Atlantic Specialty Insurance Company v. Torus Insurance UK Limited
Filing
56
ORDER AND REASONS denying Plaintiff's 32 Motion for Summary Judgment and Defendant's 40 Request for Rule 56 Relief. Signed by Judge Jane Triche Milazzo. (ecm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ATLANTIC SPECIALTY
INSURANCE COMPANY
CIVIL ACTION
VERSUS
NO: 15-818
TORUS INSURANCE UK LIMITED
SECTION: “H”(4)
ORDER AND REASONS
Before the Court is a Motion for Summary Judgment filed by Plaintiff
Atlantic Specialty Insurance Company (Doc. 32) and Defendant’s Response
and Request for Rule 56 Relief (Doc. 40). The parties both seek summary
judgment in their favor on the claims asserted in this suit. For the following
reasons, these Motions are DENIED.
BACKGROUND
This dispute concerns a coverage dispute regarding an allision between
Bordelon Marine, LLC’s vessel, the CONNER BORDELON, and an offshore oil
and gas platform (the “Allision”). Two insurance policies are at issue in this
action: a Hull & Machinery policy issued by Plaintiffs Atlantic Specialty
Insurance Company and Certain Underwriters at Lloyd’s London 1 for the
Atlantic Specialty holds a 50% lead share of the risk while the Lloyd’s underwriters
hold a 50% following share.
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2014-15 policy year (the “H&M Policy”) and a Protection & Indemnity Policy
issued by Defendant Torus Insurance UK Limited for the same policy year (the
“P&I Policy”). The parties do not dispute that, per the plain language of the
polices, Plaintiffs’ H&M policy provides coverage for the Allision.
In this
declaratory action, however, Plaintiffs seek reformation of their policy. They
contend that the parties intended to negotiate allision coverage strictly for
towing situations into the H&M policy, and that it intended allision coverage
for non-towing situations (such as the incident at issue) to be covered under
Torus’s P&I policy. They aver that broad coverage for all allisions was included
in the H&M policy due to a drafting error. Accordingly, they seek reformation
of their policy to reflect what they represent is the true mutual intent of the
parties. The parties each seek summary judgment.
I. The Players
A brief outline of the individuals involved in this matter is helpful. Scott
Saporito, a broker with Arthur Gallagher Risk Management services, acted as
Bordelon Marine’s broker in negotiating both the P&I and H&M policies.
Martin Hayes of Trident Marine Managers wrote and negotiated the H&M
policy for Atlantic’s 50% lead share while Nick Hocking of Price Forbes
negotiated the terms and conditions of the H&M policy with regard to Lloyd’s
following 50% share of the risk. Hayes also acted as the broker between Arthur
Gallagher and Paul Cummins of Price Forbes in negotiating the terms and
conditions of the P&I policy. Price Forbes, in turn, acted as the broker between
Trident and Colin Snell of Eagle Ocean America, who, on behalf of Torus,
negotiated and wrote the P&I Policy.
II. The Policies
Plaintiffs contend that, in negotiating the 2014-2015 H&M policy,
Bordelon wished to secure incidental coverage for situations where their
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vessels might be compelled to tow another vessel in distress. Trident, acting
on behalf of Plaintiffs, agreed to provide this coverage at no additional cost, as
it presented a low level of risk. To accomplish this goal, Hayes incorporated
standard language from the American Institute Tug Form Policy (“AITF”). He
avers that, through a drafting error, he failed to limit this language to allisions
and collisions involving only towing situations, thereby inadvertently
providing coverage in all allision and collision situations.
The P&I policy contains a policy provision covering allisions; however, it
also contains an exclusion disclaiming coverage to the extent that such
incidents are covered under the H&M policy. Accordingly, because coverage
for allisions was included in the H&M policy, this exclusion operates to exclude
coverage under the P&I Policy.
LEGAL STANDARD
Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with affidavits, if
any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.”2 A genuine issue
of fact exists only “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.”3
In determining whether the movant is entitled to summary judgment,
the Court views facts in the light most favorable to the non-movant and draws
all reasonable inferences in his favor.4 “If the moving party meets the initial
burden of showing that there is no genuine issue of material fact, the burden
shifts to the non-moving party to produce evidence or designate specific facts
Fed. R. Civ. P. 56(c) (2012).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
4 Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528 (5th Cir. 1997).
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showing the existence of a genuine issue for trial.”5 Summary judgment is
appropriate if the non-movant “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case.”6 “In response to a
properly supported motion for summary judgment, the non-movant must
identify specific evidence in the record and articulate the manner in which that
evidence supports that party’s claim, and such evidence must be sufficient to
sustain a finding in favor of the non-movant on all issues as to which the nonmovant would bear the burden of proof at trial.”7 “We do not . . . in the absence
of any proof, assume that the nonmoving party could or would prove the
necessary facts.”8
Additionally, “[t]he mere argued existence of a factual
dispute will not defeat an otherwise properly supported motion.”9
LAW AND ANALYSIS
As noted above, Plaintiffs seeks summary judgment granting
reformation of their policy to limit the allision coverage to towing situations in
lieu of the wider allision coverage provided by the policy as written. Torus
contends that Plaintiffs cannot carry their burden of proving that reformation
is warranted, and accordingly ask for summary judgment in their favor.
Louisiana law on contract reformation governs this dispute. 10
“Reformation is an equitable remedy designed to correct an error in the
contract.”11
As with other written contracts, “insurance policies may be
Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
7 John v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th
Cir. 2004) (internal citations omitted).
8 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 394 (5th Cir. 2000) (quoting Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
9 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
10 Motors Ins. Co. v. Bud's Boat Rental, Inc., 917 F.2d 199, 203 (5th Cir. 1990).
11 Fruge v. Amerisure Mut. Ins. Co., 663 F.3d 743, 748 (5th Cir. 2011) (citing
Samuels v. State Farm, 939 So. 2s 1235 (La. 2006).
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reformed if, through mutual error or fraud, the policy as issued does not
express the agreement of the parties”12
Where the reformation sought
substantially affects the risk assumed by the insurer, the party seeking
reformation must prove the error alleged by clear and convincing evidence. 13
“[E]ven in the event of a mutual error, reformation may be inappropriate if the
rights of third parties are affected,” particularly where the third party has
relied on the contract in question.14
Determining the intent of the parties in this matter is difficult due to the
number of players operating between the insured and the insurer. Plaintiffs
argue that the parties only intended to provide incidental towing coverage in
the H&M policy. Indeed, Hayes, who wrote the H&M policy, admits that this
was a drafting error on his part and that he intended to include only incidental
towers coverage. The remaining representatives of the underwriters on the
H&M policy confirm that they also were under the impression that the allision
coverage would be limited to towing situations. The intent of Bordelon Marine,
as represented by Arthur Gallagher, seems less clear. Bordelon asked Arthur
Gallagher to procure appropriate coverage for its operations.
Plaintiffs
contend that Saporito only inquired about obtaining incidental towage
coverage in the H&M policy, and therefore did not intend to procure unlimited
allision coverage. Defendants contend that Bordelon, acting through Saporito,
had no specific intent with regard to whether allision coverage was included in
the P&I or the H&M policy—it only wanted to ensure appropriate coverage, no
matter the source. Defendants contend that plaintiffs cannot carry their heavy
burden to prove that reformation is warranted.
Id.
Samuels v. State Farm Mut. Auto. Ins. Co., 939 So. 2d 1235, 1240 (La. 2006).
14 Am. Elec. Power Co. Inc. v. Affiliated FM Ins. Co., 556 F.3d 282, 287 (5th Cir.
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2009).
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Defendants also contend that the contract may not be reformed because
they are a third party and reformation would affect their rights. Plaintiffs
argue, however, that Defendants did not have a copy of the H&M policy at the
time they issued their P&I policy; and that accordingly they could not have
relied it in issuing the P&I policy. In response, Defendants represent that they
were under the impression that the new towage coverage in the H&M policy
included allision coverage, and that this influenced their decision to issue the
P&I policy.
The Court finds that these disputes cannot be resolved on summary
judgment. Resolution of this matter involves deciding the parties’ intent, and
“[d]etermination of intent is a question of fact.”15 The Court cannot resolve
these factual issue on the record before it. Additionally, there are factual
issues surrounding whether Defendants relied on allision coverage in the
H&M policy in issuing the P&I policy. Accordingly, the Motions are denied.
CONCLUSION
For the forgoing reasons, Plaintiff and Defendant’s respective Motions
for Summary Judgment are DENIED.
New Orleans, Louisiana this 26th day of August, 2016.
____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
15
Motors Ins. Co. v. Bud’s Boat Rental, Inc., 917 F.2d 199, 204 (5th Cir. 1990).
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