Opinion
CIVIL ACTION NO. 01-3006, c/w 01-3211, c/w 02-0066, c/w 02-0095, SECTION "N" (2)
October 14, 2003
ORDER AND REASONS
Before the Court is the Motion for Summary Judgment/Partial Summary Judgment filed by Defendant XL Specialty Insurance Company ("XL") on March 28, 2003 (Rec. Doc. No. 226). 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, XL's request for summary judgment is DENIED. XL's request for partial summary judgment is GRANTED IN PART and DENIED IN PART.
Background
On August 22, 2001, a tugboat owned and operated by DL Marine Transportation, Inc. ("D L") undertook, on behalf of TLC Marine Services, Inc.("TLC"), to transport two barges owned by Suard Barge Service, Inc. ("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. XL, Suard's hull and protection and indemnity insurer, filed the motion for summary judgment/partial summary judgment presently before the Court on March 28, 2003.
Law and Analysis
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). "An issue is material if its resolution could affect the outcome of the action." Roberts v. Cardinal Servs., Inc., 266 F.3d 368, 373 (5th Cir. 2001), cert. denied, 535 U.S. 954, 122 S.Ct. 1357 (2002). A factual dispute precludes summary judgment if the evidence would permit a reasonable trier of fact to find for the nonmoving party. Smith v. Amedisys, Inc., 298 F.3d 434, 440 (5th Cir. 2002).
XL issued a policy of ocean marine coverages to Suard for an annual term commencing on March 9, 2001. According to XL, the policy provided basic hull and protection and indemnity coverages to Suard from liability and losses flowing through scheduled vessels. XL contends that the policy provides no coverage to Suard with respect to the August 22, 2001 accident, however, because Suard did not satisfy the requirements of the policy's "notice of loss" or "automatic acquisition" provisions. Alternatively, should the Court find general issues of material fact preclude total summary judgment in its favor, XL seeks a declaration that the value of the two Suard barges involved in the August 22, 2001 accident — Suard 203 and Suard 204 — is limited to $100 per barge, Suard disagrees with these contentions, and further argues that XL's failure to deliver its policy to Suard, in accordance with La.R.S. 22:634(A), precludes reliance on any policy defenses. I. XL's Delivery Obligations Under La.R.S. 22;634f A) .
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." As explained in connection with Federal Insurance Company's motion for summary judgment, the Louisiana Supreme Court determined, in Louisiana Maintenance Servs., Inc. v. Certain Underwriters at Lloyd's of London, 616 So.2d 1250, 1253 (La. 1993), that Lloyd's could not rely on its policy exclusions when the policy was never 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.
See September 30, 2003 Order and Reasons (Rec. Doc. No. 317).
Suard's XL policy became effective on March 9, 2001. The policy was sent to Suard's insurance agent, Laris Insurance Agency, on June 21, 2001. Although Laris received the policy on June 25, 2001, it inexplicably did not forward the policy to Suard before the August 22, 2001 accident. Although not disputing that Laris was Suard's agent when it received the policy on June 25, 2001, Suard argues that delivery to Laris was ineffective, for purposes of La.R.S. 22:634(A), because-Suard never authorized XL to send the policy to anyone other than it. Thus, Suard contends that XL should not be allowed to assert any defenses found in its policy.
See June 21, 2001 Letter, Exhibit F to XL Specialty Insurance Company's Memorandum in Support of Motion for Summary Judgment/Partial Summary Judgment ("XL's Memorandum").
See June 16, 2003 Affidavit of Sidney Forrestier at ¶ VIII, Exhibit B to Suard's Memorandum in Opposition to XL's Motion for Summary Judgment/Partial Summary Judgment ("Suard's Opposition"); April 15, 2003 Deposition of Laris Insurance Agent at pp. 59-60, Exhibit D to Suard's Opposition.
See June 16, 2003 Affidavit of Sidney Forrestier at ¶ X, Exhibit B to Suard's Opposition.
As it did with the Federal motion, the Court disagrees that transmittal of the XL policy to Laris did not constitute effective delivery under La.R.S. 22:634(A). 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 XL policy accomplished an effective delivery of the policy for purposes of La.R.S. 22:634(A). Although Laris' failure to give the XL policy to Suard is unfortunate, that omission alone does not deprive XL of its right to rely on any otherwise valid defenses provided by its policy.
Regarding the timeliness component of La.R.S. 22:634(A), the Court doubts that delivery more than three months after a policy's effective date — absent special circumstances — constitutes delivery "within a reasonable period of time after issuance." Nevertheless, Suard's agent did receive the XL policy almost two months before the August 22, 2001 accident. Thus, unlike the insured in Louisiana Maintenance, Suard had sufficient time and 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 XL in delivering Suard's policy does not prevent XL from relying on any applicable coverage defenses provided by the policy. II. Notice of Loss Provision
Indeed, in the letter accompanying the policy sent to Laris, Arthur J. Gallagher Company requested that Laris "review these policies carefully, paying special attention to the schedule, to be sure that they accurately represent what you wanted bound." See June 21, 2001 Letter, Exhibit F to XL's Memorandum.
Because the policy was delivered before the August 22, 2001 accident, 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).
XL argues that Suard is not entitled to coverage under its policy because Suard did not timely notify XL of the August 22, 2001 accident. On November 14, 2001, Suard first notified the insurance broker, Arthur J. Gallagher Company, from whom it obtained the XL policy, of the accident. XL purportedly received the notice from Arthur J. Gallagher Company in "late November."
Regarding the assured's duty to provide timely notice of losses or casualties, the XL policy states:
5. NOTICE OF LOSS (MHO894O6)
Warranted that in case of any casualty or loss which may result in a claim under this Policy the Assured shall give Underwriters prompt notice thereof and reasonable opportunity to be represented on a survey of the damage.
See XL Insurance Policy, General Conditions at ¶ 5, Exhibit C to XL's Memorandum. The quoted notice provision is found in the preliminary "General Conditions" portion of the XL policy, which states that the general conditions apply to all sections of the policy. The policy further explains that the general conditions "supercede and replace anything in the policy to the contrary except Special Conditions which may be contained in each section and apply only to that particular section "In this instance, although the sections of the XL policy setting forth the hull coverage and the protection and indemnity coverage also contain notice provisions, they are contained in the standard form portion of those sections, rather than the portions specifically designated as "Special Conditions." Accordingly, the Court finds that the quoted notice provision applies to the exclusion of the others.
Although not defined by the policy, "prompt notice" is notice given within a reasonable time in view of the facts and circumstances. See 13 LEE R. RUSS THOMAS F. SEGALLA, COUCH ON INSURANCE § 190:31 (3d ed. 1999). Included in the facts and circumstances to be considered are (1) the extent of the insured's sophistication regarding commerce and insurance; (2) the insured's awareness that an occurrence has taken place; and (3) the insured's diligence in ascertaining whether coverage is available once becoming aware of the occurrence. Id. at § 190:39.
With respect to claims made against the insured, notice clauses ensure that the insurer has the chance to investigate the claim, to decide whether the claim should be settled, and, if necessary, to prepare a defense. See State of Mississippi v. Richardson, 817 F.2d 1203, 1207 (5th Cir. 1987). They also allow the insurer to prevent the insured from committing fraud and ill practices and avoid being put at an disadvantage in obtaining evidence. See Resolution Trust Corp. v. Gaudet, 907 F. Supp. 212, 216-17 (E.D. La. 1995).
The Court's preliminary assessment of this issue is that Suard did not provide XL with prompt notice of the August 22, 2001 accident, Assuming that it was reasonable for Suard to initially delay notice based on its understanding that D L and TLC had accepted responsibility for the accident, circumstances arguably changed on October 4 or 5, 2001, when Suard was served with the suit that D L filed on October 3, 2001 against Suard. At that point, Suard had to have realized that D L was faulting it for the accident, and that there was some possibility that Suard would need to rely on its own insurance coverage. Given this realization, it arguably was not reasonable for Suard, who was proceeding through the claims process with the assistance of its insurance agent, Laris, and later its attorneys, to delay notifying XL of an accident that had happened six weeks earlier for at least six more weeks.
See October 4, 2001 Return of Service (Rec. Doc. No. 2) and Ex Parte Motion for Extension of Time to Plead at ¶ 1 (Rec. Doc. No. 3) regarding the date of service.
Mindful, however, that XL, as the movant, bears the burden of demonstrating that no genuine issue of material fact exists, and that it is entitled to judgment as a matter of law, the Court declines to rule in XL's favor on this issue at this time. On the question of the timeliness of Suard's notice, the memorandum that XL submitted in support of its motion for summary judgment does little more than argue that notice more than three months after the August 22, 2001 accident "hardly can be characterized as prompt," and references the analysis of the law that Federal made in support of its motion for summary judgment. Specifically, XL does not consider the possibility that Suard was reasonable in not providing notice until being served, on October 4 or 5, 2001, with DL's lawsuit, based on its understanding that DL and/or TLC would bear responsibility for all damages resulting from the accident. See, e.g., RUSS SEGALLA, supra, §§ 192:82-84 (reasonable and good faith belief in nonliability may excuse insured's delay); see also, e.g., American Motorists Ins. Co. v. General Host Corp., 919 F. Supp. 1506, 1511 (D. Kansas 1996) (lack of knowledge of an occurrence or good faith reasonable belief of nonliability constitutes mitigating factor). Nor does it address the possibility that, even after being sued by DL, Suard exercised reasonable diligence in seeking to determine whether the XL policy provided coverage. See RUSS SEGALLA, supra, §§ 192:50-51 (justifiable ignorance of coverage or good faith belief of noncoverage may justify delay); see also American Motorists Ins. Ca, 919 F. Supp at 1511 (good faith reasonable belief that an occurrence is not covered may excuse failure to notify). In other words, though XL may be correct on this issue, it has failed to bear its burden of demonstrating this to be true.
XL's Memorandum at 10.
In his November 14, 2001 letter to Arthur J. Gallagher Company, Claude Richardel of Laris Insurance Agency explained: "[r]ealizing the barges were not scheduled, and that they were not insurable once sunk, plus Suard believed Suard 203 204 and Suard Barge were fully protected by TLC and D L, are the reasons [Suard] did not request [that his] P I carrier be advised of the incident at the time of the loss." See November 14, 2001 Letter, Exhibit G to Suard's Opposition; see also April 15, 2003 Deposition of Laris Insurance Agency at p. 85, Exhibit D to Suard's Opposition (Suard did not attempt to add the barges during the fifteen day period "because they were sunk and sitting on the bottom of . . . the Intracoastal.").
Even if the Court were to decide the question of "prompt notice" in XL's favor, the Court also does not believe that it is in a position to find that all coverage under the XL policy was thereby lost. Regarding this issue, the Fifth Circuit, applying Louisiana law, has concluded that a sophisticated insured's failure to satisfy a policy provision making timely notice an express condition precedent results in forfeiture of coverage, regardless of whether the insurer can demonstrate prejudice. See, e.g., Joslyn Mann. Co. v. Liberty Mut. Ins. Co., 30 F.3d 630 (5th Cir. 1994), cert. denied, 513 U.S. 1127, 115 S.Ct. 935 (1995); Gulf Island, IV v. Blue Streak Marine, Inc., 940 F.2d 948, 955 (5th Cir. 1991). Not concerning itself with this jurisprudence, XL argues only that its "prompt notice" requirement is in the form of a warranty, and that noncompliance with a warranty forfeits insurance coverage. In turn failing to address XL's warranty argument, Suard counters that XL must provide coverage, absent a showing of prejudice, because timely notice is not an express "condition precedent" to coverage under the XL policy, as is required by Fifth Circuit jurisprudence to obviate a consideration of prejudice.
In its opposition to Federal's motion for summary judgment, which arguments Suard incorporated into its opposition to XL's motion, Suard also argued that it is not the sophisticated insured contemplated by Joslyn. See Suard's Memorandum in Opposition to Motion for Summary Judgment filed by Federal Insurance Company ("Suard's Federal Opposition") at 13. Under the specific circumstances of this case, as the Court understands them, the Court disagrees. Suard is a business entity owning numerous commercial vessels. More importantly, however, Suard was guided through the claims process in this matter by its insurance agent, Laris Insurance Agency. See Suard's Federal Opposition at 13; June 13, 2001 Affidavit of Sidney Forrestier at ¶¶ 17, 28, and 44, Exhibit 1 to Suard's Federal Opposition. Far from a stranger to marine insurance policies, Laris also served as the insurance agent for D L and TLC, and purportedly reported insurance claims arising from the August 22, 2001 accident for them. See June 13, 2001 Affidavit of Sidney Forrestier at ¶ 34, Exhibit 1 to Suard's Federal Opposition.
Notably, if there was no prejudice to XL as a result of Suard's failure to timely notify it of the August 22, 2001 accident, accepting XL's argument would excuse it from providing coverage on a purely technical ground having no connection with the risk insured against or the cause of the loss itself. Moreover, despite the potentially harsh consequences to follow from such a breach, the only notice to the insured of those consequences is the presence of the single word "warranted" in the notice provision.
Notwithstanding these considerations, the Court would not hesitate to find that a breach of the notice warranty provision forfeited all coverage under the policy, if XL had sufficiently established the propriety of that action. XL, however, has not. Although it bears the burden of demonstrating entitlement to judgment as a matter of law, XL offers only the general proposition that, in the absence of contrary public policy or statutory authority, "warranties [originally were] given strict effect and if not exactly complied with, whether material to the risk or not, the policy was void for the particular loss. . . ." to support this result. Significantly, XL does not reference controlling or analogous jurisprudence demonstrating that this rule does or should apply to a notice of loss provision such as the one involved here.
XL's Memorandum at 10.
Oceanomics, Inc. v. Petroleum Distributing Co., 292 So.2d 190, 192 (La. 1974), a case cited by XL, establishes only that unambiguous policy exclusions and conditions should be enforced unless against public policy. While the Court agrees that decision generally supports XL's position, it does not find the case to be sufficiently analogous to satisfy XL's burden. XL also offers no discussion of the significance, if any, of the Fifth Circuit's statement in Thanh Long P'ship v. Highlands Ins. Co., 32 F.3d 189, 194 (5th Cir. 1994) (summary calendar), a case involving a maritime insurance policy, that "breach of warranty, either express or implied, is insufficient to deny recovery unless the breach is also the cause of the loss."
In addition, all of the insurance policies in the Fifth Circuit cases dispensing with the prejudice requirement apparently have contained the phrase "condition precedent" in the relevant policy language. See American Safety Risk Servs. Inc., v. Legion Indem. Co., 153 F. Supp.2d 875, 876 (E.D. La. 2001) (discussing cases). Despite the emphasis given thus far to the presence of that phrase, the Court is willing to assume that the Fifth Circuit would find alternative language unambiguously expressing that untimely notice will forfeit all coverage to similarly obviate a showing of prejudice. However, the Fifth Circuit's treatment of the district court's decision in Homestead Ins. Co. v. Zar, 1993 WL 346191 (E.D. La.), rev'd, 18 F.3d 936 (5th Cir. 1994) (Table, No. 93-03675), albeit in a one-word, unpublished opinion, creates some circumspection as to whether the language in XL's notice provision passes muster.
Local Rule 47.5.3 of the Local Rules of the United States Court of Appeals for the Fifth Circuit states that unpublished opinions issued before January 1, 1996 are precedent. See Fifth Cir. Local Rule 47.5. The rule further states that, because every opinion believed to have precedential value is published, unpublished opinions normally should be cited only for purposes of res judicata, collateral estoppel, law of the case, or with respect to issues such as sanctionable conduct or attorney's fees. Id.
According to the Homestead district court opinion, the insurance policy in that case included the following language as one of its several general conditions:
NOTICE OF LOSS LATE REPORTING WARRANTY In the event of loss or casualty resulting in a claim it is warranted that prompt notice of such an event shall be given to these underwriters. Such notice shall not exceed 72 from first knowledge of the event by owners and/or operators of the vessel. Therefore, if notice of loss exceeds 72, the Assured will have breached this warrant and all deductibles will automatically be increased by 3 times the scheduled amount.
See Homestead, 1993 WL 346191 at *1.
Finding that the notice warranty was breached by the insured's failure to report the loss within 72 hours of the date damage was suffered, or the date it became evident that repair costs would exceed the regular deductible, and reasoning that the wording of the notice warranty was "clear and express," the district court concluded the policy language must be given effect regardless of whether prejudice had been shown. See Homestead, 1993 WL 346191 at *1. Thus, because the deductible, when trebled, exceeded the cost of the repairs, the loss in question was not compensable under the hull policy. Id. In reaching that conclusion, the district court cited four Fifth Circuit cases addressing notice as a "condition precedent" to coverage. Id. (citing Gulf Island IV v. Blue Streak Marine, Inc., 940 F.2d 948, 953, 955 (5th Cir. 1991); Jackson v. Transportation Leasing Co., 893 F.2d 794 (5th Cir. 1990); Auster Oil Gas, Inc. v. Stream, 891 F.2d 570 (5th Cir. 1990); MGIC Indem. Corp. v. Central Bank, 838 F.2d 1382 (5th Cir. 1988)). Significantly, without offering any explanation for its decision, the Fifth Circuit reversed the district court.
The Court recognizes that it is possible that the Fifth Circuit's reversal in Homestead was directed at something other than the concept of a warranty excusing a showing of prejudice with a breach of an insurance policy "notice of loss" provision. Indeed, the Fifth Circuit apparently determined that publication of its decision was not required. On the other hand, the district court's ruling in Homestead was very narrow, and was based on the Fifth Circuit's "condition precedent' cases, as well as notice language that it found to be "clear and express." In any event, the ruling creates enough uncertainty regarding the effect of a notice of loss warranty provision to convince the undersigned to proceed with caution in not requiring prejudice in the absence of "condition precedent" language.
For instance, if the notice provision was exactly as quoted in the Homestead district court opinion, the Fifth Circuit may have concluded that the apparent omission of the word "hours" rendered a 72-hours notice requirement impermissibly vague and, thus, unenforceable as written.
Taking all of this into consideration, the Court is not persuaded, on the showing made by XL, that it is appropriate at this time for judgment as a matter of law, based solely on the issue of untimely notice, to be rendered in favor of XL, absent a showing of prejudice. XL may revisit these issues at trial or, if it believes it can demonstrate that sufficient grounds exist, through a subsequently filed motion directed at these issues.
Turning then to the question of prejudice from Suard's delay in notifying XL of the August 22, 2001 incident, the Court finds that XL also has not born its burden on this point. Specifically, XL stated in its supporting memorandum that it would supplement its submission with deposition testimony from its claims representative regarding the "full investigation" that XL would have initiated, and to which it has been deprived because of Suard's delay in providing notice. To the Court's knowledge, however, XL has not submitted a supplement. Furthermore, this is not a situation where the insurer received notice after or on the eve of trial. Nor is it a situation where no investigation of the accident was done prior to the time that XL received notice of the incident. Indeed, surveys conducted on behalf of D L and another of the insurers involved in this matter were begun on the night of the accident. D L and Suard personnel, in addition to the crew members on board D L's tug at the time of the accident, also went to the accident site shortly on the night of the accident, and likely can provide helpful information. Finally, photographs were taken of the scene of the accident. Given these circumstances, XL should seek to obtain relevant information regarding the accident through the discovery process, if it has not already done so. III. Automatic Acquisition Clause
See XL's Memorandum at 11.
See July 10, 2002 Deposition of Gary Rankin, Exhibit 33 to Suard's Federal Opposition; October 30, 2002 Deposition of Phillip "P.E." Gilligan, Exhibit 36 to Suard's Federal Opposition; June 16, 2003 Affidavit of Sidney Forrestier at ¶¶ 48 and 52, Exhibit 1 to Suard's Federal Opposition. In its opposition memorandum to XL's motions, Suard incorporated all of the arguments it made regarding late notice in its opposition memorandum to Federal's motion for summary judgment on coverage. See Suard Opposition at 13.
See July 10, 2002 Deposition of Gary Rankin, Exhibit 33 to Suard's Feeral Opposition; October 30, 2002 Deposition of Phillip "P.E." Gilligan, Exhibit 36 to Suard's Federal Opposition; June 16, 2003 Affidavit of Sidney Forrestier at ¶¶ 48 and 66, Exhibit 1 to Suard's Federal Opposition.
See June 16, 2003 Affidavit of Sidney Forrestier at ¶¶ 48 and 52, Exhibit 1 to Suard's Federal Opposition.
It is not disputed that the Suard 203 and Suard 204 were not included on Suard's XL policy's schedule of vessels. Despite this, Suard argues the automatic acquisition clause of the XL policy provides coverage for the two barges, because the August 22, 2001 accident occurred within fifteen days of the date that Suard purchased them from Texas Petroleum. The automatic acquisition clause provides:
21. AUTOMATIC ACQUISITION CLAUSE (MHO89423)
Subject to all terms and conditions, this Policy is automatically extended to cover other Vessels or floating equipment in which the Assured acquires an insurable interest through purchase, charter, or otherwise and are similar in description and type to those already insured hereunder.
Such vessels and/or floating equipment to be valued, unless otherwise agreed, at the amounts fixed between the Assured and those from whom they made the acquisition prior to attachment hereunder. Notwithstanding the above, Underwriters shall not be liable for values in excess of $300,000 or the largest sum previously insured on any one Vessel of its type scheduled in this Policy, whichever is less.
It is warranted that within fifteen (15) days of a Vessel coming at risk hereunder, the Assured shall:
a. Report the acquisition to Underwriters and pay additional premium thereon at rates to be advised.
b. With respect to purchased Vessels and/or Vessels chartered, leased or borrowed for a term exceeding ninety (90) days, obtain a "Condition and Valuation" survey from any one of the following approved surveyors and comply with all recommendations made therein:
A. John L. Kingston Associates
B. Rivers Gulf Surveyors, Inc.
C. Dufour, Laskay Associates, Inc.
Vessels and/or equipment chartered, leased or
borrowed on a short term basis (ninety (90) days
or less) to have an "on hire" survey performed by
an approved "NAMS" surveyor prior to the insurance
attaching hereunder.
All surveys required to be for the account of the
Assured unless otherwise agreed.
See XL Insurance Policy, General Conditions at ¶ 21, Exhibit C to XL's Memorandum.
XL contends, however, that the automatic acquisition clause does not apply because the Suard 203 and Suard 204 were not "similar in description and type to those already insured" under the XL policy. Specifically, it asserts that none of the scheduled vessels are "compressor barges," as the Suard 203 and Suard 204 are. According to XL, compressor barges pose a different form of risk than other types of barges because of the machinery and other equipment incorporated on the deck. XL additionally argues that the clause does not supply coverage because Suard did not, within fifteen days(s) of acquisition, report the purchase to XL, pay an additional premium, or arrange for surveys of the barges, in accordance with the policy's requirements.
In response, Suard argues that a compressor barge is merely a deck barge with a compressor placed on top of it; that different equipment often is placed on and removed, as needed, from deck barges; and that the XL policy's vessel schedule lists several deck barges. Suard additionally contends that compressor and production barges are essentially the same thing, and that the vessel schedule included at least three compressor barges. The Court finds that the evidence cited by Suard precludes a summary judgment finding that the Suard 203 and Suard 204 "were not similar in description and type to those already insured," for purposes of the automatic acquisition clause.
See June 21, 2002 Deposition of Sidney Forrestier at pp. 182-83, Exhibit C to Suard's Opposition Memorandum; June 16, 2003 Affidavit of Sidney Forrestier at ¶¶ XH-XIII, Exhibits to Suard's Opposition Memorandum.
See June 16, 2003 Affidavit of Sidney Forrestier at ¶¶ IV-VI and XII-XII, Exhibits to Suard's Opposition Memorandum.
With respect to Suard's failure to report the purchase to XL, pay an additional premium, or arrange for surveys of the barges, the XL policy, as Suard points out, does not specifically address how accidents occurring during the fifteen day "grace period" are to be handled. Nor does XL cite any controlling authority for its position regarding this issue. Mindful of the rule that ambiguities in insurance policies are to be construed in favor of the insured, see e.g., Exxon Corporation v. St. Paul Fire and Marine Insurance Company, 129 F.3d 781, 788 (5th Cir. 1997), the Court finds, as it did with the motion for summary judgment filed by the Gulf Coast Underwriters, two Louisiana appellate court decisions to be persuasive. See Knotts v. Hardware MUL Cas. Ca, 272 So.2d 788, 789-90 (La.App. 2 Cir. 1973); Pendleton v. Ricca, 232 So.2d 803, 807-08 (La.App. 4 Cir. 1970). In Knotts and Pendleton, the Louisiana courts of appeal held that, when an accident occurs during the period in which notice of acquisition is to be given regarding a newly acquired vehicle, insurance coverage automatically is provided with respect to that accident, regardless of whether notice of the acquisition has been or is provided to the insurer during the specified period. Although these cases addressed newly acquired automobiles, rather than vessels, the Court does not see, and has not been provided with, any reason that the same rule should not apply here. Thus, because the August 22, 2001 accident occurred before the expiration of the fifteen-day period of automatic coverage following acquisition of the Suard barges, the Court does not find this argument to entitle XL to summary judgment.
See September 23, 2003 Order and Reasons (Rec. Doc. No. 314).
There appears to be a split among the state courts regarding this issue. See 8 LEE R. Russ THOMAS F. SEGALLA, COUCH ON INSURANCE §§ 117:35-36 (3d ed. 2003).
If notice of acquisition is not provided during the specified period, and an accident occurs after the notice period has ended, however, there is no coverage for that accident. See Mathews v. Marquette Cas. Co., 152 So.2d 577, 581 (La.App. 2 Cir.), cert. denied, 153 So.2d 880 (La. 1963).
In the absence of a specific and controlling federal maritime rule, questions regarding marine insurance coverage are determined by applying state law. See Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 75 S.Ct. 368 (1955); Taylor v. Lloyds Underwriters of London, 972 F.2d 666, 668 (5th Cir. 1992), cert. denied, 507 U.S. 952, 113 S.Ct. 1366 (1993).
In reaching this conclusion, the Court further notes that, with respect to"[v]essels and/or equipment chartered, leased or borrowed on a short-term basis," the XL policy's automatic acquisition clause requires an "on hire" survey prior to insurance attaching under the automatic acquisition clause. Significantly, a similar pre-attachment requirement is not imposed with respect to the reporting, premium payment, and "condition and valuation" surveys required for purchased vessels. The Court finds this omission to provide additional support for its determination that XL has not demonstrated that the automatic acquisition clause in its policy does not provide coverage for the two Suard barges involved in the August 22, 2001 accident. IV. Valuation for the Hull Insurance Portion of the XL Policy
XL alternatively argues that, if a genuine issue of material fact precludes total summary judgment in its favor, it nonetheless is entitled to a partial summary judgment declaring the value of Suard's barges, for purposes of the hull insurance portion of the XL policy, to be $100 per barge. To support this argument, XL cites the provision in the automatic acquisition clause stating that vessels insured pursuant to that clause are "to be valued, unless otherwise agreed, at the amounts fixed between the Assured and those from whom they made the acquisition prior to attachment hereunder." Referencing Neil Suard's deposition testimony and the August 10, 2001 purchase agreement between Suard and Texas Petroleum, XL contends that Suard paid only $100 per barge and that no other agreement regarding value was reached by XL and Suard.
See XL Insurance Policy, General Conditions at ¶ 21, Exhibit C to XL's Memorandum.
See June 21, 2001 Deposition of Neil Suard at p. 52, Exhibit H to XL's Memorandum; August 10, 2001 Purchase Agreement, Exhibit A to XL's Memorandum.
The Court agrees with XL that the automatic acquisition clause limits the value of the Suard barges, for purposes of the XL hull coverage, to the amount agreed to by Suard and Texas Petroleum on August 10, 2001. Suard also is correct, however, that the August 10, 2001 purchase agreement reflects that the total value assigned to the barges by Suard and Texas Petroleum was S100 per barge plus the labor and equipment costs incurred by Suard in removing the barges from Texas Petroleum's facility. Because the Court has not been provided with evidence sufficient to determine the relevant labor and equipment costs, it cannot determine the total dollar value of the Suard 203 and Suard 204 for purposes of the XL hull insurance policy.
See August 10, 2001 Purchase Agreement, Exhibit A to XL's Memorandum; June 16, 2003 Affidavit of Sidney Forrestier at ¶¶ III, XIV and XV, Exhibit B to Suard's Opposition.
Conclusion
For the reasons stated herein, XL's request for summary judgment is DENIED. XL's request for partial summary judgment is GRANTED IN PART and DENIED IN PART.