AGCS Marine Ins. Co. v. World Fuel Servs., Inc.

Decision Date11 November 2016
Docket Number14 Civ. 5902 (PAE)
Citation220 F.Supp.3d 431
Parties AGCS MARINE INSURANCE COMPANY, Plaintiff, v. WORLD FUEL SERVICES, INC. and World Fuel Services Europe, Ltd., Defendants.
CourtU.S. District Court — Southern District of New York

John Anthony Vincent Nicoletti, Kevin John Byron O'Malley, Nooshin Namazi, Nicoletti Hornig & Sweeney, New York, NY, for Plaintiff.

Mari Kristine Bonthuis, Covington & Burling LLP, New York, NY, Marienna H. Murch, Martin H. Myers, Covington & Burling, San Francisco, CA, for Defendants.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge

On May 17, 2016, the Court issued a decision resolving cross-motions for summary judgment as to liability in this insurance-coverage lawsuit. See AGCS Marine Ins. Co. v. World Fuel Servs., Inc. , No. 14 Civ. 5902 (PAE), 2016 WL 2918428 (S.D.N.Y. May 17, 2016) ("May 17 Decision" or "Decision"). This decision resolves the remaining issues in this case, involving the calculation of damages and pre-judgment interest.

I. Background
A. Factual Background

The Court assumes familiarity with its decision as to liability and sets out here only those facts necessary to understand the outstanding issues.

This case involves a dispute between an insurer, AGCS Marine Insurance Company ("AGCS"), and its insureds, World Fuel Services, Inc. and World Fuel Services Europe, Ltd. (collectively, "World Fuel"). The dispute involved whether World Fuel's insurance policy with AGCS covered a multi-million dollar loss of marine gas oil ("MGO") by World Fuel. See Marine Open Cargo Policy No. OC91524500, Dkt. 63, Ex. 6 (the "Policy"). The loss resulted from a scam orchestrated by a fraudster, under the assumed name "James Battell," who impersonated the Defense Logistics Agency of the U.S. Government ("DLA"). The fraudster arranged to purchase the MGO through World Fuel, and thereby caused World Fuel to deliver substantial quantities of MGO to the fraudster's ship off the coast of Africa, with which "Battell," posing as DLA, then absconded.

AGCS, invoking admiralty jurisdiction, brought suit in this Court, seeking a declaratory judgment that the loss was not covered. See Dkt. 1. World Fuel, invoking diversity jurisdiction, filed counterclaims for a declaratory judgment that the loss was covered and for damages based on a breach of contract. See Dkts. 4, 18.

In the May 17 Decision, which followed discovery, the Court granted summary judgment for World Fuel on liability. In brief, the Court held that World Fuel's loss fell within the period of coverage of its "all-risk" transit insurance policy because, under New York law, delivery to a fraudster, rather than a bona fide customer, does not terminate coverage. Decision at 32–34. The Court directed the parties to submit a joint letter, identifying the remaining issues in the case and proposing a schedule to resolve them. Decision at 39.

B. Open Issues

In a May 31, 2016 joint letter, the parties identified three open issues on which each proposed to move for summary judgment. Dkt. 97 ("Letter"). These were: (1) which invoice is to be used as to measure World Fuel's damages?; (2) what rate of prejudgment interest applies?; and (3) is World Fuel entitled to attorneys' fees and/or consequential damages?

On June 22, 2016, World Fuel filed a memorandum of law, Dkt. 105 ("WFS Br."), and supporting declarations, Dkts. 106, 107. On July 13, 2016, AGCS filed its memorandum of law, Dkt. 115 ("AGCS Br."), and a supporting declaration, Dkt. 116. On July 22, 2016, World Fuel filed a reply memorandum, Dkt. 118 ("WFS Rep. Br."), and another declaration, Dkt. 119. On August 18, 2016, the Court heard argument. See Dkt. 141 ("Tr."). At argument, World Fuel withdrew its claims for fees and consequential damages, Tr. 59–60, mooting the third issue.

II. Legal Standards Governing Summary Judgment Motions

To prevail on a motion for summary judgment, the movant must "show [ ] 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). The movant bears the burden of demonstrating the absence of a question of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

When the movant has properly supported its motion with evidentiary materials, the opposing party must establish a genuine issue of fact by "citing to particular parts of materials in the record." Fed. R. Civ. P. 56(c)(1) ; see also Wright v. Goord , 554 F.3d 255, 266 (2d Cir. 2009). An issue of fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. SCR Joint Venture L.P. v. Warshawsky , 559 F.3d 133, 137 (2d Cir. 2009). "[A] party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment." Hicks v. Baines , 593 F.3d 159, 166 (2d Cir. 2010) (internal quotation marks and citation omitted). "Only disputes over facts that might affect the outcome of the suit under the governing law" will preclude a grant of summary judgment. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether there are genuine issues of material fact, the Court is "required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." Johnson v. Killian , 680 F.3d 234, 236 (2d Cir. 2012) (quoting Terry v. Ashcroft , 336 F.3d 128, 137 (2d Cir. 2003) ).

"A court faced with cross-motions for summary judgment need not ‘grant judgment as a matter of law for one side or the other,’ but ‘must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.’ " Cariou v. Prince , 784 F.Supp.2d 337, 345 (S.D.N.Y. 2011) (quoting Heublein, Inc. v. United States , 996 F.2d 1455, 1461 (2d Cir. 1993) ).

III. Which Invoice Supplies the Measure of World Fuel's Damages?

Calculating World Fuel's damages requires the Court to apply the Policy's "valuation" clause. In pertinent part, it states that "the goods and/or merchandise and/or property insured under this policy shall be valued ... [at the] Invoice value (premium included) , including all charges in the invoice and including prepaid and/or guaranteed and/or advanced freight, if any plus 10%." Policy at 2 (emphasis added).

The parties dispute which invoice is the proper measure of "[i]nvoice value." Id. at 2. World Fuel takes the position that the relevant invoice is the one that it sent to its customer, the fraudster "Battell" posing as DLA, pursuant to their written agreement. That invoice ("the resale invoice") was for $17,910,833.28 (the "re-sale invoice"). See WFS Br. at 1–5. AGCS, on the other hand, takes the position that the relevant invoice is the one that World Fuel was sent by its fuel supplier, Monjasa, which was for about $17 million (the "supply invoice"). See AGCS Br. at 1–3.1

Because resolving this dispute requires construing a term within the insurance policy, the Court therefore first reviews the legal principles governing such interpretation.

A. Principles for Interpreting Insurance Policies under New York Law

"The construction of an insurance contract is ordinarily a matter of law to be determined by the court." U.S. Underwriters Ins. Co. v. Affordable Hous. Found., Inc. , 256 F.Supp.2d 176, 180 (S.D.N.Y. 2003) (citing Town of Harrison v. Nat'l Union Fire Ins. Co. of Pittsburgh , 89 N.Y.2d 308, 316, 653 N.Y.S.2d 75, 675 N.E.2d 829 (1996) ). In resolving a summary judgment motion involving contract interpretation, "a court should accord [contract] language its plain meaning giving due consideration to the surrounding circumstances and apparent purpose which the parties sought to accomplish." Palmieri v. Allstate Ins. Co. , 445 F.3d 179, 187 (2d Cir. 2006) (quoting Thompson v. Gjivoje , 896 F.2d 716, 721 (2d Cir. 1990) ).

When contract language is unambiguous, "the district court [may] construe it as a matter of law and grant summary judgment accordingly." Id. But, if policy language is ambiguous, New York law provides that such ambiguities must be construed in favor of the insured and against the insurer. See Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co. , 600 F.3d 190, 201 (2d Cir. 2010) ; Handelsman v. Sea Ins. Co. , 85 N.Y.2d 96, 101, 623 N.Y.S.2d 750, 647 N.E.2d 1258 (1994) ("Where there is ambiguity as to the existence of coverage, doubt is to be resolved in favor of the insured and against the insurer.").

Whether a contract is ambiguous is a threshold question of law for the court. Real Estate Purchasing Grp. v. St. Paul Fire & Marine Ins. Co. , 472 F.3d 33, 42 (2d Cir. 2006). "Language in an insurance contract will be deemed ambiguous if reasonable minds could differ as to its meaning." Haber v. St. Paul Guardian Ins. Co. , 137 F.3d 691, 695 (2d Cir. 1998). "[A]mbiguity exists where the terms of an insurance contract could suggest ‘more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.’ " Morgan Stanley Grp. Inc. v. New England Ins. Co. , 225 F.3d 270, 275 (2d Cir. 2000) (quoting Lightfoot v. Union Carbide Corp. , 110 F.3d 898, 906 (2d Cir. 1997) ).

If the language in an insurance policy is ambiguous, a court should examine the language "from the vantage point of the reasonable expectations and purposes of the ordinary person." Haber , 137 F.3d at 695 (alterations and internal quotation marks omitted). The court should also "consider extrinsic evidence submitted by the parties to assist in determining their actual intent." McCostis v. Home Ins. Co. of Ind. , 31 F.3d 110, 113 (2d Cir. 1994). "If the extrinsic evidence does not yield a conclusive answer as to the parties' intent,...

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