Commercial Union Ins. v. Charleston Marine Leasing

• Decision Date: 09 February 1994
• Docket Number: Civ. A. No. 2:93cv916.
• Citation: 843 F. Supp. 124
• Court: U.S. District Court — Eastern District of Virginia
• Parties: COMMERCIAL UNION INSURANCE COMPANY, Plaintiff, v. CHARLESTON MARINE LEASING COMPANY and Marinex Construction Company, Defendants.

843 F. Supp. 124

COMMERCIAL UNION INSURANCE COMPANY, Plaintiff, v. CHARLESTON MARINE LEASING COMPANY and Marinex Construction Company, Defendants.

Civ. A. No. 2:93cv916.

United States District Court, E.D. Virginia, Norfolk Division.

February 9, 1994.

John Early Holloway, Andrew Jackson Timms, Hunton & Williams, Norfolk, VA, for plaintiff.

Martha Martin Poindexter, Guilford D. Ware, Crenshaw, Ware & Martin, Norfolk, VA, for defendant.

OPINION AND ORDER

DOUMAR, District Judge.

This is a declaratory judgment action filed by Commercial Union Insurance Company ("CU"), seeking a judgment declaring that CU is not obligated to indemnify or defend Charleston Marine Leasing Company or Marinex Construction Company (Charleston Marine Leasing Company and Marinex Construction Company to be referred to jointly as "Marinex") for any liabilities arising as a consequence of the collision between pontoons or pipes of the Dredge ARLINGTON and the F/V CAROLINA DREAM, a fishing vessel, in the Chesapeake Bay. The gravamen of the dispute is whether the pontoons or pipes were covered under the Protection and Indemnity (P & I) Policy issued by CU to Marinex.

Currently before the Court is CU's Motion for Summary Judgment. The parties have submitted briefs and appeared before the Court in oral arguments on the present motion. Therefore, the motion is ripe for disposition by the Court.

I. Facts and Procedural History

Marinex is in the marine construction business and owns or operates certain marine construction equipment including the Dredge ARLINGTON. F. Hammond Johnson, the president of Marinex¹, contacted Jimmie R. Scruggs of Reliable Insurance Company Group, Inc. in September, 1991, to obtain hull and P & I insurance coverage for the watercraft operation of Marinex, including the Dredge ARLINGTON, its pipes and pontoons. Johnson Aff. at ¶ 2. Johnson provided Scruggs with a single schedule of property to be covered by one or all of the policies. Id. at ¶ 3. The schedule listed various vessels, including the Dredge ARLINGTON, and listed certain pipes, lines, and pontoons used exclusively on the Dredge ARLINGTON. Ex. A to Johnson Aff.

Mr. Scruggs contacted Wanda Groover, an underwriter at U.S. Fire Insurance Company ("U.S. Fire") (which was later bought by CU) to inquire about policies for port risk covering hull and P & I for certain equipment. Groover Aff. at ¶ 2. Scruggs provided Groover photographs of the Dredge ARLINGTON in which no pontoons or pipes were present. Groover Aff. at ¶ 2; Ex. A to Groover Aff. Several days later, Scruggs sent Groover a memorandum seeking P & I, hull, tower's liability, crew, comprehensive general liability, wreck removal and environmental coverage for various equipment.

Scruggs provided Groover with the single schedule of the equipment to be covered by one or both of the policies. Scruggs Aff. at ¶¶ 5, 7. According to Groover, Scruggs informed Groover that the cargo, pipes, pontoons, ball joints and draglines listed on the schedule provided by Scruggs were items to be stored on land, and were therefore "contractor's equipment" to be charged the "standard contractor's equipment rate of $1.00 per thousand." Supp. Groover Aff. at ¶ 2. That the pontoons, pipes and other equipment were to be stored on land is shown in the notations which Groover made to Scruggs' schedule and the resulting premiums charged for the pontoons, pipes, and other equipment. Id.; Ex's. C, D to Groover Aff; Hull Policy. Groover sent Scruggs an estimate of the premiums for the Hull and P & I Policies separately. The Hull Policy quoted the premium for storage of the pontoons and pipes on land, but the P & I Policy did not specifically list or quote a deductible or premium for the pontoons or pipes of the Dredge ARLINGTON. Groover Aff. at ¶ 3; Ex. D to Groover Aff. Scruggs called Groover to finalize the insurance policies and to withdraw his request for coverage for several of the vessels listed on the schedule provided. Groover Aff. at ¶ 4.

Groover sent Hull and P & I Policies to Scruggs on or about September 29, 1991. Id. The Hull Policy referenced an attached schedule of vessels and equipment covered by the policy. The schedule specifically listed the Dredge ARLINGTON, its pipes, and pontoons separately, and quoted a value, deductible, and a premium for each item. The P & I Policy included a different schedule which listed certain vessels, including the Dredge ARLINGTON, but did not list or specifically describe lines, pontoons, or other equipment.²Id. A port risk endorsement was attached and was to form a part of every portion of the policy.³ Scruggs accepted the policy without any objection or comment. Id.

The next year, on September 29, 1992, Scruggs renewed the Hull and P & I Policies with CU, which had bought U.S. Fire. Scruggs requested changes, which resulted in the removal of the port risk endorsement, modification of the navigation warranty, and increase in the premiums for the vessels on the Hull Policy. Groover Aff. at ¶ 5. However, the premium under the Hull Policy for the pontoons, pipes, and equipment did not increase but remained at the "contractor's rate" of "$1 per thousand."

Separate Hull and P & I Policies were issued effective September 29, 1992. The policies were identical in all other material aspects to the former policies, and referenced the same (separate) schedules for hull and P & I coverage.

On November 19, 1992, after Marinex had concluded its dredging operations under a contract, Marinex attempted to move a flotilla of its equipment, under tow of the Tug LADY JANICE, from Fisherman's Island to the Port of Hampton Roads. The flotilla resembled a railroad train with its many cars. The flotilla was led by the Dredge ARLINGTON with a spud barge, followed by the Deck Barge NEIL loaded with dredge equipment, then the Deck Barge PATRICK loaded with an anchor, ball joints and other equipment, then the Fuel Barge No. 11, Crane Barge 30B with a thirty-ton crawler crane, then the Tug LAURA (not operational), then sixteen 500' sections of steel submerged pipe rafted together (8,000 feet total), then four 500'-600' sections of steel pontoon pipe along with pontoons (2,100 feet total), then approximately 4,000 feet of plastic pipe, then nineteen loose pontoon tank assemblies rafted together, and an anchor barge. Barto Aff. at ¶ 4.

The pontoons and pipes were owned by Marinex to be used exclusively with the Dredge ARLINGTON, the only dredge owned by Marinex. However, while they were being towed in the flotilla, the pontoons and pipes were not in any way connected to the dredge itself. In fact, as described above, the Dredge ARLINGTON was situated at the front of the flotilla, while most if not all of the pontoons and pipes were located at the rear of the flotilla.

While the flotilla was in the Chesapeake Bay, the crane barge with the thirty-ton crawler crane capsized, causing the flotilla to break up and setting a work float, dredge pipe, and pontoons adrift. On November 20, 1992, the F/V CAROLINA DREAM struck an object in the York Spit Channel of the Chesapeake Bay identified as either floating pipe or a pontoon owned by Marinex. The F/V CAROLINA DREAM sank as a result of the collision.

On January 28, 1993, the owner of the Tug LADY JANICE, Eastern Shore Diving and Marine Services ("Eastern Shore"), filed a limitation of liability proceeding in the United States District Court. Owners of the F/V CAROLINA DREAM filed a claim in the limitation proceeding and a cross-claim against Marinex seeking damages in the amount of $885,000. The first mate aboard the F/V CAROLINA DREAM filed a claim in the limitation proceeding for $11,000 for alleged losses of personal property on board the fishing vessel. A seaman serving on the fishing vessel filed a claim against the limitation fund and a cross-claim against Marinex seeking personal injury damages in the amount of $2,000,000. Finally, Eastern Shore filed a counterclaim against Marinex seeking indemnity or contribution for any liability imposed upon it as a result of the collision between the F/V CAROLINA DREAM and the pontoon or pipe.

CU is defending Charleston and Marinex in the limitation proceedings under a reservation of rights. However, CU has informed Charleston and Marinex that the P & I Policy does not provide coverage for any liabilities arising from ownership or operation of the dredge pipe or pontoons. CU now seeks summary judgment declaring that the P & I Policy does not cover the dredge pipe or pontoons in regard to this incident.

II. Analysis

A. Summary Judgment Standard

Summary judgment is properly granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial burden of "identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate an absence of a general issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once this burden is met, the non-moving party must, by affidavits or other proof, set forth sufficient facts showing that a genuine issue of material fact exists. Catawba Indian Tribe v. State of South Carolina, 978 F.2d 1334, 1339 (4th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 1415, 122 L.Ed.2d 785 (1992). In deciding the motion, the Court must view all inferences drawn from the facts in favor of the non-moving party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Catawba, 978 F.2d at 1339. Moreover, the Court notes that, in this case, CU would bear the burden of proving that Marinex's pontoons were not covered under the P & I policy. See Commercial Union Ins. Co. v. Ballowe, 671 F.Supp. 421, 423 (W.D.Va.), aff'd, 833 F.2d 1004 (1987) (citing U.S. Life Insurance Co....