Continental Insurance Company et al v. L&L Marine Transportation, Inc. et al

Filing 68

ORDER & REASONS denying 51 Motion for Partial Summary Judgment. Signed by Judge Martin L.C. Feldman on 1/25/2016. (Reference: 15-4423)(caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CONTINENTAL INSURANCE CO., ET AL.

CIVIL ACTION

V.

NOS. 15-4423
14-2967

L&L MARINE TRANSPORTATION,
INC. ET AL.

SECTION "F"

ORDER AND REASONS
Before the Court is P&I Underwriters’ motion for partial
summary judgment. P&I seeks a judgment declaring that Atlantic
Specialty Insurance Company has a duty to defend its insured. For
the reasons that follow, the motion is DENIED.
Background
This

insurance

dispute

arises

from

a

marine

allision

involving multiple boats; one of which, sank.
P&I Underwriters insures L&L Marine Transportation under a
protection and indemnity (P&I) policy. Atlantic Specialty also
insures L&L, but under a hull and machinery policy. The sole
question before the Court is whether Atlantic Specialty, under its
hull policy, has a duty to defend L&L against the plaintiffs’
claims in the underlying lawsuit asserting L&L’s liability for the
allision.1

This case is consolidated with four other cases under the master
case number 14-2697. Two of the cases are limitation of liability
proceedings. The remaining two are a property damage action and a
personal injury action. Here, the parties’ dispute is over who
must fund L&L’s defense in the underlying property damage action.
1

1

The basic facts in the underlying lawsuit are as follows. The
M/V ANGELA RAE, a vessel owned by L&L, was the lead tug in a fourvessel floatilla. The M/V ANGELA RAE and the M/V FREEDOM were
positioned behind a barge, the FSB-101, and the M/V MISS DOROTHY
was positioned in front of the barge. When the floatilla approached
the Sunshine Bridge in St. James Parish, the M/V MISS DOROTHY
allided with the bridge and sank.
The insurers of the M/V MISS DOROTHY brought suit against
L&L, the owner of the M/V ANGELA RAE, contending that L&L was
responsible for the allision and the resulting loss of the M/V
MISS DOROTHY. L&L sought coverage from Atlantic Specialty against
these claims, but Atlantic Specialty denied coverage. Pursuant to
its protection and indemnity policy, P&I has funded L&L’s defense
in that case. In this dispute, P&I seeks a judgment declaring that
Atlantic Specialty is obligated to defend L&L against the claims
in the underlying property damage action. Resolution of this motion
rests on a contractual interpretation of the Atlantic Specialty
hull policy.2
I.

Importantly, whether L&L’s loss is actually covered by the
Atlantic Specialty hull policy is not at issue in this motion.
Rather, this motion focuses strictly on whether, according to the
hull policy and the plaintiffs’ allegations in the underlying
property damage suit, Atlantic Specialty has a duty to fund L&L’s
defense.
2

2

Federal Rule of Civil Procedure 56 instructs that summary
judgment is proper if the record discloses no genuine dispute as
to any material fact such that the moving party is entitled to
judgment as a matter of law. No genuine dispute of fact exists if
the record taken as a whole could not lead a rational trier of
fact to find for the non-moving party. See Matsushita Elec. Indus.
Co. v. Zenith Radio., 475 U.S. 574, 586 (1986). A genuine dispute
of fact exists only "if the evidence is such that a reasonable
jury could return a verdict for the non-moving party." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court emphasizes that the mere argued existence of a
factual dispute does not defeat an otherwise properly supported
motion. See id. Therefore, "[i]f the evidence is merely colorable,
or

is

not

significantly

probative,"

summary

judgment

is

appropriate. Id. at 249-50 (citations omitted). Summary judgment
is also proper if the party opposing the motion fails to establish
an essential element of his case. See Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986).

In this regard, the non-moving party

must do more than simply deny the allegations raised by the moving
party. See Donaghey v. Ocean Drilling & Exploration Co., 974 F.2d
646, 649 (5th Cir. 1992). Rather, he must come forward with
competent evidence, such as affidavits or depositions, to buttress
his claim. Id. Hearsay evidence and unsworn documents that cannot
be presented in a form that would be admissible in evidence at
3

trial do not qualify as competent opposing evidence.

Martin v.

John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir.
1987); FED. R. CIV. P. 56(c)(2).

Finally, in evaluating the summary

judgment motion, the Court must read the facts in the light most
favorable to the non-moving party.

Anderson, 477 U.S. at 255.

The interpretation of an insurance policy is a question of
law. Cal-Dive Intern., Inc. v. Seabright Ins. Co., 627 F.3d 110,
113 (5th Cir. 2010). Accordingly, summary judgment review is
appropriate.
II.
Louisiana law governs the interpretation of the Atlantic
Specialty hull policy. See id. (“The interpretation of a marine
policy of insurance is governed by relevant state law . . . .”).
Under Louisiana law, “courts interpreting insurance contracts
should ‘seek to determine the parties’ common intent, as reflected
by

the

words

in

the

policy.’”

Gabarick

v.

Laurin

Maritime

(America), Inc., 650 F.3d 545, 553 (5th Cir. 2011)(quoting Seacor
Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675, 680 (5th
Cir. 2011). The words in an insurance policy must be given their
generally prevailing meaning. Id. (citing La. Civ. Code art. 2047).
“[W]hen the language of an insurance policy is clear, courts lack
the authority to change or alter its terms under the guise of
interpretation.” Coleman v. School Bd. Of Richland Parish, 418

4

F.3d 511, 518 (5th Cir. 2005)(quoting La. Ins. Guar. Ass’n v.
Interstate Fire & Cas. Co., 630 So.2d 759, 764 (La. 1994)).
“If after applying the other general rules of construction an
ambiguity remains, the ambiguous contractual provision is to be
construed against the drafter, or, as originating in the insurance
context, in favor of the insured.” La. Ins. Guar. Ass’n, 630 So.2d
at 764. “Ambiguity will also be resolved by ascertaining how a
reasonable insurance policy purchaser would construe the clause at
the time the insurance contract was entered.” Id. “Yet, if the
policy wording at issue is clear and unambiguously expresses the
parties’

intent,

the

insurance

contract

must

be

enforced

as

written.” Id. “The determination of whether a contract is clear or
ambiguous is a question of law.” Id.
III.
Atlantic Specialty has denied coverage on two grounds. First,
it claims that the hull policy is an “indemnity” policy, rather
than a “liability” policy. According to Atlantic Specialty, the
hull policy obligates it to reimburse L&L for covered defense
costs, but lacks the language necessary to create a duty to
contemporaneously fund L&L’s defense. Second, even if there is a
duty to defend, Atlantic Specialty maintains that the claims
asserted by the plaintiffs in the underlying lawsuit could not
possibly fall within the coverage of the hull policy because the
M/V MISS DOROTHY was not “in the tow” of the M/V ANGELA RAE. The
5

Court addresses first the threshold issue of whether the hull
policy creates a duty to defend.
A.
Both parties rely on the “Collision and Tower’s Liability”
provision in the Atlantic Specialty hull policy to support their
contradictory positions. That provision provides in part:
And it is further agreed that:
(a) if the Vessel hereby insured shall come
into collision with any other vessel, craft or
structure, floating or otherwise, or shall
cause any other loss or damage to her tow or
to the freight thereof or to the property on
board, and the Assured, or the Surety, in
consequence of the insured Vessel being at
fault, shall become liable to pay and shall
pay by way of damages to any other person or
persons any sum or sums, we, the Underwriters,
will pay the Assured or the Surety, whichever
shall have paid, such proportion of such sum
or sums so paid as our subscriptions hereto
bear to the value of the Vessel hereby
insured, provided always that our liability in
respect of any one such casualty shall not
exceed our proportionate part of the value of
the Vessel hereby insured.
(b) in cases where the liability of the Vessel
has been contested or proceedings have been
taken to limit liability with the consent in
writing, of a majority (in amount) of the
Underwriters on the hull and machinery, we
will also pay a like proportion of the costs
which the Assured shall thereby incur or be
compelled to pay.
Atlantic Specialty underscores the final phrase in the second
paragraph obligating it to pay “a like proportion of the costs
which the assured shall thereby incur or be compelled to pay.” It
6

urges that this language creates a duty to reimburse L&L for
defense costs (i.e., a duty of indemnity), but does not create a
duty to defend L&L against covered liabilities. Atlantic Specialty
points out that “missing from the policy is any language suggesting
an additional duty to defend.”
Although Louisiana law governs the interpretation of the hull
policy,

federal

applicable

to

courts

marine

have

recognized

insurance

policies.

general
The

principles

Fifth

Circuit

instructs that “P&I policies do not ordinarily create a duty to
defend and are indemnity policies, not liability policies. With
only

a

duty

to

pay

covered

claims

and

no

duty

to

defend,

reimbursement of costs must be footed on the indemnification, which
is limited to the agreed upon policy limit.” Gabarick v. Laurin
Maritime (America), Inc., 650 F.3d 545, 552-53 (5th Cir. 2011).
The

Fifth

Circuit

also

explains

that

“[l]iability

insurance

policies often have two components: defense and indemnity, and
when the policy limits only apply to the indemnity section, the
obligation to defend is not capped by the policy limits.” N. Am.
Specialty Ins. Co. v. Royal Surplus Lines Ins. Co., 541 F.3d 552,
559 (5th Cir. 2008). Accordingly, this Circuit recognizes the
distinction

between

indemnity

and

liability

policies,

and

acknowledges that the former typically does not create a duty to
defend.

7

To prove it has no duty to defend, Atlantic Specialty relies
primarily on two cases decided by this Court.
In Gabarick v. Laurin Maritime (America), Inc., the Court
concluded that a similar provision in a hull policy did not create
a duty to defend. Nos. 08-4007, 08-4156, 2009 WL 43096 (E.D. La.
Jan. 7, 2009)(Africk, J.) There, the policy stated:
The Assurer hereby undertakes to make good to the Assured
. . . all such loss and/or damage and/or expense as the
Assured shall have become liable to pay and shall pay on
account of the liabilities, risks, events and/or
happenings set forth:
(14) Costs, charges, and expenses reasonably
incurred and paid by the Assured in defense against any
liabilities insured hereunder . . . .
The Court reasoned that the language, “costs . . . reasonably
incurred and paid by the Assured,” clearly and explicitly provided
coverage only for amounts already expended by the insured. Id. at
*4. The Court held, “To interpret the language of [the] policy as
extending coverage to an obligation to defend when the language
refers only to ‘costs . . . incurred and paid’ would require the
Court to read terms into the policy that do not exist and to
improperly expand policy coverage.” Id.
More recently, the Court reached a similar conclusion in Chet
Morrison Contractors, LLC v. OneBeacon American Ins. Co., No. 141958, 2015 WL 1221616 (E.D. La. March 17, 2015)(Vance, J.). There,
the hull policy provided: “This contract is to indemnify the
Assured for loss resulting from loss of or damage to or liability

8

of each vessel which is prima facie covered . . . .” Id. at *2.
The policy then listed the specific risks that it insured against.
Characterizing the policy as “first-party property insurance that
‘cover[s] damage to or loss of a vessel,’” the Court found “no
language creating a duty to defend.” Id. at *4 (citing 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.”))
The language used in the policies above differs from the
language in the Atlantic Specialty hull policy. In Gabarick, the
policy used past-tense language, obligating the insurer to cover
“costs . . . incurred and paid.” Here, the language is in presenttense,3 obligating the insurer to pay “costs which the Assured
shall thereby incur or be compelled to pay.” Thus, Gabarick is not
dispositive. Similarly, in Chet Morrison, the policy makes no
mention of covering “costs” that the assured incurs. It too fails
to resolve this dispute.
Instead, the Court finds dispositive two cases that examine
policy language that is nearly identical to the language presented
here.

Generally speaking, insurance policies are hardly a paradigm of
clarity.
3

9

In Board of Commissioners of Port of New Orleans v. M/V
Rachael Guidry, this Court considered whether an insured’s defense
costs were included within the policy limit. The policy stated:
And in cases where the liability of the vessel named
herein has been contested or proceedings have been taken
to limit liability, with the consent in writing of this
Assurer, this Assurer will also pay a like proportion of
the costs, which the Assured shall thereby incur or be
compelled to pay . . . .
425 F. Supp. 661, 663 (E.D. La. 1977)(Rubin, J.)(emphasis added).4
Although the primary issue before the Court was different, the
Court nonetheless noted that “[u]nder a P and I Policy of this
type, the policy does not obligate the insurer to defend the
insured. But this merely means that, as between the insurer and
the insured, it is the duty of the insured to defend.” Id. at 66364. Accordingly, the Court found no duty to defend arose from
nearly the exact language used in the Atlantic Specialty hull
policy.
Likewise, in Gabarick v. Laurin Maritime (America), Inc., the
Fifth Circuit examined a Collision and Towers Liability Clause
that contained identical language to the Atlantic Specialty hull
policy: “we will also pay the costs which the insured shall thereby
incur or be compelled to pay.” 650 F.3d 545, 552-53 (5 Cir. 2011).

In this case and in the following case, the policies contained
language nearly identical to the first paragraph of the Atlantic
Specialty hull policy as well. The Court does not quote that
language here for the sake of brevity.
4

10

As in Board of Commissioners, the primary issue in that case was
whether reimbursement for defense costs went toward the liability
limit. However, the Court noted that “the district court has found
that the policy in dispute here did not provide a duty to defend
and the parties did not appeal that decision.” Id. at 553 n. 15.
The Court explained further that a policy of this nature ordinarily
creates a duty to reimburse defense costs, not a duty to defend.
Precedent in this Circuit has consistently found that the
language presented in the Atlantic Specialty hull policy does not
create a duty to defend. Maritime commentators agree. See William
E. O’Neil, Insuring Contractual Indemnity Agreements Under CGL,
MGL, and P&I Policies, 21 Tul. Mar. L.J. 359, 373 (1997)(“Unlike
the CGL or MGL, the standard P & I policy does not expressly
provide for a duty to defend the insured. Instead, the standard P
& I policy provides only indemnification to the insured for costs
and expenses for covered risks.”). P&I has failed to point to any
language in the hull policy that creates a duty to defend. “[W]hen
the language of an insurance policy is clear, courts lack the
authority

to

change

or

alter

its

terms

under

the

guise

of

interpretation.” Coleman v. Schoold Bd. Of Richland Parish, 418
F.3d 511, 518 (5th Cir. 2005). Atlantic Specialty does not have a
duty to defend L&L in the underlying lawsuit.
B.

11

Because there is no duty to defend, the Court need not
consider at this time whether the claims alleged in the underlying
property damage suit fall within the coverage of the hull policy.
Accordingly, P&I Underwriters’ motion for partial summary
judgment is DENIED.
New Orleans, Louisiana, January 25, 2016
______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

12