Atchafalaya Marine, LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Citation: 959 F.Supp.2d 1313
• Decision Date: 01 April 2013
• Docket Number: Civil Action No. 11–00223–KD–N.
• Parties: ATCHAFALAYA MARINE, LLC, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant.
• Court: United States District Courts. 11th Circuit. United States District Court of Southern District of Alabama

959 F.Supp.2d 1313

ATCHAFALAYA MARINE, LLC, Plaintiff,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant.

Civil Action No. 11–00223–KD–N.

United States District Court,

S.D. Alabama,

Southern Division.

April 1, 2013.

Margaret M. Miller, Margaret McDowell Miller, LLC, Mobile, AL, for Plaintiff.

John W. Dodson, Ferguson, Frost & Dodson, LLP, David Abraham Rich, Birmingham, AL, Donald C. Radcliff, Brady, Radcliff & Brown, LLP, Mobile, AL, for Defendant.

ORDER

KRISTI K. DuBOSE, District Judge.

This matter came before the Court on March 14, 2013 for a Hammond–Green Oil hearing regarding the singular issue of damages relating to Defendant's Rule 50 Renewed Motion for Judgment as a Matter of Law (Doc. 377), Rule 59 Motion for New Trial (Doc. 378), and Motion for Remittitur (Doc. 379); Plaintiff's Response (Doc. 384); Defendant's Reply (Doc. 390); and Plaintiff's Supplement (Doc. 393).

I. Background and Facts¹

In this case, Plaintiff Atchafalaya Marine, LLC (“Atchafalaya”) asserted claims for breach of contract (Count VI), abnormal bad faith (Count VII) and normal bad faith (Count VIII) against Defendant NationalUnion Fire Insurance Company of Pittsburgh, PA (“National Union”). (Doc. 60 (as amended per Doc. 206)). These claims stem from damage sustained to a commercial tugboat (the M/V BARBARY COAST) during a January 2010 salvage operation on the Tombigbee River in Alabama and an insurance dispute, which resulted from the incident.

Specifically, through Midsouth Bank, on September 12, 2008, Atchafalaya purchased the tugboat the M/V BARBARY COAST, at a cost of $790,000. Atchafalaya obtained a Preferred Ship Mortgage for the $640,000. The remainder was paid by Rodd Cairns, a member of the Atchafalaya LLC.

The M/V BARBARY COAST was the only asset of Atchafalaya. With the M/V BARBARY COAST as its only source of revenue, Atchafalaya earned gross receipts of $87,660 for the remainder of 2008; $330,253 in 2009; and $25,188 in 2010. Starting in February 2009, Atchafalaya entered into an oral charter agreement with an entity named Eagle Inland Towing (“Eagle”), through which Eagle used the M/V BARBARY COAST.

On March 18, 2009, National Union issued an insurance policy (# H2035) to Eagle for the period of March 18, 2009–March 18, 2010; this policy provided coverage to Eagle for the towboats MR. LESTER, MISS KATEYLN and CARL T. The insurance policy was obtained through Point Clear Insurance (“Point Clear”), with National Union as the insurer. Per Endorsement # 17 (also effective as of March 18, 2009), Atchafalaya was listed as an additional assured on the policy. ² On June 2, 2009, the M/V BARBARY COAST tugboat was also added to the Schedule of Vessels on Eagle's insurance policy per Endorsement # 18 with “all other terms and conditions remain[ing] unchanged.” According to the endorsement, the M/V BARBARY COAST's “Hull Agreed Valuation” was $800,000, with $1,000,000 for “Protection & Indemnity.” On September 2, 2009, the M/V BARBARY COAST was deleted from Eagle's insurance policy per Endorsement # 19. On December 21, 2009, the M/V BARBARY COAST was added back to Eagle's insurance policy per Endorsement # 23. According to the endorsement, the M/V BARBARY COAST's “Hull Agreed Valuation” was $650,000, with $1,000,000 for “Protection & Indemnity.”

On or about January 7, 2010, the M/V BARBARY COAST ran aground near mile marker 81 on the Tombigbee River during the course of a “rescue operation” (to free a grounded barge from a sandbar so a flotilla could continue to travel). As a result, the M/V BARBARY COAST received extensive and severe damage, which required it to be salvaged, taken out of service, and towed to shore. Once Atchafalaya learned of the damage to the M/V BARBARY COAST, it sought information regarding its insurance coverage (as it did not have a copy of the policy).

On January 21, 2010, the M/V BARBARY COAST was deleted from Eagle's insurance policy per Endorsement # 24, and Eagle's insurance policy was cancelled in its entirety per Endorsement # 26 on March 18, 2010. At the time of the January 2010 incident, the M/V BARBARY COAST was insured under Eagle's policy # H2035 with National Union. Thereafter, Atchafalaya made numerous attempts to not only file, but to resolve, the insurance claim with National Union for the damages to the M/V BARBARY COAST. However, these attempts were fraught with obstacles, and in the end, Atchafalaya's efforts failed for over a year.

Specifically, on February 2, 2010, Atchafalaya, through Jerri Lowrimore (“Lowrimore”—one of its members), made its first attempt to file an insurance claim with Point Clear (who issued the policy). In response, Point Clear flatly rejected Atchafalaya's effort to file an insurance claim, instructing that the holder of the policy, Eagle, must file such claim. Atchafalaya, through Lowrimore and Rodd Cairns (“Cairns”), placed additional follow-up phone calls to Point Clear, but met with the same resistance and instruction. Atchafalaya then contacted Eagle directly several times, but Eagle's owner did not want to file an insurance claim for the damage to the M/V BARBARY COAST, even though he had already filed claims on two (2) other boats that had been damaged in the same incident.³ Atchafalaya also called Midsouth Bank and requested assistance in filing an insurance claim. Initially, Midsouth Bank did not assist Atchafalaya. Later, in March 2010, Midsouth Bank, through Jay Angelle (its counsel) made an unsuccessful attempt to file an insurance claim with Point Clear.

Faced with no insurance to repair the extensive damage to the M/V BARBARY COAST, no ability to pay the mortgage on the tugboat since it was not in working order, and a huge salvage claim, on April 9, 2010, Atchafalaya borrowed another $100,239 from Midsouth Bank to repair the tugboat in order to get it back in service.⁴ Cairns collateralized his home in Morgan City, Louisiana so that Atchafalaya could borrow this money. In addition, because the salvager had removed the propellers, until the salvager was paid for his services (which was an impossibility due to Atchafalaya's inability to file a claim), Atchafalaya had to acquire other propellers at further cost to its business.

Atchafalaya continued to seek business although its tug was out of commission. Atchafalaya entered into a charter agreement ⁵ with Chris Buford of Louisiana Limestone & Logistics, LLC, for the use of the tugboat, which would commence once the M/V BARBARY COAST was repaired. However, the M/V BARBARY COAST was out of service from January 2010 until August 2010, and then again in the Fall of 2010 due to additional engine repairs. All of the repairs were necessitated by the January 2010 incident and, without the insurance claim being paid, Atchafalaya struggled to arrange for the repairs.

On May 6, 2010, National Union received an e-mail from the original marine surveyor of the January 2010 incident (Don Joiner) which stated that the M/V BARBARY COAST had been recovered in the same operation as the M/V MR. LESTER.

Atchafalaya doggedly continued its quest to have the damages to the M/V BARBARY COAST and the salvage claim covered by its insurance policy with National Union. Atchafalaya even hired an attorney to determine who the insurer was, and to contact the insurer on Atchafalaya's behalf. On September 21, 2010 Atchafalaya's attorney sent a letter to National Union notifying National Union of Atchafalaya's insurance claim. The letter was sent to the correct address for National Union. However, the letter was apparently “rerouted internally” to the workmen's compensation division. On October 11, 2010, Chartris (a worker's compensation claim administrator) sent a letter to Atchafalaya's attorney, requesting the insurance policy and claim number.

At this point, Cairns took matters into his own hands on behalf of Atchafalaya. Cairns conducted an internet search and discovered the name of a National Union attorney in Florida—David Famulari (“Famulari”). On December 9, 2010, Cairns contacted Famulari, who reported that he was already aware of Eagle's claims as to two (2) other vessels. Famulari requested that Cairns gather certain information regarding the M/V BARBARY COAST insurance claim. In response, on December 20, 2010, Cairns sent Famulari: 1) a marine survey conducted on the M/V BARBARY COAST; 2) a letter from Midsouth Bank regarding repairs to the tugboat; 3) a repair proposal from Jemison Marine; and 4) a summary of the repair work which had already been performed on the tugboat. Cairns communicated to Famulari: “[w]e are financially pressed as a result of this incident and Garrell [Chiasson] has left us hanging out to dry.” ⁶ On December 30, 2010 Cairns notified Famulari via e-mail that Marc Oliver (“Oliver”) was Atchafalaya's agent and that he had worked directly with the U.S. Coast Guard to establish a “salvage plan.”

Almost two (2) more months passed, and as of January 18, 2011, National Union had still made no offer to Atchafalaya, or even hired an adjuster for its insurance claim. At this point, Cairns had engaged Oliver the salvager, to assist him in having the insurance claim paid. Cairns also traveled to Miami, Florida to meet with Famulari to attempt to initiate action on Atchafalaya's insurance claim. These efforts were unsuccessful.

Between January 18, 2011 and February 10, 2011 it is unclear what—if anything—National Union did to investigate Atchafalaya's insurance claim. On January 28, 2011, Cairns informed Famulari that Atchafalaya's vendors were threatening seizure of the M/V BARBARY COAST for non-payment for repairs, and of the likelihood of business and personal bankruptcy if the claim was not resolved. On February 9, 2011, Cairns told Famulari via e-mail that he was “being pressed for payment from many angles. It will only be a matter of time before this vessel is locked up/shut down and everything will have to be addressed in federal court without the benefit of any...