurance does not apply to . . .
b. "Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) Assumed in a contract or agreement that is an "insured contract," provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement
( See Clarendon Mem. Supp. Summ. J. Ex. B § I(2)(b)(1).) It is undisputed that Crane and Ryan-Walsh entered into an "insured contract," as defined under the policy. ( See id. § V(6)(f).) At issue here is what Clarendon and Crane, the parties to the insurance policy, intended by the "execution" date of the insured contract. Clarendon argues that execution occurred when all of the parties formally signed the contract on May 17, 1996, six weeks before Baye's injury, and therefore the aforementioned exclusion bars coverage. Crane and Ryan-Walsh contend that the execution date refers to March 1, 1996, the date the parties agreed to all of the contract terms and began performance. Thus, they argue the contract was executed before Baye was injured, and the policy covers Crane's assumption of liability.
The insurance policy does not define the date of "execution" or use the term "execute" in any provision other than the exclusion at issue here. Construing the policy as a whole, the Court notes that while the insured contract exclusion precludes coverage for bodily injury occurring prior to the "execution" date of an insured contract, another policy provision bars coverage unless the insured had previously "entered into" a contract. ( See id. Ex. B § I(2)(b)(1); Additional Insured — Owners, Lessees or Contractors (Form B).) The plain language of the policy thus does not clearly define the "execution" date of the insured contract. Black's Law Dictionary defines an "executed contract" alternatively as "a contract that has been fully performed by both parties" or "a signed contract." BLACK'S LAW DICTIONARY 321 (7th ed. 1999). Black's further notes that "[t]he term `executed' is a slippery word. Its use is to be avoided except when accompanied by explanation." Id. at 589 ( quoting WILLIAM R. ANSON, PRINCIPLES OF THE LAW OF CONTRACT 26 n. * (Arthur L. Corbin ed., 3d Am. 3d 1919)). The Court has found no Louisiana law interpreting the "execution" of a contract in the context of the policy provision at issue. Cf. State ex rel. Ieyoub Through Wildlife Fisheries Comm'n v. Justiss Oil Co., 665 So.2d 68, 70 (La.App. 1st Cir. 1995) (defining execution of contract, for venue purposes, broadly as the point in time at which a valid contract is created between the parties, not simply when the parties signed the contract). The Court therefore finds that the term "execution" used in the insured contract exclusion does not clearly and unambiguously evidence the parties' intent.
As evidence of its intent, Crane points to affidavits that are appended to the "insured contract" between Crane and Ryan-Walsh. By affidavit, Carlton Melton and David Ferris, the designated representatives of Crane and Ryan-Walsh, aver that both parties had consented to all of the contract's terms, including "all terms concerning indemnity, defense, and insurance obligations," prior to March 1, 1996. ( See Crane Mem. Opp'n Mot. Summ. J. Ex. A, Ferris Aff., Carlton Aff. ¶ V.) Crane and Ryan-Walsh also note that a Certificate of Insurance was issued in favor of Ryan-Walsh on February 29, 1996, in accordance with the terms of the indemnity agreement and reflecting a policy coverage period from March 1, 1996 to March 1, 1997. ( See Ryan-Walsh Mem. Opp'n Summ. J. Ex. 1.) By the very terms of the insurance policy, another party such as Ryan-Walsh could not be named as an additional insured before "entering into" a contract with the primary insured, Crane. Additionally, Crane avers that it began performing under the agreement before March 1, 1996. ( See Crane Mem. Opp'n Summ. J. Ex. A, Ferris Aff., Carlton Aff. ¶ V.) Finally, Melton and Ferris state that the May 17, 1996 date on the indemnity agreement simply reflects the last date on which a signature was obtained, and the April 1, 1996 effective date was an error. ( See id. Ferris Aff., Canton Aff. ¶ VI.)
This does not appear to be a case in which an insured is trying to enlarge the policy period beyond what the parties contemplated, such as by entering into an insured contract retroactive to a time far in advance of the initial coverage date. Further, the issuance of a Certificate of Insurance to Ryan-Walsh suggests knowledge, at least by Clarendon's agent, of the prior existence of an agreement between Ryan-Walsh and Crane. Moreover, under Louisiana law, a contract may be formed by consent, the offer and acceptance of which need no particular form unless the parties contemplate otherwise, or the law prescribes a writing requirement. See La. Civ. Code arts. 1927, 1947; State v. Louis, 645 So.2d 1144, 1149 (La. 1994). Crane and Ryan-Walsh contend that the parties simply intended the written indemnity agreement to memorialize a prior binding agreement, rather than to create a condition precedent to liability. See Atlantic Banana Co. v. Standard Fruit Steamship Co., 493 F.2d 555, 559 (5th Cir. 1974). Clarendon is correct that Louisiana law presumes that when parties intend to reduce their negotiations to a written contract, they do not intend to be bound until the contract is reduced to writing and signed by both parties. See La. Civ. Code art. 1947; Baker v. Maclay Properties Co., 648 So.2d 888, 896 (La. 1995). Here, however, the addenda to the indemnity agreement and the Certificate of Insurance create an issue of fact as to whether the parties intended the execution date of the insured contract to mean the effective date of the insured contract or the date when all of the parties formally signed it.
2. Ryan-Walsh's Status as an Additional Insured
Ryan-Walsh asserts that it is directly covered under the Clarendon policy as an "additional insured." The policy covers as additional insureds the following parties:
Any Person, Organization, Partnership or Joint Venture, only if you have previously entered into a contract with such party in which it states that such party shall be an Additional Insured.
( See Clarendon Mem. Supp. Summ. J. Ex. B, Additional Insured — Owners, Lessees or Contractors (Form B).) The indemnity agreement between Crane and Ryan-Walsh provided that Crane was to obtain comprehensive general liability insurance that names Ryan-Walsh as an additional insured. ( See id. Ex. A ¶ 8C.) Clarendon argues that because this agreement was not executed until May 17, 1996, Crane had not "previously entered into a contract with" Ryan-Walsh for purposes of the additional insured endorsement. The "entered into" language of the policy is clearly ambiguous. For the reasons set forth above, the Court finds that the addenda to the indemnity agreement between Crane and Ryan-Walsh and the issuance of a Certificate of Insurance to Ryan-Walsh on February 29, 1996 raise an issue of fact as to whether the agreement was "entered into" before the policy period began on March 1, 1996. Accordingly, the Court cannot find as a matter of law that Ryan-Walsh is not an additional insured under the Clarendon policy.
3. Watercraft Exclusion
Finally, Clarendon argues that, even if Ryan-Walsh is an additional insured, the policy's watercraft exclusion bars coverage in this case. The relevant provision excludes coverage as follows:
g. "Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."
This exclusion does not apply to:
(4) Liability assumed under any "insured contract" for the ownership, maintenance or use of aircraft or watercraft;
( See Clarendon Mem. Supp. Summ. J. Ex. B.). It is undisputed that Ryan-Walsh operated the derrick barge FRANK L at the time of Baye's injury. The policy provides coverage only if the insured assumed liability in an insured contract for the use of a watercraft. Assuming Ryan-Walsh is an additional insured under the Clarendon policy, it is also subject to all of the policy exclusions. Although Crane assumed liability for the use of the FRANK L under an "insured contract," there is no evidence that Ryan-Walsh entered into an insured contract in which Ryan-Walsh assumed liability for the use of a watercraft. Absent such a contract, the watercraft exclusion bars any direct recovery by Ryan-Walsh. Because no reasonable jury could find that Ryan-Walsh is entitled to coverage under the Clarendon policy, the Court grants Clarendon's motion for summary judgment against Ryan-Walsh.
III. CONCLUSION
For the foregoing reasons, Clarendon's motion for summary judgment is denied in part and granted in part. The Court concludes that an issue of fact exists as to whether Crane is covered under the policy. Summary judgment is therefore inappropriate against Crane. By contrast, the Court finds as a matter of law that the watercraft exclusion bars any claims by Ryan-Walsh as an additional insured and thus grants Clarendon's motion for summary judgment against Ryan-Walsh. Ryan-Walsh's third-party complaint against Clarendon is hereby dismissed with prejudice.
New Orleans, Louisiana, this 16th day of February, 2000.