XL Specialty Insurance Company v. Bollinger Shipyards, Inc. et al
Filing
102
ORDER AND REASONS denying 76 Motion by Bollinger for Partial Summary Judgment. Signed by Chief Judge Sarah S. Vance on 1/3/14. (Reference: 12-2167)(jjs, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
XL SPECIALTY INSURANCE COMPANY
CIVIL ACTION
VERSUS
NO: 12-2071
BOLLINGER SHIPYARDS, INC., ET
AL.
SECTION: R(2)
ORDER AND REASONS
Bollinger Shipyards, Inc., Bollinger Shipyards Lockport,
L.L.C., and Halter Bollinger Joint Venture, L.L.C. (collectively
"Bollinger") move the Court for partial summary judgment against
Bollinger's insurer, National Union Fire Insurance Company of
Pittsburg, Pa., and National Union's claims administrator,
Chartis Claims, Inc.1 The Court DENIES Bollinger's motion because
it has failed to show that a claim was made against it during the
applicable policy period, and it is therefore not entitled to
coverage or defense costs under its policy with National Union.
I. BACKGROUND
This lawsuit arises out of Bollinger's involvement in the
United States Coast Guard's Deepwater program to modernize its
fleet of water vessels, aircraft, and electronics systems.2 The
United States selected Integrated Coast Guard Systems (ICGS) to
serve as lead contractor of the program, and ICGS in turn
1
R. Doc. 76.
2
R. Doc. 76-5 at 4.
subcontracted a portion of that work to Bollinger.3 Bollinger was
responsible for converting eight 110-foot cutters into 123-foot
cutters.4 Bollinger delivered the first of these vessels to the
Coast Guard in March 2004.5 In September 2004, that vessel
suffered a structural casualty.6 According to the United States,
a subsequent Coast Guard and IGCS investigation revealed that
Bollinger had misrepresented the longitudinal strength of the
hulls of the cutters it delivered to the United States.7
On December 23, 2008, the United States executed a tolling
agreement with Bollinger.8 The agreement provided in relevant
part:
WHEREAS, On December 5, 2008 the United States of America
informed Bollinger . . . that the United States . . .
[believes it] may have certain civil causes of action and
administrative claims against Bollinger under the False
Claims Act, 31 U.S.C. §§ 3729 et seq., other statutes and
regulations including the Program Fraud Civil Remedies
Act, 31 U.S.C. §§ 3801 et seq., equity, or the common
law, arising from Bollinger's performance of conversion
work on the U.S. Coast Guard Deepwater Program's 110 Foot
Island Class vessels . . .; and
3
Id. at 5.
4
Id. at 5, 10.
5
Id. at 10.
6
Id. at 11.
7
Id.
8
R. Doc. 77-3.
2
WHEREAS, the parties have entered into
relating to the possible settlement of
States's above claims prior to suit;
discussions
the United
NOW, THEREFORE, . . . the United States and Bollinger
agree that, as consideration for the United States not
filing, or initiating claims against Bollinger under the
False Claims Act, 31 U.S.C. §§ 3729 et seq., or the
Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801 et
seq., on or before December 31, 2008, the period of time
between and including December 5, 2008 and May 5, 2009
shall be excluded when determining whether any civil or
administrative claims are time-barred by the statute of
limitations, laches, or any other time-related defenses.
Bollinger further agrees it will not . . . plead statute
of limitations, laches, or any other similar defense to
any civil or administrative action filed or initiated
against Bollinger on or before May 5, 2009 under the
False Claims Act, 31 U.S.C. §§ 3729 et seq., other
statutes and regulations, including the Program Fraud
Civil Remedies Act, 31 U.S.C. §§ 3801 et seq., equity or
the common law, based on the performance of conversion
work on the U.S. Coast Guard Deepwater Program's 110 Foot
Island Class vessels . . . .9
On July 29, 2011, the United States filed a complaint
against Bollinger based on allegations that "Bollinger knowingly
misled the Coast Guard to enter into a contract for the
lengthening of Coast Guard cutters by falsifying data relating to
the structural strength of the converted vessels."10 The United
States' complaint alleged two violations of the False Claims Act,
as well as common law fraud, negligent misrepresentation, and
unjust enrichment.11
9
Id. at 1.
10
R. Doc. 76-5 at 2.
11
Id. at 12-14.
3
On August 3, 2011, days after the underlying suit was filed,
Bollinger put National Union and Chartis on notice of the suit.12
Bollinger held a Directors, Officers, and Private Company
Liability Insurance Policy with National Union ("the D&O
Policy").13 The policy covered defense costs and liability for
claims first made against Bollinger during the "Policy Period" of
March 1, 2011 to March 1, 2012.14
On August 4, Chartis acknowledged receipt of Bollinger's
claim.15 On August 30, Chartis informed Bollinger via letter that
the underlying suit was not covered under the D&O Policy because,
among other things, the United States' "claim" was first made in
December 2008, when the tolling agreement was executed -- over
two years before the Policy Period began.16 After multiple
unsuccessful attempts to convince Chartis and National Union that
the D&O Policy covered the United States' lawsuit,17 Bollinger
sued Chartis and National Union in state court.18 Defendants
12
R. Doc. 76-5 at 1.
13
See R. Doc. 76-13.
14
Id. at 1.
15
R. Doc. 76-6.
16
R. Doc. 76-7 at 2-3.
17
See R. Docs. 76-8, 76-9, 76-10, 76-11.
18
See Bollinger Shipyards, Inc. et al. v. National Union
Fire Insurance Company of Pittsburg, Pa. et al., No. 12-cv-2167,
R. Doc. 1.
4
removed the case to federal court on August 24, 2012, and the
Court eventually consolidated it with this matter.19 Bollinger
now asks the Court to find as a matter of law that the D&O Policy
entitles Bollinger to the defense costs it has incurred in the
underlying suit. Bollinger also seeks an award of statutory
penalties, attorneys' fees, costs, and interest.
II. STANDARD
Summary judgment is warranted when “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.” Fed. R. Civ.
P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.
1994). When assessing whether a dispute as to any material fact
exists, the Court considers “all of the evidence in the record
but refrain[s] from making credibility determinations or weighing
the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness
Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008). All reasonable
inferences are drawn in favor of the nonmoving party, but
“unsupported allegations or affidavits setting forth ‘ultimate or
conclusory facts and conclusions of law’ are insufficient to
either support or defeat a motion for summary judgment.” Galindo
19
R. Doc. 19.
5
v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); see
also Little, 37 F.3d at 1075.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th
Cir. 1991). The nonmoving party can then defeat the motion by
either countering with evidence sufficient to demonstrate the
existence of a genuine dispute of material fact, or “showing that
the moving party’s evidence is so sheer that it may not persuade
the reasonable fact-finder to return a verdict in favor of the
moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in
the record is insufficient with respect to an essential element
of the nonmoving party's claim. See Celotex, 477 U.S. at 325.
The burden then shifts to the nonmoving party, who must, by
submitting or referring to evidence, set out specific facts
showing that a genuine issue exists. See id. at 324. The
nonmovant may not rest upon the pleadings, but must identify
specific facts that establish a genuine issue for trial. See,
e.g., id.; Little, 37 F.3d at 1075 ("Rule 56 'mandates the entry
6
of summary judgment, after adequate time for discovery and upon
motion, 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.'" (quoting Celotex, 477 U.S. at 322)).
III. DISCUSSION
The parties agree that Louisiana law governs this case. In
Louisiana, an insurance policy "should be construed by using the
general rules of interpretation of contracts set forth in the
Civil Code." La. Ins. Guar. Ass'n v. Interstate Fire & Cas. Co.,
630 So.2d 759, 763 (La. 1994). "The judicial responsibility in
interpreting insurance contracts is to determine the parties'
common intent." Id. (citing La. Civ. Code art. 2045). If the
words of the contract are "clear and explicit and lead to no
absurd consequences," the plain meaning of the contract prevails,
and "no further interpretation may be made in search of the
parties' intent." La. Civ. Code art. 2046; id. art. 2047 (words
of a contract should be given their "generally prevailing
meaning," unless the words have acquired a technical meaning).
If there is ambiguity in an insurance policy, the ambiguity
must be resolved in favor of the insured. La. Ins. Guar. Ass'n,
630 So.2d at 764; see also La. Civ. Code art. 2056 ("A contract
executed in a standard form of one party must be interpreted, in
case of doubt, in favor of the other party."). This rule of
7
strict construction should be applied only if the contract is
actually ambiguous; it “does not authorize a perversion of
language, or the exercise of inventive powers for the purpose of
creating ambiguity where none exists.” Reynolds v. Select Props.,
Ltd., 634 So.2d 1180, 1183 (La. 1994) (quoting Union Ins. Co. v.
Advance Coating Co., 351 So.2d 1183, 1185 (La. 1977)); see also
La. Ins. Guar. Ass'n, 630 So.2d at 764 ("When the language of an
insurance policy is clear, courts lack the authority to change or
alter its terms under the guise of interpretation."). Moreover,
"insurance companies have the right to limit coverage in any
manner they desire, so long as the limitations do not conflict
with statutory provisions or public policy.” Reynolds, 634 So.2d
at 1183.
National Union insured Bollinger under a claims made policy,
which provides coverage for claims first made against the insured
during the policy period.20 The primary dispute between the
parties concerns when the United States' claim was first made
against Bollinger. National Union and Chartis contend that the
claim was first made in 2008, when the tolling agreement was
executed. If this is correct, then the D&O Policy does not cover
the claim, since the D&O Policy's "Policy Period" runs from March
20
See R. Doc. 76-13 at 6 ("This policy shall pay the Loss
of the Company arising from a . . . Claim first made against the
Company . . . during the Policy Period . . . and reported to the
Insurer pursuant to the terms of this policy for any actual or
alleged Wrongful Act . . . .").
8
1, 2011 to March 1, 2012.21 Bollinger on the other hand, argues
that the United States' claim was first made in July 2011, when
the lawsuit was filed. If Bollinger is right, then the D&O Policy
covers the claim, unless an exclusion applies.
The plain language of the D&O Policy resolves this dispute
definitively in favor of National Union and Chartis. The policy
defines the term "claim," in relevant part, as follows:
(1)
(2)
a written demand for monetary or non-monetary
relief (including any request to toll or waive the
statute of limitations); [or]
a civil, criminal, administrative, regulatory or
arbitration proceeding for monetary or non-monetary
relief which is commenced by:
(i) service of a complaint or similar pleading;
(ii) return of an indictment, information or
similar document (in the case of a criminal
proceeding); or
(iii)receipt or filing of a notice of charges . . .22
The tolling agreement between Bollinger and the United
States stated that the government believed that it had claims
against Bollinger arising from its performance of the conversion
work for the ICGS, and memorialized Bollinger's agreement to toll
the statute of limitations so that the parties could discuss
settlement of those claims before engaging in litigation.23
Clearly, then, under the language of the D&O Policy, the United
States' "claim" against Bollinger was first made in 2008, over
21
Id. at 1.
22
R. Doc. 76-13 at 63 (emphasis added).
23
See R. Doc. 77-3 at 1.
9
two years before the policy period began. Cf. Precis, Inc. v.
Fed. Ins. Co., 184 F. App'x 439, 440-41 (5th Cir. 2006) (finding
that claim was first made against insured when it received
letters demanding money and "threaten[ing] litigation if a
settlement could not be reached" because the policies in question
defined "claim" as including "a written demand for monetary
damages"); Specialty Food Sys., Inc. v. Reliance Ins. Co. of
Ill., 45 F. Supp. 2d 541, 543 (E.D. La. 1999) (finding that an
Equal Employment Opportunities Commission charge against the
insured constituted a "claim" for purposes of a claims first made
policy because the policy defined "claim" to include "any written
demand or notice received by an Insured from . . . any
administrative agency advising that it is the intention of a
person to hold the Insured responsible for the consequences of a
Wrongful Employment Practice"), aff'd, 200 F.3d 816 (5th Cir.
1999); cf. also Jensen v. Snellings, 841 F.2d 600, 616 (5th Cir.
1988) (noting that "the making of a claim can be something less
than the filing of a lawsuit").
Bollinger contends that the above reasoning does not apply
to the United States' claims for negligent misrepresentation and
unjust enrichment. It argues that the tolling agreement concerned
only "the United States' rights regarding 'claims against
Bollinger under the False Claims Act, 31 U.S.C. §§ 3729, et seq.,
other statutes and regulations, including the Program Fraud Civil
10
Remedies Act, 31 U.S.C. §§ 3801, et seq,'" and did not provide
Bollinger with notice of the unjust enrichment and negligent
misrepresentation claims.24 Thus, according to Bollinger, the
latter two claims were first made when the United States filed
suit in July 2011. In support of this argument, Bollinger submits
an affidavit from the CFO of Bollinger Shipyards, Inc., stating
that "[r]eceipt of the U.S. lawsuit was the first time Bollinger
learned that the United States would allege it had negligently
misrepresented anything, or that it had enriched itself
unjustly."25 Bollinger purports to distinguish Specialty Foods on
the basis that there, "the EEOC claim made by the plaintiff
consisted of substantially the same allegations as the lawsuit he
later filed."26
Bollinger is incorrect. The tolling agreement was not
limited to claims "based solely on fraud and dishonesty,"27 as
Bollinger's selective quotation of it would suggest. In fact, the
tolling agreement stated that
24
R. Doc. 87 at 3 (quoting the tolling agreement); see
also id. at 4 ("[T]he Tolling Agreement represents awareness of a
claim based solely on fraud and dishonesty, but the lawsuit filed
by the United States aggregated multiple claims, including the
never before made claims for Negligent Misrepresentation and
Unjust Enrichment.").
25
R. Doc. 76-4 at 2.
26
R. Doc. 87 at 3-4.
27
Id. at 4.
11
[o]n December 5, 2008 the United States of America
informed Bollinger . . . that the United States . . .
[believes it] may have certain civil causes of action and
administrative claims against Bollinger under the False
Claims Act, 31 U.S.C. §§ 3729 et seq., other statutes and
regulations including the Program Fraud Civil Remedies
Act, 31 U.S.C. §§ 3801 et seq., equity, or the common
law, arising from Bollinger's performance of conversion
work on the U.S. Coast Guard Deepwater Program's 110 Foot
Island Class vessels . . .28
The tolling agreement put Bollinger on notice that the
United States was considering bringing claims based on
Bollinger's work on the 123-foot cutters under one or more of the
following: the False Claims Act, the Program Fraud Civil Remedies
Act, equity, or the common law. The United States' allegations of
negligent misrepresentation and unjust enrichment concerned
precisely that work and were rooted in the common law and equity,
respectively. The entire underlying lawsuit thus falls
comfortably within the language of the tolling agreement. In
other words, just as in Specialty Foods, the United States'
tolling agreement concerned "substantially the same allegations
as the lawsuit [it] later filed."29 See Specialty Foods, 45 F.
Supp. 2d at 542-43; see also Precis, 184 F. App'x at 440-41
(finding that claim was first made against insured when it
received letters demanding money and threatening litigation -not when a lawsuit was actually filed -- because "the underlying
28
R. Doc. 77-3 at 1 (emphasis added).
29
R. Doc. 87 at 3-4.
12
conduct complained of in the . . . suit was the same conduct
complained of in the . . . letters").
In sum, the Court finds that the claims in the underlying
suit were first made by December 2008, when the tolling agreement
was executed. Coverage under the D&O Policy is "limited to
liability for only those claims that are first made against the
insured during the policy period" of March 1, 2011, to March 1,
2012.30 Accordingly, the underlying suit is not covered by the
policy.
Because the Court has determined that Chartis and National
Union are correct in their assessment that the D&O Policy does
not cover the underlying suit, Bollinger's claim that it is
entitled to penalties, fees, costs, and interest necessarily
fails.
IV. CONCLUSION
For the foregoing reasons, the Court DENIES Bollinger's
motion for summary judgment.
Because the Court has found that the United States' claims
were first made against Bollinger before the inception of the
applicable policy period, summary judgment in favor of National
Union and Chartis appears warranted. Under Federal Rule of Civil
Procedure 56(f), a district court may grant summary judgment for
30
R. Doc. 76-13 at 1.
13
a nonmovant "[a]fter giving notice and a reasonable time to
respond." Therefore, if Bollinger believes that it can show that
there exists a genuine dispute of material fact regarding the
liability of National Union and Chartis, it must respond within
fourteen (14) days of this order. Cf. Stingley v. Den-Mar, Inc.,
347 F. App'x 14, 17-18 (5th Cir. 2009) (upholding district
court's decision to enter summary judgment against a nonomvant
after giving the nonmovant ten business days' notice to present
evidence). If Bollinger cannot do so, the Court will enter
judgment in favor of National Union and Chartis.
New Orleans, Louisiana, this 3rd day of January, 2014.
__
_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
14
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