Various Summary Judgment Issues decided in St. Paul Fire & Marine Insurance Litigation
Various Summary Judgment Issues decided in St. Paul Fire & Marine Insurance Litigation
Summary by Tyler Loga
St. Paul Fire & Marine Ins. Co. v. Abhe & Svoboda, Inc., Civil No. 12-1482 (DWF/FLN), 2017 U.S. Dist. LEXIS 80415; 2017 WL 2274956, (D. Minn. May 24, 2017).
BackgroundDefendant, Abhe & Svoboda, Inc. (“ASI”) was hired to repair and paint the Pell Bridge over the Narragansett Bay Bridge in Rhode Island. In order to perform this work, ASI chartered two “dumb” barges. ASI applied to Plaintiff-insurer, St. Paul Fire and Marine Insurance Company (“St. Paul Fire”) to insure the barges. St. Paul Fire issued a one-year Marine “Hull Policy” and a Protection and Indemnity Policy (“P&I Policy”) effective July 1, 2011. On October 29, 2011 a storm sank barge SEI-34.Under information from the Coast Guard that the wreck would be federalized if ASI did not timely remove it, St. Paul Fire negotiated a contract with a salvager (“Donjon”) on behalf of ASI. Donjon removed the barge and equipment still attached, but failed to recover equipment that had fallen off. In order to comply with the Coast Guard’s ultimatum, ASI was required to find a second salvager and had to arbitrate with Donjon seeking full payment. ASI ultimately prevailed in arbitration with a reduction in the amount sought.St. Paul Fire filed a complaint, seeking judicial declaration that it was not obligated to cover the losses of ASI. In response ASI filed four counterclaims. St. Paul Fire moved for summary judgment and to strike certain claims. ASI filed its own motion for partial summary judgment. The district court awarded summary judgment in favor of St. Paul Fire on one of its arguments; but the Eighth Circuit Court of Appeals reversed on ASI’s appeal, finding that there was a genuine issue of material fact. ASI responded with its own motion for partial summary judgment.On RemandOn remand the parties raised the following issues from their previous motions: Remaining from ASI’s motion for partial summary judgment was (D1) whether the P&I Policy contained an express warranty of seaworthiness. Remaining from St. Paul Fire’s motion for summary judgment is (P1) if the P&I policy contained an express warranty of seaworthiness, whether the barge was seaworthy; (P2) whether ASI was collaterally estopped from seeking damages from St. Paul’s Fire because a previous arbitrator already found the same damages unrecoverable from Donjon; (P3) assuming that St. Paul Fire negligently negotiated the contract with Donjon, whether St. Paul Fire can be found to be the legal cause of those damages resulting from the salvage operator’s breach; (P4) whether ASI was entitled to a jury for any of its claims; and finally (P5) whether ASI could seek attorney fees for defending this action.Seaworthiness (D1 and P1)St Paul Fire argued that ASI breached the warranty of seaworthiness. ASI argued that that the P&I policy contained no express or implied warranty of seaworthiness. Therefore, to settle both arguments the court determined whether the P&I policy contained a warranty of seaworthiness. Hull insurance policies contain an implied warranty of seaworthiness while P&I policies do not. The contract at issue here included both the Hull policy and the P&I policy. The contract also includes an express warranty of seaworthiness. ASI argued that this express warranty applied to the Hull policy and not the P&I, while St. Paul Fire argued that the express warranty must apply to the P&I because the Hull Policy already included an implied warranty.The express warranty of seaworthiness is part of the special conditions forms organized with the Hull Policy. Separately, the P&I policy contains another section of special conditions, which does not include a warranty of seaworthiness. The numbering of these separate special condition forms corresponds with the policies they follow. “OMOH” forms apply to the Hull policy while “OMPI” forms applied to the P&I policy. Here, the express warranty of seaworthiness was numbered “OMOH”. Further, elsewhere in the contract, when St. Paul Fire wanted to carryover conditions from one policy to another they were explicitly incorporated. The court, considering the separate special condition sections, form numbering, and the lack of explicit incorporation concluded that the P&I Policy included no warranty of seaworthiness. Therefore, ASI’s motion for partial summary judgment was granted (D1) and St. Paul Fire’s was partially denied (P1).Collateral Estoppel (P2)St. Paul Fire argued that ASI was collaterally estopped from seeking damages because an arbitrator had already found that ASI could not recover those damages from a 3rd Party salvager with whom St. Paul Fire contracted to recover the wreck. The salvager recovered the barge, but left certain equipment unrecovered requiring ASI to contract with a second salvager to avoid loss of its property. Under Minnesota law, which the court found applicable, collateral estoppel requires four elements be satisfied: (1) the issue must be identical to the one adjudicated prior; (2) there was a final judgment on the merits; (3) the estopped party was a party or in privity with a party to the prior adjudication; and (4) the estopped party was given full and fair opportunity to be heard on the adjudicated issue. The court found that St Paul Fire failed to prove all of the required elements because they failed to show that ASI’s damages from the salvager’s breach would be the same as ASI’s damages from St Paul Fire’s breach. The court therefore denied the motion for summary judgment seeking collateral estoppel (P2).Causation (P3)St. Paul Fire moved for summary judgment on ASI’s negligence claim. ASI alleged that St. Paul negligently negotiated the contract with the salvager allowing for the abandonment of the contract and ASI’s damages and costly arbitration. St. Paul Fire argued that ASI could not prove causation, that is, that ASI was unable to show that had the contract been worded differently the salvager would have completed the job. The court concluded that there existed an issue of material fact as to whether the poorly worded contract caused the breach. It could have been that the contract indeed had no effect on the salvager’s decision to breach; but, because St. Paul Fire presented no evidence to show this, the court denied St. Paul Fire’s motion for summary judgment on ASI’s negligence claim (P3).Defendant’s Right to Jury (P4)St. Paul Fire moved to strike ASI’s request for a jury because juries are not generally allowed in admiralty cases. ASI argued that it should be allowed a jury for the common law negligence claim. Courts have held that when the defendant’s counterclaims arise out of the same contract as the plaintiff’s and are sufficiently related, the plaintiff’s admiralty designation trumps the jury demand. As ASI’s breach-of-contract claim was based on the same policy under which St. Paul Fire brought its original claim under admiralty jurisdiction, the admiralty designation supersedes ASI’s jury demand. Further, because the negligence claim is just an alternative theory of liability based on the same conduct, ASI is not entitled to a jury on the negligence claim. The court granted St. Paul Fire’s motion to strike ASI’s jury request.Defendant’s Right Attorney Fees (P5)St. Paul Fire moved to strike ASI’s claim for attorney fees because the claim was barred under admiralty law. The court, relying on Assicurazioni Generali S., held that state contract law applies to disputes arising out of marine insurance contracts unless an established federal admiralty rule addresses the issue raised. (362 F.3d at 1111.) Here, there was no such admiralty rule so Minnesota law was applied. Under Minnesota law, an insured can recover attorney fees from successfully defending an insurer’s declaratory judgment action depending on the language of the policy. Minnesota courts have awarded attorney fees based on policies worded similarly to the policy in question. Therefore, the court denied St. Paul Fire’s motion to strike ASI’s claim for attorney fees, and ASI may recover attorney fees if it successfully defends the declaratory-judgment action.
