Miele, et al. v. Certain Underwriters at Lloyd’s of London

Miele, et al. v. Certain Underwriters at Lloyd’s of London

By: Forrest Guedry

The dispute in this case concerns the denial of insurance coverage the plaintiffs received from the defendants. Frank Miele and Reginald Carnick, herein plaintiffs, are joint owners of a vessel named BLUE SIDE UP. Plaintiffs contracted an insurance policy with defendants to cover their vessel. The policy provided insurance for damages to the hull up to $92,000 and for loss of personal effects up to $2,500. While the policy was in effect and the vessel was docked, the BLUE SIDE UP sank. Within two days of the vessel sinking, plaintiffs filed a claim under their policy with defendants. Consequently, defendants hired Stewart Hutcheson, a marine surveyor, to investigate the cause of the vessel sinking. Following inspection of the vessel, Mr. Hutcheson determined that BLUE SIDE UP sank because water entered the vessel through a "degraded and rotten" air conditioning hose. Upon discovering the reason for the vessel sinking, the defendants denied the plaintiffs claim. Defendants denied the claim based on 'Exclusion C’ of the policy. ‘Exclusion C’ read in pertinent part, "this insurance does not cover losses and or damages arising (whether incurred directly or indirectly) from... [t]he cost of repairs or replacing any part of YOUR BOAT by reason of wear and tear, gradual deterioration, osmosis, wet or dry rot, corrosion, weathering, marring, scratching, denting, vermin, pets or marine life, or electrolytic or galvanic action.” (Emphasis added). After plaintiffs were denied coverage, they filed suit in Florida state court requesting a declaratory judgment. Plaintiffs alleged that defendants did not comply with Florida law when they investigated the sunken vessel and that defendants, in denying them coverage, breached the contract, which required them to provide insurance to the plaintiffs. Once defendants were served, they promptly removed the case to federal District Court.During the discovery stage, defendants put plaintiffs on notice that they planned to use David Hills, a materials and corrosion engineer, as an expert at trial. Mr. Hills reviewed both pre-loss and post-loss survey reports of the sunken vessel, as well as a sample of the hose alleged to have caused the loss. Next, Mr. Hills conducted scientific tests that he used to issue areport on his results. The plaintiffs received these reports within the statutory deadline for disclosure of information obtained by expert witnesses.Once discovery ended, the defendants filed a motion for summary judgment. This motion was accompanied by evidentiary materials, which supported the defendants’ case. Included in these materials was the expert’s declaration. Although the plaintiffs did not receive the actual expert’s declaration during discovery, they did receive the declaration when they were served with the defendants’ motion for summary judgment. This declaration said nothing more than what had previously been expressed in the expert’s report. Regardless, the plaintiffs filed a motion to strike the expert’s declaration. The District Court promptly denied the plaintiffs’ motion to strike and granted the defendants’ motion for summary judgment. The court found that the expert’s declaration was materially similar to the information contained in the expert’s report. Based on this fact, the court reasoned that because the plaintiffs received the expert’s report and no previously undisclosed information was contained in the declaration, there was no reason to strike the expert’s declaration.The same issue arose at the Appellate Court level. The Appellate Court affirmed the District Court’s view that because the expert’s report was materially similar to his declaration the defendants’ failure to provide the plaintiffs with the expert’s declaration was harmless.Furthermore, the Appellate Court affirmed the District Court’s grant of the defendants’ motion for summary judgment. Despite the affidavits filed on behalf of the plaintiffs declaring how well the plaintiffs had taken care of the vessel in years past, the court found that there was no genuine issue of material fact as to what caused the hose's deterioration.The plaintiffs’ final argument relies on the court finding that ‘Exclusion C’ was ambiguous and should be read to only exclude the cost of replacing a single air conditioning hose. Under Florida law, the court must interpret the policy according to its plain meaning and find any ambiguities in favor of coverage. Further, the policy is deemed ambiguous only when the language issusceptible to two reasonable interpretations, one that provides coverage and the other that excludes coverage. Here, ‘Exclusion C’ is not ambiguous. It clearly excludes coverage for losses and damages arising directly or indirectly from the cost of repairing or replacing a part due to wear and tear. Consequently, the Appellate Court affirmed the District Court’s decision to grant the defendants’ motion for summary judgment concerning the plaintiffs’ breach of contract claim.