Opinion
Civil Action No. 1:01CV287GR
November 20, 2001
OPINION
This cause comes before the Court on Defendant's Motion for Jury Trial of Right, and its Memorandum in support thereof, received by this Court on October 2, 2001. On October 5, 2001, Plaintiff submitted its Memorandum of Authorities in Opposition to Defendant's Motion for Jury Trial and, in response, Defendant submitted a Reply Memorandum on October 16, 2001. Defendant claims that all issues arising from this dispute with Plaintiff should be determined by jury, pursuant to Federal Rule of Civil Procedure 38, as the cause of action does not arise pursuant to the Court's admiralty and maritime jurisdiction. For the following reasons, this Court is of the opinion that Defendant's motion is well taken and that the instant contract suit does not fall within this Court's admiralty jurisdiction.
In the instant action, plaintiff accepted a premium payment of $107,500.00 from defendant on December 31, 2000, agreeing to reimburse defendant for any fire damage caused to the "Copa Casino" between December 31, 2000 and December 31, 2001. On March 25, 2001, a fire broke out in the casino causing a variety of damages. After unsuccessfully attempting to agree on the scope of coverage and the effect of certain policy provisions, plaintiff then filed a Declaratory Judgement Action on July 12, 2001 seeking to avoid responsibility under the insurance policy. In that action, plaintiff alleged that the cause of action arose pursuant to this Court's admiralty and maritime jurisdiction. Defendant responded with the motion now pending before this Court.
Federal Rule of Civil Procedure 38 dictates that the right to a trial by jury shall be preserved as provided for by the Seventh Amendment and statutes of the United States. Despite this, other Federal Rules mandate that such a rule should not be construed so as to expand the right to a jury trial beyond statutory or constitutional grants, "especially in admiralty." See Rachal v. Ingram Corp., 795 F.2d 1210, 1214 (5th Cir. 1986). As such, once a plaintiff pleads his case in admiralty, by amendment or otherwise, the court sits in admiralty and no party has the right to a trial by jury. Rachal, 795 F.2d at 1216.
Federal Rule of Civil Procedure 38(e) states, "[t]hese rules shall not be construed to create a right to trial by jury of the issues in an admiralty or maritime claim within the meaning of Rule 9(h)."
In its motion, defendant argues that this Court is without admiralty and maritime jurisdiction in the present action and, therefore, there exists a right to trial by jury. Defendant asserts that admiralty jurisdiction is not present when the object or subject matter of the insurance policy is not maritime. As a result, defendant claims that the interest insured in the present case, the Copa Casino, is not a "vessel" so as to provide admiralty jurisdiction. Defendant provides a thorough analysis of whether the casino in question is a "vessel" as that term has been used by the Fifth Circuit.
"For an insurance policy to be within admiralty jurisdiction, the interests insured, and not just the risks insured against, must be maritime." Royal Ins. Co. of America v. Pier 39, Ltd., 738 F.2d 1035, 1036 (9th Cir 1984).
In response, plaintiff argues that the determination of whether the casino in question is a "vessel" is not relevant to the jurisdictional issue presented to this Court. Plaintiff relies on Jeffcott v. Aetna Ins. Co., 129 F.2d 582 (2nd Cir. 1942) for the proposition that determining whether an insurance policy is marine in nature turns on the question of whether the insurer assumes risks which are marine risks. Jeffcott, 129 F.2d at 584. In Jeffcott, the Second Circuit held that because the insurance contract provided protection against marine risks, the contract was within the court's admiralty jurisdiction because such a contract is itself "business" or "commerce" of the sea. Id. Plaintiff contends that the insurance contract in the present case and the one at issue in Jeffcott are very similar in that they both use the traditional language of marine policies and both insure against marine risks. In addition, both the ship in Jeffcott and the casino in the case at bar were out of commission at the time of the loss.
In Jeffcott, a large yacht was laid up at a shipyard and was damaged by a hurricane which caused the ship to brake loose from its moorings and drift about 500 feet. Jeffcott, 129 F.2d at 584. The ship was insured by two policies, a hull policy and a liability policy, which both provided that the ship was to be laid up while the policy was in effect. Id.
The court noted that "[b]y its terms the policy covers marine risks. The insurer assumes the risks of the perils of the seas to the vessel insured. Respondent now asserts that the maritime nature of this policy was destroyed by its having required the vessel to be laid up. What the insurer really did was decrease the quantum of risk, i.e., decrease the likelihood of loss. . . . If there were a change in the nature of the risk involved, respondent might be justified in asserting that maritime character disappeared. But when it seeks only to diminish the likelihood of damage from perils of the seas [by requiring that the ship be laid up] it seems gratuitous to tell it that unwittingly it ceased being a marine insurer." Jeffcott, 129 F.2d at 584-85.
Plaintiff also cites Commercial Union Ins. Co. v. Detyens Shipyard, Inc., 147 F. Supp.2d 413 (D.S.C. 2001) for the proposition that admiralty contract jurisdiction, as it relates to hull insurance, is not dependent on the insured object being a "vessel." Commercial Union, 147 F. Supp.2d at 419-20.
Plaintiff cites Royal Ins. Co. of America v. Pier 39, Ltd., 738 F.2d 1035, 1036 (9th Cir. 1984) as adverse authority. In Royal Ins., the Ninth Circuit found that a floating dock and breakwater, both insured under a hull policy, were not within the admiralty jurisdiction of the court. Royal Ins., 738 F.2d at 1037. The court based it's decision on whether the objects insured were maritime interests and not on whether the risks insured against were maritime in nature. Id. Therefore, the key question presented to the court was whether the floating dock and breakwater were "vessels." Id. Ultimately, the court held that these objects were not vessels and, therefore, the policies covering them were not marine insurance policies. Id. at 1037-38. As such, the dispute was not within the court's admiralty jurisdiction. Id. at 1038.
In its Reply Memorandum, defendant acknowledges plaintiffs reliance on Jeffcott and argues that the insured object in that case was agreed by the parties to be a vessel and was even called such by the court. Defendant also points out that in Commercial Union, a case relied on by plaintiff, the court based its decision as to the status of the insurance policy as a maritime contract on the question of whether the insurable interest of the contract was related to the operation of a vessel and navigation. The court ultimately held that a drydock was so involved in the "crucial maritime activity" of repairing vessels that the insurance contract covering it was subject to admiralty jurisdiction even though the drydock itself was not a "vessel." Commercial Union, 147 F. Supp.2d at 419.
For example, "[b]y its terms the policy covers marine risks. The insurer assumes the risks of the perils of the seas to the vessel insured." Jeffcott, 129 F.2d at 584. (emphasis added)
The court noted that a maritime contract "is one that . . . relates to a ship and its use as such, or to commerce or to navigation on navigable waters, or to transportation by sea or to maritime employment. The only general rule is that to be a maritime contract, the subject matter [i.e. the insurable interest] of the contract must be directly and intimately related to the operation of a vessel and navigation; it is not enough that the contract related in some preliminary (shoreside) manner to maritime affairs." Commercial Union, 147 F. Supp.2d at 419.
Thus, this Court is left with the question of which criteria to use in order to determine whether the present insurance contract covering the Copa Casino is a "marine contract" and, therefore, subject to the Court's admiralty jurisdiction. The Court finds that the status of the insured interest as maritime, and not the status of the risks insured against, is a necessary prerequisite to a finding that the insurance covering it is marine insurance. Such a result is dictated by the reasoning found in Royal Ins., Commercial Union and even Jeffcott. If the Court were to find that the type of risks insured against was to dictate whether an insurance policy was a marine contract, some absurd results may be reached. For example, a beach side home may be insured for damage caused by "perils of the sea" but insurance on this real property would certainly fall outside admiralty jurisdiction.
It is important to note that the Royal Ins. and Commercial Union courts were expressly of the opinion that the insured interest must be maritime in nature for the insurance covering it to be a maritime contract. At first blush, the Jeffcott court appears to take a totally different view of the issue and hold that the nature of the risks insured against dictate whether or not an insurance policy is a marine contract. However, as was pointed out earlier, the court repeatedly refers to the ship at issue in Jeffcott as a "vessel." Therefore, it becomes clear that the court, in effect, did not hold that the nature of the risks insured against, standing alone, was dispositive of the jurisdictional question. It is uncertain whether the Jeffcott court would have reached the same conclusion if the insured interest was clearly not maritime in nature.
As a result, the question then becomes whether the Copa Casino, i.e. the insured interest, is a maritime interest. This court addressed the issue of whether a permanently moored, floating casino was a "vessel" so as to confer admiralty jurisdiction in Ketzel v. Mississippi Riverboat Amusement Ltd., 867 F. Supp. 1260 (S.D. Miss. 1994). In Ketzel, the court noted "[t]hat the casino looks like a ship engaged in transportation of cargo or passengers is not enough [to find that it is a vessel]. The [casino] is not equipped, nor does it serve any transportation function whatsoever. To conclude otherwise would be absurd." Ketzel, 867 F. Supp. at 1268. In addition, the Fifth Circuit has listed the criteria by which vessel status is decided. In Manuel v. P.A.W. Drilling Well Serv., Inc., 135 F.3d 344 (5th Cir. 1998), the court stated, "[d]espite the outward appearance of the structure at issue, if a primary purpose of the craft is to transport passengers, cargo, or equipment from place to place across navigable waters, then that structure is a vessel." Specifically, structures which have been held to not be vessels were "(1) . . . constructed and used primarily as work platforms; (2) . . . were moored or otherwise secured at the time of the accident; and (3) although they were capable of movement . . . any transportation function they performed was merely incidental to their primary purpose of serving as work platforms." Manuel, 135 F.3d at 349.
on appeal, the Fifth Circuit stated, "the [casino] (1) was removed from navigation and (2) was a work platform. Under either circumstance, it was not then a vessel for the purposes of the Jones Act or the general maritime law." Pavone v. Mississippi Riverboat Amusement Corp., 52 F.3d 560, 570 (5th Cir. 1995).
The Court finds that the Copa Casino ("Copa") is not a "vessel" so as to be a maritime interest. While Copa was, at one time, an oceangoing vessel, it was subsequently reconstructed as a permanently moored vessel. Its power plant and navigational gear has been disabled for at least ten years. It is not self-propelled and, therefore, cannot be moved except by tug power. In addition, Copa was moored at the time the instant insurance policy came into effect in December of 2000 and has been permanently moored since April 1994. Finally, although Copa can be moved from its present site via towing power, it has no independent ability to move on its own.
The Court finds that because the Copa is not a "vessel," it is not a marine interest. As a result, the insurance policies covering it cannot be classified as "marine contracts" even though they cover certain marine risks. Therefore, because no maritime contract exists, this Court is without admiralty jurisdiction. See J.A.R., Inc. v. M/V Lady Lucille, 963 F.2d 96, 98 (5th Cir. 1992). For the above reasons, the Court is of the opinion that Defendant's motion is well taken and that the instant contract suit should be resolved by jury trial.
Plaintiff issues two policies, a hull insurance policy and a protection and indemnity policy. The hull policy insured the Copa against: . . . the Seas, Men of War, Fire, Lightning, Earthquake, Enemies, Pirates, Rovers, Assailing Thieves, Jettisons, Letters of Mart and Counter-mart, Surprisals, Takings at Sea, Arrests, Restraints and Detainments of all Kings, Princes and People, of what nation, condition or quality soever, Barratry of the Master and Mariners and of all other like Perils, Losses and Misfortunes that have or shall come to the Hurt, Detriment or Damage of the Vessel, or any part thereof, excepting, however, such of the foregoing perils as may be excluded by provisions elsewhere in the Policy or by endorsement thereon.
ORDER
This cause comes before the Court on Defendant's Motion for Jury Trial of Right. After duly considering the issue, the Court finds that defendant's motion is well taken and should be granted.