Opinion
Civil Action No. 02-3588 c/w 04-624 Section "N" (4).
February 3, 2005
ORDER AND REASONS
Presently before the Court is Zurich's Motion for Reconsideration and/or Clarification of Orders 369 and 370 (Rec. Doc. No. 380). As stated herein, IT IS ORDERED that the motion is GRANTED IN PART and DENIED IN PART. The parties are cautioned that the Court's ruling on Zurich's motion does not suggest a determination of the merits of any party's position regarding the substantive insurance issues that remain in dispute.
1. Preliminary Statement
As a preliminary matter, the Court emphasizes that its January 14, 2005 ruling (Rec. Doc. No. 369) on Zurich's Motion for Leave to Amend Answer assumed that Zurich would not have filed a motion seeking unnecessary relief. Similarly, the Court further assumed that, if justification for an amendment existed, it would be explained in the memorandum supporting the motion seeking leave to file that amendment. The Court also desires to emphasize that its January 14, 2005 Order did not shift burdens of proof otherwise applicable to this matter; nor was it intended to nullify, disregard, or strike defenses that were asserted in Zurich's original Answers, but not brought to the Court's attention in connection with Zurich's motion for leave to amend its Answers.
II. Zurich's Proposed Amendments A. Pre-Loss Reported Value
Defendant's proposed amendments to its Answers include an assertion that coverage is limited to the policy's limits, which it contends are based on reported values of risk, and here should not exceed the pre-loss reported value of the vessel. The Court acknowledges that Zurich pled "the terms, conditions, exclusions, and limitations of its policy in extenso" in the Answers it previously filed against Halter and Felham. Defense Number 6 of the Answer asserted against Halter, moreover, specifically alleges that "coverage is limited to and by the reported value of the Yacht ULYSSES as of the date of the loss." Given these allegations, and that Zurich's assertion addresses policy limits, rather than a policy exclusion, the Court does not find an amendment urging this point to be necessary. Thus, subject to any other valid evidentiary objections that might be offered at trial, Zurich will be allowed to introduce evidence regarding the pre-loss reported values for the vessel, and to attempt to convince the Court that the dollar amount of coverage should be so limited.
See Zurich's Answer to Halter's Original Complaint, which is attached as Exhibit A to Zurich's Memorandum in Support (Rec. Doc. No. 380) at ¶¶ 15, 30, 40, and 63; Zurich's Answer to Felham's Complaint (Rec. Doc. No. 23) at ¶¶ XIII.
See Zurich's Answer to Halter's Original Complaint, which is attached as Exhibit A to Zurich's Memorandum in Support (Rec. Doc. No. 380) at ¶¶ 15, 30. The Court realizes that Zurich's Answer to Felham's complaint does not contain a defense comparable to Defense Number 6 to Halter's Answer, but nonetheless finds that the general statement in ¶ XIII sufficiently invokes the policy's dollar limits.
In reaching this conclusion, the Court is cognizant of Felham's argument that Zurich should not be allowed to rely on any policy exclusions, limitations, and defenses, because it did not timely issue or deliver its policy to Halter. The jurisprudence cited by Felham in support of this argument, however, explains that timely delivery of the policy is essential because the insured will otherwise be unaware of relevant exclusionary language, and instead will assume that the desired coverage exists. Here, the Court understands that Halter received sufficient policy documentation from the London underwriters (or its own London broker) to provide it with notice of the provisions implicated by Zurich's motion. Thus, provided that Zurich does not seek to rely on provisions in its policy that are different from and more onerous than those set forth in the documents issued by the London underwriters (or Halter's London broker), the Court does not find that Halter or Felham has been prejudiced by Zurich's alleged failure to deliver its own policy documents to its insured, such that it cannot rely upon relevant policy provisions. B. The Vessel's "Trim"
The Court also notes that Felham contends that Zurich's Answer references the wrong policy number, i.e. MH-2191745-04. See Felham's Opposition (Rec. Doc. No. 394) at 4, n. 2, and 5. According to Felham, that number refers to the policy covering October 1, 1999 to March 1, 2000 that was cancelled and rewritten, and replaced by Zurich policy MH-3587718-00 for the March 1, 2000 through October 1, 2000 policy period. Id. Notwithstanding this apparent error, Zurich's Answers also indicate that the policy covers the period March 1, 2000 to October 1, 2000. Thus, on the showing made, the Court does not find that Zurich's citation of the wrong policy number precludes its reliance on provisions from the policy applicable to the March 1, 2000 through October 1, 2000 term.
As stated in its January 14, 2005 Order, the Court has allowed Zurich to assert the defenses set forth in its proposed amended answers that are based on stability problems that allegedly plagued the M/Y Ulysses at the time of the fire. Accordingly, Zurich likewise shall be allowed to introduce evidence relevant to those stability problems at trial. Based on the information presently before it, however, the Court is not in position to determine whether evidence of the yacht's trim and/or draft is probative of the yacht's stability. Accordingly, the Court will defer a further ruling on the admissibility of such evidence until trial, when it can make this determination with the assistance of testimony by expert and other competent witnesses.
C. Applicable Policy Year — 15% v. 10%
Although Zurich pled the terms, conditions, exclusions and limitations of its policy in its Answers, it likewise admitted in those documents that its policy provided 15% of Halter's builder's risk coverage for the period March 1, 2000 through October 1, 2000, and is applicable to the damage done to the M/Y ULYSSES by the July 2, 2002 fire. To the extent that Zurich thereafter discovered information leading it to question whether these admissions were in error, it should have timely sought discovery relevant to and amendment of the pertinent statements in its Answers. Despite Continental's stated disagreement, in January and February 2004, with the propriety of the policy year change, and Zurich's own statement, in its August 10, 2004 motion for continuance, that it believed the claim had been manipulated to implicate the earlier policy year, Zurich did not offer any amendment regarding this point until December 20, 2004. Nor did it request that the deadline for a possible amendment on that issue be extended to allow necessary additional discovery. Given the proximity of the trial date, and Zurich's ability to have sought discovery of this issue, and corresponding amendments of its pleadings, much earlier in this proceeding, the Court will not now allow a retraction of these admissions. Accordingly, Felham and Halter will not be required to prove the applicable policy year or Zurich's participation level (15%).
See Zurich's Answer to Halter's Original Complaint, which is attached as Exhibit A to Zurich's Memorandum in Support (Rec. Doc. No. 380) at ¶¶ 15, 30, 39, 40, and 63; Zurich's Answer to Felham's Complaint (Rec. Doc. No. 23) at ¶¶ XIII and XV.
The Court further notes Felham's assertion that the policy for the October 2, 2000 through October 1, 2001 term has not been produced in the course of this litigation or otherwise. See Felham's Opposition at 6.
Zurich has indicated that it also seeks to introduce evidence of the alleged manipulation of the policy year in support of its uberrimae fidei defense. The Court has allowed Zurich to add that defense, however, only insofar as it is premised on the alleged stability problems that formed the basis of the continuance granted in August 2004. In other words, for essentially the same reasons as those stated in the preceding paragraph, an amendment asserting an uberrimae fidei defense based on the alleged manipulation of the applicable policy year has not been allowed. Accordingly, unless this evidence has relevance other than to establish the policy that is applicable to Halter's and Felham's claims, or to support a corresponding uberrimae fidei defense, Zurich will not be allowed to introduce it at trial. D. OFE Sublimit
As previously stated, Zurich asserted the "the terms, conditions, exclusions, and limitations of its policy in extenso" in the Answers it filed against Halter and Felham. Accordingly, provided that Zurich does not seek to rely on provisions in its policy that are different from and more onerous than those set forth in the documents issued by the London underwriters (or Halter's London broker), and subject to any other valid evidentiary objections that might be asserted at trial, the Court will allow Zurich to introduce evidence demonstrating any OFE sublimit established by its policy.
See Zurich's Answer to Halter's Original Complaint, which is attached as Exhibit A to Zurich's Memorandum in Support (Rec. Doc. No. 380) at ¶¶ 15, 30, 40, and 63; Zurich's Answer to Felham's Complaint (Rec. Doc. No. 23) at ¶¶ XIII.
E. Halter's Cost Overruns
Halter and Zurich disagree as to who bears the burden of proof with respect to Halter's cost overruns. Halter contends that Zurich desires to assert an affirmative defense of a lack of coverage; Zurich maintains its argument goes to Halter's burden of proving a loss within coverage. If Zurich is correct, no affirmative defense is required and Zurich is entitled to introduce evidence probative to the issue of whether Halter has demonstrated that its loss falls within the scope of its builder's risk insurance. Even if Halter is correct that the burden is on Zurich, however, the dispute, as urged by Zurich, implicates the "Agreed Value" clause of the policy, which relates to the policy's limits. Thus, because it asserted "the terms, conditions, exclusions, and limitations of its policy in extenso" in the Answers it previously filed against Halter and Felham, the Court will allow Zurich to introduce relevant evidence, subject to any other valid evidentiary objections that might be asserted at trial.
The parties are to be prepared to address this issue, as well as the related issue of whether federal maritime law or state law is controlling, at trial. All parties' briefs addressing Zurich's motion for reconsideration contain some reference to decisions from the Louisiana state courts in discussing their respective burdens of proof. On this point, the Court notes that the Louisiana Supreme Court has stated that, "[i]n an action under an insurance contract, the insured bears the burden of proving the existence of the policy and coverage," while the insurer "bears the burden of showing policy limits or exclusions." See Tunstall v. Stierwald, 809 So. 2d 916, 921-23 (La. 2002) (finding insurer satisfied its burden of establishing policy limits of $50,000).
Considering the foregoing, the Court also vacates its January 14, 2005 Order (Rec. Doc. No. 369) that Zurich's Motion for Partial Summary Judgment on Lack of Coverage (Rec. Doc. No. 341) was rendered moot by the Court's Order and Reasons ruling on Zurich's motion for leave to amend its answer. A ruling on the motion for partial summary judgment shall follow.