Atlantic Specialty Insurance Company et al v. Thomassen

Filing 38

ORDER: re Pending Motions. 25 Motion for Summary Judgment; 18 Motion for Summary Judgment; and 22 Motion to Intervene. Signed by Judge Sharon L. Gleason on 09/06/2016. (AEM, CHAMBERS STAFF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
ATLANTIC SPECIALTY INSURANCE
COMPANY, a New York corporation, et
al.,
Plaintiffs,
v.
JAY THOMASSEN, an individual and
Alaska resident,

Case No. 1:15-cv-00009-SLG

Defendant.
ORDER RE PENDING MOTIONS
Before the Court at Docket 18 is Defendant Jay Thomassen’s Motion for Summary
Judgment. Plaintiffs Atlantic Specialty Insurance Company, Travelers Property Casualty
Company of America, Navigators Insurance Services of Washington, Inc., and Great
American Insurance Company (collectively, Underwriters) filed an opposition and crossmotion for summary judgment at Docket 21. Both motions are fully briefed. Also before
the Court, at Docket 22, is a motion to intervene filed by Yolanda Perez Orozco, a crew
member of the vessel at the center of this dispute. 1 Plaintiffs opposed that motion at
Docket 31; Ms. Perez replied at Docket 33. The Court heard oral argument on the
motions for summary judgment on March 31, 2016. Oral argument was not requested on
the motion to intervene, and was not necessary to the Court’s determination of that issue.
//
//

1

Yolanda Perez Orozco signed her declaration “Yolanda Perez” and refers to herself as Ms.
Perez. Docket 23-2 (Perez Decl.) at 3. The Court will do the same.

BACKGROUND
Mr. Thomassen is the sole owner of Angelette, LLC. 2 Angelette, LLC, purchased
the KUPREANOF, a 73-foot tender vessel, in March 2015. 3 On or about March 18, 2015,
through an insurance agent, Sea-Mountain Insurance, Plaintiffs agreed to underwrite for
Mr. Thomassen a marine insurance policy providing coverage for the KUPREANOF. 4 Mr.
Thomassen is listed as the “Named Insured.” The policy includes the following two
provisions relevant to this dispute:
Layup Warranty
Vessel warranted laid up and out of commission from August 20 to June 20,
annually. Permission granted to make alterations and repairs, to dock and
undock, go on or off ways, gridirons and drydocks and to move about port
for said purposes.
Held Covered Clause: Held covered in respect to breach of trading
warranty, and/or lay-up warranty provided Underwriters are advised within
72 hours from inception of the breach, at additional premiums, if any, to be
determined by Underwriters. 5
On or before June 6, 2015, Mr. Thomassen had hired a captain, Stephen Berry,
and a crew that included Ms. Perez for the vessel’s 2015 season. 6 In early June 2015,
the vessel was in Petersburg, Alaska undergoing repairs at Piston and Rudder Services.
On June 6, 2015, the vessel left Piston and Rudder Services and moved a few hundred

2

Docket 12 (Answer) at 2.

3

Docket 19-1 (Thomassen Aff.) at 2.

4

Docket 1-1 (Insurance Policy) at 1.

5

Docket 1-1 at 1, 13.

6

Docket 21-4 at 1–8 (Berry Contract), 25–32 (Perez Contract). Mr. Berry’s contract indicates a
“Date of Hire” of June 1, 2015 but a signature date of June 6, 2015. The date of hire on Ms.
Perez’s contract indicates “8-22-68” with a signature date of June 6, 2015.
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yards to the dock at Petro Marine Services in order to take on hydraulic fluid. 7 The
KUPREANOF left the dock at Petersburg sometime in the morning of June 7, 2015. The
precise time of the departure is disputed. Plaintiffs assert “the KUPREANOF departed
Petersburg for Juneau at approximately 0400 on June 7, 2015 with Captain Berry and the
three crew members.”8 In support of this position, Plaintiffs cite to a copy of a U.S. Coast
Guard Report of Marine Casualty Form 2892 that states the departure was at “6/7 4:AM.”9
Mr. Thomassen has stated that he “was not at the dock at the time” and “[o]n information
and belief, according to Captain Berry, the Vessel left Petersburg dock as late as 8:00
a.m. or 9:00 a.m. or later Alaska time and not at ‘4 AM’ as stated on the Coast Guard
Form 2892.”10 Ms. Perez’s declaration in support of her motion to intervene states the
“KUPREANOF left the dock on June 7, 2015 at around 0800 ADT. . . . We left the waters
of the Petersburg area around 0830 ADT.” 11
Early in the day on June 10, 2015, the vessel sank, although all crewmembers
were successfully rescued. Captain Berry informed Mr. Thomassen of the sinking, and
Mr. Thomassen has indicated that he was not aware of any potential breach of the

7

See Docket 25-2 (Defendant’s Response to Plaintiffs’ First Discovery to Defendant) at 4.

8

Docket 21 (Plaintiffs’ Opp’n & Mot.) at 3.

9

Docket 25-5 (Coast Guard Report) at 1.

10

Docket 25-2 at 4.

11

Docket 23-2 (Perez Decl.) at 2. It is true that Mr. Thomassen did not refer to this declaration
(indeed, it had not yet been made) in his initial motion for summary judgment. But he did refer to
it in his opposition to Plaintiffs’ cross motion for summary judgment. See Docket 24 at 16. In any
event, while a district court is obligated to consider “the papers submitted on the motion and such
other papers as may be on file and specifically referred to and facts therein set forth in the motion
papers,” it “has discretion in appropriate circumstances to consider other materials.” Carmen v.
San Francisco Unified Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001).
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insurance policy prior to that point. 12 All parties agree that Mr. Thomassen notified the
Underwriters (through Sea-Mountain) of the sinking at 8:04 a.m. Alaska time. 13
Plaintiffs filed suit on August 25, 2015, seeking a declaratory judgment that there
is no coverage under the policy for hull or protection and indemnity (P&I) claims because
the KUPREANOF and crew claims arise “from the sinking on June 10, 2015 that occurred
in breach of the lay-up warranty.” 14 Several months later, on November 19, 2015, Mr.
Thomassen wrote to Sea-Mountain, “I advised Underwriters via your office of the breach
within 72 hours from inception of the breach of the lay-up warranty. Would you discuss
with the Underwriters what ‘additional premiums, if any, to be determined by Underwriters’
are required to be forwarded by me to continue coverage?” 15 One of the Underwriters
responded on December 7, 2015 that “[w]ith respect to the question regarding additional
premium pursuant to the held covered provision of the policy, Counsel has determined
factually that there was no notice of the breach within the 72 hours after inception. We

12

See Docket 19-1 (Thomassen Aff.) at ¶ 13.

13

Mr. Thomassen states that, after learning of the sinking from Captain Berry, he left a message
with Sea-Mountain that same day at or about 8:04 a.m. Alaska time, “providing notice that the
Vessel sank and everyone got off safely.” Docket 19-1 (Thomassen Aff.) at 3. Plaintiffs concur in
the timing of this notice: “Underwriters were not advised that the vessel was ‘in commission’ and
therefore not laid up until 0804 Alaska time on June 10, 2015; at that time, Underwriters were
informed that the vessel sank in deep waters in the Gulf of Alaska.” Docket 21 (Plaintiffs’ Opp’n &
Mot.) at 19.
14

Docket 1 (Compl.) at 5.

15

Docket 19-1 at 8 (Thomassen letter dated November 19, 2015); see also Docket 1-1 (Insurance
Policy) at 13 (providing for payment of additional premiums when held covered clause is invoked).
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will pass the assured’s inquiry to underwriters with Counsel’s comments in that regard.” 16
The parties’ cross-motions for summary judgment followed.
DISCUSSION
I.

Jurisdiction
Plaintiffs have designated this as a suit in admiralty under Federal Rule of Civil

Procedure 9(h), and Defendant agrees that the Court has original admiralty jurisdiction
pursuant to 28 U.S.C. § 1333. The Court also has jurisdiction under 28 U.S.C. § 1332
because there is complete diversity between the parties and the amount in controversy
exceeds $75,000, and under 28 U.S.C. § 2201, the Declaratory Judgment Act.
II.

Summary Judgment Standard
Federal Rule of Civil Procedure 56(a) directs a court to “grant summary judgment

if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” The burden of showing the absence
of a genuine dispute of material fact lies with the moving party. 17 If the moving party
meets this burden, the non-moving party must present specific factual evidence
demonstrating the existence of a genuine issue of fact. 18 The non-moving party may not
rely on mere allegations or denials. 19 Rather, that party must demonstrate that enough

16

Docket 19-1 at 5 (Underwriter e-mail dated December 7, 2015).

17

Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).

18

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986).

19

Id. at 248–49.

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evidence supports the alleged factual dispute to require a finder of fact to make a
determination at trial between the parties’ differing versions of the truth. 20
When considering a motion for summary judgment, a court views the facts in the
light most favorable to the non-moving party and draws “all justifiable inferences” in the
non-moving party’s favor. 21 When faced with cross-motions for summary judgment, a
court “review[s] each separately, giving the non-movant for each motion the benefit of all
reasonable inferences.” 22 To reach the level of a genuine dispute, the evidence must be
such “that a reasonable jury could return a verdict for the non-moving party.” 23 If the
evidence provided by the non-moving party is “merely colorable” or “not significantly
probative,” summary judgment is appropriate. 24
III.

Applicable Law
Here, the parties dispute the meaning of two clauses in the marine insurance

policy: the lay-up warranty and the held covered clause. To interpret these disputed
terms, the Court must first determine whether to apply state or federal law. 25 The general
rule is that courts “apply state law unless an established federal rule address[es] the

20

Id. (citing First National Bank of Arizona v. Cities Service Co., 391 U.S. 253 (1968)).

21

Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158–59 (1970)).

22

Flores v. City of San Gabriel, 824 F.3d 890, 897 (9th Cir. 2016) (citing Ctr. for Bio–Ethical
Reform, Inc. v. L.A. Cty. Sheriff Dep’t, 533 F.3d 780, 786 (9th Cir. 2008)).

23

Anderson, 477 U.S. at 248.

24

Id. at 249.

25

See Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 313–14 (1955).

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issues raised, or there [is] a need for uniformity in admiralty practice.” 26 “In Wilburn Boat
Co. v. Fireman’s Fund Insurance Co., the Supreme Court declared that no established
federal rule addressed marine insurance policy warranty clauses, and that the clauses
should be interpreted using state law.” 27 Therefore, the Court will apply Alaska law to the
lay-up warranty. 28
As to the held covered clause, Plaintiffs contend that state law also controls. 29 But
Mr. Thomassen urges the Court to find that there is “judicially established and entrenched
federal admiralty law” that continues coverage pursuant to a held covered clause so long
as the owner notifies the insurer of the breach promptly upon learning of the breach, and
pays an additional premium. 30 Mr. Thomassen extrapolates this proposed federal rule
from a collection of federal cases interpreting held covered clauses. But those held
covered clauses contain language quite different from the language at issue here. For
example, in Kalmbach, Inc. v. Insurance Co. of the State of Pennsylvania, Inc., the first

26

Yu v. Albany Ins. Co., 281 F.3d 803, 808 (9th Cir. 2002).

27

Guam Indus. Servs., Inc. v. Zurich Am. Ins. Co., 787 F.3d 1001, 1004 n.1 (9th Cir. 2015).

28

See id. The Court is aware that the Ninth Circuit did not disclaim the existence of a federal
“strict compliance” rule regarding maritime insurance warranties in either Guam Indus. Servs. or
Yu. But neither did the Ninth Circuit hold that such a rule existed and displaced state law on the
matter. In both cases, the Court emphasized that there was no conflict with state law and so it
did not need to decide whether a federal rule applied or even existed. See Guam Indus. Servs.,
787 F.3d at 1004; Yu, 281 F.3d at 808–09. The Circuit Court applied the majority rule of strict
compliance that it concluded would be followed in both Guam, see Guam Indus. Servs., 787 F.3d
at 1005, and Hawaii, see Yu, 281 F.3d at 809.
29

See Docket 21 (Plaintiffs’ Opp’n & Mot.) at 9.

30

Docket 24 (Defendant’s Reply) at 11 & n.3 (citing Hilton Oil Transport v. Jonas, 75 F.3d 627,
630 (11th Cir. 1996)); Docket 19 (Defendant’s Mem.) at 14 (citing Campbell v. Hartford Fire Ins.
Co., 533 F.2d 496 (9th Cir. 1976)).
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of the cases Mr. Thomassen relies on, the Ninth Circuit applied “local” law—relying on
state law authorities from both California and Alaska—“because both parties urge us to
do so, and because there is no statutory or judicially established federal admiralty rule
governing the provisions in question.”31 Accordingly, Kalmbach does not establish any
federal rule for the interpretation of held covered clauses. Nor does Campbell v. Hartford
Fire Insurance Co., 32 also cited by Mr. Thomassen. In Campbell, the parties stipulated
that coverage under the policy should be governed by English law, and the court then
relied on English authorities to interpret the held covered clause. 33
Mr. Thomassen also cites Northwestern National Insurance Co. v. Federal
Intermediate Credit Bank of Spokane, in which the Ninth Circuit held that, consistent
Kalmbach, “[w]hen the held-covered clause is unambiguous, courts must apply it as
written.” 34 Based on the unambiguous terms of that particular held covered clause, the
Court of Appeals held that “[e]ven if the assured does not notify the insurer until after the
loss, the held-covered clause extends coverage, provided the assured did not know of
the breach before that time.”35

But the outcome in that case derived not from an

“established and entrenched federal admiralty rule,” but instead from the explicit and

31

529 F.2d 552, 555 (9th Cir. 1976).

32

533 F.2d 496 (9th Cir. 1976).

33

Id. at 497–98.

34

839 F.2d 1366, 1368 (9th Cir. 1988) (citing Kalmbach, 529 F.2d at 556).

35

Id. at 1368.

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unambiguous terms of the contract. 36 Northwestern does not support the existence of an
established federal rule. 37
Finally, Mr. Thomassen cites to Hilton Oil Transport v. Jonas, in which the Eleventh
Circuit observed that “in the absence of a ‘held covered’ clause, federal admiralty law, not
state law, would control.” 38 Here, in the contract before the Court, there is a held covered
clause. Thus, even if the Ninth Circuit were to follow the Eleventh Circuit’s approach, the
Hilton rule would not apply.
The Court is not persuaded that Mr. Thomassen’s proposed rule is an “established
federal rule” that should be applied in this case. If the cases cited by Mr. Thomassen
support any federal rule, it is that marine insurance held covered clauses should be
interpreted according to their terms. And Congress has expressly discouraged federal,
as opposed to state, regulation of insurance. 39 Accordingly, under the presumption that
state law applies established by Wilburn Boat and under Ninth Circuit precedent, the

36

The clause at issue in Northwestern reads: “The Vessel is held covered in case of any breach
of conditions as to cargo, trade, locality, towage or salvage activities, or date of sailing, or loading
or discharging cargo at sea, provided (a) notice is given to the Underwriters immediately following
receipt of knowledge thereof by the Assured, and (b) any amended terms of cover and any
additional premium required by the Underwriters are agreed to by the Assured.” Id. at 1367.
37

Indeed, the Northwestern court did not discuss the choice-of-law issue at all in this context.
The court did consider—and reject—the existence of a federal rule to govern whether the
insurance broker was an agent of the marine insurer such that notice to the broker satisfied the
held covered clause’s notice requirement. Id. at 1368–69.
38

75 F.3d 627, 630 (11th Cir. 1996).

39

McCarran Act of 1945, 15 U.S.C. § 1011–12. Cf. Rhea D. Pappas-Ward, Strict Compliance
with Marine Insurance Contracts: Conflicting Rules in the Ninth Circuit, 70 Wash. L. Rev. 519, 535
(1995) (“State insurance laws are one example of an area where Congress has expressly
mandated that comprehensive state regulation is preferable to national insurance laws. However,
the Supremacy Clause still prevents even permissible state regulation from displacing established
federal admiralty law.”).
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Court will apply Alaska’s interpretive framework to the held covered clause at issue in this
case as well as to the lay-up warranty.
IV.

Interpretation of the Policy
a.

General Principles of Alaska Insurance Law

Under Alaska law, “[t]he construction of an insurance contract is a matter for the
court, unless its interpretation is dependent upon the resolution of controverted facts.” 40
The Alaska Supreme Court has observed that “[t]he first and generally most important
rule is that ‘[w]ords and other conduct are interpreted in the light of all the circumstances,
and if the principal purpose of the parties is ascertainable it is given great weight.” 41 But
“insurance policies are contracts of adhesion and must be interpreted according to the
reasonable expectations of the insured.”42

“To determine the parties’ reasonable

expectations, we examine (1) the language of the disputed policy provisions; (2) the
language of other provisions in the same policy; (3) extrinsic evidence; and (4) case law
interpreting similar provisions.” 43

“When the language of a contract provision is

unambiguous, we determine ‘the parties’ intention from the instrument itself.’” 44 “[W]here
a clause in an insurance policy is ambiguous in the sense that it is reasonably susceptible

40

O’Neill Investigations, Inc. v. Illinois Emp’rs. Ins. of Wausau, 636 P.2d 1170, 1173 (Alaska 1981).

41

Estate of Polushkin ex rel. Polushkin v. Maw, 170 P.3d 162, 168 (Alaska 2007) (citing
Restatement (Second) of Contracts § 202(1) (1981)).
42

Attorneys Liab. Prot. Soc’y, Inc. v. Ingaldson Fitzgerald, P.C., 370 P.3d 1101, 1108 (Alaska
2016).

43

Devine v. Great Divide Ins. Co., 350 P.3d 782, 786 (Alaska 2015).

44

Ellingstad v. State, Dep’t of Nat. Res., 979 P.2d 1000, 1004 (Alaska 1999) (quoting Klosterman
v. Hickel Inv. Co., 821 P.2d 118, 124 (Alaska 1991)).
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to more than one interpretation, we accept the interpretation that most favors the
insured.”45

And “‘[a]n interpretation which gives a reasonable, lawful, and effective

meaning to all the terms is preferred to an interpretation which leaves a part
unreasonable, unlawful, or of no effect.’” 46
b.

Lay-up Warranty

The lay-up provision consists of two sentences. The first sentence is “Vessel
warranted laid up and out of commission from August 20 to June 20, annually.” Neither
party seems to assert that this sentence is ambiguous, and the Court finds it clear: to be
covered under the policy, the default status of the KUPREANOF from August 20 to June
20 is meant to be “removed from active operation or navigation.” 47
The second sentence is “Permission granted to make alterations and repairs, to
dock and undock, go on or off ways, gridirons and drydocks and to move about port for
said purposes.” The parties dispute the meaning of this provision, but “[t]he fact that the
parties dispute a contract’s meaning does not establish that the contract is ambiguous.” 48
Defendant’s position appears to be that he could reasonably interpret this provision
to allow the vessel to transit from Petersburg to Juneau and head to the fishing grounds,

45

Kalenka v. Infinity Ins. Cos., 262 P.3d 602, 607 (Alaska 2011) (quoting C.P. ex rel. M.L. v. Allstate
Ins. Co., 996 P.2d 1216, 1222 (Alaska 2000)).
46

Polushkin, 170 P.3d at 172 (quoting Restatement (Second) of Contracts § 203(a) (1981)).

47

See Glossary of Marine Insurance and Shipping Terms, 14 U.S.F. Mar. L.J. 305, 369 (2002)
(defining “Laid-Up” as “[a] vessel removed from active operation or navigation.”).

48

Kennewick Irrigation Dist. v. United States, 880 F.2d 1018, 1032 (9th Cir. 1989) (quoting Int’l
Union of Bricklayers & Allied Craftsman Local No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1406
(9th Cir. 1985)).
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all without breaching the lay-up warranty. 49 This is not a reasonable interpretation of the
“permission granted” clause because it entirely swallows up the “laid-up” provision: the
KUPREANOF would be covered year-round, in and out of port, virtually without limit. Mr.
Thomassen could not have a reasonable expectation that this policy would provide such
extensive coverage when the policy specifies that the KUPREANOF is to be “laid up and
out of commission” for ten months of the year.
Plaintiffs offer their own equally unconvincing interpretation. They argue that it
does not matter what time the vessel left the dock on June 7 because, under their
interpretation of the “permission granted” clause, the vessel was already in breach on
June 6. 50 Plaintiffs assert that under the “permission granted clause” “the only permitted
activity was making alterations and repairs,” 51 such that the vessel was no longer laid up
once its repairs were completed and it had started getting ready to leave Petersburg. In
Plaintiffs’ view, “[w]hen the KUPREANOF left Piston and Rudder Services on June 6,
2015 and docked at Petro Marine Services in Petersburg where hydraulic oil was put in
the tank, it was not docking or moving about the port for the purpose of making alterations
and repairs.” 52 Plaintiffs assert that “it cannot be reasonably disputed that the vessel was
not ‘laid up and out of commission’ where it was moored with fuel and a full crew ready

49

Mr. Thomassen averred that “I believe that the activities of the T/V KUPREANOF on and around
June 7 to June 10 generally complied with the general activities described and allowed in the
‘Layup Warranty.’” Docket 19-1(Thomassen Aff.) at 2. See also Docket 21-2 at 4.

50

Docket 32 (Plaintiff’s Reply) at 8-10.

51

Docket 32 at 8.

52

Id.

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for the imminent voyage to Juneau on the morning of June 7th.”53 But, in light of the
permission granted clause, “laid up and out of commission” is not the only status allowed
of the vessel during the lay-up period. 54
The Court finds the “permission granted” provision unambiguous. It uses three
distinct infinitives to permit three distinct classes of activity. The policy first provides
permission “to make alterations and repairs.” Second, it provides permission “to dock
and undock, go on or off ways, gridirons and drydocks.” And third, it provides permission
“to move about port for said purposes,” that is, for the purposes of “mak[ing] alterations
or repairs” or “dock[ing] and undock[ing], go[ing] on or off ways, gridirons and drydocks.”55

53

Docket 32 (Plaintiffs’ Reply) at 8. Plaintiffs urge the Court to adopt a crew hire date of June 1,
2016 as the “date the vessel was no longer ‘laid up.’” Docket 21 (Plaintiffs’ Opp’n & Mot.) at 13 &
n.2. But the policy permits certain operations within the port such that Mr. Thomassen could
reasonably expect the policy allows a crew to operate the vessel in conformity with the permission
granted clause.
54

Plaintiffs maintain that “had a crew member suffered injury at any time between June 1, 2015
and the sinking, this court would surely conclude that the vessel was ‘in navigation’ for purposes
of seaman status under the Jones Act. The vessel cannot be both ‘laid up and out of commission’
and ‘in navigation’ at the same time.” Docket 21 (Plaintiffs’ Opp’n & Mot.) at 18; see also Docket
23 (Mem. ISO Mot. to Intervene) at 6-7 n.18. But the Court need not decide when a vessel is “in
navigation” for the purposes of the Jones Act because it has no bearing on whether the vessel
was in compliance with the lay-up warranty.
55

Neither party has presented definitions of the terms “ways,” “gridirons,” or “drydocks” as used
in the “permission granted” clause. In the marine insurance context, “ways” means “[t]he
framework on which a vessel is built and from which it slides into the water upon launching.” See
Glossary of Marine Insurance and Shipping Terms, 14 U.S.F. Mar. L.J. 305, 421 (2002); see also
Way, 20 THE OXFORD ENGLISH DICTIONARY 17 (2nd Ed. 2001) (In nautical terms, “Ways, balks
laid down for rolling weights along. Launching ways, two parallel platforms of solid timber, one
on each side of the keel of a vessel while building, and on which her cradle slides on launching.”).
A gridiron in this context is “[a] heavy framework of beams in parallel open order (suggesting a
gridiron) used to support a ship in dock.” 4 THE OXFORD ENGLISH DICTIONARY 1092 (2nd Ed.
2001). A drydock is “[a] dock from which the water is or may be let out, for repairing (or building)
a ship.” 6 THE OXFORD ENGLISH DICTIONARY 834 (2nd Ed. 2001). Accord INTERNATIONAL
MARITIME DICTIONARY 438 (Launching Ways); 904 (Ways); 338 (Gridiron); 246 (Dry Dock) (2nd
Ed. 1961).
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Plaintiffs’ interpretation is unreasonable because it would deny permission to move the
vessel to and from the designated locations within the port—docks, ways, gridirons, and
drydocks—unless that movement was for the purpose of making alterations and repairs. 56
Contrary to Plaintiffs’ argument, the policy necessarily permits receiving fuel and hydraulic
oil because—if the vessel may move about the port for the stated purposes—Mr.
Thomassen could reasonably expect the policy allows him to keep the vessel operational.
Moreover, the clause expressly grants permission “to dock” and “to move about port” for
the purpose of docking—precisely what the vessel did when it left Piston and Rudder
Services and docked at Petro Marine Services on June 6, 2015.
The Court finds that the lay-up warranty would be breached when the vessel left a
particular location for any purpose other than (1) to make alterations and repairs, or (2)
to dock and undock, or to go on or off ways, gridirons, and drydocks within the port. For
example, the vessel could move about port as necessary to conduct repairs or alterations,
such as when testing newly installed equipment. Or, the vessel could be taken out of a
drydock and moved to a dock within the same port when—repairs completed—the
drydock was needed for another vessel. There would be no breach if the vessel relocated
from Dock A to Dock B within the same port when directed to do so by the port operators,
even if such movement was not related to alterations or repairs. And, based on the
current record, there was no breach when, on June 6, 2015, the vessel “move[d] about
port” “to dock” at Petro Marine Services. But it would violate the lay-up warranty when

56

In essence, Plaintiffs ask the Court to read the provision as “Permission granted to make
alterations and repairs, and to dock and undock, go on or off ways, gridirons and drydocks and to
move about port for said purposes.”
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the vessel left a dock in Petersburg for the purpose of heading out to sea, even when it
was still within the harbor, because such movement would not be one of the permitted
activities in the permission granted clause. Thus the lay-up warranty would be breached
when the vessel moved about the port—that is, at the moment the last line was cast
away—for purposes other than of making alterations or repairs, docking or undocking, or
going on or off ways, gridirons, or drydocks within the same port.
c.

Held Covered Clause

The policy provides that the KUPREANOF is “[h]eld covered in respect to breach
of trading warranty, and/or lay-up warranty provided Underwriters are advised within 72
hours from inception of the breach, at additional premiums, if any, to be determined by
Underwriters.” 57 Mr. Thomassen asserts that “[e]very interpretation of a ‘held covered’
clause states that the owner must not be aware of a breach and then, when the owner is
aware of a breach, must provide immediate notice to underwriters.” 58 But “[a] typical [held
covered] clause is as follows: . . . The Vessel is held covered . . . provided (a) notice is
given to the Underwriters immediately following receipt of knowledge thereof by the
assured . . . .”59 The held covered clause in this case is not typical, as it contains no such
provision. Plaintiffs correctly assert that, in this case, “the held covered clause does not
require notice only after ‘becoming aware’ of the event and does not require privity on the
part of the owner. Rather, the held covered clause extends coverage in the event of a

57

Docket 1-1 (Insurance Policy) at 13.

58

Docket 24 (Defendant’s Reply) at 10.

59

THOMAS J. SCHOENBAUM, ADMIRALTY & MARITIME LAW 448 (5th ed. 2011).

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breach of the lay-up warranty ‘provided Underwriters are advised within 72 hours from
inception of the breach.’” 60

By the policy’s plain and unambiguous terms, the

KUPREANOF was covered under the policy only if the Underwriters were notified within
72 hours of the precise time a breach of the lay-up warranty began, without regard to
when Mr. Thomassen learned of the breach.
V.

Application
Applying the foregoing interpretation of the policy, it is clear that a genuine dispute

of material fact precludes summary judgment for either party. Both parties agree that the
Underwriters were notified that the vessel had sunk on the open seas, and thereby
informed that the vessel had not been laid up, at 8:04 a.m. Alaska time on June 10,
2015. 61 Under the contract, as explained above, this notification properly invoked the
held covered clause only if the breach began not more than 72 hours prior to that time. 62
That breach, as explained above, occurred when the vessel left the dock in Petersburg
to begin transit to Juneau. The essential question, then, is whether the vessel left the
dock before or after 8:04 a.m. on June 7, 2015.
There is a genuine dispute between the parties as to when, precisely, the vessel
cast off. If the KUPREANOF left the dock headed for open water at or after 8:04 a.m.
Alaska time, the June 10 notice was sufficient to invoke the held covered clause. If the
vessel cast off before 8:04 a.m. on June 7, 2015, then the notice requirement of the held

60

Docket 21 (Plaintiffs’ Opp’n & Mot.) at 13.

61

Docket 21 at 19; Docket 19-1 (Thomassen Aff.) at 3.

62

The Court interprets “within” to include the full 72 hours as “the interpretation that most favors
the insured.” Kalenka, 262 P.3d at 607 (quoting C.P. ex rel. M.L., 996 P.2d at 1222).
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covered clause was not met. Plaintiffs have asserted, relying on an official document
filed by Captain Berry with the U.S. Coast Guard, that “the KUPREANOF departed
Petersburg for Juneau at approximately 0400 on June 7, 2015.” 63 Mr. Thomassen
responded to an interrogatory that “[o]n information and belief, according to Captain
Berry, the Vessel left the Petersburg dock as late as 8:00 a.m. or 9:00 a.m. or later Alaska
time and not at ‘4 AM’ as stated on the Coast Guard Form 2892,” 64 and Ms. Perez stated
in her declaration that “KUPREANOF left the dock on June 7, 2015 at around 0800
ADT.”65
Both motions for summary judgment will be denied because the evidence as to
when precisely the breach began is such that a reasonable jury could return a verdict for
either party.
VI.

Motion to Intervene
Ms. Perez seeks to intervene under Rule 24, and her memorandum in support of

that motion focuses on intervention as of right. 66 Mr. Thomassen did not respond to Ms.
Perez’s motion. Plaintiffs oppose the motion and dispute each element of the test for
intervention. 67

63

Docket 21 at 3.

64

Docket 25-2 (Defendant’s Response to Plaintiffs’ First Discovery to Defendant) at 4.

65

Docket 23-2 (Perez Decl.) at 2.

66

Docket 22 (Mot. to Intervene); Docket 23 (Mem. in Support of Mot. to Intervene).

67

See Docket 31 (Opp’n).

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a.

Intervention as of Right

Federal Rule of Civil Procedure 24(a)(2) gives a person a right to intervene when
“[o]n timely motion,” the applicant “claims an interest relating to the property or transaction
that is the subject of the action, and is so situated that disposing of the action may as a
practical matter impair or impede the movant's ability to protect its interest, unless existing
parties adequately represent that interest.” “The Ninth Circuit requires an applicant for
intervention as of right under Fed. R. Civ. P. 24(a)(2) to demonstrate that (1) it has a
significant protectable interest relating to the property or transaction that is the subject of
the action; (2) the disposition of the action may, as a practical matter, impair or impede
the applicant's ability to protect its interest; (3) the application is timely; and (4) the existing
parties may not adequately represent the applicant's interest.” 68 “Each of these four
requirements must be satisfied to support a right to intervene.” 69

“While Rule 24

traditionally receives liberal construction in favor of applicants for intervention, it is
incumbent on the party seeking to intervene to show that all the requirements for
intervention have been met.” 70
“An applicant for intervention has a significantly protectable interest if the interest
is protected by law and there is a relationship between the legally protected interest and
the plaintiff’s claims.” 71 A “specific legal or equitable interest” is not required, and it is

68

Chamness v. Bowen, 722 F.3d 1110, 1121 (9th Cir. 2013) (citing United States v. Alisal Water
Corp., 370 F.3d 915, 919 (9th Cir. 2004)).
69

Id. (quoting Arakaki v. Cayetano, 324 F.3d 1078, 1083 (9th Cir. 2003)).

70

Id. (internal quotation marks, formatting, and citations omitted).

71

Alisal Water Corp., 370 F.3d at 919.

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“generally enough that the interest is protectable under some law, and that there is a
relationship between the legally protected interest and the claims at issue.” 72 Ms. Perez
asserts that the insurance “policy at issue contains provisions of direct interest and
obligations regarding the no-fault cure claims of the crew of the vessel KUPREANOF.”73
Plaintiffs maintain that Ms. Perez’s “contingent economic interest in insurance policy
proceeds is insufficient to satisfy the [protectable interest] requirement for intervention as
of right.” 74 They maintain that she “is not an intended beneficiary of the insurance policy
and she may not sue to enforce the insurance contract.”75
Ms. Perez’s interest in the outcome of this litigation is in obtaining a source of funds
for any future cure that she may be awarded. 76 She does not have an independent
interest in the contractual relationship between Mr. Thomassen and Plaintiffs. Ms. Perez
may or may not obtain a judgment on her cure claims, and the outcome of this case may
impact the likelihood of her collecting on such a judgment. But the Ninth Circuit has held

72

Wilderness Soc’y v. U.S. Forest Serv., 630 F.3d 1173, 1179 (9th Cir. 2011) (en banc) (citations
omitted).

73

Docket 22 (Mot. to Intervene) at 2. “Cure” is the right of certain maritime workers (known as
“seamen” in admiralty law) to necessary medical services, protected by the general maritime law.
See THOMAS J. SCHOENBAUM, 1 ADMIRALTY AND MARITIME LAW 505, 522 (5th Ed. 2011). The policy
provision here provides that “this Company hereby undertakes to pay up to the amount hereby
insured . . . such sums as the Assured . . . shall have become legally liable to pay and shall have
paid on account of . . . Hospital, medical, or other expenses necessarily and reasonably incurred
in respects of loss of life of, injury to, or illness of any member of the crew of the vessel named
herein.” Docket 23-1 at 10, lines 10-16. The Court assumes without deciding that this provision
refers to any maintenance and cure claims of the type Ms. Perez may be asserting.
74

Docket 31 (Opp’n) at 6.

75

Docket 31 at 11.

76

See Docket 23 at 9 (“Ms. Perez’ interest in the policy for payment of her medical expenses is
clear.”)
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that “an allegedly impaired ability to collect judgments arising from past claims does not,
on its own, support a right to intervention.”77
Ms. Perez argues that “[u]nlike a standard tort victim, Ms. Perez is an intended
beneficiary under the subject policy.” 78 But there is nothing in the policy itself that
distinguishes between a tort claimant and a cure claimant. Coverage for both types of
claims is detailed in the P&I Clauses, and are subject to the same requirements. 79
Ms. Perez argues that she will “suffer a practical impairment of [her] interests” if
Plaintiffs prevail, and that this is a sufficient interest for intervention purposes. 80 But to
satisfy this test, Ms. Perez must show that she will suffer a practical impairment to an
“interest” that is protectable. Ms. Perez’s protectable interest is her legal right to seek
cure. But the outcome of this litigation will have no practical impact on that protectable
interest.
The Ninth Circuit caselaw on this point illustrates the distinction. In California ex
rel. Lockyer v. United States, the case on which Ms. Perez relies, California challenged

77

United States v. Alisal Water Corp., 370 F.3d 915, 919-20 (9th Cir. 2005) (denying a judgment
creditor the right to intervene in an environmental civil enforcement action brought by the United
States against the debtor because “the prospective collectability of a debt . . . is several degrees
removed from the overriding public health and environmental policies that are the backbone of
this litigation”); cf. Cal. Edison Co. v. Lynch, 307 F.3d 794, 803 (9th Cir. 2002) (finding that “a
contingent, unsecured claim against a third-party debtor” did not support intervention).
78

Docket 23 at 2.

79

See Docket 23-1 at 10-11. Ms. Perez is correct that proving up a claim for maintenance and
cure is less of a burden than proving up a negligence claim. See Docket 33 at 7-8. But liability
is not automatic. As discussed below, Ms. Perez still must prove both that she was a seaman
and that she was injured while in service of the ship.

80

Docket 23 at 9 (quoting California ex rel. Lockyer v. United States, 450 F.3d 436, 441 (9th Cir.
2006)).
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the constitutionality of a federal statute designed to “keep doctors who have moral qualms
about performing abortions from being put to the hard choice of acting in conformity with
their beliefs, or risking imprisonment or loss of professional livelihood.” 81 Two groups of
doctors sought to intervene to defend the federal law; California and the United States
opposed intervention. The Ninth Circuit reversed the district court’s denial of intervention
as of right. The Circuit Court reasoned that the challenged law “provides an important
layer of protection” for the doctors and that its invalidation would necessarily impair that
interest. And the court distinguished Donnelly v. Glickman, in which the Ninth Circuit
denied the intervention of male Forest Service employees in a discrimination suit brought
by female employees because “the fate of the women’s claims wouldn’t affect the men’s
claims at all.” 82 Ms. Perez’s interest falls closer to Donnelly: the fate of the Underwriters’
and Mr. Thomassen’s claims in this action won’t affect the validity of her legal claims for
cure.
The Ninth Circuit’s reasoning in United States v. Aerojet General Corp. also
reveals the limits of the “practical impairment” test. 83 In that case, the Court of Appeals
held that parties potentially liable for cleanup costs under federal environmental laws
could intervene as of right in other parties’ consent decree proceedings. The applicable
statutes would permit the intervenors to seek contribution from the settling parties, but
also permitted the United States to effectively immunize parties who entered consent

81

Lockyer, 450 F.3d at 441.

82

Lockyer, 450 F.3d at 442 (citing Donnelly v. Glickman, 159 F.3d 405, 409-10 (9th Cir. 1998)).

83

606 F.3d 1142 (9th Cir. 2010).

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decrees. The Circuit Court rejected the argument that because the intervenors had not
yet incurred liability on which to seek contribution, their interest was too speculative. The
court reasoned that the intervenors’ legally protected interest was their right to seek
contribution from other responsible parties once they were sued, and that this right could
be practically impaired by the proceedings: if the consent decree was approved, the
intervenors’ right to seek contribution from the settling parties would be extinguished. 84
Here, by contrast, the outcome of the litigation will have no impact on Ms. Perez’s legal
right to seek cure.
Ms. Perez does not have a significant protectable legal interest that is directly
related to the insurance coverage dispute that is the subject of this action. Her protectable
interest is the legal right to seek cure, and that right will not be directly impaired by the
outcome of this litigation. Because “[f]ailure to satisfy any one of the requirements is fatal
to the application” to intervene, the Court “need not reach the remaining elements . . . .”85
The Court will not permit intervention as of right.
b.

Permissive Intervention

Intervention under Federal Rule of Civil Procedure 24(b) is not entirely within the
discretion of a district court.

Rather, the movant must meet one of two sets of

requirements before a court may permit intervention. Permissive intervention under Rule
24(b)(1)(A) may apply if a movant “is given a conditional right to intervene by a federal

84

See Aerojet General, 606 F.3d at 1150-51.

85

Perry v. Proposition 8 Official Proponents, 587 F.3d 947, 950 (9th Cir. 2009).

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statute” fact.” 86 The Court is unaware of, and the parties have not pointed to, any federal
statute that gives Ms. Perez a conditional right to intervene. Accordingly, the Court will
not permit intervention under Rule 24(b)(1)(A).
Alternatively, “[a] district court may grant permissive intervention under Federal
Rule of Civil Procedure 24(b)(1)(B) where the applicant ‘shows (1) independent grounds
for jurisdiction; (2) the motion is timely; and (3) the applicant's claim or defense, and the
main action, have a question of law or a question of fact in common.’” 87 Ms. Perez’s own
claim is for maintenance and cure. 88 To prevail on such a claim, Ms. Perez must show
that she was a “seaman,” that she was injured or became ill while in the service of the
vessel, and the amount of maintenance and cure to which she is entitled. 89 In the present
action, the issues are only the scope of the insurer’s contractual obligations to the insured,
and, as explained above, whether and when the KUPREANOF was in breach of the
applicable warranties. There is no overlap of either law or fact between the claims in this
action and the claims that Ms. Perez has brought (or might bring). Accordingly, the Court
will deny permissive intervention under Rule 24(b)(1)(B).
In light of the foregoing, Ms. Perez will not be allowed to intervene under Rule 24.

86

Fed. R. Civ. P. 24(b)(1).

87

Perry, 587 F.3d at 955 (quoting Nw. Forest Res. Council v. Glickman, 82 F.3d 825, 839 (9th Cir.
1996), as amended on denial of reh'g (May 30, 1996)).

88

Ms. Perez appears to concede that intervention cannot be premised on her other, “fault”-related
claims. See Docket 22 at 2; Docket 23 at 10. In any event, none of those other claims raises any
issue of law or fact common to this action.
89

See Lipscomb v. Foss Maritime Co., 83 F.3d 1106, 1109 (9th Cir. 1996); see also
Calmar S.S. Corp. v. Taylor, 303 U.S. 525, 527-28 (1938) (discussing the origins of the right to
maintenance and cure).
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CONCLUSION
Therefore, IT IS ORDERED that Defendant’s Motion for Summary Judgment at
Docket 18, and Plaintiffs’ Cross-Motion for Summary Judgment at Docket 21 are
DENIED. Ms. Perez’s Motion to Intervene at Docket 22 is DENIED.
DATED this 6th day of September, 2016 at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE

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