American Steamship Owners v. Dann Ocean Towing, Inc.

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 1:08-cv-02195-CCB. [999383606]. [13-1495]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-1495

AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY
ASSOCIATION, INC.,
Plaintiff - Appellant,
v.
DANN OCEAN TOWING, INC., in personam; THE TUG CAPTAIN DANN,
in rem; DANN TOWING COMPANY,
Defendants - Appellees.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.
Catherine C. Blake, District Judge.
(1:08-cv-02195-CCB)

Argued:

May 13, 2014

Decided:

June 26, 2014

Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.

Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Judge Wilkinson and Judge Diaz joined.

ARGUED: David H. Fromm, BROWN GAVALAS & FROMM LLP, New York, New
York, for Appellant.
Allen K. von Spiegelfeld, BANKER LOPEZ
GASSLER, PA, Tampa, Florida, for Appellees.
ON BRIEF: Patrick
R. O'Mea, BROWN GAVALAS & FROMM LLP, New York, New York, for
Appellant. James W. Bartlett, III, Alexander M. Giles, SEMMES,
BOWEN & SEMMES, Baltimore, Maryland, for Appellees.

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BARBARA MILANO KEENAN, Circuit Judge:
In

this

appeal,

we

consider

whether

the

district

court

erred in concluding that a choice-of-law provision in a maritime
insurance contract required use of New York’s six-year statute
of limitations, rather than the equitable doctrine of laches
ordinarily

applied

timeliness

of

contract.

Upon our review, we hold that the district court

properly

under

certain

determined

maritime

claims

that

the

law,

brought

to

determine

under

choice-of-law

the

the

insurance

provision

in

the

parties’ contract required application of New York’s statute of
limitations to the claims at issue.

Therefore, we affirm the

district court’s judgment.

I.
The

American

Steamship

Owners

Mutual

Protection

and

Indemnity Association, Inc. (the Club) is a non-profit provider
of protection and indemnity insurance, which insurance covers
vessel

owners

and

charterers

against

third-party

liabilities

arising from the ownership and operation of insured vessels.
Members

of

the

Club

pay

insurance

premiums

and

assessments,

which the Club uses to reimburse members for covered losses.
The Club issues to each of its members a Certificate of Entry,
which

reflects

that

the

member

2

has

entered

into

a

marine

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insurance contract with the Club subject to the Club’s By-Laws
and Rules (Rules).
The

Club’s

Rules

include

a

choice-of-law

provision

selecting New York law and a two-year statute of limitations for
claims

against

exhausting
litigation.

the

Club,

insurance

in

addition

disputes

and

to

requirements

selecting

a

forum

for
for

The relevant section of the Rules reads as follows:

If any difference or dispute shall arise between a
Member and the [Club] concerning the construction of
these Rules, or the insurance afforded by the [Club]
under these Rules, or any amount due from the [Club]
to the Member, such difference or dispute shall in the
first instance be referred to and adjudicated by the
Board of Directors.
No Member shall be entitled to
maintain any action, suit or other legal proceedings
against the [Club] upon any such difference or dispute
unless and until the same has been submitted to the
Directors and they shall have given their decision
thereto, or shall have been in default for three
months in so doing.
These Rules and any contract of
insurance between the [Club] and a Member shall be
governed by and construed in accordance with the law
of the State of New York.
In no event shall suit on
any claim be maintainable against the [Club] unless
commenced within two years after the loss, damage or
expense resulting from liabilities, risks, events,
occurrences and expenditures specified under this Rule
shall have been paid by the Member.
Any such suit
against the [Club] shall be brought in the United
States District Court for the Southern District of New
York. (Emphasis added.)

Dann Ocean Towing, Inc. (Dann) was a member of the Club
between 1995 and 2001.

Dann obtained insurance through the Club

for

damaged

a

tugboat,

which

a

3

barge

when

the

tugboat

ran

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aground on a coral reef in 1998.

The barge’s owner asserted a

claim against Dann for property damage, and the United States
asserted a claim against Dann for environmental damage to the
reef.

Dann settled both parties’ claims in November 2001 for a

total amount of $2,170,000.
The Club originally agreed to contribute $1,170,000 toward
the settlement.
liability

However, one of the underwriters for Dann’s

insurance

became

insolvent

and

could

not

pay

its

portion of the settlement, in the amount of $278,552.55 (the
shortfall).

Although

both

Dann

and

the

Club

denied

responsibility for the shortfall, the Club paid the shortfall to
preserve

a

settlement

offer

that

it

considered

“extremely

favorable,” but indicated that the Club would seek reimbursement
from Dann.
Dann refused to reimburse the Club for the shortfall.
response,

the

Club

declined

to

reimburse

Dann

for

In

certain

insurance claims that otherwise would have been payable to Dann,
and withheld a total amount of $131,085.43 in covered losses
that the Club later used to offset the shortfall.

Thereafter,

Dann refused to pay its insurance premiums to the Club for the
policy years 1999, 2000, and 2001.

The total amount of Dann’s

unpaid premiums was $452,610.23.
In August 2008, the Club filed a civil action against Dann
and

the

tugboat,

alleging

that
4

Dann

breached

the

insurance

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contract by failing to reimburse the Club for the shortfall and
by failing to pay the overdue insurance premiums.

Dann filed a

counterclaim against the Club, alleging that the Club breached
the insurance contract by failing to indemnify Dann for covered
losses.

The Club and Dann each alleged that the respective

claims against them were time-barred, posted $500,000 bonds as
security and counter-security for the various claims, 1 and filed
cross-motions for summary judgment.
In August 2010, the district court initially ruled that the
equitable doctrine of laches, rather than New York’s six-year
statute

of

limitations

for

contract

claims,

timeliness of the Club’s claims against Dann.
that

all

the

Club’s

claims,

except

one

governed

the

The court found

involving

an

unpaid

insurance premium in the amount of $76,925.56, accrued more than
six years before the Club filed suit.

In its laches analysis,

the

claim

court

concluded

that

the

Club’s

relating

to

the

shortfall was not barred because the Club’s delay in filing suit
was

reasonable,

in

that

the

Club

made

various

out-of-court

attempts to obtain reimbursement from Dann and the delay did not
prejudice Dann.

1

Dann posted a $500,000 vessel release bond as security for
the claims against the tugboat, and the Club posted a $500,000
bond as counter-security for Dann’s claims.
5

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In May 2012, however, upon further briefing by the parties,
the district court reconsidered its ruling.
that

although

there

is

a

“typical

The court observed

presumption

that

courts

sitting in admiralty jurisdiction apply the equitable doctrine
of laches rather than a specific statute of limitations,” the
choice-of-law
application

clause
of

limitations.”

in

the

the

parties’

“compels

the

jurisdiction’s

elected

contract

statute

of

Accordingly, the district court held that “claims

arising from the maritime insurance contract between [Dann] and
the

Club

are

subject

to

New

York’s

six-year

statute

of

limitations,” which barred all the Club’s claims except for the
one concerning the $76,925.56 premium.
Because

the

parties’

contract

expressly

provided

that

claims brought against the Club were subject to an even shorter
two-year
claims

limitation,

against

the

the
Club

court
were

ruled

that

time-barred

Dann’s

under

indemnity

the

parties’

contract, but that those claims could be employed defensively
under the doctrine of recoupment to offset the entirety of the
Club’s

surviving

premium.

claim

for

the

$76,925.56

unpaid

insurance

Thus, although the court granted summary judgment to

the Club on its surviving unpaid insurance claim and dismissed
the

parties’

other

claims,

the

court

ultimately

held

that

“neither party can recover against the other,” granted Dann’s
motion

to

reduce

the

amount

of
6

its

bond

from

$500,000

to

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$100,000, and directed that the case be closed.

The Club timely

appealed.

II.
We consider on appeal whether the district court erred in
concluding that the timeliness of the Club’s contract claims
against

Dann

limitations

is
for

governed
contract

by

New

York’s

actions,

six-year

based

on

statute

the

of

parties’

agreement that the insurance contract “shall be governed by and
construed in accordance with the law of the State of New York.”
The Club contends that because this case arises under admiralty
jurisdiction,

the

district

court

was

required

to

apply

the

doctrine of laches as the procedural law of the maritime forum,
rather than New York’s statute of limitations.

We disagree with

the Club’s argument.
Laches is an equitable doctrine that can be raised by a
defendant as an affirmative defense to a claim, and requires
that the defendant show “(1) lack of diligence by the party
against whom the defense is asserted, and (2) prejudice to the
party asserting the defense.”

Giddens v. Isbrandtsen Co., 355

F.2d 125, 127 (4th Cir. 1966) (citation and internal quotation
marks

omitted).

In

assessing

the

timeliness

of

a

maritime

claim, the doctrine of laches typically applies rather than any
fixed statute of limitations.

See id. at 126-27.
7

However,

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there are many examples of exceptions to this general rule, such
as statutory provisions that impose time bars on personal injury
actions arising out of maritime torts, see 46 U.S.C. § 30106, on
certain cargo loss contract claims under the Carriage of Goods
by Sea Act, see 49 Stat. 1207, 1209 (1936) (codified at 46
U.S.C. § 30701 note), and on maritime salvage actions, see 46
U.S.C. § 80107(c).
In this case, the district court ultimately agreed with
Dann that parties to a maritime insurance contract may elect to
avoid the doctrine of laches by including in their contract an
enforceable choice-of-law provision that requires application of
another jurisdiction’s law and, implicitly, that jurisdiction’s
statute of limitations.

The court based its analysis on two

cases, namely, Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151
(11th

Cir.

2009),

and

Italia

Marittima,

S.P.A.

v.

Seaside

Transportation Services, LLC, 2010 WL 3504834 (N.D. Cal. Sept.
7, 2010) (unpublished).
In

Cooper,

the

Eleventh

Circuit

considered

a

claim

for

indemnification and contribution brought by a ship owner against
a ship builder for injuries sustained by a worker on the ship.
The parties’ contract provided that “all disputes arising out of
or in connection with [the contract] . . . shall be construed in
accordance with and shall be governed by the Dutch law.”
F.3d at 1162.

575

The court held that this provision was “clearly
8

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meant to be read broadly” and that the parties’ choice of Dutch
law governed not only the timeliness of pure contract claims,
but also the timeliness of the indemnification and contribution
action for related tort claims.

Id.

Similarly, in Italia Marittima, a district court considered
claims for negligence and breach of contract arising from the
performance

of

stevedoring

services

aboard

a

vessel

sustained a loss of cargo during inclement weather.
3504834, at *1-3.

that

2010 WL

The court held that California’s statutes of

limitations applied to both the breach of contract claims and
the negligence claims based on a choice-of-law provision in the
parties’ contract stating that the contract “shall be construed,
interpreted

and

enforced

in

accordance

with

the

laws

of

the

State of California without reference to the laws of any other
jurisdiction,

except

to

the

extent

that

the

laws,

rules

regulations of the United States of America shall apply.”
at *8.

and
Id.

Because the choice-of-law clause clearly “promote[d]

California law,” and because laches is a common law doctrine
rather than codified federal law, the court reasoned that the
contract

required

limitations.
We
federal

do

application

of

California’s

statutes

of

Id.
not

court

discern
sitting

any
in

contrary

admiralty

authority
from

preventing

enforcing

a

a

valid

choice-of-law provision in a maritime contract incorporating a
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statute of limitations, in place of the traditional doctrine of
laches.

Accordingly, we agree with the district court, and with

the reasoning of the decisions in Cooper and Italia Marittima,
that an otherwise valid choice-of-law provision in a maritime
contract

is

enforceable

and

may

require

application

of

a

jurisdiction’s statute of limitations, in lieu of the doctrine
of laches, to govern issues regarding the timeliness of claims
asserted under that agreement.
We find no merit in the Club’s alternative argument that
the decisions in Cooper and Italia Marittima are distinguishable
because, in contrast to the provision before us, the choice-oflaw

clauses

interpreted

in

those

cases

were

sufficiently

detailed to incorporate the “procedural” rules in addition to
the

“substantive”

rules

of

the

chosen

jurisdictions.

Even

assuming that New York’s statute of limitations constitutes a
“procedural” rule of law in this context, the Club’s argument is
unpersuasive

because,

under

New

York

law,

we

must

accord

unambiguous provisions of an insurance contract their plain and
ordinary meaning.

See, e.g., White v. Cont’l Cas. Co., 878

N.E.2d

(N.Y.

1019,

contract
shall

stated

before

be

signals

1021

“governed

the
in

us

The

plain

unambiguously

provides

by”

law.

parties’
the

2007).

New

intent

York

contract,

New

that,
York
10

that

This

subject
law

language

to

will

the

phrase
any
be

of

the

contract
clearly

exceptions
applied

as

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“governing”

the

contract.

Because

contractual

in

exception

for

choice-of-law
Thus,

the

timeliness
the

nature

of

claims
and

are

claims

brought

clause

amply

plain

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language

claims
at
not

issue

against

the

in

the

to

Club,

the

parties’

under

the

case

are

this

subject

encompasses

of

asserted

the
the

present

contract

stated
parties’
claims.

fails

to

contain any indication that the parties intended to preserve
application of the doctrine of laches for any claims brought
under the contract.
Additionally, even if we were to assume, without deciding,
that

the

choice-of-law

provision

is

ambiguous

regarding

the

parties’ intent to incorporate New York’s statute of limitations
for

contract

actions,

we

would,

under

basic

principles

of

contract interpretation, resolve any such ambiguity against the
insurer and in favor of the insured party.

See id. (stating

that if the terms in an insurance contract are ambiguous, any
ambiguity must be construed in favor of the insured and against
the insurer); see also McCarthy v. Am. Int’l Grp., Inc., 283
F.3d 121, 124 (2d Cir. 2002) (observing that under New York law,
courts construe ambiguities in insurance contracts against the
drafter).

Here, it is undisputed that the Club, as insurer,

supplied Dann with the contract of insurance and drafted the
Rules governing the parties’ insurance contract.

Therefore, we

construe any ambiguity regarding the intended breadth of the
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provision

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against

the

Club

and

in

favor

of

applying New York’s statute of limitations to the Club’s claims
against Dann.

III.
Accordingly,

we

hold

that

the

district

court

correctly

applied New York’s six-year statute of limitations to the Club’s
claims arising under its maritime insurance contract with Dann.
We therefore affirm the district court’s judgment. 2
AFFIRMED

2

In affirming the district court’s judgment, we also affirm
the court’s decision granting Dann’s motion to reduce the amount
of its bond.
Although Dann requested in its brief that we
discharge the bonds posted by both parties, we do not address
this issue because Dann did not seek a full discharge of the
bonds from the district court in the first instance, and did not
appeal the district court’s order.
Therefore, Dann’s request
for relief is not properly before us on appeal.
12