Lakeshore Sail Charters, LLC v. Acadia Insurance Company

Filing 69

MEMORANDUM Opinion and Order Signed by the Honorable John Z. Lee on 3/7/16Mailed notice(ca, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LAKESHORE SAIL CHARTERS, LLC,
Plaintiff and
Counter-Defendant,
v.
ACADIA INSURANCE COMPANY,
Defendant and
Counter-Plaintiff.

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14-cv-2410
Judge John Z. Lee

MEMORANDUM OPINION AND ORDER
This suit for breach of an insurance contract is brought under the Court’s
admiralty jurisdiction, 28 U.S.C. § 1333. Plaintiff Lakeshore Sail Charters, LLC,
claims that Defendant Acadia Insurance Company breached its contract to insure
Lakeshore against damage to a sailing vessel, the Halie & Matthew, and against
any resulting lost earnings. Lakeshore further claims that Acadia acted in bad faith
by refusing to honor the contract, entitling Lakeshore to additional compensation
under Illinois law. Acadia retorts that it has fulfilled its obligations under the
contract and that Illinois law does not apply.
Both sides have moved for summary judgment. Acadia also has moved to
strike two affidavits Lakeshore submitted in support of its motion. For the reasons
given below, the Court denies Acadia’s motions to strike, and the motions for
summary judgment are granted in part and denied in part. Judgment is granted in
favor of Lakeshore as to its loss of earnings claim, but denied in all other respects.

I. Factual Background 1
Lakeshore Sail Charters, an Illinois company, acquired a 79-foot schooner
named the Halie & Matthew with the intention of participating in various “tall
ship” festivals in the Great Lakes during the summer of 2013. Pl.’s SOF ¶¶ 7; Pl.’s
Ex. 1 (Affidavit of Karen Randall) ¶ 2. As a participating sailing vessel, the Halie &
Matthew would have the opportunity to sell tickets for scheduled excursions. Pl.’s
SOF ¶ 9; Pl.’s Ex. 1 (Randall Aff.). In advance of the festivals, Lakeshore purchased
an insurance policy for the Halie & Matthew from an agent in Maine. Pl.’s SOF ¶ 3;
Def.’s SOF ¶ 6. The policy, which went into effect on June 12, 2013, was issued by
Acadia Insurance, a New Hampshire company. Pl.’s SOF ¶¶ 3, 12; Def.’s SOF ¶ 5.
The policy covered damage to the vessel while voyaging in the Great Lakes.
Def.’s SOF ¶ 8. Lakeshore also purchased several endorsements from Acadia to
expand the policy’s coverage. Id. Three of the purchased endorsements are relevant
to the claims in this case.
First, the Loss of Earnings Endorsement covered losses due to an
interruption in business resulting from damage to the ship. Pl.’s SOF ¶ 13; Pl.’s
Ex. 2 (Contract) at 30. “Loss of Earnings” is defined as “net profits and continuing
expenses.” Id. To make a claim under the Loss of Earnings Endorsement, the
insured was required to submit a good faith estimate of its losses. Pl.’s Ex. 2
(Contract) at 30. The coverage amount under this endorsement was capped at
The following facts are undisputed except where noted. Any properly supported fact
that a party disputes without “providing specific references to the affidavits, parts of the
record, and other supporting materials relied upon,” see LR56.1(b)(3)(B), is deemed
admitted. See Friend v. Valley View Cmty. Unit Sch. Dist. 365U, 789 F.3d 707, 710 (7th Cir.
2015).
1

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$250,000. Pl.’s SOF ¶ 30. The endorsement did not provide coverage “in the event
the interruption in business is caused as a result of the suspension or termination of
the insured’s authority to operate by a governmental or regulatory body.” Pl.’s Ex. 2
(Contract) at 30.
Second,

the

Medical

Payments

Endorsement

expanded

the

policy’s

“Protection and Indemnity Clauses” to add “medical payments.” This endorsement
applied “to fare paying passengers only.” Pl.’s SOF ¶ 15; Ex. 2 (Contract) at 33.
Finally, an untitled endorsement expanded the coverage of the policy from
voyages in the Great Lakes to a “[o]ne time trip from Maine to Chicago.” Def.’s SOF
¶ 9; Pl.’s Ex. 2 (Contract) at 36. The same endorsement also specified that “there is
no coverage for fare paying passengers until a new COI is received and accepted by
Acadia Insurance Company.” Id. A COI is a certificate of inspection from the Coast
Guard. Id. The parties agree that the Halie & Matthew had a certificate of
inspection issued by the Coast Guard in Maine, see Pl.’s Additional Facts ¶ 13;
Def.’s Resp. Pl.’s Additional Facts ¶ 13, but that the ship could not carry passengers
after leaving Maine until it arrived in the Great Lakes and was authorized by the
Coast Guard there, see Def.’s SOF ¶ 12; Pl.’s Resp. Def.’s SOF ¶ 12. According to
Acadia, the Coast Guard in the Great Lakes would actually issue a new certificate,
while Lakeshore contends that the existing certificate would simply be updated.
Def.’s SOF ¶ 12; Pl.’s Resp. Def.’s SOF ¶ 12. (As will be seen, the distinction makes
no difference.)

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On June 28 or 29, 2013, while en route to the Great Lakes, the Halie &
Matthew encountered bad weather and sustained significant damage to its
bowsprit. Pl.’s SOF ¶ 10; Def.’s SOF ¶ 14. The ship could not continue to its
destination before being repaired. Pl.’s SOF ¶ 11.
The repairs were begun in Quebec but had to be completed in New York.
Def.’s SOF ¶ 14. According to Lakeshore, the time needed to complete the repairs
caused the Halie & Matthew to miss most of the tall ship festivals it was scheduled
to attend, causing a substantial financial loss. Pl.’s SOF ¶ 11; Pl.’s Ex. 1 (Randall
Aff.) ¶6; Pl.’s Ex. 6 (Loss Estimate). Acadia disputes this statement, denying the
sufficiency of the evidence offered in support. See Def.’s Resp. Pl.’s SOF ¶ 11.
Lakeshore submitted a claim to Acadia for costs related to the ship’s repair.
The claim sought $100,700.64. Pl.’s SOF 35. Acadia approved payment in the
amount of $63,661.86, but denied the remainder of the claim. Def.’s SOF ¶ 31.
Lakeshore also submitted a claim under the Loss of Earnings Endorsement
for the profits it had anticipated from the tall ship festivals it missed. Pl.’s SOF
¶¶ 24–25; Pl.’s Ex. 1 (Randall Aff.) ¶ 12; Pl.’s Ex. 6 (Loss Estimate). In support of
that claim, Lakeshore provided a detailed estimate of its lost earnings along with
copies of the “appearance agreements” it had executed with festival organizers. Id.
Those agreements provided the schedules for those festivals and division of ticketsale revenues between Lakeshore and the festival organizers. Id.
Lakeshore calculated its anticipated profits from ticket sales at the four
festivals by multiplying its share of each ticket sale by an estimated number of

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passengers for each event and then subtracting estimated crew and fuel costs. Id.
Lakeshore explained that it estimated the number of passengers who would have
bought tickets for excursions on the Halie & Matthew based on reports from festival
organizers of the percentage of tickets sold by the ships that did participate. Id.
Lakeshore estimated its net profits at $385,000. Id. In compiling that
estimate, Lakeshore included only four of the five festivals it missed and did not
include an estimate of “continuing expenses” because the estimated net profits from
the first four festivals far exceeded the policy cap of $250,000. Id. Lakeshore invited
Acadia to forward any information that it believed would affect that estimate. Id.
Acadia denied Lakeshore’s loss of earnings claim entirely, contending that
the Loss of Earnings Endorsement was not in effect at the time of the accident
because the Halie & Matthew had not yet obtained a new certificate of inspection
from the Coast Guard in the Great Lakes. Id. ¶ 28; Pl.’s Ex. 9 (Denial Letter of
11/26/13). Faced with the denial, Lakeshore filed this lawsuit, bringing two claims
for breach of contract and one for a statutory penalty and damages under 215 Ill.
Comp. Stat. § 5/155. Acadia in turn filed a counterclaim seeking a declaratory
judgment that it is not liable to Lakeshore. Both parties have moved for summary
judgment on Lakeshore’s claims. Acadia also has moved to strike two affidavits by
Karen Randall, Lakeshore’s owner.
II. Legal Standard
When deciding a motion under Federal Rule of Civil Procedure 56 for
summary judgment, the Court views the evidence in the light most favorable to the

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non-moving party. Shell v. Smith, 789 F.3d 715, 717 (7th Cir. 2015). The motion will
be granted if there is no genuine dispute of material fact and the movant is entitled
to judgment as a matter of law. Id. Rule 56 “requires the district court to grant a
motion for summary judgment after discovery ‘against a party who fails to make a
showing sufficient to establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at trial.’” Silverman v.
Bd. of Educ. of City of Chi., 637 F.3d 729, 743 (7th Cir. 2011) (quoting Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986)).
III. Analysis
A. Motions to Strike
Lakeshore submitted an affidavit and supplemental affidavit from Karen
Randall, the “sole managing member of Lakeshore Sail Charters, LLC,” in support
of its motion for summary judgment. See Ex. 1 to Pl.’s SOF; Ex. 1 to Pl.’s Additional
Facts. Acadia moves to strike these affidavits on the ground that they do not comply
with Fed. R. Civ. P. 56(c)(4), which requires that affidavits “used to support or
oppose a motion must be made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant or declarant is competent to
testify on the matters stated.” See Boyce v. Moore, 314 F.3d 884, 889 (7th Cir. 2002)
(affidavits “must set forth facts that would be admissible in evidence”).
Acadia’s specific objections are aimed at Randall’s statements concerning
Lakeshore’s claim for loss of earnings. According to Acadia, Randall does not
provide sufficient documentation to support the loss estimates she provides. See

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Def.’s Mot. Strike Randall Aff. at 3–4 [ECF 49]; Def.’s Mot. Strike Supplemental Aff.
at 2–3 [ECF 58].
The Court disagrees. Randall’s account of Lakeshore’s lost profits is a
description of the claim her company submitted to Acadia, and that detailed claim,
along with the appearance agreements supporting it, are in the record. See Pl.’s Ex.
1 (Randall Aff.) ¶ 12; Pl.’s Ex. 6 (Loss Estimate). Randall, as the sole managing
member of Lakeshore, is competent to testify that her company submitted such a
claim to Acadia, and business owners are permitted to testify about expected
profits. See Echo, Inc. v. Timberland Machines & Irr., Inc., 661 F.3d 959, 965 (7th
Cir. 2011) (“As the advisory committee notes to Rule 701 explain, a business owner
or officer is allowed to testify ‘to the value or projected profits of the business,
without [being qualified] as an accountant, appraiser, or similar expert’ where that
testimony is based on the ‘particularized knowledge that the witness has by virtue
of his or her position in the business.’”).
Accordingly, Acadia’s motions to strike are denied. This is not to say that
each of Randall’s statements constitutes an undisputed fact—or even a fact at all.
The Court will disregard legal conclusions in her affidavits, as well as any factual
statements that are too vague or conclusory to have evidentiary value.
B. Choice of Law
The insurance contract in this case did not include a choice-of-law provision.
Acadia argues that Maine law should apply, and Lakeshore argues that Illinois law

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should apply. This Court is sitting in admiralty, and the Seventh Circuit has
explained that
a federal court sitting in admiralty can, by analogy to the
practice of the federal courts in regard to federal common
law (which is to say nonadmiralty federal judge-made
law), borrow the law of a state or a foreign country to
resolve a dispute that had come into court under the
admiralty jurisdiction, especially when dealing with a
subject traditionally regulated by the states, such as
insurance (including marine insurance).
Cont’l Cas. Co. v. Anderson Excavating & Wrecking Co., 189 F.3d 512, 519 (7th Cir.
1999). But before borrowing a state law, a federal court “must ask whether there is
admiralty law on the issue and if so it must apply that law and if not it must decide
whether the interest in uniformity should trump the state’s regulatory interest and
expertise.” Id.
In Continental Casualty, the court found that admiralty law existed on the
interpretation of the particular contract provision at issue (the “Inchmaree Clause”).
189 F.3d at 519–20. In this case, the parties cite no admiralty law guiding the
interpretation of the contract provisions at issue, and the Court finds none. The
Court will therefore apply state-law interpretive rules, choosing which state’s law to
apply based on federal choice-of-law rules.
The federal choice-of-law inquiry in marine contract cases asks which state
has the “greatest interest” or “most significant relationship” to the dispute. Albany
Ins. Co. v. Anh Thi Kieu, 927 F.2d 882, 891 (5th Cir. 1991); Lien Ho Hsing Steel
Enter. Co. v. Weihtag, 738 F.2d 1455, 1458 (9th Cir.1984); Ill. Constructors Corp. v.
Morency & Assocs., Inc., 802 F. Supp. 185, 188 (N.D. Ill. 1992). As Acadia
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acknowledges, see Def.’s Resp. Br./Mem. Supp. at 1 n.1, whether the Court borrows
from Maine or Illinois is inconsequential when it comes to rules governing contract
interpretation or the allocation of burdens because those rules are essentially the
same in both states.
The choice, however, is potentially important for Lakeshore’s claim under 215
Ill. Comp. Stat. § 5/155 for attorneys’ fees and statutory damages. And the Court
concludes that, on balance, Illinois law rather than Maine law should apply.
Although the contract was executed in Maine and the Halie & Matthew was in
Maine at the time, Lakeshore is based in Illinois, and Acadia chose to insure the
vessel for a “trip from Maine to Chicago” as well as voyages in the Great Lakes.
Under these circumstances, the Court finds that Illinois has the greatest interest in
this dispute.
This determination, however, does not conclusively decide whether § 5/155
can be “borrowed” in an admiralty case. Neither party has briefed whether
admiralty law exists on the subject, and in fact there is a circuit split concerning
whether state laws providing for attorneys’ fees and/or statutory damages for
vexatious and unreasonable conduct by the insurer can be applied in admiralty
insurance coverage cases. The Court will return to this subject when analyzing
Lakeshore’s claim under § 5/155 below.
C. Breach of Contract - Loss of Earnings Claim
Lakeshore claims that Acadia breached the insurance contract by not
honoring the Loss of Earnings Endorsement. See Compl. ¶¶ 29–36. According to

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Lakeshore, Acadia was obliged to pay Lakeshore for the estimated net profits it
would have realized from the tall ship festivals had the Halie & Matthew not been
damaged. Pl.’s Mem. Supp. at 8–12. Lakeshore contends that the contract
unambiguously obligates Acadia to compensate it for these losses and further
contends that that those losses indisputably far exceed the $250,000 cap. Id.
For its part, Acadia argues that the Loss of Earnings Endorsement was not
actually in effect at the time of the accident because the untitled endorsement
specifies that “there is no coverage for fare paying passengers until a new COI is
received and accepted by Acadia Insurance Company.” Def’s Resp. Br./Mem. Supp.
at 3–5. According to Acadia, this language means that the Loss of Earnings
Endorsement did not apply at the time of the accident because Lakeshore had not
yet reached the Great Lakes and obtained a new certificate of inspection. Id. Under
Acadia’s proposed reading of the contract, “no coverage for fare paying passengers”
means no reimbursement for lost ticket sales. Id. 2
Lakeshore counters that the “fare paying passenger” language in the untitled
endorsement refers to the Medical Coverage Endorsement, which also uses the term
“fare paying passengers,” and not to the Loss of Earnings Endorsement, which does
not. Pl.’s Mem. Supp. at 9–10; Pl.’s Reply/Resp. Br. at 4–5. Lakeshore also points
out that the Loss of Earnings Endorsement covers “continuing expenses” in addition

It is unclear whether Acadia also is attempting to argue that the Loss of Earnings
Endorsement does not apply because Lakeshore had not commenced operating its business
in the first place prior to arriving at the Great Lakes and obtaining the COI. If so, Acadia
presents no facts to support such an argument, and all facts in the record are to the
contrary. Pl.’s Ex. 1 (Randall Aff.) ¶12 ; Pl.’s Ex. 6 (Appearance Agreements).
2

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to “net profits,” making Acadia’s reading of the untitled endorsement as a limitation
on the Loss of Earnings Endorsement even less tenable. Pl.’s Mem. Supp. at 10–11.
Under Illinois law, “unambiguous” contract provisions “will be enforced as
written.” Berrey v. Travelers Indem. Co. of Am., 770 F.3d 591, 595 (7th Cir. 2014).
“A policy will be considered ambiguous only where its language is subject to more
than one reasonable interpretation.” Id. Whether an ambiguity exists is a question
of law. Int’l Union v. ZF Boge Elastmetall LLC, 649 F.3d 641, 649 (7th Cir. 2011).
The Court agrees with Lakeshore that the untitled endorsement is
unambiguous and is not a limitation on the Loss of Earnings Endorsement. The “no
coverage for fare paying passengers” language in the untitled endorsement clearly
was intended to echo the “fare paying passengers” language contained in the
Medical Payments Endorsement, which provides coverage for certain medical
payments for “fare paying passengers only.” Furthermore, the Loss of Earnings
Endorsement covers a “loss of earnings,” that is, the lack of fare paying passengers,
while the untitled endorsement envisions coverage for fare paying passengers once
a CIO is received. Indeed, to fit Acadia’s construction, the endorsement would have
to read “there is no coverage for the absence of fare paying passengers until a new
COI is received.” Had Acadia wanted to include such a limitation on the Loss of
Earnings Endorsement, it easily could have done so, but the absence of such a
provision speaks volumes.
Acadia next argues that the Loss of Earnings Endorsement was not in effect
at the time of the accident because the endorsement specifies that “no coverage will

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apply in the event the interruption of business is caused as a result of the
suspension or termination of the insured’s authority to operate by a governmental
or regulatory body.” Def’s Resp. Br./Mem. Supp. at 6–7. According to Acadia, this
provision applies because the Halie & Matthew had not been yet been cleared by
the Coast Guard to carry passengers in the Great Lakes. Id.
This argument too is refuted by the unambiguous words in the policy. The
exclusion requires two things: (1) a “suspension or termination” that (2) causes an
interruption in business. As to the first requirement, Acadia provides no evidence
that a governmental or regulatory body had suspended or terminated the Halie &
Matthew’s authority to operate its business prior to the accident. Taking the
evidence in the light most favorable to Acadia, the ship was required to get a new
certificate of inspection from the Coast Guard once it arrived in the Great Lakes,
but this requirement, which was apparently a matter of course, cannot be
understood as a suspension or termination of the Halie & Matthew’s authority to do
business.
What is more, Acadia concedes that Lakeshore had a valid certificate of
inspection in place for the journey from Maine to the Great Lakes when the accident
took place, see Def.’s Resp. Pl.’s Additional Facts ¶ 13, and also concedes that
Lakeshore could not have obtained the certificate required for carrying passengers
in the Great Lakes prior to arriving in the Great Lakes, see Def.’s Reply Br. at 6
(“Lakeshore could not operate as a charter business in the Great Lakes until it had
reached the Great Lakes, obtained a new Certificate of Inspection (‘COI’), provided

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that COI to Acadia and had it accepted by Acadia.”). Moreover, Acadia does not
suggest that the Halie & Matthew would have had any difficulty obtaining the
required certificate as soon as it arrived at the Great Lakes had the accident not
occurred. And, in fact, it is undisputed that the ship obtained the certificate once
the damage from the accident was repaired. Def.’s SOF ¶ 16.
As to the second requirement, Lakeshore’s position is that it was the damage
the Halie & Matthew sustained that caused it to miss the tall ship festivals, not a
suspension or termination by a governmental authority. Pl.’s SOF ¶ 11; Pl’s Ex. 1
(Randall Aff.) ¶ 6. Acadia purports to dispute this fact, but does so only by
challenging the sufficiency of Lakeshore’s evidence—the Randall affidavit—and by
demanding “strict proof thereof.” See Def.’s Resp. Pl.’s SOF ¶ 11. But Randall’s
affidavit constitutes admissible evidence on why her ship was unable to participate
in the tall ship festivals. And demanding proof of a fact does not dispute it. See Fed.
Deposit Ins. Corp. v. Meyer, 781 F.2d 1260, 1267 (7th Cir. 1986) (holding a demand
for “’strict proof thereof’” in response to a Rule 56 statement of fact “is insufficient to
raise a genuine issue of material fact.”).
Acadia’s final argument is that it did not need to pay Lakeshore for lost
earnings because Lakeshore had not provided sufficient proof of its loss. Def’s Resp.
Br./Mem. Supp. at 7–10. But the Loss of Earnings Endorsement required Lakeshore
to provide only a good-faith estimate. See Pl.’s Ex. 2 (Contract) at 30. Acadia could
then inspect the insured’s records during normal business hours if it was “not
satisfied with the estimates.” Id. Lakeshore even invited Acadia to suggest

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alterations to the estimate if it believed alterations were needed. See Pl.’s Ex. 6
(Loss Estimate). Rather than exercise these options, Acadia just denied the claim.
Pl.’s Ex. 9 (Denial Letter).
Nor has Acadia put forward any evidence that Lakeshore’s estimate was not
made in good faith or that any necessary adjustment to the estimate would bring
Lakeshore’s damages below the $250,000 cap. Acadia argues that Lakeshore’s
estimate exaggerated the number of tickets it would have sold, citing to the
deposition testimony of Bruce Randall, Karen’s husband, who explained that they
had anticipated that all tall ship festivals would sell out but that a festival the
Halie & Matthew attended after it was repaired did not. See Def.’s Resp. Br/Mem.
Supp. at 8 n.6. Acadia, however, failed to reference these statements in its Rule 56.1
Statement of Facts, and, in any event, the testimony does not actually undermine
the loss estimate Lakeshore submitted. The estimate explained that three festivals
sold out according to organizers and that a fourth festival reportedly sold only 80%
of its tickets. See Pl.’s Ex. 6 (Loss Estimate). This is not inconsistent with Bruce
Randall’s testimony.
Acadia also argues that Lakeshore should have subtracted additional
expenses from the gross revenues it calculated, but it points to no evidence to
support this argument. See Def.’s Resp. Br./Mem. Supp. at 9. Finally, Acadia
complains that Lakeshore did not comply with discovery requests for information on
its losses, see Def.’s Reply Br. at 10, but the time to litigate discovery disputes is
before discovery closes, not in response to a motion for summary judgment.

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In short, there is no genuine dispute of material fact as to this claim, and
Lakeshore is entitled to judgment as a matter of law with respect to its loss of
earnings claim. Lakeshore has presented evidence of damages far exceeding the
$250,000 cap under the Loss of Earning Endorsement, and Acadia has offered no
alternative calculation supported by evidence that could bring that figure below the
cap. The Court therefore awards Lakeshore $250,000.
D. Breach of Contract – Hull Repair Claim
Lakeshore claims that Acadia also breached the insurance contract by not
fully reimbursing Lakeshore for covered repair costs. According to Lakeshore,
Acadia still owes $37,039. The bulk of that amount—$27,538.94—is for crew costs.
See Pl.’s SOF ¶ 35; Def.’s SOF ¶ 31. The remaining roughly $9,500 is for “travel,”
“bank fees,” and “additional charges.” Pl.’s SOF ¶ 35.
Acadia first argues that the insurance policy did not cover the disputed crew
costs. Def.’s Resp. Br./Mem. Supp. at 11. Acadia did pay Lakeshore $3442.37 in crew
costs to cover the crew’s wages for moving the ship for necessary repairs, see Pl.’s
SOF ¶35; Def.’s SOF ¶ 31, but it denied coverage as to the remainder, Def.’s SOF
¶ 26. Acadia points to this provision in support of its denial:
No claim shall be allowed in particular average for wages
and maintenance of the Master, Officers or Crew, except
when incurred solely for the necessary removal of the
Vessel from one port to another for average repairs or for
trial trips to test average repairs, in which cases wages
and maintenance will be allowed only while the Vessel is
under way. This exclusion shall not apply to overtime or
similar extraordinary payments to the Master, Officers or
Crew incurred in shifting the Vessel for cleaning or

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repairs or while specifically engaged in these activities,
either in port or at sea.
Id. ¶ 24; Def.’s Resp. Br./Mem. Supp. at 11.
Lakeshore does not address this provision in responding to Acadia’s
argument. Instead, Lakeshore counters that the crew costs it seeks should be
covered as “continuing expenses” under the Loss of Earnings Endorsement. Pl.’s
Resp. Br./Reply Br. at 11–12; Resp. to Def.’s SOF at ¶ 24. But even if Lakeshore
were correct that crew costs qualify as “continuing expenses” under that
endorsement, Lakeshore’s lost profits alone exceed the endorsement’s cap, and any
additional amounts would not be recoverable.
As to the remaining $9,500, Acadia argues that Lakeshore has not met its
burden of putting forward evidence to establish that those costs were covered under
the policy. Acadia, relying on the affidavit of the adjuster who handled Lakeshore’s
claims, states that the “Bank Fees and Travel Fees were not directly related to the
repair of the Vessel so as to be covered by the Policy.” Def.’s SOF ¶ 27; Def.’s Ex. A
(Affidavit of Lisa Briggs). Lakeshore disputes this fact, stating that the “costs were
directly related to the repairs,” citing to Randall’s affidavit. Pl.’s Resp. Def’s SOF
¶ 27.
The Court agrees that Lakeshore’s evidence does not create a genuine dispute
of material fact on this point. Neither of Randall’s affidavits explains how the
“travel,” “bank fees,” and “additional charges” were connected to the repair efforts.
Lakeshore contends that it “provided a detailed affidavit of Karen Randall which
specified the costs that were being sought, the reasons those costs were incurred in
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connection with the repair efforts and the plan for coverage relating thereto.” Pl.’s
Resp. Br./Reply Br. at 11. But in reality she merely asserts in her affidavit that
“Lakeshore’s expenses were as follows” and then lists those line items without
further explanation. See Pl.’s SOF, Ex. 1 (Randall Aff.) ¶¶ 20–21. In Illinois, “the
burden is on the insured to prove that its claim falls within the coverage of an
insurance policy.” Addison Ins. Co. v. Fay, 905 N.E.2d 747, 752 (Ill. 2009). Because
Lakeshore’s evidence would not allow it to meet that burden at trial, the Court
grants Acadia’s motion for summary judgment on Count II. See Silverman, 637 F.3d
at 743 (explaining that summary judgment is appropriate when nonmoving party’s
evidence could not meet its burden at trial).
E. Count III – Claim for “Consequential Damages”
As discussed, the Court concludes that Illinois has the most significant
connection to this dispute. But whether state laws such as 215 Ill. Comp. Stat.
§ 5/155, which allows for recovery of attorneys’ fees and/or statutory damages, can
be applied in an admiralty case—and specifically in an admiralty case concerning
insurance coverage—is another matter. The Seventh Circuit has not spoken on the
issue, and the circuits that have spoken are split. Compare Am. Nat. Fire Ins. Co. v.
Kenealy, 72 F.3d 264, 270 (2d Cir. 1995) (rejecting application of New York state
law on attorneys’ fees in a maritime insurance case), with INA of Tex. v. Richard,
800 F.2d 1379, 1381 (5th Cir. 1986) (allowing state law fee shifting in marine
insurance cases); Misener Marine Const., Inc. v. Norfolk Dredging Co., 594 F.3d 832,
839–42 (11th Cir. 2010) (concluding that Georgia’s attorneys’ fees statute could not

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be applied in admiralty contract case but distinguishing insurance contracts); and
Southworth Mach. Co. v. F/V Corey Pride, 994 F.2d 37, 41–42 (1st Cir. 1993)
(holding in contract case that Massachusetts attorneys’ fees provision was
inconsistent with federal admiralty law but distinguishing insurance contracts).
Other cases have held that a court sitting in admiralty has the equitable
discretion to award attorney’s fees when a party to a contract acted in bad faith.
See, e.g., Sosebee v. Rath, 893 F.2d 54, 56–57 (3d Cir. 1990) (rejecting application of
Virgin Islands attorney’s fees law but stating that attorneys’ fees are available in
admiralty cases if “the court determines in its equitable discretion that one party
has acted in bad faith”); Ingersoll Mill. Mach. Co. v. M/V Bodena, 829 F.2d 293, 309
(2d Cir. 1987) (“[T]he general rule is that the award of fees and expenses in
admiralty actions is discretionary with the district judge upon a finding of bad
faith.”).
Finally, two courts in this district have found § 5/155 applicable in admiralty
cases. See Great Lakes Dredge & Dock Co. v. Commercial Union Assur. Co., No. 94 C
2579, 2000 WL 1898533, at **10–12 (N.D. Ill. Sept. 18, 2000); Perzy v. Intercargo
Corp., 827 F. Supp. 1365, 1367 (N.D. Ill. 1993).
Whether § 5/155 can be properly applied in an admiralty case need not be
decided in this case, however, because the Court concludes that, even if the
provision were to apply here, Lakeshore falls short of satisfying its requirements.
Section 5/155 permits recovery if “it appears to the court” that an insurer’s denial of
a claim or delay in paying was “vexatious and unreasonable.” 215 Ill. Comp. Stat.

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§ 5/155. This is a question of law for the Court, see Johnson v. Safeco Ins. Co., 809 F.
Supp. 602, 608 (N.D. Ill. 1992), affirmed 9 F.3d 112 (7th Cir. 1993), and the
evidence in this case, viewed in the light most favorable to Lakeshore, cannot
establish its entitlement to recovery under the statute.
Lakeshore’s main argument is that Acadia’s interpretation of the Loss of
Earnings Endorsement was wrong. But no recovery is permitted under § 5/155 if
there was “a bona fide dispute concerning the scope and application of insurance
coverage.” TKK USA, Inc. v. Safety Nat. Cas. Corp., 727 F.3d 782, 793 (7th Cir.
2013) (citation omitted). And, while Acadia’s construction of the contract was
incorrect, its reading was not completely out of bounds or foreclosed by prior
authority. The Court thus concludes that there was a bona fide dispute as to
coverage here. See id. (concluding that a dispute was bona fide because it raised a
matter of first impression).
Lakeshore also contends that it is entitled to recovery under § 5/155 on the
basis that Acadia took an excessively long time to pay its hull repair claim. As
evidence that Acadia was not negotiating that claim in good faith, Lakeshore points
to a lawsuit Acadia filed in the District of Maine seeking a declaratory judgment
that it was not liable for Lakeshore’s claim under the Loss of Earnings
Endorsement. Pl.’s Mem. Supp. at 14; Pl.’s SOF 29; see Acadia Ins. Co. v. Lakeshore
Sail Charters, LLC, No. 13-cv-00459-GZS (D. Me.). 3 Lakeshore notes that Acadia
filed the suit shortly after denying the Loss of Earning claim but failed to inform
The Maine case was ultimately transferred to the Northern District of Illinois as
Case No. 14-cv-9918 and voluntarily dismissed by Acadia.
3

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Lakeshore of the lawsuit for several months while the parties continued to negotiate
the hull repair claim. Pl’s SOF ¶¶ 28–29; see Acadia Ins. Co., No. 13-cv-00459-GZS,
Doc. 6 (granting Acadia’s motion to extend time to serve complaint). Although
Lakeshore may have been surprised by the lawsuit given that it was attempting to
negotiate the related hull repair claim with Acadia at the time, the Court does not
believe that Acadia’s filing of the Maine lawsuit in and of itself is evidence of bad
faith, particularly when it did so only after denying the lost earnings claim.
Finally, Lakeshore also notes that “[f]or reasons unknown, Acadia’s first
marine surveyor refused to communicate with Lakeshore” and that the second
surveyor made a low-ball settlement offer. Pl.’s SOF ¶¶ 33–34. Entirely absent,
however, is any clear statement of how long it actually took Acadia to pay the claim
and why the delay was unreasonable when compared to similar circumstances.
Furthermore, it is undisputed that Acadia did pay a total of $17,500 on the claim
between July and August 2013. See Def.’s SOF ¶ 22; Def.’s Ex. A (Briggs Aff.) ¶ 7.
Without evidence that any delay paying the remainder was unreasonable, the Court
could not find for Lakeshore on this claim.
As a final point, although Lakeshore’s complaint seeks as relief “an award of
a statutory penalty and damages” as well as attorney’s fees, its motion only seeks
“consequential damages” totaling $150,000: $100,000 for a down payment made for
renting the vessel, and $50,000 for “additional investment for equipment in order to
outfit the vessel or excursions.” Pl.’s Ex. 1 (Randall Aff.) ¶ 23. 215 Ill. Comp. Stat.
§ 5/155(1) provides:

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[T]he court may allow as part of the taxable costs in the
action reasonable attorney’s fees, other costs, plus an
amount not to exceed any one of the following amounts:
(a) 60% of the amount which the court or jury finds such
party is entitled to recover against the company, exclusive
of all costs;
(b) $60,000;
(c) the excess of the amount which the court or jury finds
such party is entitled to recover, exclusive of costs, over
the amount, if any, which the company offered to pay in
settlement of the claim prior to the action.
Rather than tethering its claim to these elements and explaining why the amount it
seeks is appropriate, Lakeshore requests $150,000 in “consequential damages”
based on nothing more than bald assertions of loss by Karen Randall. This is
insufficient to establish a claim under this section.
For all of these reasons, summary judgment is granted to Acadia as to
Count III.
III. Conclusion
For the reasons given above, the Court grants Lakeshore’s motion for
summary judgment [47] on the Loss of Earnings contract claim in the amount of
$250,000. The Court denies Lakeshore’s motion as to the Hull Repair claim and its
claim under 215 Ill. Comp. Stat. § 5/155. The Court denies Acadia’s motion for
summary judgment [52] on Lakeshore’s Loss of Earnings contract claim but grants
it on the other two claims. Acadia’s motions to strike [49, 50] are denied, and
Acadia’s Counterclaim [27] is dismissed at moot. Judgment is entered in favor of
Lakeshore and against Acadia in the amount of $250,000.
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SO ORDERED

ENTER: 3/7/16
________________________________________
JOHN Z. LEE
United States District Judge

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