Opinion
Civil Action No. 02-3588 d/w 04-624, SECTION "N" (4).
January 24, 2005
ORDER AND REASONS
Before the Court is Felham's Motion for Reconsideration of the Court's December 3, 2004 Order and Reasons (Rec. Doc. No. 346). For the reasons stated herein, IT IS ORDERED that the motion is DENIED.
The Court's December 3, 2004 Order and Reasons concluded that Felham does not have standing to seek relief under La.R.S. 22:658 or 22:1220. This conclusion rests, in part, on the Court's determination that, while Felham is an additional insured for purposes of the liability coverage of the Zurich policy, it is only a simple loss payee with respect to the builder's risk coverage. With its motion for reconsideration, Felham offers several reasons why it believes the Court should set aside the December 3, 2004 Order, and reinstate Felham's bad faith claims against Zurich. I. Zurich's Uberrimae Fidei Defense and Robert Shepherd's Testimony
Felham first argues in its supporting memorandum that Zurich's assertion of the uberrimae fidei doctrine with respect to Felham's claim is itself an admission of Felham's insured status, and demonstrates that Zurich "believed and intended that, under the terms of its builder's risk policy, Felham is an insured." Adding to this argument, Felham's reply memoranda contends that the Court's December 3, 2004 Order held: "summary judgment [i]s proper only in 'the absence of any evidence that it is customary in the marine construction industry for the owner of a vessel under construction and/or an owner of materials to be installed in that vessel to be treated as an insured under a contractor's builder's risk policy." According to Felham, Zurich's uberrimae fidei defense, particularly when considered together with testimony provided by Halter, through its corporate representative, Robert Shepherd, creates a genuine issue of material fact as to the custom of the marine construction industry.
See Felham's December 21, 2004 Memorandum (Rec. Doc. No. 346) at 4.
Felham's January 12, 2005 Reply Memorandum (Rec. Doc. No. 329) at 2. Contrary to Felham's suggestion, the Court's December 3, 2004 ruling in favor of Zurich did not turn solely on an absence of evidence regarding industry custom. Indeed, although the absence of such evidence was referenced as one basis for distinguishing two cases cited by Felham, the Court's discussion highlighted the existence of objective evidence establishing the parties' intent regarding Felham's status. The Court additionally notes that Felham appears to admonish it for not "seeking additional evidence from any party regarding the customary practices of the marine insurance industry. . . ." See Felham's January 12, 2005 Reply Memorandum at 2. The two cases referenced in the December 3, 2004 Order and Reasons in which customary practices of the industry were considered by the Louisiana courts of appeal, however, were brought to the attention of the Court by Felham, not the other way around. See December 3, 2004 Order and Reasons at 8. The Court respectfully suggests, moreover, that Rule 56 of the Federal Rules of Civil Procedure provided sufficient invitation for such evidence.
As stated in the Court's December 3, 2004 Order, the construction contract between Felham and Trinity and the subcontract between Trinity and Halter, which were drafted shortly before the Ulysses project began, as well as the language of relevant insurance policy documents, reflect the parties' decision to have Felham named as an additional insured for liability purposes, and a simple co-loss payee for purposes of the builder's risk insurance. The Court does not find Zurich's recently asserted uberrimae fidei defense to establish a different intent on the part of Zurich, or create a triable issue with respect to the custom in the marine construction industry. To the contrary, the Court agrees that Zurich's assertion of this defense with respect to Felham's claims merely reflects that a simple loss payee can recover under an insurance policy only to the extent that the named insured can. See May v. Market Ins. Co., 387 So. 2d 1081, 1083-84 (1980) (explaining recovery for standard loss payee, unlike simple mortgage payee, is not defeated by act or neglect of the insured); 4 COUCH ON INS. § 65:24 (3d ed. Supp. 2004) (because simple loss payee's right of recovery is not greater than the right of the insured, the insured's breach of the policy conditions also prevents recovery by the loss payee); 4 COUCH ON INS. § 65:27 (3d ed. Supp. 2004) (because simple loss payee's rights are derivative of the insured's, material misrepresentations and concealments by the insured have precluded simple loss payee's right to recovery under policy); see also Transamerica Leasing, Inc. v. Institute of London Underwriters, et al., 267 F.3d 1303, 1307-09, 1312 (11th Cir. 2001) (indicating that insured's breach of uberrimae fidei doctrine would negate coverage for simple loss payee). Thus, if conduct attributable to Halter voids the policy, it likewise eviscerates any right of recovery held by Felham.
To the extent that Felham relies on any allegations of wrongdoing asserted solely against it, e.g., Zurich's allegations regarding Felham's alleged misrepresentation of the amount of its stripping, cleaning, and repainting repair costs, the Court likewise concludes that these allegations are not an admission by Zurich of Felham's insured status.
Felham's reliance on the testimony recently provided by Mr. Shepherd at Halter's December 1, 2004 corporate deposition likewise is unavailing. Mr. Shepherd's testimony at best attempts to explain the contracting parties' understanding of Felham's status for purposes of this particular construction project. It does not purport to explain the industry practice, and certainly does not create a genuine issue of material fact on this point.
See Deposition Transcript, Exhibit A to Felham's Reply Memorandum. As indicated in its December 3, 2004 Order, moreover, the Court finds that the construction contract and policy document provisions relevant to this issue unambiguously reflect the parties' objective manifestation of their intent. Accordingly, the Court does not find it appropriate to consider Mr. Shepherd's after-the-fact testimony regarding the parties' intent with respect to Felham's status. See La. Civ. Code art. 2046, et seq.
II. Zurich's Failure to Deliver Its Policy
Referencing the Louisiana Supreme Court's decision in Louisiana Maintenance Servs., Inc. v. Certain Underwriters at Lloyd's of London, et al., 616 So. 2d 1250 (La. 1993), as well as subsequent decisions from other courts, Felham argues that, because Zurich did not issue a copy of its own policy to its insured or its insured's agent, it cannot rely on any exclusions or limitations with respect to Felham's additional assured or loss payee status. The jurisprudence cited by Zurich, 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. See Louisiana Maintenance, 616 So. 2d at 1252. Here, however, the construction contracts demonstrate that neither Halter nor Felham desired Felham's status to be anything other than a simple loss payee for purposes of the builder's risk coverage. In addition, Halter's receipt of policy documents from the London underwriters participating in 70% of Halter's marine insurance package provided notice of Felham's status for purposes of the builder's risk and liability coverages. Thus, Zurich's alleged failure to timely deliver its policy was not, in this instance, prejudicial to its insured and, therefore, does not preclude it from relying on policy language establishing Felham's status. Cf. Naquin v. Fortson, 774 So. 2d 1277, 1279-80 (La.App. 1 Cir. 2000) (finding the principles underlying the delivery requirement were met because the solicitation of insurance coverage letter signed by the insured communicated the exclusion of automobile liability coverage).
The Court is not aware that any party has alleged that the London underwriters failed to timely deliver necessary policy documents to Halter and/or its agent. Nor does Zurich seek to rely on provisions in its policy that are different from and more onerous than those set forth in the policy documents issued by the London underwriters.
III. Zurich's Policy Language
Felham's final argument is that certain language in Zurich's policy itself evidences that Felham was considered an insured with regard to the builder's risk coverage, and that it is customary for owners of vessels under construction to be insureds. The language in question states:
Felham has justified the filing of its motion for reconsideration on the ground that relevant information was not discovered prior to the Court's issuance of its December 3, 2004 Order and Reasons. The language quoted by Felham, however, is found in the form policy documents attached as Exhibit E (Z-0911) to Felham's October 28, 2003 motion for partial summary judgment (Rec. Doc. No. 40), and in the policy documents produced by Zurich in January 2004. Thus, there appears to be no reason why Felham previously could not have referenced this language in opposition to Zurich's motion for partial summary judgment.
If the claim is made under this policy by anyone other than the owner of the vessel, such person shall not be entitled to recover to a greater extent than would the owner, had claim been made by the owner as an assured named in this policy.
See American Institute Builder's Risk Clauses (Feb. 8, 1979), Exhibit B to Felham's Reply Memorandum.
Felham has not cited any authority supporting its interpretation of this language. In the absence of such authority, the Court is not persuaded that it should set aside its December 3, 2004 determination of Felham's standing on the basis of the quoted form language. Specifically, the Court notes that this language immediately follows a sentence providing a blank line onto which the name of the person(s) insured by the policy is to be written, and stating that the listed person(s) is "hereinafter referred to as the Assured." Both sentences are located under the heading styled "ASSURED." Given this context, the Court finds the quoted language simply recognizes that someone other than the owner of the vessel, such as Halter, can insure the vessel and thus will be the person(s) designated as the "Assured," but limits the amount of that person's recovery to the amount that the owner would be able to recover if the owner had been identified in the policy as an "Assured." Contrary to Felham's proffered interpretation of this language, the Court does not find this language to automatically confer insured status upon an owner who has not been named as an insured in accordance with applicable policy provisions.