MARICOPA CAPITAL LIMITED v. CERTAIN UNDERWRITERS OF LLOYD LONDON B1 101SSLMA 1711 107 1955 2007 1897 (2019)

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

THIS CAUSE comes before the Court on Defendants' Motion for Summary Judgment (D.E. 32) and Plaintiff's Motion for Summary Judgment (D.E. 43).

THE COURT has considered the motions, the relevant portions of the record, and is otherwise fully advised in the premises. For the reasons set forth below, Defendants' Motion for Summary Judgment (D.E. 32) is denied and Plaintiff's Motion for Summary Judgment (D.E. 43) is denied.

I. BACKGROUND

Plaintiff's action arises from a claim for insurance coverage for the damage to a vessel owned by Plaintiff. Plaintiff, Maricopa Capital Limited (“Maricopa”), owned a vessel named “Imagine” (the “Vessel”). The Vessel is a 1989 70' Magnum boat powered by twin Caterpillar engines which were rebuilt in 2013. The Vessel was insured under a marine Policy of Insurance (the “Policy”) issued by Defendants, Barbican Syndicate 1955, Novae Syndicate 2007, Skuld Syndicate 1897, 1897 (collectively, “Syndicates”) collectively d/b/a Certain Underwriters at Lloyd's, London (“Lloyd's”) and Reaal Schadeverzekeringen N.V. (“Reaal”) (collectively with Lloyd's, “Defendants” or “Underwriters”). Defendants Policy covered the Vessel from May 6, 2017 to May 6, 2018.

On or about June 30, 2017, the Vessel's starboard engine overheated and failed while in transit from Exuma to Nassau, Bahamas. Following the incident, using the port engine, the Vessel's captain completed the voyage and returned to Miami, Florida. In July, upon return to Florida, the Vessel was inspected by Caterpillar service provider Performance Power of South Florida (“Performance Power”). On July 24, 2017, notice of the incident was provided to Underwriters. On August 2, 2017, Performance Power issued its report regarding the damage sustained to the Vessel and the starboard engine. Thereafter, at the suggestion of the Defendants' agent, Braemar, the Vessel was inspected by another Caterpillar service provider, Ring Power. On September 5, 2017, after inspection of the Vessel, Ring Power issued its initial repair estimate “Quote Number 1” of $182,819.82 for the repair of both the starboard engine and port engine. On September 14, 2017, at the request of Defendants surveyor, Ring Power issued an estimate for approximately $101,923.86 for repair of only the starboard engine. Thereafter, Ring Power issued subsequent estimates for different amounts as to repair of both engines. All estimates provided by Ring Power contained expiration dates. In October 2017, Underwriters paid $25,000 toward repairs to Maricopa. To date, Underwriters has issued no further payment to Plaintiff.

Subsequently, a dispute arose regarding the scope of coverage and damages for the June 30, 2017 incident. Specifically, Plaintiff claims that both engines were damaged and sought insurance proceeds to repair both engines. Underwriters acknowledged coverage of damage to the starboard engine but denied Plaintiff's claim to the extent it sought insurance benefits for the port engine asserting there was no evidence it was damaged by the underlying incident.

On October 5, 2018, Maricopa filed its operative Amended Complaint in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida alleging breach of contract and statutory bad faith. On November 14, 2018, Defendants removed Plaintiff's suit to this Court based on admiralty jurisdiction and diversity. (D.E. 1). On November 14, 2018, Defendants filed its Motion to Dismiss Plaintiff's Amended Complaint and Strike Any Claims Regarding Loss of Use and Lost Income. (D.E. 3). On January 10, 2019, this Court granted Defendants Motion to Dismiss dismissing Plaintiff's statutory bad faith claim and claims for loss of use and lost income damages. (D.E. 10). The matter is now before the Court on the parties' cross-motions for summary judgment. (D.E. 32 and 43).

II. LAW & ANALYSIS

A. Legal Standard

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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.” Fed. R. Civ. P. 56(c). The burden of establishing the absence of a genuine issue of material fact lies with the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986). A court's focus in reviewing a motion for summary judgment is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997). The Court should not grant summary judgment unless it is clear that a trial is unnecessary, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and any doubts in this regard should be resolved against the moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 26 L.Ed.2d 142 (1970). This standard is not affected by the filing of cross motions for summary judgment, and the Court must determine for each side whether a judgment may be entered in accordance with Rule 56.

B. Analysis

1. Cross-Motions for Summary Judgment

The parties agree that a valid insurance policy exists. See Defendants' Answer, paragraphs 9-16 (D.E. 16 & 17). The parties also agree that the Policy covers damages to the starboard engine of the Vessel that occurred during the June 2017 incident. However, the parties dispute the amount due under the Policy and whether the port engine is a covered loss under same.

The Policy covers “[h]ull and Materials, Engines and Machinery and everything connected therewith, nothing excluded,” subject to the Policy terms and conditions. (See D.E. 32-1, Market Reform Contract, Section I, p. 1 of 15). The Policy expressly provides coverage for “failure in the working mechanism of machinery or motor generators or other electrical machinery and their connections which causes the same to cease functioning or to function improperly.” (See D.E. 32-1, Market Reform Contract, Section I, p. 3 of 15).

Additionally, the Policy contains the following relevant provisions:

Coverage

The insurance provided by this Section covers, subject to the exclusions and limitations of this Policy, against ALL RISKS of physical loss or damage to the property covered from any external cause, as well as physical loss or damage directly caused by fire, explosions, bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull (excluding the cost and expense of repairing or replacing any defective part), provided such loss or damage has not resulted from want of due diligence or intentional damage by the owners of the Yacht or by the Assured; provided always that the amount recoverable hereunder shall not exceed the amount of insurance.

(See D.E. 32-1 Exhibit A, p. 3 of 7). The Policy further excludes coverage as a result of “[a]ny loss or damage directly or indirectly caused by or resulting from wear and tear, gradual deterioration, inherent vice, marine borers, vermin, or electrolysis.” (See D.E. 32-1 Exhibit A, p. 5 of 7).

Also, Plaintiff had a duty to report any damages sustained to the Vessel immediately:

Notice of Loss And Filing of Proof

It is agreed by the Assured to report immediately to the Assurers or to their representative who shall have issued this Policy every occurrence which may become a claim under this Policy, and shall also file with the Assurers or their representative a detailed sworn proof of loss and proof of interest and/or receipted bills in case of a partial loss, within ninety (90) days from date of loss.

(See D.E. 32-1 Exhibit A, p. 1 of 7).

a. Defendants' Motion for Summary Judgment

Defendants move for summary judgment asserting that there is no record evidence linking the Vessel's damaged port engine to the damages sustained because of the June 30, 2017 incident. (D.E. 32). Specifically, according to Underwriters, there is no evidence that the Vessel's port engine was damaged by the underlying failure of the starboard engine. Id. Alternatively, Underwriters contends that the evidence demonstrates Maricopa's lack of reasonable care or due diligence in the maintenance of the Vessel, because Plaintiff failed to inspect the port engine despite Defendants' willingness to cover any costs associated with the inspection and testing of that engine. Id. Underwriters argues that because Maricopa never inspected or documented any damage to the Vessel's port engine, summary judgment should be entered in Defendants' favor. Id.

In support of its motion for summary judgment, Underwriters relies on the deposition testimony of David Orr of Performance Power. (D.E. 32-2). According to Mr. Orr, in July 2017, upon the Vessel's return to Florida the owner of the Vessel, Mr. Boutboul, contacted Performance Power to conduct an inspection and analysis of the failed starboard engine. (See Orr Deposition Trans., p. 8:13-24; p. 10:13-20; pp.29:24-30:6). Mr. Schell, the Operations Manager for Performance Power authored a letter dated August 2, 2017 detailing the diagnosis of the failed starboard engine. (See Orr Deposition Trans., pp. 22:12-23:18). Notwithstanding its diagnosis of the starboard engine, Performance Power did not provide an estimate of repair costs. (See Orr Deposition Trans., p. 28:9-18; p. 39:15-40:8). According to Mr. Orr, Performance Power did not inspect or analyze the port engine. Mr. Orr further testified that if asked, Performance Power would have performed an analysis of the port engine. (See Orr Deposition Trans., p. 30:3-22). However, Performance Power was called specifically to look at the failed starboard engine. Id. During its inspection, Performance Power disassembled parts of the starboard engine. (See Orr Deposition Trans., p. 42:24-43:4). Performance Power did not reassemble the parts to the starboard engine after completing its inspection and providing the report. (See Orr Deposition Trans., p.43: 5-25). Although Mr. Orr testified that without signs of failure there would be no reason to rebuild the port engine because it had low running hours, he also testified that given the damaged engine it would be prudent to inspect the non-damaged engine. (See Orr Deposition Trans., p. 47:9-25).

Underwriters also references the deposition of Sean Glocker of Ring Power. (D.E. 32-3). Ring Power is another authorized Caterpillar service provider asked to inspect the Vessel and give a secondary opinion regarding repairs. (See Glocker Deposition Trans., p. 9:5-25). During his deposition, Mr. Glocker testified that Ring Power never inspected nor ascertained whether the port engine ever failed or was, in fact, damaged. (See Glocker Deposition Trans., p. 24: 17-20; p. 50:18-21; p. 177:8-11; p. 179:2-12). Mr. Glocker also testified that following his inspection of the Vessel, he did not generate a report or any notes, instead, he only supplied an estimate of rebuild for both engines dated September 5, 2017. (See Glocker Deposition Trans., p. 14:8-19). Mr. Glocker further testified that although only one engine failed, his September 5, 2017 estimate of $182,819.82 included the cost for rebuild of both engines because it was possible that the other engine was starting to fail. (See Glocker Deposition Trans., pp. 23:22-24:20). Thereafter, Ring Power issued numerous subsequent estimates for different scopes of work as to both engines. See id. at pp. 28:14-19, 31:2-24, 35:3-22, 39:3-8, 40:5-11, 40:16-41:22, 54:3-23, 56:3-57:21, 58:22-25, Exhibits 2-7).

Regarding concerns of potential damage to the port engine, Mr. Glocker indicated that his “only concern would be that one failed, why did that fail, [and] what would cause it[.]” (See Glocker Deposition Trans., p. 89:5-19). However, Mr. Glocker also testified that in an email to Mr. Boutboul, he advised that Ring Power, as a CAT dealer strongly recommended rebuilding both engines because “if we only rebuild one engine there is an extreme possibility that the same failure can occur in the sister engine.” (See Glocker Deposition Trans., p. 124:3-25). The email also notes that “even if failure does not happen to the sister engine you could have load issues due to one rebuilt engine and the other not being rebuilt.” (See Glocker Deposition Trans., p. 125, line 1-13). Mr. Glocker explained that having a rebuilt engine working harder than a non-rebuilt engine decreases its life cycle. Id. Notably, Mr. Glocker testified that the only way he could guaranty that the Vessel be returned to its condition prior to the loss included “an all-inclusive price for any and all parts and labor ․ concerning the first engine, and ․ may be discovered as being required with respect to the second [port] engine.” (See Glocker Deposition Trans., p. 136:1-25).

Mr. Glocker continued that because no one at Ring Power determined that the port engine was damaged, the email and estimates referencing rebuild of the port engine were just recommendations. (See Glocker Deposition Trans., p. 177, line 8-23). Further, Glocker testified that in his experience where customers have a single engine failure, 50% may have both engines repaired and/or overhauled. (See Glocker Deposition Trans., p. 191:18-24; p. 192:1-16).

Plaintiff responds that the record evidence shows that the Vessel's port engine was damaged and required repairs and/or overhauling as a result of the June 2017 incident. [D.E. 72]. Specifically, Plaintiff relies on the deposition of Mr. Boutboul who testified that the captain of the Vessel, Matthew Terence, advised him of damage to the port engine. (See Deposition of Philippe Boutboul, pp. 64:23-65). This testimony is supported by July 2017 emails to Mr. Boutboul from Captain Matthew reporting that while running on the port engine there was continued smoke from the engine room and/or exhaust after the starboard engine failure. (72-4, Exhibit D). Captain Matthew also reported “RMP fluctuations while running on just the port motor on our return to port” and suggested that Caterpillar be advised to fully diagnose the port motor as well. Id. Based on this evidence, there are material issues of fact that preclude summary judgment for either party.

With respect to Underwriter's claim that it was Maricopa's lack of reasonable care or due diligence in the maintenance of the vessel that caused the damages to the port engine, the evidence of record is to the contrary. The December 4, 2017, letter from Yachtline Broker Paul Brenchley to Mr. Boutboul indicates that Maricopa was prudent and diligent regarding this claim. (See D.E. 44-25, Ex. “Y”). Mr. Brenchley confirmed Maricopa's diligence and cooperation in his deposition testimony stating the Mr. Boutboul complied with all instructions and requests throughout the claim. (See D.E. 72-5, Deposition of Paul Brenchley, p. 54:1-14).

Moreover, in a letter dated February 14, 2018, Mr. Roberts, Underwriters' Group Head of Claims, informed Mr. Boutboul, that Defendants “intend to ensure an inspection of the Portside Engine be carried out to establish whether the damage is attributable to the original incident.” However, Kevin Hislop, Defendants assigned surveyor charged with inspecting the Vessel, testified that he was not informed that Defendants had agreed to inspect the portside engine. (See D.E. 44-5 and Deposition of Kevin Hislop, p. 64:14-25). The letter to Mr. Boutboul also stated that Mr. Hislop's determination of “reasonable cost of claim related repairs” would include “attending your Yacht together with Ring Power Engineer to complete the assessment to establish the potential damages to the Port Engine.” Mr. Hislop instead testified that “this was not done” because Mr. Boutboul “didn't tell [Hislop] anything about the letter to him” and “didn't mention that we also intend to ensure inspection of the port side engine to be carried out.” (See Deposition of Kevin Hislop, p. 66:6-25). This testimony creates a genuine issue of fact as to who was ultimately responsible for ensuring the inspection of the portside engine to determine an damage attributable to the underlying incident.

b. Plaintiff's motion for summary judgment

Conversely, Plaintiff moves for summary judgment on its claim for breach of contract (Count I) against Underwriters asserting that Defendants breached their insurance contract with Maricopa by failing to pay the full amount they acknowledge is due under the policy for physical loss and damage to the Vessel. [D.E. 43]. Specifically, Maricopa asserts while there is a dispute concerning the full scope and amount of the covered loss, it is undisputed that Underwriters are liable under the Policy and that they agree that they owe but have not paid $182,000.00 less the deductible and prior $25,000 payment. [D.E. 77, p. 3]. Accordingly, Maricopa contends the Court should enter partial summary judgment in Plaintiff's favor on its Breach of Contract claim. Id. The Court disagrees.

Although Underwriters concedes liability as to coverage of the starboard engine, it disputes the amount due Plaintiff. Moreover, Defendants contend that the prior payment of $25,000 to Maricopa was for the loss to the Vessel's starboard engine and did not represent agreement that the port engine was damaged at all. (see D.E. 80-1). Further, according to Underwriters, the offer of $182,818.82 less deductibles and previous $25,000 interim payment was not an admission of liability as to that amount, but rather a full and final settlement offer for repairs to the starboard engine. (See 44-24). This settlement offer explicitly stated that “there is no further claim regarding the portside engine, which was confirmed as not damaged by the initial incident in July 2017.” (D.E. 44-24, p. 2). However, notwithstanding Underwriters assertion that the offer of $182,818 was for repair of the starboard engine only, this offer is based on the “Ring Power Quote number 1” of $182,818.82 dated September 5, 2017 which contemplates repair of both the starboard and portside engines. (See D.E. 44-13; 32-3, p. 20:7-23, pp.23-24:22-3). Additionally, Maricopa relies on the deposition testimony of James Roberts, Underwriters' corporate representative, who acknowledged consent to the estimate of $180,000 in “Quote Number 1” included work on both engines. (See D.E. 72, p. 10; Deposition of James Roberts, p. 54:7-13; p. 126:10-15; pp. 272-273:4-8).

This conflicting evidence raises material fact disputes about coverage and loss amount issues that cannot be resolved under Rule 56. Whether the port engine was subject to coverage under the Policy as a result of the June 2017 incident, and the amount due Plaintiff for damage as to either or both engines, are questions for trial. Having considered the arguments for both sides, the Court finds that there exist genuine issues of triable material fact that precludes summary judgment for Plaintiff or Defendants.

Plaintiff also moves for summary judgment on Defendants' Affirmative Defenses to Plaintiff's Amended Complaint filed January 24, 2019. [D.E. 43]. With respect to Plaintiff's motion for summary judgment as to Defendants' affirmative defenses, the Court finds that Defendants properly pled its affirmative defenses. As such, Plaintiff's motion on this basis is denied.

III. CONCLUSION

Based on the foregoing, it is hereby

ORDERED AND ADJUDGED that Defendants' Motion for Summary Judgment [D.E. 32] is DENIED. It is further

ORDERED AND ADJUDGED that Plaintiff's Motion for Summary Judgment [D.E. 43] is DENIED.

DONE AND ORDERED in Chambers at Miami, Florida, this 24th day of October, 2019.

DONALD L. GRAHAM, UNITED STATES DISTRICT JUDGE