Catlin (Syndicate 2003) at Lloyds et al v. San Juan Towing & Marine Services, Inc.

Filing 157

OPINION AND ORDER re 134 motion for summary judgment; and re 136 motion for summary judgment. The Court GRANTS IN PART AND DENIES IN PART Catlin's motion for summary judgment. The Court GRANTS IN PART and DENIES IN PART SJT's motion for summary judgment. Signed by Judge Francisco A. Besosa on 07/30/2013. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
CATLIN (Syndicate 2003) at
LLOYD’S,
CIVIL NO. 11-2093 (FAB)
Plaintiff,
Consolidated with
v.
Civil No. 11-2116 (FAB)
SAN JUAN TOWING & MARINE
SERVICES, INC.,
Defendant.
OPINION AND ORDER
BESOSA, District Judge.
Before the Court are Catlin (Syndicate 2003) at Lloyd’s
(“Catlin”)’s motion for summary judgment, (Docket No. 134), and San
Juan Towing & Marine Services, Inc. (“SJT”)’s motion for summary
judgment, (Docket No. 136).

Having considered Catlin’s motion and

memorandum of law, (Docket No. 135); SJT’s opposition, (Docket
No. 140); and Catlin’s reply, (Docket No. 146); the Court GRANTS IN
PART AND DENIES IN PART Catlin’s motion for summary judgment.
Having also reviewed SJT’s motion and memorandum of law (Docket
No. 138); Catlin’s opposition, (Docket No. 142); and SJT’s reply
(Docket No. 150); the Court GRANTS IN PART AND DENIES IN PART SJT’s
motion for summary judgment.

Civil No. 11-2093 & 11-2116 (FAB)
I.

2

Background
A.

Financial History Relating to SJT and the Dry Dock
Perseverence
On August 27, 2006, SJT — a Puerto Rico corporation in

the Ship Repair business based in San Juan, Puerto Rico — purchased
a floating drydock called the Perseverence for $1,050,000 from
Formel Marine Services.
139 at 1.)

(Docket Nos. 79 at 1; 81 at 1; 134-1 at 1;

Around that same time, SJT obtained a line of credit

with a limit of $1,540,000 from Banco Popular de Puerto Rico
(“Banco Popular”).

(Docket Nos. 134-1 at 2; 139 at 1.)

The line

of credit was used to pay for, and was secured by, the drydock.
Id.

In 2008, SJT began having difficulty making payments on the

Banco Popular loan, and in September 2009, SJT asked Banco Popular
for a “moratorium” on payments of the loan principal.
Nos. 134-1 at 2; 139 at 2.)
which

permitted

SJT

to

principal on the loan.

(Docket

Banco Popular granted the moratorium,

only

pay

the

interest

and

not

(Docket Nos. 134-1 at 3; 139 at 2.)

repay
SJT

stopped operating the drydock in 2008 or 2009 because there was no
business for it.

(Docket Nos. 134-1 at 2; 139 at 2.)

In 2009, SJT

decided to sell the drydock because there was no business for it,
and

it

advertised

the

Perseverence

(Docket Nos. 134-1 at 3; 139 at 2.)
of $147,557 in 2009.

for

sale

for

$1,350,000.

SJT had a net operating loss

(Docket Nos. 134-1 at 3; 139 at 2.)

SJT had

an operating loss of $177,675 in 2010, and the value of equity in
SJT to its sole shareholders, Mark and Jayne Payne (“Mr. Payne” and

Civil No. 11-2093 & 11-2116 (FAB)
“Mrs.

Payne,”

respectively),

in

3
2010

(Docket Nos. 134-1 at 1 & 3; 139 at 2.)

was

negative

$274,000.

At the end of 2010, SJT

also had two unsecured lines of credit with a total balance of
$140,449, and Mrs. Payne was using a personal line of credit
secured by her residence to pay SJT’s operating expenses.
No. 139 at 2.)

(Docket

The 2010 year-end balance on Mrs. Payne’s personal

credit loan was $183,940.

(Docket Nos. 134-1 at 4; 139 at 2.)

During January 2011, SJT continued to advertise the
drydock for sale for $1,350,000.
at 2.)

(Docket Nos. 134-1 at 4; 139

On January 3, 2011, Hendry Corporation offered to purchase

the drydock for $700,000, and Mr. Payne, reporting the offer to
Banco Popular, stated, “It seems to me that the [$700,000] offer I
am attaching is very close to reality.”

Id.

Over the course of

that month, SJT and Hendry Corporation bargained over the selling
price of the Perseverence.

On January 21, 2011, SJT offered to

sell the drydock to Hendry for $850,000; Hendry responded to SJT’s
counteroffer on January 21, 2011 with $775,000, and on January 29,
2011, SJT offered to sell the drydock to Hendry for $800,000.
(Docket Nos. 134-1 at 5, 139 at 2–3.)

Hendry did not ultimately

purchase the Perseverence.
From 2006 to 2011, SJT had insured the drydock with RLI
Insurance Company (“RLI”).

(Docket No. 134-1 at 5; 139 at 3.)

In

2006, SJT had hired the services of Marine Consultants, Inc. to
perform a condition and valuation survey of the drydock.

(Docket

Civil No. 11-2093 & 11-2116 (FAB)
Nos. 139 at 9; 147 at 1.)

4

In that survey, which was dated

April 17, 2006, the Perseverence was valued at $1,500,000.

Id.

After purchasing the drydock on August 27, 2006, SJT modified it so
that it could be towed from Louisiana to Puerto Rico.

Id.

Marine

Consultants, Inc. then issued another condition and valuation
report on November 21, 2006, in which it valued the drydock
at $1,750,000.

Id.

The increase in value of the drydock from one

report to another was due to the value added to the drydock by the
modifications made to it.

Id.

The hull coverage for the drydock

placed with RLI began in 2006, with a declared hull value of
$1,750,000. Id. Mr. John Kirchhofer was the underwriter in charge
of the SJT file with RLI.

(Docket Nos. 139 at 10; 147 at 3.)

Mr. Kirchhofer handled SJT’s account at RLI up until he left RLI to
work at Catlin, in January 2011.

Id.

On February 9, 2011, RLI

advised SJT that it was cancelling the insurance mid-term, and on
February 14, 2011, RLI issued a Notice of Cancellation/Nonrenewal,
which stated the reason as “Loss History.”
139 at 3.)

(Docket No. 134-1 at 5;

In April 2011, SJT advertised the drydock for sale for

$800,000; Banco Popular approved the advertisement before it ran.
(Docket Nos. 134-1 at 6; 139 at 3.)
Mr. John Toscani was the insurance broker for SJT who
placed the marine insurance coverage for SJT with Catlin.
No. 134-1 at Ex. 12, p. 20.)

(Docket

His relationship with SJT began

roughly in 2002, and he ceased working with SJT shortly after the

Civil No. 11-2093 & 11-2116 (FAB)

5

Perseverence sank and SJT submitted its insurance claim to Catlin.
Id. at pp. 20 & 25.

In 2011, Mr. Toscani “placed a package policy

consisting of hull, P&I, ship repairs, legal, general liability and
contractor’s equipment” for SJT with Catlin, and he considered it
a marine insurance policy.

Id. at pp. 28–20.

In placing the SJT

account, Mr. Toscani communicated with Mr. John Kirchhofer at
Catlin.
and

Id. at p. 30.

was

working

department.

as

Mr. Kirchhofer had moved from RLI to Catlin
a

(Docket

marine
Nos.

underwriter

134-1

at

6;

in

Catlin’s

139

at

3.)

marine
All

communications between Catlin and SJT, prior to the issuance of the
insurance policy covering the Perseverence, were made through SJT’s
broker and were limited to phone and e-mail conversations. (Docket
No. 137 at 2; 141 at 2.)

On April 12, 2011, Mr. Toscani e-mailed

Mr. Kirchhofer regarding insurance coverage for SJT.
134-1 at Ex. 18.)

(Docket No.

The e-mail advised that the drydock was

“currently up for sale” and included a copy of the “SRLL/CGL Hull
P&I policy with RLI, which depicted the Perseverence’s value at
$1,750,000.
RLI’s

Id.

notice

of

Mr. Toscani did not provide Catlin with a copy of
cancellation.

Id.

On

April

18,

2011,

Mr. Kirchhofer sent Catlin’s marine coverage quote via e-mail, and
SJT accepted Catlin’s quote on April 25, 2011.
Docket Nos. 134-1 at 9; 139 at 4.

Id. at Ex. 19;

The Ocean Marine Insurance

Policy No. HLO-3464-0411 (“the Policy”) became effective April 29,
2011.

(Docket No. 50-1.)

Civil No. 11-2093 & 11-2116 (FAB)

6

Endorsement 5 to the Policy provided coverage for the
Perseverence.

(Docket Nos. 50-1 at 54–56; 134-1 at 12; 139 at 8.)

Endorsement 5 identifies the perils insured against:
DRYDOCK
. . . .
TOUCHING THE ADVENTURES AND PERILS which we, the said
Assurers, are contended to bear and take upon us, they
are of the Seas, Rivers, Lakes, Harbours. Men-of-War,
Fire, Enemies, Pirates, Rovers, Thieves, Jettisons,
Letters of Mart of Counter Mart, Surprisals, Takings at
Sea, Arrests, Restraints and Detainments of all Kings,
Princes and Peoples, of what nation, condition or quality
soever, Barratry of the Master and Mariners, Explosions,
Riots, or other causes of whatsoever nature arising
either on shore or otherwise, causing Loss of or injury
to the Property hereby insured, and of all other Perils,
Losses, and Misfortunes that have or shall come to the
Hurt, Detriment, or Damage of the said Dock, &c., or any
part thereof.
(Docket Nos. 50-1 at 54; 134-1 at 12–13; 139 at 8.)
On May 17, 2011, SJT advised Damco Marine Management,
Inc. that the drydock was still for sale for $800,000.
Nos. 134-1 at 10; 139 at 5.)

(Docket

On June 5, 2011, Mr. Richard Ortego

— Vice-President and General Manager Repair of Leevac Shipyards,
LLC, a Lousiana-based company — traveled to Puerto Rico to look at
the drydock.

(Docket Nos. 137 at 2; 141 at 5.)

Mr. Ortego has

experience inspecting, preparing, and using floating drydocks.
When

he

visited

Puerto

Rico,

(Docket Nos. 137 at 3; 141 at 5.)

he

inspected

the

Perseverence.

Spending half a day between the

drydock and SJT’s premises, Mr. Ortego talked to Mr. Payne about
the maintenance given to the drydock; entered into about half of

Civil No. 11-2093 & 11-2116 (FAB)

7

the drydock’s holds; crawled around the holds and inspected them
and the valves for decay, damage, and general conditions; and
determined that the drydock was “suitable for purchase.”
Nos. 137

at

4; 141

at

6–10.)

When

Mr.

Ortego

(Docket

returned

to

Louisiana, he gave his report to Leevac’s owner and recommended the
purchase of the Perseverence; negotiations for the sale of the
drydock then began between Leevac and SJT.

Id.

On or around

September 4, 2011, SJT agreed to sell the Perseverence to Leevac,
(Docket No. 81-16 at 7), and on September 19, 2011, SJT accepted
Leevac’s offer to purchase the drydock for $700,000 when Mr. Payne,
on behalf of SJT, signed a purchase and sale agreement.

(Docket

Nos. 134-1 at 10; 139 at 5.)
B.

The Perseverence Sinks
On September 28, 2011, SJT was ballasting the drydock in

its back portion in order to raise its front portion and perform
repairs on the front.

(Docket Nos. 137 at 7; 141 at 14.)

The

ballasting process included the use of two 175-cubic-feet water
tanks (each holding up to 5 tons of water) and a 6,000- to 7,000pound concrete block.

Id.

Before leaving work at noon to attend

his son’s school function, Mr. Payne gave instructions to SJT’s
welders.

(Docket Nos. 137 at 8; 141 at 15.)

Around 3:30 p.m.,

Mr. Jose Monge, SJT’s foreman, also gave instructions to the
employees to pick up all of their cables and to make sure they shut
off the hose, which was filling up at least one of the water tanks.

Civil No. 11-2093 & 11-2116 (FAB)
Id.

8

Late in the evening between September 28 and September 29,

2011, the Perseverence sank while at its berth at Pier 15 in
Miramar.

(Docket Nos. 134-1 at 11; 139 at 7; 137 at 6; 141 at 13.)

Neftali Padilla, a tug captain in the employ of Puerto Rico Towing,
was returning to PRT’s dock after providing towage services at San
Juan Harbor when he saw the drydock sinking at its berth.

Id.

The

drydock’s back portion was completely underwater, and its front
part was

partially

underwater.

Id.

Captain

Padilla

called

Mr. Payne’s cell phone to inform Mr. Payne that the drydock was
sinking, and approximately 10 minutes later, at midnight, Captain
Padilla called Mr. Payne again to inform him that the drydock was
completely underwater.

Id.

Mr. Payne arrived at the pier.

Fifteen to twenty minutes later,
(Docket Nos. 137 at 8; 141 at 16.)

Captain Padilla and Mr. Payne took a look at the sunken drydock
together from the pier.

(Docket Nos. 137 at 9; 141 at 16.)

Captain Padilla noticed that a ball valve on the y-connector at the
water main next to the drydock was in the open position.

Id.

There was a fire hose connected to the portion of the y-connector
with the open ball valve, and by looking at the surface of the
water, Captain Padilla could see that water was coming out of the
fire hose.

Id.

He called Mr. Payne over to point his observations

out to Mr. Payne, and Mr. Payne closed the ball valve to which the
fire hose was connected.

Id.

At that time, anybody with access to

Civil No. 11-2093 & 11-2116 (FAB)

9

the pier had access to the water main valve next to the drydock.
(Docket Nos. 137 at 9; 141 at 17.)
At the time of its sinking, the drydock was scheduled to
be inspected by a surveyor appointed by Banco Popular, and SJT owed
$1,348,178 to Banco Popular on its line of credit secured by the
drydock. (Docket Nos. 134-1 at 11–12; 139 at 8.)
down by salvors after the drydock sank.

Id.

Divers were sent

On November 3, 2011,

the drydock was successfully refloated. (Docket Nos. 137 at 6; 141
at 13.) After being refloated, the drydock spent the last month of
2011’s hurricane season — which typically runs from June 1 to
November 30 in Puerto Rico — as well as the entire 2012 hurricane
season, floating at its berth at Pier 15 before being sold for
scrap in December 2012.
II.

Id.

Summary Judgment Standard
The Court may grant a motion for summary judgment “if 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).

A fact is “material” if it has the potential

to “affect the outcome of the suit under the governing law.”

Id.

A dispute is “genuine” when it “could be resolved in favor of
either party.”

Calero-Cerezo v. U.S. Dep’t. of Justice, 355 F.3d

6, 19 (1st Cir. 2004).
The party moving for summary judgment has the initial burden
of “demonstrat[ing] the absence of a genuine issue of material

Civil No. 11-2093 & 11-2116 (FAB)
fact.”

10

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

The

party must demonstrate this absence with definite and competent
evidence.

See Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576,

581 (1st Cir. 1994). It must identify “portions of ‘the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any’” which support its motion.
Id. (citing Fed.R.Civ.P. 56(c)). Once a properly supported motion
has been presented, the burden shifts to the non-moving party “to
demonstrate that a trier of fact reasonably could find in [its]
favor.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d
46, 52 (1st Cir. 2000) (internal citation omitted).
If the non-moving party establishes uncertainty as to the
“true state of any material fact, the movant’s efforts should be
deemed unavailing.”

See Lopez & Medina Corp. v. Marsh USA, Inc.,

694 F.Supp.2d 119, 123 (D.P.R. 2010) (citing Suarez v. Pueblo
Int’l., 229 F.3d 49, 53 (1st Cir. 2000)).

It is well-settled that

“[t]he mere existence of a scintilla of evidence” is insufficient
to

defeat

a

properly

supported

Anderson, 477 U.S. at 252.
opposing
evidence

summary
to

for

summary

judgment.

It is therefore necessary that “a party

judgment

rebut

motion

the

must

‘present

motion.’”

definite,

competent

Maldonado-Denis

v.

Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994) (internal
citation omitted).

In making this assessment, the Court must take

the entire record in the light most favorable to the nonmoving

Civil No. 11-2093 & 11-2116 (FAB)

11

party and draw all reasonable inferences in its favor.

Farmers

Ins. Exch. v. RNK, Inc., 632 F.3d 777, 779-80 (1st Cir. 2011).

The

Court does not, however, “make credibility determinations or weigh
the evidence.”

Anderson, 477 U.S. at 255.

The Court may safely

ignore “conclusory allegations, improbable inferences, acrimonious
invective, or rank speculation.”

Ahern v. Shinseki, 629 F.3d 49,

54 (1st Cir. 2010).
The First Circuit Court of Appeals has “repeatedly . . .
emphasized the importance of local rules similar to Local Rule 56
[of the District of Puerto Rico].”

Hernandez v. Phillip Morris

USA, Inc., 486 F.3d 1, 7 (1st Cir. 2007).

Rules such as Local

Rule 56 “are designed to function as a means of ‘focusing a
district court’s attention on what is - and what is not - genuinely
controverted.’”

Id. (quoting Calvi v. Knox County, 470 F.3d 422,

427 (1st Cir. 2006)).

Local Rule 56 imposes guidelines for both

the movant and the party opposing summary judgment. A party moving
for summary judgment must submit factual assertions in “a separate,
short, and concise statement of material facts, set forth in
numbered paragraphs.”

Loc. Rule 56(b).

A party opposing a motion

for summary judgment must “admit, deny, or qualify the facts
supporting the motion for summary judgment by reference to each
numbered paragraph of the moving party’s statement of facts.” Loc.
Rule

56(c).

Facts

which

are

properly

supported

“by

record

citations as required by this rule, shall be deemed admitted unless

Civil No. 11-2093 & 11-2116 (FAB)
properly controverted.”

12

Loc. Rule 56(e).

The Court may, however,

“disregard any statement of fact not supported by a specific
citation
judgment.”

to

record

material

Loc. Rule 56(e).

properly

considered

on

summary

“The court shall have no independent

duty to search or consider any part of the record not specifically
referenced in the parties’ separate statement of facts.”

Due to

the importance of this function to the summary judgment process,
“litigants ignore [those rules] at their peril.”

Hernandez, 486

F.3d at 7.
III. SJT’s Motion for Summary Judgment Against Catlin
On November 8, 2011, Catlin filed a complaint against SJT
alleging eight causes of action.

(Docket No. 1.)

SJT argues that

summary judgment is warranted as to each cause of action.

The

Court addresses each cause of action in turn.
A.

Catlin’s Uberrimae Fidei Claims
In its first cause of action, Catlin alleges that SJT

breached its duty of utmost good faith and thus violated the
doctrine of uberrimae fidei1 pursuant to federal admiralty law by
1

The First Circuit Court of Appeals roughly defines uberrimae
fidei as “of the utmost good faith.”
Comm. Union Ins. Co. v.
Pesante, 459 F.3d 34, 37 (1st Cir. 2006). Treatises define marine
insurance as “a contract ‘uberrimae fidei,’ requiring the utmost
good faith by both parties to the contract.” Thomas J. Schoenbaum,
2 ADMIRALTY & MAR. LAW § 19-14 (5th ed.). Pursuant to the uberrimae
fidei doctrine, the insured must “disclose to the insurer all known
circumstances that materially affect the insurer’s risk, the
default of which . . . renders the insurance contract voidable by
the insurer.” Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57
F.3d 50, 54–55 (1st Cir. 1995).

Civil No. 11-2093 & 11-2116 (FAB)

13

failing to disclose “material information about the risk when
seeking the [insurance] coverage and during the Policy period.”
(Docket No. 1 at 4.)

Catlin’s second cause of action also alleges

a violation of the duty of utmost good faith and uberrimae fidei by
claiming that SJT “misrepresented, concealed or omitted material
facts it had a duty to disclose when seeking coverage.”

Id.

As a

result of those alleged breaches by SJT, Catlin argues that the
Policy insuring the Perseverence is void ab initio. Id.

SJT seeks

summary judgment on Catlin’s first and second causes of action,

Civil No. 11-2093 & 11-2116 (FAB)

14

claiming that the uberrimae fidei doctrine is not applicable to
this case.2
1.

(Docket No. 138.)
Does Admiralty or State Law Govern?
Although the Perseverence is not a “vessel” under

maritime law, (see Catlin (Syndicate 2003) at Lloyds, v. San Juan

2

For the first seven pages of its opposition brief, SJT
argues that Catlin’s argument regarding the “overvaluation” of the
Perseverence’s value must be discarded as a threshold matter
because it was “never pleaded.”
(Docket No. 140 at 1–8.)
It
claims that Catlin’s complaint does not allege an overvaluation
claim and that Catlin waited too long to raise the argument in the
Joint Case Management Memorandum dated May 2012. Id. SJT also
argues that Catlin’s allegation of intentional concealment or
misrepresentation of the drydock’s value involves allegations of
fraud, which Catlin failed to timely raise pursuant to Fed. R. Civ.
P. 9(b). Id. at 2–7. Claiming unfair prejudice, SJT alleges that
Catlin has waived its first two causes of action. Id. at 6–7. The
Court disagrees.
First, and as mentioned above, Catlin’s complaint did include
two uberrimae fidei causes of action due to SJT’s alleged
concealment, omissions, and misrepresentation of material facts.
(Docket No. 1 at 4–5.) Catlin’s responses to SJT’s First Set of
Interrogatories — which requested that Catlin “[e]xplain the basis
for each contention by which [Catlin] claim[s] there is no coverage
under the Policy for the Claim . . . ” — were sufficient to inform
SJT of Catlin’s theory for those claims; on April 3, 2012, Catlin
specifically identified “the value of the drydock” as a fact
“material to the risk insured” that SJT failed to disclose when
seeking coverage of the Perseverence. (Docket No. 147-1 at 6.)
Second, uberrimae fidei does not require a showing of fraud, and
thus SJT’s argument that Catlin’s pleading is insufficient pursuant
to Rule 9(b) is misplaced. See A/S Ivarans Rederei v. P.R. Ports
Auth., 617 F.2d 903, 905 (1st Cir. 1980) (“Whether the
nondisclosure of a known fact material to a marine risk was
intended or not is beside the point; such nondisclosure voids the
policy.”); 37 Am. Jur. 2d Fraud and Deceit § 9 (2010) (“Breach of
fiduciary duty or contract uberrimae fidei is usually called
‘constructive fraud,’ whereas the term ‘legal fraud’ is generally
used to characterize a misrepresentation made with knowledge of its
falsity.”).

Civil No. 11-2093 & 11-2116 (FAB)

15

Towing & Marine Services, Inc., 2013 U.S. Dist. Lexis 52307 (D.P.R.
2013) (Besosa, J.) (Catlin I), at Docket No. 112), the Court
previously found that admiralty subject matter jurisdiction exists
because the Policy at issue is a marine insurance policy.

(See

Catlin (Syndicate 2003) at Lloyds, v. San Juan Towing & Marine
Services, Inc., 2013 U.S. Dist. Lexis 69255 (D.P.R. 2013) (Besosa,
J.) (Catlin II), at Docket No. 121.)

The Court stands by that

determination, because “[t]he propriety of maritime jurisdiction
over a suit involving a marine insurance policy is unquestionable.”
Giragosian, 57 F.3d at 54.

Whether admiralty law controls over

state law in a lawsuit over which the Court enjoys admiralty
jurisdiction, however, is a discrete and “enigmatic” question.
Albany Ins. Co. v. Wisniewski, 579 F. Supp. 1004, 1013 (D.R.I.
1984) (Selya, J.).

In Wilburn Boat Co. v. Fireman’s Fund Ins. Co.,

348 U.S. 310, 313 (1955), “the Supreme Court chartered a course
away from explicit application of admiralty law for maritime
insurance contracts.”

St. Paul Fire & Marine Ins. Co. v. Halifax

Trawlers, Inc., 495 F. Supp. 2d 232, 237 (D. Mass. 2007); see
Wilburn Boat, 348 U.S. at 313 (“Since the insurance policy here
sued on is a maritime contract[,] the Admiralty Clause of the
Constitution brings it within federal jurisdiction.

But it does

not follow, as the courts below seemed to think, that every term in
every maritime contract can only be controlled by some federally
defined admiralty rule.

In the field of maritime contracts . . .

Civil No. 11-2093 & 11-2116 (FAB)

16

the National Government has left much regulatory power in the
States.”).

While the rules of admiralty law generally supersede

local authority, a “gray area” exists with respect to maritime
contracts.

Halifax Trawlers, 495 F. Supp. at 237.

The First

Circuit Court of Appeals has held that in a case involving a marine
insurance contract, state law will apply unless an established
maritime rule

controls

the

disputed

materially different from state law.”
(internal quotation omitted).3

issue,

and

that

rule

is

Pesante, 459 F.3d at 37

A district court must determine,

therefore, whether to employ “the channel markers of Wilburn Boat
to deduce whether federal admiralty law or state insurance law will
control the litigation.”
a.

Wisniewski, 579 F. Supp. at 1013.

Does a Well Established Maritime Rule Exist?
Presented

twice

with

the issue,

the

First

Circuit Court of Appeals has yet to take an authoritative stance on
whether uberrimae fidei is an established rule of maritime law.
See Pesante, 459 F.3d at 38 (“While we have never actually decided
the issue, it is true that we have questioned whether uberrimae
fidei is an established rule of maritime law.”); Giragosian, 57
F.3d at 54, 54 n.3 (“[I]t is debatable whether the doctrine can

3

The determination of subject matter jurisdiction over the
case is a separate and distinct concept from which law — admiralty
or state law — governs issues at litigation.
Thus, Catlin’s
contention that SJT asks the Court “to contradict itself” and find
that the Puerto Rico Insurance Code governs the dispute, (Docket
No. 142 at 10), is off the mark.

Civil No. 11-2093 & 11-2116 (FAB)

17

still be deemed an ‘entrenched’ rule of law . . . . We need not
undertake this analysis [of whether to apply uberrimae fidei]
however . . . .”).

As a sister district court has pointed out, the

lack of binding precedent from the First Circuit Court of Appeals
as to the applicability of the uberrimae fidei doctrine in this
circuit leaves the Court with “a cloudy choice-of-law analysis.”
Good Bus Corp. v. Markel Am. Ins. Co., 2012 U.S. Dist. LEXIS 118106
at *12 (D.P.R. 2012) (Casellas, J.) (citing Pesante, 459 F.3d at 38
and Cent. Int’l. Co. v. Kemper Nat’l. Ins. Cos., 202 F.3d 372, 373
(1st Cir. 2000)).

Even despite the lack of a clear stance on the

issue by the First Circuit Court of Appeals, however, “the number
and ratio of courts endorsing the doctrine weigh in favor of [the]
conclusion [that uberrimae fidei is an established rule of maritime
law].”

Halifax Trawlers, 495 F. Supp. 2d at 238.
The majority of circuits are in agreement that

uberrimae fidei controls in maritime insurance disputes.

AGF

Marine Aviation & Transp. v. Richard C. Cassin Cit Group/Sales
Fin., Inc., 544 F.3d 255, 262–63 (3rd Cir. 2008).

“In the lion’s

share of federal cases, where the issue of non-disclosure is raised
by an insurer seeking to vitiate a policy of maritime coverage, the
traditional rule of uberrimae fidei has been applied.”

Halifax

Trawlers, 495 F. Supp. 2d at 238; see also Commercial Union Ins.
Co. v. Detyens Shipyard, Inc., 147 F. Supp. 2d 413, 423 (D.S.C.
2001) (“The majority of courts faced with the application of

Civil No. 11-2093 & 11-2116 (FAB)

18

uberrimae fidei to a marine insurance policy[] have found that
utmost good faith applies.”); Certain Underwriters at Lloyd’s v.
Johnson, 124 F. Supp. 2d 763, 769 (D.P.R. 1999) (Castellanos, J.)
(“A vast host of federal district courts have very recently spoken
on this subject and there is near unanimity of agreement that the
time-honored doctrine of uberrimae fidei . . . continues to be[4]
a correct statement of the law of American marine insurance.”);
Port Lynch, Inc. v. New Eng. Int’l. Assurety, Inc., 754 F. Supp.
816, 821 (W.D.Wa. 1991) (“In almost all the federal cases where the
issue of misrepresentation or nondisclosure has been raised as a
defense to coverage under a marine insurance policy, courts have
applied the general rule of marine insurance, requiring full
disclosure

of

all

material

facts

by the

insured

and

holding

policies void ab initio where the insured fails to comply with this
duty.”).
The only circuit to disavow the doctrine of
uberrimae fidei as “not entrenched federal precedent” is the Fifth
Circuit Court of Appeals.

See Albany Ins. Co. v. Anh Thi Kieu, 927

F.2d 882 (5th Cir. 1991).

The Fifth Circuit’s position, however,

has been heavily criticized and “contradicts the general sentiment

4

The uberrimae fidei doctrine dates back centuries; in 1766,
Lord Mansfield recognized the duty underlying uberrimae fidei,
stating: “Good faith forbids either party, by concealing what he
privately knows, to draw the other into a bargain from his
ignorance of that fact, and from his believing to the contrary.”
Schoenbaum at § 19-14 (citing Carter v. Boehm, (1766) 3 Burr.
1905)).

Civil No. 11-2093 & 11-2116 (FAB)
in

scholarly

literature.”5

Moreover, a

19
leading

treatise

has

clarified that “the principle of good faith is alive and well
despite the Fifth Circuit’s decision in Anh Thi Kieu,” and that
“[t]he duty of good faith is well established as the federal
maritime law rule in marine insurance.” Schoenbaum at § 19-14 n.1.
The Court thus subscribes to the Ninth Circuit Court of Appeals’
conclusion that “[i]ronically, were it not for the Anh Thi Kieu
decision itself, there would be little cause at all to doubt that
uberrimae fidei is indeed firmly entrenched maritime law.”

Inlet

Fisheries, 518 F.3d at 652; id. at 653 (“Not surprisingly, no other
circuit has followed Anh Thi Kieu in the sixteen years since it was
decided.

In our view, in the face of 200 years of precedent, it

takes more than a single circuit case and spotty citation in recent
years to uproot an entrenched doctrine.”).

Having weighed the

Fifth Circuit Court of Appeals’ opinion against opposing authority
from other circuits and legal scholars, the Court holds that the
uberrimae fidei doctrine constitutes a well-entrenched federal

5

The Third Circuit in AGF Marine Aviation, 544 F.3d at 263
cites an arsenal of authority supporting that position: Certain
Underwriters at Lloyds v. Inlet Fisheries, Inc., 518 F.3d 645,
652–53 (9th Cir. 2008); THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW
297 (4th ed. 2004); Graydon S. Staring & George L. Waddell, Marine
Insurance, 73 TUL. L. REV. 1619, 1651 (1999); Mitchell J. Popham &
Chau Vo, Misrepresentation and Concealment in Marine Insurance
Contracts: An Analysis of Federal and State Law Within the Ninth
Circuit, 11 U.S.F. MAR. L.J. 99, 108–12 (1998-1999); Thomas J.
Schoenbaum, The Duty of Utmost Good Faith in Marine Insurance Law:
A Comparative Analysis of American and English Law, 29 J. MAR. L. &
COM. 1, 11–13 (1998).

Civil No. 11-2093 & 11-2116 (FAB)

20

precedent, even in the face of the First Circuit Court of Appeals
apparent hesitation to hold it does not. Pursuant to Wilburn Boat,
the Court must next determine whether the federal rule materially
differs from state law.
b.

Does The Uberrimae Fidei Doctrine Materially
Differ From Puerto Rico Law?
SJT devotes much of its briefs to arguing that

the

Puerto

Rico

Insurance

following reasons:

Code

applies

to

the

case

for

the

(1) the First Circuit Court of Appeals in

Guerrido v. Alcoa S.S. Co., 234 F.2d 349, 355 (1st Cir. 1956)
recognized a congressional grant of power to the Puerto Rico
legislature to contravene federal maritime law,6 (Docket No. 138
at 4–7); (2) section 1101 of the Puerto Rico Insurance Code

6

In 1956, the First Circuit Court of Appeals in Guerrido
discussed the historical application of maritime law to the
Commonwealth of Puerto Rico. To argue that the maritime doctrine
of uberrimae fidei does not apply to the Policy at issue, SJT
relies on the Guerrido Court’s following conclusion:
[T]he rules of the admiralty and maritime law of the
United States are presently in force in the navigable
waters of the United States in and around the island of
Puerto Rico to the extent that they are not locally
inapplicable . . . because they have been rendered
inapplicable to these waters by inconsistent Puerto Rican
legislation.
234 F.2d at 355; Docket No. 138 at 5.

Civil No. 11-2093 & 11-2116 (FAB)

21

(“section 1101”)7 does not include drydocks in the definition of
“ocean marine insurance” and because the Policy covers a drydock,
the Policy is not “ocean marine insurance,” P.R. Laws Ann. tit. 26

7

Section 1101 provides, in pertinent part:

(1)
The applicable provisions of this chapter shall
apply to insurances other than ocean marine and foreign
trade insurances as defined in subsection (2) . . . .
(2) For the purposes of subsection (1) of this section
and this title, “ocean marine and foreign trade
insurances” shall include only:
(a) Insurances upon vessels, crafts, hulls,
and of interests therein or with relation
thereto.
(b)
Insurance of marine builders' risks,
marine war risks, and contracts of marine
protection and indemnity insurance.
(c) Insurance of freights and disbursements
pertaining to a subject of insurance coming
within this definition.
(d)
Insurance of personal property and
interests therein, in course of exportation
from or importation into any country, or in
course of transportation coastwise, including
transportation by land, water, or air from
point of origin to final destination, in
respect to, appertaining to, or in connection
with, any and all risks or perils of
navigation, transit or transportation, and
while being prepared for and while awaiting
shipment, and during any delays, storage,
trans-shipment or reshipment incident thereto.

Civil No. 11-2093 & 11-2116 (FAB)

22

§ 1101, id. at 8–9; (3) section 4058 of the Puerto Rico Insurance
Code “specifically

includ[es]

insurance

policies

for

drydocks

within the scope of Chapter 11 of the Puerto Rico Insurance Code,”

8

Section 405 provides, in pertinent part:
Marine and transportation insurance is:
(1)

Insurance against loss of or damage to:
. . .
(d) Bridges, tunnels and other
instrumentalities of transportation
and
communication
(excluding
buildings,
their
furniture
and
furnishings, fixed contents and
supplies held in storage); piers,
wharves, docks and slips, and other
aids
to
navigation
and
transportation, including dry docks
and
marine
railways,
dams and
appurtenant
facilities
for
the
control of waterways.

(emphasis added).

Civil No. 11-2093 & 11-2116 (FAB)

23

P.R. Laws Ann., tit. 26 § 405, id. at 7–9; (4) section 11109 of the
Puerto Rico Insurance Code, which addresses representations made in
applying for insurance, contravenes the doctrine of uberrimae
fidei, Laws of P.R. Ann. tit. 26 § 1110, id. at 9–13; and (5) the
Puerto Rico legislature — through section 1110 — has thus exercised
its right to create contravening state law, which must control over
general maritime law in this case, id. at 9–13.

Although it finds

SJT’s argument creative, the Court is unpersuaded and must reject
SJT’s contention that Puerto Rico law governs the Policy.

9

Section 1110 provides:

Misrepresentations, omissions, concealment of acts,
and incorrect statements shall not prevent a recovery
under the policy unless:
(1)

Fraudulent; or

(2) material either to the acceptance of the
risk, or to the hazard assumed by the insurer,
or
(3)
the insurer in good faith would either
not have issued the policy, or would not have
issued a policy in as large an amount, or
would not have provided coverage with respect
to the hazard resulting in the loss, if the
true facts had been made known to the insurer
as required either by the application for the
policy or otherwise.
When the applicant incurs in any of the actions
enumerated in subsections (1), (2) and (3) of this
section, the recovery shall only be prevented if such
actions or omissions contributed to the loss that gave
rise to the action.

Civil No. 11-2093 & 11-2116 (FAB)

24

While it is true that the Puerto Rico Federal
Relations Act continues to confer to the Commonwealth the ability
to enact inconsistent regulations with the rules of admiralty and
maritime law, see United States v. Zenon-Encarnacion, 185 F. Supp.
2d 127, 130 (D.P.R. 2001) (Dominguez, J.) (citing Guerrido, 234
F.2d at 355), the Puerto Rico legislature has declined to do so in
the area of maritime insurance contracts.

Lloyd’s of London v.

Pagan-Sanchez, 539 F.3d 19, 25 (1st Cir. 2008).
provisions

of

the

Puerto

Rico

Insurance

Citing thirteen

Code

—

including

Section 1101 — the First Circuit Court of Appeals explicitly
acknowledged that “the Puerto Rico legislature has expressed its
intent to exclude maritime insurance contracts from its statutory
provisions

governing

insurance contracts.”

the

interpretation

and

construction

of

Pagan-Sanchez, 539 F.3d at 25; Cf. Zenon-

Encarnacion, 185 F. Supp. 2d at 130 (“Since Congress gave the
Legislature of Puerto Rico full power to provide compensation for
marine workers injured in Puerto Rican waters to the exclusion of
the remedies against their employers provided by the American
maritime law, Puerto Rico did just that.”).

The First Circuit

Court of Appeals’ decision in Pagan-Sanchez thus forecloses SJT’s
arguments that (1) section 405 brings insurance contracts covering
drydocks under Chapter 11’s purview; and that (2) “the Puerto Rican
Legislature has exercised its legislative power in contravention
with general maritime law, in the specific case of insurance

Civil No. 11-2093 & 11-2116 (FAB)

25

policies for drydocks.” This Court previously held that the Policy
at issue is a marine insurance policy.
No. 121.)

(Catlin II at Docket

Accordingly, the Policy is excluded from Chapter 11 of

the Puerto

Rico

Insurance

Code,

and

the

federal

doctrine

of

uberrimae fidei applies.
2.

Did SJT Violate Uberrimae Fidei as a Matter of Law?
In

its

complaint,

Catlin

alleges

that

SJT

“misrepresented, concealed or omitted material facts it had a duty
to disclose when seeking coverage.”

(Docket No. 1 at 4.)

The

doctrine of uberrimae fidei implicates two distinct but closely
related

aspects:

non-disclosure

Schoenbaum, § 19-14 at p. 408.

and

misrepresentation.

Premised on the belief that the

“assured is in the best position to know of any circumstances
material

to

underwriter,”

the

risk

[and]

must

reveal

those

facts

to

the

Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 13 (2d

Cir. 1986), “the strict maritime rule of uberrimae fidei [provides
that] an insured must make full disclosure of all material facts of
which the insured has, or ought to have, knowledge . . . even
though no inquiry be made.”

Grande v. St. Paul Fire & Marine Ins.

Co., 436 F.3d 277, 283 (1st Cir. 2006) (internal quotations and
citations omitted).

“The obligation to disclose [also] includes

the duty not to misrepresent.”
(internal citation omitted).

Wisniewski, 579 F. Supp. at 1014

The duty of utmost good faith thus

“places a high burden on the assured.”

Schoenbaum, § 19-14 at

Civil No. 11-2093 & 11-2116 (FAB)
p. 412.

26

When the insured fails to disclose to the insurer all

circumstances

known

to

it

and

unknown

to

the

insurer,

which

materially affect the risk, the policy is voidable at the option of
the innocent party.
Cir. 1931).

The same is true for a material misrepresentation by

the insured.
consequence
disclosure
mistake.”

King v. Aetna Ins. Co., 54 F.2d 253, 254 (2d

Wisniewski, 579 F. Supp. at 1015.
whether

occurred

the

insured’s

“due

to

fraud,

It is of no

misrepresentation
negligence,

or

non-

accident,

or

Schoenbaum, § 19-14 at p. 412; see also Wisniewski, 579

F. Supp. at 1015 (“If a policy of marine insurance is issued upon
false and material representations, the absence of fraud or of an
intent to deceive will not save the contract from rescission.”);
Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485, 510-511 (1883)
(“It is the duty of the assured to place the underwriter in the
same situation as himself; to give to him the same means and
opportunity of judging of the value of the risks; and when any
circumstance is withheld, however slight and immaterial it may have
seemed

to

himself,

that,

if

disclosed,

would

probably

have

influenced the terms of the insurance, the concealment vitiates the
policy.”).
An

insured’s

representations

about,

and/or

concealment of, the true value of the object to be insured directly
pertains to the subject matter of the risk, and thus “overstating
value is one of the most frequent subjects of breach of the duty of

Civil No. 11-2093 & 11-2116 (FAB)
good

faith.”

Schoenbaum,

over-valuation

of

an

§

insured

27

19-14

at

object

p.
by

413
the

n.

44.

insured

The
is

a

misrepresentation of a material fact that voids the policy, and
failure to disclose material information regarding the subject
matter of the risk similarly vitiates the policy.

See King, 54

F.2d at 255 (“[C]oncealment of an overvaluation so excessive as to
make the risk speculative vitiates the policy.

The valuation of a

vessel at sixteen times what she had just cost the insured likewise
makes the risk speculative; the insured has less incentive to
protect her than he would had he paid a sum some where [sic] near
commensurate with the stated value.”);

Bella S.S. Co. v. Ins. Co.

of N. Am., 5 F.2d 570, 572 (4th Cir. 1925) (“No reasonable insurer
will knowingly take an insurance risk when it is to the interest of
the insured that the property should be lost.”); Smith v. Cont’l.
Ins. Co., 2001 U.S. Dist. LEXIS 4999 *12–13, 15 (D. Md. 2001)
(finding

a

policy

void

ab

initio

because

the

insured’s

misrepresentation of a vessel’s value as $32,000 when it had been
(1) purchased five years earlier for $16,000 and (2) estimated at
$100 a year earlier in a bankruptcy petition was material, and
because the insured’s failure to disclose those earlier prices was
also material);

Albany Ins. Co. v. Horak, 1993 U.S. Dist. LEXIS

9500, *27–28 (E.D.N.Y. 1993) (holding that the purchase price and
cost of repairs are both relevant to risk valuation, and that an
insured’s nondisclosure of a $57,000 purchase price one year before

Civil No. 11-2093 & 11-2116 (FAB)

28

obtaining $350,000 insurance coverage was material and voided the
policy ab initio);

Hartford Ins. Co. v. Garvey, 1988 U.S. Dist.

LEXIS 17300, 17-18 (N.D. Cal. 1988) (“The over-valuation of the
insured vessel by the insured is a misrepresentation of a material
fact and voids the policy, because it increases the risk, provides
an inducement to insurance fraud, and changes the object of the
insurance from indemnity to an outright gamble at stakes greatly
favoring the insured.”) (citations omitted);

Wisniewski, 579 F.

Supp. at 1015-17 (finding a $1.5 million insurance policy void ab
initio due to (1) the insured’s misrepresentations of material fact
that the fair market value was $2.25 million when it had purchased
the vessel a month earlier for $69,000, and (2) the insured’s nondisclosure of the price paid for the vessel, which constituted
“concealment of material fact”); Ionides v. Pender, (1874) L.R. 9
Q.B. 531, 538-39 (finding overvaluation so great as to make risk
speculative is material to rational underwriters and therefore must
be disclosed).

Thus, if the Court determines that SJT — whether

fraudulently, negligently, accidentally, or by mistake — overstated
the Perseverence’s value and/or concealed material information
regarding the subject matter of the risk while seeking insurance
coverage from Catlin, the Policy will be void ab initio.
Due to remaining genuine disputes of material fact,
however, the Court cannot at this stage determine whether SJT
indeed misrepresented or concealed material information when it

Civil No. 11-2093 & 11-2116 (FAB)

29

applied to insure the Perseverence with Catlin. Both parties admit
that SJT put the Perseverence up for sale between 2009 and the time
it sank in September, 2011, but they disagree as to (1) the
appropriate value of the drydock when Catlin issued the Policy, and
(2) whether, when, and to what degree information regarding the
Perseverence’s value was ever disclosed to Catlin.

Although the

Perseverence was initially advertised for $1,350,000 in 2009, SJT
acknowledged to Banco Popular in January 2011 that a $700,000 offer
is “very close to reality.”

SJT also claims, however, that “the

amounts in the advertisements do not reflect what may have been the
fair market value of the dry dock, prior to the inception of the
policy . . . because SJT was not a willing seller.”
No. 140 at 9.)

(Docket

Moreover, Catlin specifically asserts that SJT

failed to disclose that “at the time SJT requested $1,750,000 in
coverage from Catlin, the drydock was being advertised for sale
with an asking price of $800,000.”
Mr.

Toscani

in

his

April

12,

(Docket No. 141 at 3.)

2011

e-mail

to

Mr.

Yet

Kirchhofer

explicitly revealed that the drydock was “currently up for sale,”
albeit without including the advertising price in the e-mail.

The

e-mail also indicates that Mr. Toscani and Mr. Kirchhofer had
spoken on the telephone and had discussed both the insurance
coverage and the fact that the Perseverence was up for sale at that
time.

Catlin’s uberrimae fidei misrepresentation claim cannot

properly

be

decided

as

a

matter

of

law,

therefore,

because

Civil No. 11-2093 & 11-2116 (FAB)

30

conflicting evidence exists as to (1) what the true fair market
value of the Perseverence was at the time SJT sought insurance
coverage from Catlin; and (2) the value that SJT represented to
Catlin that the Perseverence was worth.
Furthermore, the parties do not agree on material
facts underlying the issue of whether SJT concealed from Catlin
material information regarding the Perseverence’s risk.

Catlin

claims that SJT did not disclose that it had offered to sell the
drydock for $800,000 in January 2011 or that it considered $700,000
to be the market value for the drydock.

Evidence potentially

demonstrates, however, that Catlin may have already understood the
risks of insuring the Perseverence through Mr. Kirchhofer, who had
been the underwriter in charge of the SJT file with a previous
insurer, RLI.

In his deposition, for example, Mr. Kirchhofer

admitted that he did not ask Mr. Toscani about the loss history of
the drydock, and that he “had familiarity with the risk.”
No. 141-2 at 6–7.)

(Docket

Mr. Toscani’s April 12, 2011 e-mail also

indicates that Mr. Kirchhofer was aware that the Perseverence was
“currently up for sale” just days before Catlin issued the marine
insurance policy.

The extent of Mr. Kirchhofer’s — and thus

Catlin’s — knowledge about the Perseverence’s risk and value
implicates the “weighting of evidence,” and a trial — as opposed to
summary judgment — is thus the proper arena to gauge a witness’
credibility.

See Reliance Nat’l. Ins. Co. (Europe), Ltd., 246 F.

Civil No. 11-2093 & 11-2116 (FAB)
Supp. 2d at 127.

31

Furthermore, the question of whether the insured

concealed a material circumstance is an issue for the trier of
fact.

Wisniewski, 579 F. Supp. at 1016 (citing King, 54 F.2d

at 255 and 2 J. Arnould, Law of Marine Insurance and Average (10
British Shipping Laws) § 637 (15th ed. 1961)).

Because the facts

as presented are in dispute as to whether or not SJT complied with
the

uberrimae

fidei

doctrine’s

representation

and

disclosure

requirements, SJT’s motion for summary judgment on Catlin’s first
and second causes of action is DENIED.

See Detyens Shipyard, 147

F. Supp. 2d at 424.
B.

Catlin’s Denial of Insurance Coverage
In its alternative seventh cause of action, Catlin claims

that the drydock coverage under the Policy applies only to certain
“named perils,” and that because the claim SJT submitted was not
due to an enumerated peril, SJT’s claim is not covered.
No. 1 at 6.)

(Docket

SJT, in contrast, claims that the Policy was an “all

risk” policy that covers its loss.

A named perils policy provides

coverage that is limited to the specific perils insured against,
while

an

all

risk

policy

is

insurance

in

which

“all

losses

attributable to external causes are covered,” subject to specific
exclusions.

N.W. Mut. Life Ins. Co. v. Linard, 498 F.2d 556, 561

(2d Cir. 1974); By’s Chartering Serv., Inc. v. Interstate Ins. Co.,
524 F.2d 1045, 1047 n. 2 (1st Cir. 1975).

Whether a policy is a

named perils policy or an all risk policy is significant to the

Civil No. 11-2093 & 11-2116 (FAB)

32

legal standard used to determine coverage.

If a court regards a

policy as a “named perils” policy, “then [the] plaintiff has the
burden of coming forward with a preponderance of competent evidence
that

the

sinking

occurrence.”

of

the

[object]

was

caused

by

a

covered

Miller Marine Servs., Inc. v. Travelers Prop. Cas.

Ins. Co., 2005 WL 2334385, 2005 A.M.C. 2601 at *4 (1st Cir. 2005)
(unreported) (citing Linard, 498 F.2d at 561).

On the other hand,

“an all risk policy places the burden on the insured to establish
only the existence of the all risk policy and its loss.

Then the

burden shifts to the insurer to show that the coverage of the loss
comes within one of the exceptions.”

Miller Marine, 2005 WL

2334385 at *4 (citing Pan Am. World Airways, Inc. v. Aetna Cas. &
Sur. Co., 505 F.2d 989, 999 (2d Cir. 1974)).

Thus, under a named

perils policy, SJT as the insured would have to show that its loss
arose from a covered peril.

In contrast, under an “all risk”

policy, SJT need only establish the existence of the all risk
policy and a loss, and to deny coverage Catlin would have to
demonstrate that the loss falls within one of the exceptions to
coverage.

To determine as a matter of law whether Catlin properly

denied coverage for SJT’s loss, the Court must address (1) whether
the Policy at issue is an all risk or named perils policy, and
(2) what proximately caused SJT’s loss.

Civil No. 11-2093 & 11-2116 (FAB)
1.

33

All Risk Policy v. Named Perils Policy
Endorsement

5

outlines

the

coverage

for

the

Perseverence:
TOUCHING THE ADVENTURES AND PERILS which
we, the said Assurers, are contended to
bear and take upon us, they are of the
Seas, Rivers, Lakes, Harbours. Men-ofWar, Fire, Enemies, Pirates, Rovers,
Thieves, Jettisons, Letters of Mart of
Counter Mart, Surprisals, Takings at Sea,
Arrests, Restraints and Detainments of
all Kings, Princes and Peoples, of what
nation, condition or quality soever,
Barratry of the Master and Mariners,
Explosions, Riots, or other causes of
whatsoever nature arising either on shore
or otherwise, causing Loss of or injury
to the Property hereby insured, and of
all other Perils, Losses, and Misfortunes
that have or shall come to the Hurt,
Detriment, or Damage of the said Dock,
&c., or any part thereof.
(Docket No. 134-2 at 67.)

The parties take issue with the meaning

of the second half of the coverage provision.

SJT claims that the

phrases “causes of whatsoever nature arising on shore or otherwise”
and “all other [p]erils, [l]osses, and [m]isfortunes” reflect an
all risk policy.

(Docket No. 138 at 17.)

arguing

phrase

that

the

“all

other

Catlin disagrees,

[p]erils,

[l]osses,

and

[m]isfortunes” must not be read to render the entire [p]erils
clause superfluous, and that pursuant to the doctrine of ejusdem
generis, the Policy covers only the enumerated “perils of the sea”
and “similar perils.”

(Docket No. 135 at 25–26 (“To ignore the

lengthy description of covered [p]erils articulated in the clause

Civil No. 11-2093 & 11-2116 (FAB)
would

effectively

render

the

34
entire

clause

a

‘literary

embellishment.’”) (citing Feinberg v. Ins. Co. of N. Am., 260 F.2d
523, 527–29 (1st Cir. 1958))).

Fatalistically, Catlin does not

justify how “other causes of whatsoever nature arising either on
shore or otherwise” supports its conclusion that the Policy is a
named perils policy.
The

Court

finds

that

the

Policy covering the

Perseverence constitutes an all risk policy, not a named perils
policy.

Two

cases

that

interpret

nearly

identical

coverage

provisions10 as Endorsement 5 at issue here, Int’l. Ship Repair &
Marine Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 944 F.
Supp. 886 (M.D. Fla. 1996) and Mellon v. Fed. Ins. Co., 14 F.2d 997
(S.D.N.Y.

1926),

are

particularly

persuasive

to

the

Court’s

conclusion. The phrases “other causes of whatsoever nature arising
either on shore or otherwise” and “all other perils, losses, and
misfortunes,” — especially coupled together — indicate an expansive
range of coverage against all risks, not a limited coverage of
named risks.

Literary embellishment, after all, “has no place in

an insurance policy.

On the contrary[,] it is the universally

accepted rule that words used in such a document must be presumed
to have been used on purpose to convey some meaning.”

10

Feinberg,

Most importantly, the coverage provisions in those cases
included the clauses “other causes of whatsoever nature arising
either on shore or otherwise” and “all other perils, losses, and
misfortunes” that are at issue in this case.

Civil No. 11-2093 & 11-2116 (FAB)
260 F.2d at 527.

35

Just as International Ship reasoned, therefore,

“[a]ny time an insurer decides to draft an insurance policy which
provides coverage for ‘other causes of whatsoever nature’ and ‘all
other perils, losses, and misfortunes,’ it intends to provide ‘all
risk’ coverage to its insured, not simply a covered ‘perils’
policy.”

944 F. Supp. at 892.

International Ship and Mellon thus

held — and this Court agrees — that policies including the clauses
“or other causes of whatsoever nature arising either on shore or
otherwise, causing injury to the property hereby insured and of all
other

perils,

losses,

and

misfortunes”

are

not

named

perils

policies, but rather are all risk policies.
The legal authority upon which Catlin relies is
consistent with that holding.

Many of the cases and treatises

address the historical nature of the “all other [p]erils” language
typically included in marine insurance policies and also point out
the English courts’ conclusion that “all other [p]erils” is ejusdem
generis, “intended to incorporate only perils of the same nature”
and indicative of a named perils policy.
Docket No. at 22-28.)

(See sources cited in

While those cases provide consistent legal

precedent, they are inapposite to this case for failing to shed
light on the impact of the dual coverage provisions “other causes
of whatsoever nature arising either on shore or otherwise” and “all

Civil No. 11-2093 & 11-2116 (FAB)

36

other perils, losses, and misfortunes.”11

Other cases, moreover,

can be distinguished for the subtle but major difference in the
policy language construed; several cases interpret marine insurance
contracts as named perils policies due to the inclusion of the word
“like” before the “perils, losses and misfortunes” clause.

See,

e.g., Feinberg, 260 F.2d 523 (addressing whether the plaintiff
suffered a “like” peril, loss or misfortune within the meaning of
the

insurance

policy’s

“all

other

like

perils,

losses

and

misfortunes” provision); Linard, 498 F.2d 556 (construing a policy
which included the word “like” in the concluding clause covering
“other . . . [p]erils, [l]osses and [m]isfortunes” as a named
perils policy).

In light of such precedent, the Court must

disagree with Catlin’s argument that “precedents do [sic] not

11

Catlin cites Underwriters at Lloyd’s v. Labarca, 260 F.3d
3 (1st Cir. 2001) and Lanasa Fruit S. S. & Importing Co. v.
Universal Ins. Co., 302 U.S. 556 (1938) to support its contention
that Endorsement 5 is a named perils policy. The Court does not
find these cases apposite to the threshold question of whether the
Policy is an all risk or named perils policy, however, because
neither case directly addresses or analyzes that issue.
In
Labarca, the First Circuit Court of Appeals referenced the scope of
the “perils of the sea” concept but noted that the marine insurance
policy at issue did not contain a “perils of the sea” clause. 260
F.3d at 8–9.
Although the Lanasa case did involve a typical
“perils of the sea” clause — “all other perils, losses, and
misfortunes” — the Supreme Court’s analysis centered on whether a
sea peril, stranding, was a proximate cause of the insured’s loss,
not on what type of marine insurance contract was at issue. See
generally 302 U.S. 556. Accordingly, the Court does not regard
those cases as binding authority for the proposition that policies
with “other causes of whatsoever nature arising either on shore or
otherwise . . . and of all other perils, losses, and misfortunes”
language constitute named perils policies.

Civil No. 11-2093 & 11-2116 (FAB)

37

recognize a distinction” between perils clauses that include the
words “like perils” and those that do not, (Docket No. 134 at 28),
and that “distinguishing between [p]erils clauses referring to ‘all
other perils’ and those incorporating ‘all other like perils’
ignores both the language and precedent,”

(Docket No. 135 at 27).

The Court agrees with SJT that the wording included
in Endorsement 5 “reflects Catlin’s intent to offer all risk
coverage as opposed to coverage for named perils and perils similar
to those listed in the clause.”

(Docket No. 138 at 17.)

It also

agrees with Catlin’s contention that “if ‘all risk’ coverage was
intended, it would have been much simpler and easier to say ‘all
risk’” instead of including language that resembles typical named
perils coverage.

(Docket No. 135 at 28.)

Catlin may have intended

for Endorsement 5 to be “based on a traditional form consistently
construed for over a century” as a named perils policy, (Docket
No. 142 at 20), but ultimately, the effect of the “causes of
whatsoever nature arising either on shore or otherwise” and “all
other perils, losses and misfortunes” language indicates an intent

Civil No. 11-2093 & 11-2116 (FAB)

38

to provide more than mere named perils coverage.12 Accordingly, the
Court holds that the Policy insuring the Perseverence is an all
risk insurance policy.
2.

Proximate Cause of SJT’s Loss
Under an all risk policy, the insured must show that

the loss or damage suffered was fortuitous.
F.2d at 386

Dow Chem. Co., 635

(“[A]n all risk policy will be allowed for all

fortuitous losses not resulting from misconduct or fraud . . . .”);
Linard, 498 F.2d at 561 n.5 (“Even an ‘all risks’ policy is subject
to the proposition that the damage must have been due to some
fortuitous

circumstance

or

casualty.”)

(internal

citations

12

The Court finds that the “other causes of whatsoever nature
arising either on shore or otherwise” and “all other perils”
language clearly indicates an all risk policy. As such, it is the
duty of the Court to apply the words’ ordinary meaning and not to
favor either party in construction.
See Lloyd’s of London v.
Pagan-Sanchez, 539 F.3d 19, 23 (1st Cir. 2008) (“It is a well
settled rule that clear and unambiguous clauses must be accepted as
the expression of the intent of the parties, and enforced by the
courts as written.”) (internal quotations and citation omitted).
Even if the Court was persuaded by Catlin’s argument that the
Policy’s “all other perils” language was designed to mirror a named
perils policy, however, it would regard the inclusion of the “other
causes of whatsoever nature arising either on shore or otherwise”
language as rendering the Policy coverage ambiguous. Accordingly,
it would construe the Policy in favor of the insured, SJT. See
Littlefield v. Acadia Ins. Co., 392 F.3d 1, 8 (1st Cir. 2004) (“If
an insurance policy provision is susceptible to more than one
reasonable interpretation, and an interpretation provides coverage,
the policy contains an ambiguity and will be construed against the
insurer.”) (internal citation omitted). Ambiguities in a contract
should be construed against the party who drafted it. Gonzalez v.
Coop. Seguros de Vida de P.R., 117 D.P.R. 659 (1986) (citing Laws
P.R. Ann. tit 31 § 3478 and holding that ambiguities in a contract
should be construed against the drafting party).

Civil No. 11-2093 & 11-2116 (FAB)

39

omitted); Texas E. Transmission v. Marine Office-Appleton & Cox
Corp., 579 F.2d 561, 564 (10th Cir. 1978) (“[R]ecovery under [an
all risks] policy will generally be allowed, at least for all
losses of a fortuitous nature, in the absence of fraud or other
intentional misconduct of the insured . . . . No case has been
found denying the above proposition . . . .”).

Accordingly, SJT

bears the initial burden of establishing that a loss occurred to
the Perseverence and that it was due to some fortuitous event or
circumstance.
The Court finds that genuine issues of material fact
remain as to the proximate cause of SJT’s loss.

SJT has submitted

an explanation of how the sinking of the Perseverence occurred:
that “somebody left the fire hose and the manholes at the drydock’s
deck open, even though Mr. Payne and SJT’s foreman gave clear
instructions to the contrary, and the drydock sank by its back
portion.”

(Docket No. 138 at 20.)

It supports this contention

with facts attested to by Mr. Payne and Captain Padilla from their
observations

of

the

submerged

September 28–29, 2011.

drydock

on

the

night

of

Relying on the conflicting testimony of

SJT’s foreman, Mr. Monge — who was on site during the ballasting
operations

on

September

28,

2011

—

Catlin

argues

that

circumstances of the sinking are disputed issues of fact.

the

Catlin

nevertheless offers its own explanation of the cause of SJT’s loss:
the drydock sank because of its “deteriorated, wasted condition.”

Civil No. 11-2093 & 11-2116 (FAB)

40

SJT disagrees, arguing that “[w]hatever corrosion the drydock had
was not the cause of its sinking.”

Id. at 21.

The evidence here “tend[s] to support conflicting
inferences” of why the Perseverence sank.

See Mandel v. Boston

Phoenix, Inc., 456 F.3d 198, 207 (1st Cir. 2006).

The testimony of

Captain Padilla and Mr. Payne supports the inference that the
drydock sank due to the running water from the fire hose and open
manholes on the drydock’s deck.

Testimony from Catlin’s expert

that wasted bulkheads throughout the drydock allowed water ingress
and progressive flooding, however, also supports a conclusion that
the drydock sank as a result of its poor condition.

Because the

determination about the proximate cause of SJT’s loss can go both
ways, the Court declines to resolve the issue at this time.

See

Montfort-Rodriguez, 504 F.3d at 228; Montfort-Rodriguez v. ReyHernandez, 504 F.3d 221, 229 (1st Cir. 2007) (“Summary judgment
cannot be predicated on so vacillatory a record.”) (citation and
internal quotations omitted).

Accordingly, it is remains unclear

whether SJT’s damage occurred due to some fortuitous circumstance
or casualty that is covered under the all risk policy, and summary
judgment is DENIED as to Catlin’s alternative seventh cause of
action.

(Docket No. 142 at 16.)

The Court also DENIES SJT’s

motion for summary judgment of Catlin’s alternative sixth cause of
action on those grounds.

Civil No. 11-2093 & 11-2116 (FAB)
C.

41

Catlin’s Third, Fourth, Fifth, and Eighth Causes of
Action
SJT argues that Catlin’s alternative third,13 fourth,14 and

eighth15 causes of action implicate the doctrine of seaworthiness.
(See Docket No. 1 at 5–7.)

Generally, the implied warranties of

seaworthiness are “premised on the notion that, because the insured
is best able to foresee the nature, extent, and necessities of the
specific voyage, the insured is also best able to have the vessel
adequately prepared for the voyage.”

Emp’s. Ins. of Wausau v.

Occidental Petroleum Corp., 978 F.2d 1422, 1433 (5th Cir. 1992).
In the legion case of The Caledonia, the Supreme Court explained
that “every person who proposes to any insurers [sic] to insure his
ship

against

warrants

that

sea
his

perils,
ship

during

is,

in

a

certain

every

voyage,

respect,

in

impliedly
a

suitable

condition to proceed and continue on that voyage and to encounter
all common perils and damages with safety.”

157 U.S. 124, 131

(1895).

13

The alternative third cause of action alleges a breach of
the Absolute Warranty of Seaworthiness that renders coverage of the
drydock void ab initio. (Docket No. 1 at 5.)
14

The alternative fourth cause of action alleges that the
Perseverence was not in a serviceable or seaworthy condition in
violation of the Policy conditions, which renders the Policy void
ab initio. (Docket No. 1 at 5.)
15

The alternative eighth cause of action alleges a violation
of the Negative Implied Warranty of Seaworthiness that renders
coverage of the drydock unenforceable. (Docket No. 1 at 6–7.)

Civil No. 11-2093 & 11-2116 (FAB)
Seaworthiness,

as

42

discussed

above,

applies

only

to

vessels. See In re McAllister Towing of Virginia, Inc., 2000 A.M.C.
2164, 2168 (E.D.Va. 2000); Detyens Shipyard, 147 F. Supp. 2d
at 421-22.

Because there are no warranties of seaworthiness on a

non-vessel, and the Court previously held that the Perseverence is
not a vessel pursuant to federal admiralty law, (Docket No. 112
at 28), the Court GRANTS SJT’s motion for summary judgment on
Catlin’s alternative third, fourth, and eighth causes of action and
DISMISSES those claims.

See Detyens, 147 F. Supp. 2d at 421–22.

Catlin’s alternative fifth cause of action is that SJT
failed to comply with a “Condition of Coverage” under the Policy —
to “provide routine and necessary maintenance to the Drydock.”
(Docket No. 1 at 5.)

To the extent that this cause of action

relies upon the seaworthiness clauses of the Policy, (Docket
No. 50-1 at 7), this claim is also DISMISSED.
E.

SJT’S Claims for Attorneys’ Fees, Punitive Damages, and
Demand for a Jury Trial
1.

Attorneys’ Fees
The “American system” generally requires each party

to pay its own attorneys’ fees unless a statute or contract permits
recovery.
2003).

Mullane v. Chambers, 333 F.3d 322, 337-38 (1st Cir.
Puerto

Rico

law

grants

attorneys’

fees

in

certain

circumstances, and, pursuant to such law, the First Circuit Court
of

Appeals

allows

attorneys’

fees

in

diversity

cases,

where

Civil No. 11-2093 & 11-2116 (FAB)
appropriate.

43

Templeman v. Chris Craft Corp., 770 F.2d 245, 250

(1st Cir. 1985) (citing Pan Am. World Airways, Inc. v. Ramos, 357
F.2d 341, 342 (1st Cir. 1966)). In admiralty cases, however — even
when the Court could hear the case through diversity jurisdiction
— the Court does not apply Puerto Rico law regarding attorneys’
fees; rather the Court applies admiralty law.

Id.; see also

Clarendon Am. Ins. Co. v. Fernandez-Rodriguez, 1999 AMC 2885
(D.P.R. 1999) (stating “[a]lthough attorneys’ fees are awarded in
admiralty cases for disputes which are normally not the subject of
admiralty, the case at bar [sic] does not hinge on an aspect which
remains unaddressed by maritime law, but rather on an allegation of
a breach of a maritime insurance contract.”).

“Under admiralty

law, a court has inherent power ‘to assess attorneys’ fees when a
party has

acted

in

oppressive reasons.’”

bad

faith, vexatiously,

wantonly,

or

for

Id. (quoting Gradmann & Holler GMBH v.

Cont’l. Lines, S.A., 679 F.2d 272, 274 (1st Cir. 1982) (internal
quotations omitted)).
In its opposition for summary judgment, SJT contends
that attorneys’ fees are recognized by the current state of Puerto
Rico law.

(Docket No. 140 at 12–13.)

This case, however, is an

allegation of a breach of a maritime insurance contract, and,
accordingly, the Court applies admiralty law in deciding whether an
award of attorneys’ fees would be appropriate.

The Court does not

find that either party has acted “in bad faith, vexatiously,

Civil No. 11-2093 & 11-2116 (FAB)

44

wantonly, or for oppressive reasons.” Accordingly, Catlin’s motion
to strike SJT’s demand for attorneys’ fees is GRANTED.
2.

Punitive Damages
Catlin demands that the Court strike SJT’s request

for punitive damages because Puerto Rico law governs whether
punitive damages are available in a maritime insurance action, and
punitive damages do not exist under Puerto Rico law.
at p. 22.)

(Docket 135

SJT failed to respond to Catlin’s motion to strike

punitive damages.
As noted above, admiralty law controls this case.
When causes of actions arise under admiralty law, federal law —
rather than state law — controls the damages issue.

Protectus

Alpha Nav. Co., Ltd. v. N. Pac. Grain Growers, Inc., 767 F.2d 1379,
1385 (9th Cir. 1985) (citing Pizani v. M/V Cotton Blossom, 669 F.2d
1084, 1088 n. 2 (5th Cir. 1982)).

“The common law tradition of

punitive damages extends to maritime claims.”

Atl. Sounding Co.,

Inc. v. Townsend, 557 U.S. 404, 414 (2009); see also S. Port
Marine, LLC v. Gulf Oil Ltd. P’ship., 234 F.3d 58, 65 (1st Cir.
2000) (finding that punitive damages for reckless conduct are
traditionally available under the general maritime law).

Punitive

damages are appropriate in maritime cases “for wanton, willful, or
outrageous conduct.”

See Atl. Sounding, 557 U.S. at 409.

Because admiralty law controls the Policy at issue
and punitive damages are available under admiralty law, the Court

Civil No. 11-2093 & 11-2116 (FAB)

45

finds that punitive damages cannot be barred as a remedy in this
case.

Accordingly, Catlin’s motion to strike SJT’s demand for

punitive damages is DENIED.
3.

Jury Trial
When a plaintiff identifies his or her claim as an

admiralty or maritime claim, the plaintiff does not have a right to
a trial by jury.

Matter of Armatur, S.A., 710 F. Supp. 404, 406

(D.P.R. 1989); Fed.R.Civ.P. 38(e).
counterclaim

to

a

plaintiff’s

When a defendant brings a

admiralty

claim,

and

it

is

so

intertwined with the main action that the resolution of both claims
hinges

on

the

same

factual

determinations,

counterclaim cannot be heard by a jury.

the

defendant’s

Clarendon Am. Ins. Co.,

1999 AMC at 2885 (citing Harrison v. Flota Mercante Grancolombiana,
S.A., 1979 AMC 824, 848-49 (5th Cir. 1978)); see also Royal Ins.
Co. of Am. v. Hansen, 125 F.R.D. 5, 9 (D. Mass. 1988) (quoting Ins.
Co. of N.A. v. Virgilio, 574. F. Supp. 48, 51 (S.D. Cal. 1983))
(holding that a defendant’s counterclaim — that is based on the
breach of the same maritime insurance contract as the main claim —
cannot be granted a jury trial because the resolution of the
defendant’s claim would dispose of all or part of the plaintiff’s
action.

“The net result would be to resolve the case in a jury

trial despite the plaintiff’s 9(h) election.”).
As in Clarendon and Royal Ins. Co. of Am., SJT’s
counterclaim stems from the same marine insurance contract as the

Civil No. 11-2093 & 11-2116 (FAB)
main claim.

46

The resolution of the counterclaim and the main claim

thus hinges on determining the same facts.

Granting SJT’s request

for a jury trial would, therefore, dispose of all or part of
Catlin’s

action

by

jury

despite

Catlin’s

9(h)

election.

Accordingly, SJT’s counterclaim cannot be heard in a trial by jury,
and Catlin’s motion to strike SJT’s demand for trial by jury is
GRANTED.
IV.

Conclusion
For the reasons discussed above, the Court GRANTS IN PART and

DENIES IN PART SJT’s motion for summary judgment. Summary judgment
is DENIED as to Catlin’s first, second, sixth and seventh causes of
action.

Summary judgment is GRANTED as to Catlin’s alternative

third, fourth,
doctrine
DISMISSED.

of

fifth,

and eighth

seaworthiness,

and

causes of
those

action

causes

of

under

the

action

are

Catlin’s motion to strike SJT’s demand for attorneys’

fees is GRANTED.

Catlin’s motion to strike SJT’s demand for

punitive damages is DENIED. Catlin’s motion to strike SJT’s demand
for trial by jury is GRANTED.
IT IS SO ORDERED.
San Juan, Puerto Rico, July 30, 2013.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
United States District Judge