Commercial Union Ins. v. Detyens Shipyard

• Decision Date: 21 June 2001
• Docket Number: CIV.A. No. 2:00-0389-18.
• Citation: 147 F.Supp.2d 413
• Parties: COMMERCIAL UNION INSURANCE CO., Plaintiff, v. DETYENS SHIPYARD, INC., Defendant.
• Court: U.S. District Court — District of South Carolina

Page 413

147 F.Supp.2d 413

COMMERCIAL UNION INSURANCE CO., Plaintiff, v. DETYENS SHIPYARD, INC., Defendant.

CIV.A. No. 2:00-0389-18.

United States District Court, D. South Carolina, Charleston Division.

June 21, 2001.

COPYRIGHT MATERIAL OMITTED

Scott Bluestein, Charleston, SC, John Nicolletti, New York City, for plaintiff.

Lucas Padgett, Paul Tecklenburg, Rivers Jenkins, Charleston, SC, for defendant.

ORDER

NORTON, District Judge.

This matter is before the court on defendant's Motion for Summary Judgment as to all causes of action for declaratory relief under the Protection & Indemnity Policy and for Partial Summary Judgment on plaintiff's First, Second, and Fourth causes of action; and for Partial Summary Judgment on Detyens' First, Second, and Third Causes of Action stated in its Counterclaim.

I. FACTUAL BACKGROUND

This declaratory judgment action arises out of a claim for insurance coverage on a wooden drydock owned by Detyens Shipyard's Wando River facility ("Detyens") and insured by Commercial Union Insurance Company ("Commercial Union"). The subject drydock was constructed in approximately 1942, was permanently moored outside of any navigable channel, and had no propulsion or steering.¹

International Marine Underwriters ("IMU") provided drydock, hull, and Protection and Indemnity ("P & I") coverage to Detyens from 1982 until 1991. In 1991, Commercial Union purchased IMU. In 1992, Commercial Union began writing hull, drydock, and P & I risks for Detyens.

In April 1999, Commercial Union issued four policies of insurance to Detyens and charged premiums totaling Two Hundred Seven Thousand Nine Hundred Thirty and No/100 Dollars ($207,930.00). The "hull" and "business interruption policy" includes "hull" insurance on two drydocks, six work barges, and a land-side crane. Specifically, Drydock Number 1, which is the subject of this litigation, was listed as Item 1 on Endorsement 5.² Item 2 was a second steel drydock also moored at Detyens' Wando facility.

The terms and conditions of Form Drydock 107, attached to the Dock Policy, govern the two drydocks. Form Drydock 107 provides that:

TOUCHING THE ADVENTURES AND PERILS which we, the said Assurers, are contented to bear and take upon us, they are of the Seas, Rivers, Lakes, Harbours, Men-of-War, Fire, Enemies, Pirates, ... Arrests, ... Explosions, Riots, and other causes of whatsoever nature arising either on shore or otherwise, causing Loss of or injury to the Property hereby insured, and of all other Perils, Losses and Misfortunes that have or shall come to the Hurt, Detriment, or Damage of the said Dock, & c., or any part thereof.

The P & I Policy issued by Commercial Union includes Endorsement 4, which lists vessels, drydocks, and work barges, including Drydock Number 1. The indemnity clause in the P & I policy provides in relevant part:

The underwriters agree to indemnify the Assured for any sums which the Assured, as owner of the Vessel, shall have become liable to pay, and shall have paid, in respect of any casualty or occurrence during the currency of the policy, but only in consequence of any matters set forth hereunder ... (6) Costs or expense of, or incidental to, any attempted or actual removal or disposal of obstructions, wrecks or their cargoes under statutory power or otherwise pursuant to law, PROVIDED, however, that there shall be deducted from such claim for costs or expenses, the value of any salvage from the wreck inuring to the benefit of the Assured or any subrogee thereof.

Detyens claims that Hurricane Floyd destroyed Drydock Number 1 in 1999,³ whereas Commercial Union claims that Drydock Number 1 sank due to its wasted condition.⁴ Detyens claims that after Hurricane Floyd, its marine surveyor, Martin, Ottaway, van Hemen & Dolan of Red Bank, New Jersey, determined that the drydock was a constructive total loss. Soon thereafter, Detyens made a claim under the Dock Policy of Nine Hundred Ninety Thousand and no/100 Dollars ($990,000.00) for the loss of Sections 1, 2, and 3 of Drydock Number 1. Commercial Union now seeks a declaration that there is no coverage for the damage or total loss claims because the subject policy was null and void ab initio. For the reasons articulated below, defendant's motion is granted in part and denied in part.

II. SUMMARY JUDGMENT

Summary judgment shall be granted when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "At the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The trial judge will grant summary judgment "if there is no genuine issue as to any material fact and if the moving party is entitled to judgment as a matter of law." Id. The judge is not required to make findings of fact. See id. Rather, the threshold inquiry is whether "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. When determining whether there is an issue for trial, the court must view the inferences to be drawn from the underlying facts in the light most favorable to the non-moving party. See United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). In sum, summary judgment provides an avenue "to isolate and dispose of factually unsupported claims or defenses." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. LAW/ANALYSIS

A. Admiralty Jurisdiction

At the outset, this court must address defendant's challenge to the court's earlier ruling that this case falls within the purview of admiralty jurisdiction granted to federal courts.⁵ Article III, Section 2 of the United States Constitution provides that "the Judicial Power shall extend to all Cases of admiralty and maritime Jurisdiction." U.S. Const., Art. III, § 2. The statutory grant of admiralty jurisdiction is codified at 28 U.S.C. § 1333. Section 1333 provides that: "The district courts shall have original jurisdiction, exclusive of the courts of the States, of: (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases of other remedies to which they are otherwise entitled." For the reasons that follow, admiralty jurisdiction is appropriate in this case.⁶

Detyens previously argued that admiralty jurisdiction is not present in this case because Drydock Number 1 is not a vessel. In response, Commercial Union argued that this case involves a maritime contract, thus clearly invoking the admiralty and maritime jurisdiction of this court. Detyens has readdressed these earlier arguments. As discussed below, Drydock Number 1 is not a vessel. However, admiralty jurisdiction pursuant to 28 U.S.C. § 1333 is proper in the case sub judice based upon the fact that the subject matter of the contract is maritime in nature.

(1) Drydock Number 1 Is Not A "Vessel"

"When a floating drydock is moored and in use as a drydock, courts have consistently found that the drydock is not a `vessel.'" In Re McAllister Towing of Virginia, Inc., NO. 2:00-CV-36, 2000 A.M.C. 2164, 2000 WL 1881197, *3 (E.D.Va. July 11, 2000); Bender Shipbuilding & Repair Co. v. Brasileiro, 874 F.2d 1551, 1554 (11th Cir.1989) ("Courts have consistently found that a floating dry dock is not a `vessel' within the meaning of admiralty jurisdiction when a drydock is moored and in use as a drydock."); see also Cope v. Vallette Dry-Dock Co., 119 U.S. 625, 627, 7 S.Ct. 336, 30 L.Ed. 501 (1887) (finding that a moored dry dock was not a vessel for purposes of a salvage claim in admiralty); United States v. Moran Towing & Transp. Co., 374 F.2d 656, 662-63 (4th Cir.1967), reversed on other grounds, 389 U.S. 575, 88 S.Ct. 689, 19 L.Ed.2d 775 (1968) (holding that a dry dock constituted a vessel when its attachments to the land had been severed and it was moving over navigable waters under tow and equipped with navigation lights, but noting that a dry dock in service, permanently moored to the land, "has most of the attributes of such an extension of the land as a wharf or a dock" and has been held not to be a vessel); Keller v. Dravo Corp., 441 F.2d 1239, 1244 (5th Cir.1971) ("While we are unwilling to promulgate an absolute rule of law that a floating dry dock can never be a vessel, we [find] ... as a matter of law, [that] a floating dry dock is not a vessel when it is moored and in use as a dry dock."); Royal Ins. Co. v. Pier 39 Ltd. Partnership, 738 F.2d 1035, 1037 (9th Cir.1984) ("The general rule is that stationary floating dry docks are not vessels."); J.M.L. Trading Corp. v. Marine Salvage Corp., 501 F.Supp. 323, 324 (E.D.N.Y.1980) ("The great majority of decisions concerning the `reach' of admiralty jurisdiction over drydocks have held that drydocks when in use as drydocks are not ships or vessels subject to such jurisdiction."). However, when the dry dock is being transported from one location to another, the drydock may then be deemed a vessel. See e.g., In Re McAllister, 2000 WL 1881197, *3 (citing United States v. Moran Towing & Transp. Co., 374 F.2d 656, 663 (4th Cir. 1967), reversed on other grounds, 389 U.S. 575, 88 S.Ct. 689, 19 L.Ed.2d 775 (1968)). As evidenced from the cases cited above, a majority of courts follow the rule that when a drydock is moored to the shore and in use as a drydock, it is not a vessel. There is no question in this case that Drydock Number 1 was moored and in use as a drydock at the time it was allegedly damaged. Thus, the insured drydock was clearly not a vessel as that term is defined for jurisdictional purposes.

(2) Marine Insurance...