Chet Morrison Contractors, LLC v. OneBeacon American Insurance Company et al

Filing 28

ORDER AND REASONS - the Court finds that the H&M Policy does not provide Chet Morrison with defense or indemnity coverage. Because Onebeacon and Markel's liability is premised solely on their status as underwriters for the H&M Policy, the Court GRANTS Onebeacon and Markel's motion 18 to dismiss. Chet Morrison's arguments were so transparently wrong that the Court questions how counsel could have brought these claims in good faith.. Signed by Chief Judge Sarah S. Vance on 3/17/15. (jjs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CHET MORRISON CONTRACTORS, L.L.C.

CIVIL ACTION

Plaintiff,
NO: 14-1958
VERSUS
ONEBEACON AMERICAN INSURANCE
COMPANY; MARKEL AMERICAN INSURANCE
COMPANY; AND CONTINENTAL INSURANCE
COMPANY.

SECTION: R(3)

Defendants.

ORDER AND REASONS
Defendants Onebeacon American Insurance Company and Markel
American Insurance Company move the Court to dismiss plaintiff's
claims under Federal Rule of Civil Procedure 12(b)(6).

The Court

grants the defendants' motion because the hull and machinery
insurance policy at issue does not provide defense coverage to
plaintiff.

I.

Background
A.

The Underlying "Offshore Marine" Litigation

On October 29, 2010, Offshore Marine Contractors, Inc. filed
suit in this Court alleging that Palm Energy Offshore, LLC and Chet
Morrison Well Services, LLC failed to pay for the charter of one of
Offshore Marine's vessels, the L/B Nicole Eymard.

Offshore Marine

also claimed that Palm Energy and Chet Morrison breached a separate

oral agreement that the parties allegedly formed after one of the
legs of the L/B Nicole Eymard became stuck.

Under the terms of the

alleged oral contract, Palm Energy and Chet Morrison promised to
pay Offshore Marine for repair costs and lost charter fees if
Offshore Marine cut the legs of the vessel to free it.1
Chet Morrison later sued Palm Energy and H.C. Resources, LLC
("HCR") alleging that if Chet Morrison were found to have chartered
the L/B Nicole Eymard, Palm Energy and HCR were obligated to pay
Chet Morrison the cost of the charter, plus a 15% markup and
interest for untimely payments.

On February 6, 2013, the Court

consolidated the two cases for trial.2
On June 24, 2013 the Court conducted a two-day bench trial and
summarized its findings as follows:
(1) [Chet Morrison] is liable to [Offshore Marine] for
the charter of the L/B Nicole Eymard for the Chandeleur
37 job, which took place from July 15 to July 27, 2008.
HCR is in turn liable to [Chet Morrison] for the full
amount of those charter fees.
(2) [Chet Morrison] is liable to OMC for the charter of
the vessel for the West Delta 55 job, which took place
from July 28 to August 18, 2008. [Palm Energy] is in
turn liable to [Chet Morrison] for the full amount of
those charter fees.

1

Offshore Marine Contractors, Inc. v. Palm Energy Offshore
LLC and Chet Morrison Well Services, LLC (hereinafter "Offshore
Marine Litigation"), No. 10-4151, R. Doc. 1.
2

Offshore Marine Litigation, R. Doc. 140.
2

(3) Neither [Chet Morrison] nor [Palm Energy] is liable
for the repair costs and downtime charter associated with
the decision to cut the leg of the vessel.3
B.

The Instant Litigation

Following the conclusion of the Offshore Marine litigation,
Chet Morrison sued defendants Onebeacon America Insurance Company,
Markel

American

Insurance

Company,

and

Continental

Insurance

Company alleging that all three insurance companies failed to
undertake Chet Morrison's defense in the Offshore Marine litigation
despite Chet Morrison's status as an "additional insured" under the
insurance policies underwritten by the defendants.

Thus, Chet

Morrison seeks remuneration of the amount it was cast in judgment
as well as defense costs associated with the Offshore Marine
litigation.

Chet Morrison also asserts derivative statutory bad

faith claims relating to the denial of those defense costs.
Onebeacon and Markel, as the underwriters for the hull and
machinery policy ("H&M policy"), now move the Court to dismiss Chet
Morrison's claims against them.

Onebeacon and Markel contend that

the H&M policy provides first-party property insurance and does not
contain any provision extending defense or indemnity coverage to
Chet Morrison under the circumstances.4

3

Offshore Marine Litigation, R. Doc. 243. The Court later
amended the judgment limiting Chet Morrison's liability for the
West Delta 55 job to charter fees incurred between July 28 and
July 31, 2008. Offshore Marine Litigation, R. Doc. 258 at 15.
4

R. Doc. 18-1.
3

C.

The Marine Package Policy

The H&M policy at issue is part of a marine package policy,
which provides five distinct coverages that are underwritten by
different insurers.

These coverages include (1) the H&M Policy,

(2) an Increased Value Policy, (3) a Protection and Indemnity
Policy, (4) a Bumbershoot Liability Policy, and (5) and Excess
Bumbershoot Liability Policy, all of which are subject to the terms
of the "General Conditions" section.5

Although Gulf Coast Marine

is the named insured, Chet Morrison is included as an additional
insured in the general conditions section.

This section provides,

in pertinent part:
Permission is hereby granted to charter the vessel(s) to
or to broker vessels through Chet Morrison Contractors,
Inc. and/or any of their subsidiaries or affiliated
companies; and for operations during the period of any
such brokerage or charter, either oral or in writing: (a)
Chet Morrison Contractors, Inc., or any of their
subsidiaries or affiliates, and/or any corporation,
partnership or individual operating and/or working the
vessel(s), and/or anyone for whom the vessel(s) is/are
working or being operated, shall be considered as
Additional Insureds under all coverage provided by the
policies referenced above, and underwriters' rights of
subrogation against the additional insureds are hereby
waived,; and (b) contractual liability shall be afforded
Chet Morrison under this endorsement, which shall be
deemed a written contract, providing defense and
indemnity to Chet Morrison for any claims brought by or
on behalf of the vessel's owners, employees, invitees, or
crew for sickness, disease, personal injury or death,
arising out of, directly or indirectly, the charter or
brokerage of the vessel regardless if caused or

5

R. Doc. 18-2 at 2.
4

contributed to by the sole or concurrent fault,
negligence, or strict liability of Chet Morrison.6
The general conditions also contains a "Notice of Claim" section,
which provides that
the Assureds must see to it that Underwriters receive
written notice of any third party claim or "suit" as soon
as practicable and must cooperate with Underwriters in
the investigation or settlement of the claim or defense
against any "suit". . . .7
Although Chet Morrison was included as an "additional insured"
under all of the policies contained in the Marine Package Policy,
Onebeacon and Markel did not subscribe to all of the individual
policies.
the

H&M

Instead, Onebeacon and Markel are the underwriters for
Policy

only.

Thus,

Chet

Morrison's

claims

against

Onebeacon and Markel are based solely on Chet Morrison's status as
an additional insured under the H&M Policy.

The H&M Policy

provides:
This contract is to indemnify the Assured for loss
resulting from loss of or damage to or liability of each
vessel which is prima facie covered by the Owners'
Policies or Club Entries but in respect of which there is
subsequent non-payment . . . .8
In the "Perils" clause, the policy identifies the specific risks
that the H&M Policy insures against:
Touching the Adventures and Perils which the Underwriters
are contented to bear and take upon themselves, they are

6

Id. at 21.

7

Id. at 15.

8

Id. at 32.
5

of the Seas, Men-of-War, Fire, Lightning, Earthquake,
Enemies, Pirates, Rovers, Assailing Thieves, Jettisons,
Letter of Mart and Counter-Mart, Surprisals, Taking of
Seas, Arrests, Restraints and Detainment of all Kings,
Princes and Peoples, of what nation, condition, or
quality soever, Barratry of the Master and Mariners, and
of all other like Perils, Losses and Misfortunes that
have or shall come to the Hurt, Detriment or Damage of
the Vessel . . . .9
The "extended adventures and perils clause" also provides coverage
for:
Loss or damage howsoever caused by theft, flood,
cloudburst, tidal action, water current, rising water,
ice, freezing, rain or other storm, and/or tempest,
tornado or windstorm, landslide, falling object, listing,
upset, miring down, capsizing, overturn, and shall also
include direct loss or damage from pillage and looting
and/or blowout and catering as there latter two terms are
known in the oil industry.10
Finally, the H&M policy's "Inchmaree" clause provides that "this
insurance also covers loss of or damage to the Vessel" directly
caused by a variety of additional risks.11
II.

Legal Standard
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff

must plead enough facts to “state a claim to relief that is
plausible on its face.”

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).

9

A claim is facially plausible “when the plaintiff pleads

Id. at 37.

10

Id. at 25.

11

Id. at 37.
6

factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Id.

A court must accept all well-pleaded facts as true and must

draw all reasonable inferences in favor of the plaintiff.

Lormand

v. U.S. Unwired, Inc., 565 F.3d 228, 239 (5th Cir. 2009).

But the

Court is not bound to accept as true legal conclusions couched as
factual allegations. Iqbal, 556 U.S. at 678.
A legally sufficient complaint need not contain detailed
factual

allegations,

but

it

must

go

beyond

labels,

legal

conclusions, or formulaic recitations of the elements of a cause of
action.

Id.

In other words, the face of the complaint must

contain enough factual matter to raise a reasonable expectation
that

discovery

will

plaintiff’s claim.

reveal

evidence

of

each

element

Lormand, 565 F.3d at 257.

of

the

If there are

insufficient factual allegations to raise a right to relief above
the speculative level, or if it is apparent from the face of the
complaint that there is an insuperable bar to relief, the claim
must be dismissed.

Twombly, 550 U.S. at 555.

In considering a motion to dismiss for failure to state a
claim, a court must typically limit itself to the contents of the
pleadings, including their attachments.

Collins v. Morgan Stanley

Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
under

12(b)(6)

or

12(c),

matters

outside

"If, on a motion

the

pleadings

are

presented to and not excluded by the court, the motion must be

7

treated as one for summary judgment under Rule 56."
P. 12(d).

Fed. R. Civ.

Nevertheless, uncontested documents referred to in the

pleadings may be considered by the Court without converting the
motion to one for summary judgment even when the documents are not
physically attached to the complaint.

See Great Plains Trust Co.

v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 313 (5th Cir.
2002) (district court properly considered documents not attached to
complaint when ruling on Rule 12(c) motion).
consider

documents

converting

the

attached

motion

into

to
one

a

motion

for

The Court may also
to

summary

dismiss
judgment

without
if

the

documents are referred to in the complaint and are central to the
plaintiff's claim.

Causey v. Sewell Cadillac-Chevrolet, Inc., 394

F.3d 285, 288 (5th Cir. 2004) (citations omitted).

III. Discussion
To determine whether Onebeacon and Markel breached their duty
to

defend

Chet

Morrison

in

the

underlying

Offshore

Marine

litigation, the Court must interpret the insurance policy at issue.
Both parties agree that Louisiana law governs the interpretation of
the insurance contract.

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
8

determine the parties' common intent."
art. 2045).

Id. (citing La. Civ. Code

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."
2047

(words

of

a

contract

La. Civ. Code art. 2046; id. art.

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 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

9

desire, so long as the limitations do not conflict with statutory
provisions or public policy.” Reynolds, 634 So. 2d at 1183.
Chet Morrison fails to identify any provision in the H&M
Policy that provides for defense coverage and, after a careful
reading of the policy,12 the Court finds that the H&M Policy does
not contain any provision providing Chet Morrison with defense
coverage under the circumstances. The clear language of the policy
indicates that the H&M Policy insures against "Perils, Losses and
Misfortunes that have or shall come to the Hurt, Detriment or
Damage of the [insured] Vessel."13

In other words, the H&M Policy

is first-party property insurance that "cover[s] damage to or loss
of a vessel."

Robert Force, ADMIRALTY

2013) (Federal Judicial Center).

AND

MARITIME LAW 195 (2d ed.

See also Destin Trading Co. v.

Royal Ins. of Am., CIV. A. No. 89-5279, 1990 WL 238988, at *2 (E.D.
La. Dec. 31, 1990) ("Thus the hull and machinery policy . . .
covers [mitigation costs] if they were expended to avert or
minimize damage to the barge.").

The H&M Policy contains no

12

The Court considers the Marine Package Policy in ruling
on the motion to dismiss because the complaint refers to the
policy numerous times and is central to Chet Morrison's claim.
See Shamrock Associated Indus., LLC v. Fid. Nat'l Prop. & Cas.
Ins. Co., No. 06-4093, 2006 WL 6927866, at *2 (E.D. La. Nov. 2,
2006) (court considered mortgage contract not attached to
complaint in ruling on motion to dismiss because complaint
"refers to the mortgage numerous times[,] [t]he mortgage is
attached to this motion, and is central to plaintiff's claims").
13

R. Doc. 18-2 at 37 ("[T]his insurance also covers loss of
or damage to the Vessel directly caused by the following
[enumerated perils] . . . .").
10

language creating a duty to defend.

See United Nat. Ins. Co. v.

Mundell Terminal Serv., Inc., 915 F. Supp. 2d 809, 816 (W.D. Tex.
2012) ("[T]he determination of whether the insurer has a duty to
defend or a duty to indemnify presumes that there is a provision
locatable in the policy that obligates the insurer to undertake
such a duty.").

Accordingly, the Court finds that the unambiguous

language of the H&M Policy does not provide Chet Morrison with
defense coverage.

See 14 Steven Plitt et al., Couch on Insurance

§ 198:3 (3d ed. 2013) ("[F]irst-party insurance . . . does not
involve any need or duty to provide the insured with a legal
defense.").
Although Chet Morrison concedes that the language of the H&M
Policy itself does not provide defense coverage, it nevertheless
argues that two provisions in the "General Conditions" section
create a duty to defend under the H&M Policy.14

As previously

noted, the General Conditions section applies to all of the
policies in the Maritime Package Policy, including the H&M Policy.15
Chet

Morrison

first

argues

that

the

General

Condition's

"cooperation" clause creates a defense obligation under the H&M
Policy.16

14

The cooperation clause states as follows:

R. Doc. 19 at 5.

15

R. Doc. 18-2 at 24 ("[The H&M Policy] is separate
insurance but is subject always to the other terms and conditions
stated in this policy . . . .").
16

R. Doc. 19 at 5.
11

[T]he Assureds must see to it that Underwriters receive
written notice of any third party claim or "suit" as soon
as practicable and must cooperate with Underwriters in
the investigation or settlement of the claim or defense
against any "suit."17
Although

the

cooperation

Package

Policy

clause

contemplates

demonstrates

defense

that

coverage

the
in

Marine
certain

circumstances, it does not operate to transform the H&M Policy,
which

is

first-party

liability policy.

property

coverage,

into

a

third-party

Indeed, the express terms of the cooperation

clause limits the clause's applicability to "third party claim[s]
or suits," which are not cognizable under a first-party property
policy.

See Couch on Insurance § 198:3 ("[F]irst-party insurance

. . . does not involve any need or duty to provide the insured with
a legal defense.").

In other words, there is no occasion in which

Chet Morrison would need to cooperate with Onebeacon and Markel in
investigating or settling a third-party claim because the H&M
Policy covers only first-party property claims.

See Nat. Cas. Co.

v. Lockheed Martin Corp., 799 F. Supp. 2d 537, 545-46 (D. Md. 2011)
(holding

that

a

provision

for

defense

costs

in

the

general

conditions section of a Marine Package Policy does not transform a
H&M Policy into one for defense and indemnity because such language
"is commonplace in third-party-liability policies, but is never

17

R. Doc. 18-2 at 15.
12

found in policies that only provide property-insurance coverage").18
Accordingly,

the

Court

finds

that

the

General

Condition's

"cooperation clause" does not create a duty to defend under the H&M
Policy.
Chet Morrison next argues that the General Condition's special
endorsement clause, which adds Chet Morrison as an additional
insured, provides for defense and indemnity "in relation to any
oral or written charter of an [Offshore Marine] vessel."19

Chet

Morrison's argument misrepresents the language of the special
endorsement.

The special endorsement provides, in pertinent part:

[C]ontractual liability shall be afforded Chet Morrison
under this endorsement, which shall be deemed a written
contract, providing defense and indemnity to Chet
Morrison for any claims brought by or on behalf of the
vessel's owners, employees, invitees, or crew for
sickness, disease, personal injury or death . . . .20
Thus, the unambiguous terms of the special endorsement indicate
that the defense and indemnity coverage extended by this provision
is limited to "claims . . . for sickness, disease, personal injury,
or death . . . ."21

Acknowledging that the underlying suit did not

involve any such claims, Chet Morrison argues that the clause's
limitation

of

defense

and

indemnity

coverage

18

to

claims

Chet Morrison does not cite or otherwise attempt to
distinguish Lockheed Martin in its opposition.
19

R. Doc. 19 at 5.

20

R. Doc. 18-2 at 21 (emphasis added).

21

Id.
13

for

sickness, disease, personal injury, or death is a mistake "that
must be reformed."22

Chet Morrison's argument is foreclosed by its

failure to plead the mistake with particularity as is required by
the Federal Rules.

Fed. R. Civ. P. 9(b) ("In alleging fraud or

mistake, a party must state with particularity the circumstances
constituting

fraud

or

mistake.").

Indeed,

Chet

Morrison's

complaint is bereft of any allegations of a mistake, let alone the
heightened pleading standard required by Rule 9(b).

Thus, the

Court finds that the General Conditions' special endorsement does
not create a duty to defend under the H&M Policy and declines Chet
Morrison's request to reform the plain language of the insurance
policy.

See PYR Energy Corp. v. Samson Resources Co., Civ. A. No.

1:05-530, 2007 WL 858804,

at *2 (E.D. Tex. Mar. 9, 2007) (Rule

9(b) requires, "at a minimum, [that] a party . . . aver what was
intended, what was done, and how the mistake came to be made")
(citing Wright & Miller, 5A Federal Practice & Procedure § 1299).
Chet Morrison also asserts several derivative claims relating
to the statutory duties of insurance carriers.
§§ 22:1892 and 22:1973.

See La. Rev. Stat.

Because Chet Morrison has no underlying

claim against Onebeacon or Markel, its claims under La. Rev. Stat.
§§ 22:1892 and 22:1973 fail as a matter of law.

See Riley v. Sw.

Bus. Corp., Civ. A. No. 06-4884, 2008 WL 4286631, at *3 (E.D. La.
Sept. 17, 2008) ("To prevail under La. Rev. Stat. 22:[1892] and

22

R. Doc. 19 at 6.
14

22:[1973],

a

substantive

plaintiff
claim

upon

must

first

which

have

insurance

a

valid,

coverage

underlying,
is

based.")

(internal quotations omitted).

IV.

Conclusion
For the foregoing reasons, the Court finds that the H&M Policy

does not provide Chet Morrison with defense or indemnity coverage.
Because Onebeacon and Markel's liability is premised solely on
their status as underwriters for the H&M Policy, the Court GRANTS
Onebeacon

and

Markel's

motion

to

dismiss.

Chet

Morrison's

arguments were so transparently wrong that the Court questions how
counsel could have brought these claims in good faith.

New Orleans, Louisiana, this _____ day of March, 2015.
17th

_____________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

15