American Home Assur. v. Masters' Ships, 03 CIV. 0618(JFK).
| Decision Date | 23 March 2006 |
| Docket Number | No. 03 CIV. 0618(JFK).,03 CIV. 0618(JFK). |
| Citation | 423 F.Supp.2d 193 |
| Parties | AMERICAN HOME ASSURANCE COMPANY, New York Marine & General Insurance Co., Bluewater Insurance ASA, Generali France Assurances, Hamburger Versicherung VVAG VERS A (Converium), Hamburger Versicherung VAG VERS B(R + V), Gothaer VAG, ING Insurance, and "the Ethniki" Hellenic General Company S.A., Plaintiffs, v. MASTERS' SHIPS MANAGEMENT S.A., and Endeavour Navigation S.A. and the Royal Bank of Scotland PLC, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Waesche, Sheinbaum & O'Regan, P.C., New York, Of Counsel: Francis M. O'Regan, Esq., Richard W. Stone II, Esq., for Plaintiffs.
Freehill, Hogan & Mahar LLP, New York, Of Counsel: Eric E. Lenck, Esq., Michael Fernandez, Esq., John F. Karpousis, Esq., for Defendants Masters' Ships Management S.A. and Endeavour Navigation S.A.
FINDINGS OF FACT and CONCLUSIONS OF LAW
This is a maritime insurance action arising out of the grounding of the bulk carrier SATURN II off the western coast of India on June 25, 2002. Plaintiffs are a group of insurers that underwrote hull and machinery (H & M) insurance on the SAURN II. Defendants are the owners and managers of the vessel, respectively.1 Plaintiffs seek a declaratory judgment that the insurance policies are voidable ab initio because of defendants' alleged breaches of the duty of utmost good faith, or, alternatively, that they may deny coverage because defendants cannot show a valid claim and because the vessel was unseaworthy.
Defendants have counterclaimed. They allege that the SATURN II was a constructive total loss and that plaintiffs are liable on the policies for $6,000,000. Defendants further allege that plaintiffs failed to satisfy sue and labor and general average obligations under the policies; that plaintiffs themselves breached fiduciary duties during their investigation of the claim; and that plaintiffs' actions with respect to the discharge of cargo and salvage caused additional damage in an undetermined amount. Defendants also contend that plaintiffs should be estopped from denying coverage. Both sides demand attorneys' fees and costs.
This matter was tried to the Bench over seventeen days in February and March 2005. The Court heard oral argument on May 31, 2005. This order constitutes the Court's findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure.
At all relevant times, plaintiffs American Home Assurance Company ("American Home") and New York Marine & General Insurance Co. ("New York Marine") were insurance companies that underwrote H & M insurance on blue water vessels. (S.F. ## 1-2.)2 American Home's underwriting agent was American International Marine Agency of New York, Inc. ("AIMA"). (S.F. # 1.) New York Marine's underwriting agent was Mutual Marine Office, Inc. ("MMO"), located in New York, New York. (S.F. # 2.) Plaintiffs Bluewater Insurance ASA ("Bluewater") of Oslo, Generali France Assurances ("Generali France") of Paris, and "The Ethniki" Hellenic General Insurance Company S.A. ("Ethniki") of Athens, underwrote H & M insurance on blue water vessels. (S.F. ## 3-4, 6.) Plaintiffs Hamburger Versicherung VVAG VERS A (CONVERIUM) ("Hamburger A"), Hamburger Versicherung VVAG VERS B(R + V) ("Hamburger B"), Gothaer VAG ("Gothaer") and ING Insurance ("ING") underwrote H & M insurance on blue water vessels through their managing general agent Belgian Marine Insurers S.A. ("Belmarine"), located in Liege, Belgium. (S.F. # 5.)
Defendant Endeavour Navigation S.A. ("Endeavour") was a Liberian Corporation and the registered owner of the SATURN II. (S.F. ## 7, 8, 37.) Defendant Masters' Ships Management S.A. ("MSM"), a Liberian corporation with its principal place of business in Athens, managed the SAURN II under a management agreement dated December 22, 1999. (S.F. # 12; Tr. 1242-43; Ex. X-3.)3 Former Defendant Royal Bank of Scotland PLC, the first mortgagee on the SATURN II, assigned back to defendants its interest in any insurance proceeds paid by the plaintiffs because of the grounding. (S.F. # 52.)
For the present purposes, the two most important crew members of the SATURN II were the master, Captain Manuel Padayhag, and the chief engineer, Rogelio Santos. Both testified by way of deposition.
Each underwriter or its authorized agent was represented at trial. The witnesses and their respective affiliations were as follows: Joseph O'Doherty (AIMA), Tim McAndrew (MMO), Erik Lund (Bluewater), Francois Azou (Generali France), Pierre Cobus (Belmarine) and George Dalianis (Ethniki). All testified during the plaintiffs' case-in-chief.
Plaintiffs retained the Salvage Association, an H & M surveying firm, to assess the damage to the SATURN II. William Johnstone, a Salvage Association surveyor who visited the vessel, testified for plaintiffs. Defendant Endeavour, with the insurers' approval, retained the British law firm Clyde & Co. to protect its interests on issues of salvage. Martin C. Hall from Clyde & Co. testified during plaintiffs' direct case.
Plaintiffs retained Evdemon & Partners ("Evdemon") to inspect the SATURN II after the grounding. Stavros Trimis, a senior surveyor at Evdemon, testified for plaintiffs. AI Marine Adjusters ("AI Marine") handled the investigation of the SATURN II insurance claim on behalf of the underwriters. Vincent Corteselli, the manager of H & M liabilities at AI Marine, testified during the plaintiffs' direct case. Mr. Corteselli contacted Aquila Maritime Business, Inc. ("Aquila") in Manila for assistance in setting up interviews with former crew members of the SATURN II. Andrew J. Malpass, the executive vice president of Aquila at the time, testified for plaintiffs.
Harry S. Keefe, who retired in 1998 after a 40-year career in the marine insurance business, offered expert testimony on H & M insurance for plaintiffs. In his last position, Mr. Keefe was vice president and manager of the blue water hull underwriting department at GRE Insurance Group. (Tr. 21; Ex. 141.)
Nikos Christodoulatos testified at trial on behalf of MSM. Nikos was the managing director at MSM—in his words "the top man in the company"—in 2002. (Tr. 1241.) Nikos's father, Gerassimos Christodoulatos, testified by deposition. Gerassimos was a member of the board of administration at Endeavour during the relevant time period. Nikos testified that Gerassimos was not employed by MSM in 2002 and had no involvement with the SATURN II. (Tr. 1244.) This was one of many lies from that witness. As will be discussed in greater detail below, there is ample evidence that Gerassimos was actively involved with MSM, the SATURN II account and the aftermath of the grounding.
MSM's crew manager, Georgios Petsinis, and superintendent engineer, Petros Moundreas, also testified for defendants— with much the same lack of forthrightness as Nikos Christodoulatos.
The insurance broker for Endeavour and MSM with respect to the placement of the H & M insurance was HBI International Ltd. ("HBI"). HBI had an office in New York. Both sides designated Anthony Piazza, the president of HBI during the relevant time period, as an intended witness. He testified during plaintiffs' case-in-chief. There was no need to call him back to testify during defendants' case.
Captain John Bergin offered expert testimony for defendants on navigation. Captain Bergin retired in 2001 after over 30 years as a seagoing master. He now teaches advanced ship handling courses at the Maritime Institute of Technology. (Tr.1952, 1957.)
The SATURN II was a 64,535 metricton deadweight bulk carrier built in 1981. It was 224.50 meters (736.55 feet) in length, 32.20 meters (105.64 feet) in breadth and 17.70 meters (58.07 feet) in depth. A Sulzer 6 RND 76M type main engine powered the vessel. (S.F.# 9.) The agreed value of the vessel for the purposes of H & M insurance was $7,500,000. (S.F.# 27.) The vessel's sound market value at the time of the June 25, 2002 grounding was between $4,000,000 and $4,500,000. (Tr. 455-56, 465, 493-94.)
The size of the MSM fleet fluctuated prior to 2002. On June 22, 2000, there were four ships on the account: the SAURN II, MADONA, AFRICANA and SILVER TOY. (Tr. 187-88, 401-02.) Nikos Christodoulatos testified that in 2000, when American Home wrote H & M insurance as the lead underwriter on the MSM account, the SILVER TOY was insured as a single vessel. He said that the MADNA, AFRICANA and SATURN II were added later. (Tr. 1255-56.) The Court discounts this testimony and just about everything else Mr. Christodoulatos said on the stand. He was one of the least credible witnesses the Court has seen in over 22 years. Both Mr. O'Doherty and Mr. Piazza testified credibly that there were four ships on the account in 2000, one of which was the SILVER TOY. (Tr. 232, 401.) The MADONA was lost at sea, bringing the fleet size down to three. (Tr. 232)4 The AFRICANA was sold sometime prior to May 22, 2002. (Tr. 402-03.) MSM made attempts to purchase other vessels, but the fleet size remained at two (SILVER TOY and SATURN II) as of early May 2002. (Tr. 396-97, 403.)
The SILVER TOY was sold for scrap pursuant to a contract dated May 24, 2002 and delivered to a scrap yard in China on or about June 6, 2002. (S.F. ## 13, 25-26.) Nikos Christodoulatos testified that he did not become aware of the sale until June 2002. (Tr. 1269.) This testimony was incredible, coming as it did from the self-proclaimed "top man" at MSM. Mr. Christodoulatos in so testifying wants the Court to believe that during the...
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