Petroterminal De Panama, S.A. v. Certain Underwriters Doing Business at Lloyd's, London et al

Filing 65

OPINION. Based upon the findings and conclusions set forth above, Plaintiff's partial motion for summary judgment is granted, and Defendants' motion for summary judgment is denied. It is so ordered. re: 53 AMENDED MOTION for Summary Ju dgment Dismissing Complaint filed by Certain Underwriters Doing Business at Lloyd's, London, Liberty Mutual Insurance Company, Liberty Mutual Insurance Europe, Markel Syndicate 3000, QBE Marine and Specialty Syndicate 1036, Ca tlin Insurance Company, Munich Reinsurance Company, 50 FIRST MOTION for Summary Judgment Dismissing Complaint filed by Certain Underwriters Doing Business at Lloyd's, London, Liberty Mutual Insurance Company, Liberty Mutual I nsurance Europe, Markel Syndicate 3000, QBE Marine and Specialty Syndicate 1036, Catlin Insurance Company, Munich Reinsurance Company, 45 MOTION for Partial Summary Judgment filed by Petroterminal De Panama, S.A. (Signed by Judge Robert W. Sweet on 1/18/2017) (rjm)

UNITED STATES DISTRICT COURT
SOUTH ERN DISTRICT OF NEW YORK

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PETROTERMINAL DE PANAMA , S.A. ,
Plaintiff ,
- against -

14 Ci v . 8614
OPINION

QBE MARINE & SPECIALTY SYNDICATE 1036,
MARKEL SYNDICATE 3000 , STARR INS . &
REINSURANCE CO., MUNICH REINSURANCE CO .,
LIBERTY MUTUAL INS. EUROPE LTD., AND
CATLIN INS . CO . (UK) LTD,
Defendants .
------------ - ------------------------- -x
A P P E A R A N C E S:
Attorneys for Plaintiff
BLANK ROME LLP
405 Lexington Avenue
New York , NY 10174
By:
Jared Zola, Esq.
James Carter , Esq.

Attorneys for Defendants
BROCKMANN & VICTORY , LLP
420 Lexington Avenue , Ste. 1621
New York, NY 10128
By:
Richard J . Sprock , Esq.
Robert Louttit, Esq.
Mark Bruckmann, Esq.

•
Sweet, D . J.

Defendants QBE Marine & Specialty Syndicate 1036,
Markel Synd i cate 3000 , Starr I nsurance & Reinsurance Company ,
Munich Reinsurance Company , Liberty Mutual Insurance Europe
Limited , and Catlin Insurance Company (UK) Limited (the
"Defendants") moved pursuant to Ru l e 56 , F. R. Civ . P. for
summary judgment dismissing the complaint of plaintiff
Petroterminal de Panama, S . A .
"Plaintiff " ) .

("Petroterminal " or the

Plaintiff simu l taneously moved for partial

summary judgment for a determination that Plaintiff has made a
prima facie showing for all risk coverage under the insurance
policy .

Based upon the findings and conclusions set forth

below , Plaintiff's motion for partial summary judgment is
granted , and Defendant's motion for summary judgment is denied .

Prior Proceedings

The Plaintiff initiated this action on October 28 ,
2014 alleging claims for breach of contract , specific
performance , and declaratory judgment for issues relat i ng to
whether certain insurers are required to pay for damage caused
by a fallen pile.

The instant motions for summary judgment were
1

filed on June 13 , 2016 and were heard and marked fully submitted
on September 22 , 2016.

The Facts

The facts have been set forth in the parties'
stipulation of undisputed facts as we ll as Plaintiff and
Defendants' Statements of Material Facts per Local Civil Rule
56 .1, which are not in dispute except as noted below.

Plaintiff stores and transports crude oil and
petroleum products with terminals on the Atlantic and Pacific
coasts of Panama.
8 , 27 : 24-28 : 13 .

Zola Deel., Ex. 3 , P. Ripp Dep. Tr. at 11:2This case concerns Plaintiff 's Pacific

Terminal, which includes Piers 1 and 2, both of which were used
for loading and unloading petroleum .
Undisputed Facts,

~

3.

Amended Stipulation o f

Pier 2 contained four "breasting

dolphinsu used for mooring and berthing operations .

Id. at

~

4.

Each breasting dolphin consisted of a steel pipe pile and a
pivoting timber-faced fender panel.

Id. at

~

5.

These piles were all installed in 1984 in order to
increase the pier ' s capacity to accommodate larger vessels and
were built with a larger diameter than the original piles.

2

Id.

at

~

8.

Each of the steel piles was comprised of several

sections that were attached to one another using a
circumferential weld.

Id. at

~

10 .

dolphins have an outside diameter of

The outer breasting
110~

inches and the two

inner breasting dolphins have a diameter of
~

78~

inches.

Id. at

8.

On February 10, 2012, a hull oi l tanker, the Maya ,
carrying 380 , 742 . 87 GSV (US barrels) was being moored to Pier 2 ,
using the

78~

inch diameter steel pile of the southern inner

breasting dolphin pile ("Pile PDB - 2AA"), when Pile PDB-2AA fell
over.

Id. at

~

13 , 15.

Prior to February 10 , 2012 , Pile PDB -

2AA was standing and was being used regu l arly to moor vessels to
Pier 2 .

Id . at

~

14 .

At first,

the pile came to rest against

another pile and was chained there.

Id. at

~

15 .

After the

Maya was moved to Pier 1, the fa ll en pile segment was unchained
and allowed to fall and rest on the seabed .

Id. at

16.

~

It is undisputed that standard mooring procedures were
followed on February 10 , 2012.

Id. at

~

17.

The parties

dispute the cause of why the pile fell on February 10, 2012.

A

portion of the failed pile was retrieved, and the parties agree
that it failed at a point above the mud li ne .

3

Id . at

~

18 - 20 .

The parties stipulated that al l four of the breasting
dolphins at Pier 2 , including Pile PDB-2AA, are covered under
the insurance policy .

Id . at

~

6.

This policy was in effect

from January 15 , 2012 through January 15 , 2013 .

Id . at

~

2.

The insurance policy "insures against all risks of physical loss
or damage occurring during the per i od of th i s pol i cy from any
cause

. except as hereinafter exc luded ."

Ex . A at 00053 CANDL.

Zola Deel., Ex. 2 ,

However the policy excluded a number of

potential perils , including " gradua l deter i oration , corrosion
(but this policy does not exclude corrosion occurring from a
sudden and accidenta l event) , inherent v i ce ,

. , ordinary

wear and tear, unless loss or damage by a peri l not otherwise
excluded ensues and then the policy shall be liable for only
such ensuing or resulting loss or damage ."

Id. at 00062 CANDL .

The Applicable Standard

Summary judgment i s appropr iate only where "there is
no genuine issue as to any material fact and .

. the moving

party is entitled to a judgment as a matter of law."
Civ . P. 56(c) .

Fed. R .

A d i spute is " genu ine" if "t he evidence is such

that a reasonable jury cou l d return a verdict for the nonmoving
party ."

Anderson v . Liberty Lobby, Inc ., 477 U.S . 242 , 248

(1986) .

The relevant inquiry on app li cation for summary
4

judgment is "whether the evidence presents a sufficient
disagreement to require submiss i on to a jury or whether it is so
one - sided that one party must prevai l as a matter of law ."
at 251 - 52 .

Id .

A court is not charged with weighing the evidence

and determining its truth , but with determin i ng whether there is
a genuine issue for trial .

Westinghouse Elec. Corp. v . N. Y.

City Trans i t Auth ., 735 F . Supp. 1205, 1212 (S . D. N. Y. 1990)
(quoting Anderson , 477 U. S . at 249) .

"[T]he mere existence of

some alleged factual dispute between the parties will not defeat
an otherwise proper l y supported motion for summary judgment ; the
requirement is that there be no genuine issue of material fact."
Anderson , 477 U. S. at 247 - 48

(emphasis in original) .

Plaintiff Has Established a Prima Facie Case for Coverage under
the Policy

Plaintiff moves for summary judgment on the i ssue that
Plaint i ff satisfied its burden of proving a prima facie case of
all - risk coverage, thereby transferring the burden to Defendants
to prove that the collapsed p i le in this case falls under an
exemption to the all - risk insurance policy .

I n order for an al l- risk insured to establish a prima
facie case for recovery , they must prove :

5

"(1) the existence of

an all-risk policy ,

(2) an insurable interest in the subject of

the insurance contract , and (3) the fortuitous loss of the
covered property ."

Int'l Mu l tifoods Corp . v . Commercial Union

Ins. Co ., 309 F.3d 76, 83

(2d Cir. 2002) .

In this case it is

undisputed that the first two prongs are satisfied.

First, the

insurance policy "insures against all risks of physical loss or
damage" satisfying the requirement that the policy insure
against al l risks.

Zola Deel., Ex. 2, Ex . A at 00053 CANDL .

Second , the parties stipulated that all four of the piles,
including Pile PDB-2AA, are covered under the insurance policy,
creating an insurable interest in the property.
~

Stipulation of Undisputed Facts,

Amended

6.

The parties dispute the third prong of the test:
whether the loss was fortuitous.

On the one hand, "The burden

on the insured with respect to demonstrating a fortuitous loss
is relatively light ."

under an 'all-risks' policy
Multifoods Corp ., 309 F.3d at 83.

Int'l

Further, "All risk coverage

covers all losses which are fortuitous no matter what caused the
loss , including the insured's negligence, unless the insured
expressly advises otherwise ."

Id.

(quoting Ingersoll Mill.

Mach . Co. v. M/V Bodena, 829 F.2d 293 , 307

(2d Cir. 1987)).

On

the other hand, "A loss is fortuitous unless it results from an
inherent defect , ordinary wear and tear, or intentional
6

misconduct of the insured.

Id.

(emphasis added).

Plaintiff

"need not prove the precise cause of the loss ;" just that the
loss was fortuitous.

Id .

(quoting In re Balfour MacLaine Int' 1

Ltd., 85 F.3d 68 , 77-78 (2d Cir . 1996) .

The issue is whether Plaintiff satisfied its
"relatively light" burden for fortuity that the cause of the
co llaps ed pile was not ordinary wear and tear.

A fortuitous

event is defined by New York Insurance Law as "any occurrence or
failure to occur which is, or is assumed by the parties to be ,
to a substantial extent beyond the control of either party."
N.Y. Ins. Law§ llOl(a) (1)-(2).

However, "normal wear and tear"

cannot be fortuitous because under New York law it "is not an
insurable risk, but a certainty. "

Contractors Realty Co . v .

Ins. Co. of N. Arn., 469 F.Supp. 1287, 1293 (S.D.N . Y. 1979).

Here, Plaintiff has met its burden for fortuity.
First, Plaintiff introduced evidence that the pile was designed
for infinite life and therefore should not have failed from wear
and tear after only 28 years.

Second, Plaintiff's expert

identif i ed indications that the pile co llapsed because of an
over l oad event instead of ordinary wear and tear.

7

Plaintiff intr oduced evidence that the pile was
designed for an infinite life, which contradicts the theory that
regular wear and tear caused the pile's collapse after only 28
years.

The engineer who designed the piles, H. Brant Brown,

submitted a sworn declaration attached to these motions that the
pile in this case was designed for indefinite fatigue life and
would not fail absent "corrosion or a mishap."

Brown Dec. at

~

10.

Plaintiff introduced evidence from an expert witness,
Dr. Kenneth Gall from Duke University, and an engineering
consulting firm, Mueser Rutledge, to establish that the cause of
the failed pile was not ordinary wear and tear.

Dr. Gall

testified that he examined the failed pile and that from this
examination he concluded that the pile failed from one or more
overload eve nts that caused cracks to develop in the pile.
Dep., Dkt. 49-10, at 41:8-24.

Gall

Specifically, Dr. Gall's report

concluded:
In the present catastrophic failure, the existence of
the fatigue is the issue because fatigue should not
have occurred in the first place. Although fatigue is
a gradual process by its defining nature, structures
designed to the endurance limit approach do not
fatigue from stresses below the endurance limit. The
only explanation for fatigue failure in the pile is an
unforeseen stressing event, or overload, which could
occur in several different ways, including when a ship
impacts or presses against the pile with excessive
force, that caused the start of the fatigue process.
8

Dr. Gall Dec., Ex. A at 10.

Defendants create a disputed issue of material fact
with their own expert reports that the pile was not designed for
infinite lif e and that the pile collapsed from regular wear and
tear.

However, the "relatively li ght" burden for Plaintiff to

establish fortuity does not require the Court to resolve this
battle of the experts at this stage .

Plaintiff has demonstrated

fortuity because when a pile is designed for an infinite fatigue
life, an overload event is "t o a substantial extent beyond the
control of either party."

N.Y. Ins. Law§ llOl(a) (1) - (2) .

Plaintiff's motion for partial summary judgment is
granted and Plaintiff has met its prima facie burden to
establish coverage under the all-risk policy.

Defendants' Motion for Summary Judgment Is Denied

After Plaintiff makes out a prima facie case for
coverage , Defendants must "com[e] forward and show[] that there
was no coverage of the loss."
Ltd., 85 F.3d at 78.

In re Balfour MacLaine Int'l

Defendants argue that the wear and tear

exclusion from the insurance policy applies, but Plaintiff's
have created a disputed issue of material fact regarding the

9

proximate cause of the pile ' s collapse.
follow,

For the reasons that

Defendants' motion for summary judgment is denied.

When an insurer seeks to disclaim coverage based on a
policy exclusion , the insurer "' must establish that the
exc l usion is stated in clear and unmistakable language, is
subject to no other reasonable interpretation, and applies in
the particular case and that its interpretation of the exclusion
is the only construction that [ could ] fairly be placed
thereon .'"

Rapid Park Indus. v . Great N.

8292(JSR) , 2010 WL 4456856 , at *3
Fed . Appx. 40

(2d Cir. 20 1 2)

Ins. Co. , No.

09 Civ.

(Oct . 15, 2010) , aff'd,

502

(quoting Parks Real Estate

Purchasing Group v. St. Paul Fire & Marine Ins. Co ., 472 F.3d
33, 42

(2d Cir . 2006)).

Here, the policy stated in clear language that damage
resulting from "ordinary wear and tear" was excluded from
coverage under the policy .
CANDL .

Zola Deel., Ex . 2 , Ex. A at 00062

Plaintiff does not dispute that wear and tear is a

proper exclusion , and Defendants do not dispute the possibility
that there may have been an overload event at some indeterminate
time before the p il e collapsed .

Instead, the parties dispute

whether wear and tear or an overload event proximately caused
the pile to collapse .
10

To determine "cause" in the insurance context, New
York courts must determine the "effi cient or dominant cause of
the loss ," not the event that "merel y set the stage f or that
lat er event."

Home Ins. Co . v. Am. Ins. Co., 147 A.D.2d 353 ,

354 , 537 N.Y.S.2d 516 (1st Dep't 1989); see also Kula v. Sta te
Farm Fire and Cas. Co., 212 A.D.2d 16, 20,
Dep't 1995)

628 N.Y.S.2d 988

(4th

("Only the most direct and obvious cause should be

looked to for purposes of the exclusionary clause").

Further,

between competing potential causes "the causat ion inquiry stops
at the efficient physical cause of the l oss ; it does not trace
events back to their metaphysical beginnings."

Pan Am. World

Airways , In c . v . Aetna Cas . & Sur . Co., 505 F.2d 989 , 1 006

(2d

Cir. 1974).

Defendants argue that the proximate cause in this case
was ordinary wear and tear and even if there was an overload
event, it was a cause , but not the proximate cause , of the
pile's collapse.

To support this position, Defendants point to

Album Realty, a case in which the New York Court of Appeals held
that when a sprinkler in a building froze and ruptured, the
damage was caused by the water that flooded the building, not
the freezing temperatures.

Album Realty Corp. v . Am. Home

Assur. Co., 80 N.Y.2d 100 8 , 1010-11, 607 N.E.2d 804 , 59 2
11

N. Y. S . 2d 657

(1992).

Similarly in Home Ins. Co ., hot water and

steam escaped from an open drain causing electrical arcing,
which ultimately led certain electrical systems to short
circuit.

Home Ins. Co. v. Am . Ins . Co ., 147 A.D.2d at 354 .

"[W]hile it is apparent that the introduction of moisture into
the bus duct facilitated the electrical injuries in this case,
it is also apparent that the losses themselves were not moisture
injuries."

Id.

However, those cases are different from the instant
case because Plaintiff ' s have raised a disputed issue of
material fact as to whether the overload was the "efficient or
dominant cause of the loss," not the event that "merely set the
stage for that later event ."
A. D.2d at 354 .

Home Ins. Co . v . Am . Ins. Co ., 147

Here, Plaintiff has presented evidence to show

that the pile shou l d not have collapsed absent an overload event
because of the pile ' s infinite fatigue life.
10.

Brown Dec. at

~

When the pile collapsed , the loss was the pile ' s failure

and cost of replacement.

Yet in Album Realty freezing

temperatures did not cause the damage .
damage .

The loss was from water

Likewise in Home Insurance Company , the loss was from

the electrical arcing not moisture.

Plaintiff here has

introduced sufficient evidence to create a disputed issue of
material fact as to whether that separation between the alleged
12

cause and the proximate cause found in Alb um Rea l ty and Home
In surance Company exists in this case .

Other courts have not applied the wear and tear
exception when an overload event caused a loss requiring
replacement of the equipment .

In 20 East 33 Owners Corp. the

wear and tear exception did not apply when an already
deteriorating, but still functioning pipe was accidentally
ruptured by a contractor.

20 Ea st 33 Owners Corp. v . Great Am.

Ins. Co. , No . 95 Civ . 2642

(KTD) , 1996 WL 438172, at *2-3

(S.D .N. Y. Aug. 5 , 1996).

After the rupture , the gas pipe could

not withstand the required extreme pressure test required after
experiencing a rupture of this kind and accordingly needed to be
replaced.

Id. at *3.

Similarly in this case, the pile was

functioning up until the point when it experienced an overload
event.

Based on the evidence Plaintiff introdu ced , Defendants

have n o t proven as a matter of law that no reasonable jury could
find that the overload event was the proximate cause of the pile
collapsing , particularly because the pile was designed for an
infinite fatigue life.

For these reasons, the Defendants motion for summary
judgment is denied.

13

Conclusion

Based upon the findings and conclusions set forth
above, Plaintiff ' s partial motion for summary judgment is
granted , and Defendants ' motion for summary judgment is denied .

It is so ordered .

New York , NY
January
201 7

ff;

14