Consol. Rail Corp. v. Aspen Specialty Ins. Co.
| Decision Date | 10 June 2019 |
| Docket Number | Civil No. 17-12281 (RBK/KMW) |
| Parties | CONSOLIDATED RAIL CORPORATION, Plaintiff, v. ASPEN SPECIALTY INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
This matter comes before the Court on the summary judgment motion (Doc. No. 31) of Plaintiff Consolidated Rail Corporation ("Conrail") and the cross-motion for summary judgment (Doc. No. 59) of Defendants Aspen Specialty Insurance Company and Landmark American Insurance Company.1 For the reasons below, Defendants' motion is GRANTED, and Conrail's motion is DENIED.
This case concerns whether insurers Aspen and Landmark are required to pay for the costs that Conrail—a rail service provider for freight shipments—incurred in rebuilding a bridge that spans a creek in Paulsboro, New Jersey. The bridge sustained damage following a trainderailment in November 2012 and to repair it, Conrail converted the bridge from a movable "swing bridge" to a movable "lift bridge," a change that Conrail contends the law required.
This case implicates several terms in the parties' insurance contracts. Aspen and Landmark sold Conrail "all risks" insurance policies that insured Conrail against property damage between June 1, 2012, and June 1, 2013. (Doc. No. 32 ("Pl.'s SMF") at ¶¶ 1, 5.) Both policies provide a limit of $6 million as part of a $30 million quota share that attaches excess of the primary policy. (Id. at ¶¶ 2, 6.) The policies each insure against all risks of "direct physical loss, damage or expenses to covered property, including claim adjustment and subrogation expenses, as may be further extended, limited, or defined elsewhere" in the policies. (Doc. No. 1-1 at 15, ¶ 4; Doc. No. 1-3 at 13, ¶ 4.)
The policies extended Conrail's all risks insurance to "contingent liability from operation of any law or order governing the demolition, repair, or replacement of insured property damaged by an insured peril." (Doc. No. 1-1 at 22, ¶ 2A(2)(i); Doc. No. 1-3 at 20, ¶ 2A(2)(i).) Importantly, "contingent liability from operation of law governing the demolition, repair or replacement of insured property" as used in the policies means:
This policy shall cover consequential expenses or losses resulting from the enforcement of laws or ordinances which do not permit restoration of structures to their condition prior to the damage caused by a peril insured against. These expenses shall include the loss of value of the undamaged portion of the structure, cost of demolition of the undamaged portion of the structure, and increased expense to replace the structure with one conforming to laws or ordinances or to repair the damaged structure so that it meets current building laws or ordinances.
(Doc. No. 1-1 at 15, ¶ 3(D); Doc. No. 1-3 at 13, ¶ 3(D).) The policies also provide that "[i]n the event of loss or damage under this policy that results in the enforcement of any law or ordinance regulating the construction or repair of damaged facilities, including the demolition of theundamaged portions of the facilities," Defendants "shall be liable for . . . the increased cost of repair or reconstruction of the damaged and undamaged facility on the same or another site and limited to the minimum requirements of such law or ordinance regulating the repair or reconstruction of the damaged property on the same site." (Doc. No. 1-1 at 26, ¶ 2A(4)(i)(iii); Doc. No. 1-3 at 24, ¶ 2A(4)(i)(iii).)
On November 30, 2012, a train derailed while crossing a bridge that spanned Mantua Creek in Paulsboro, New Jersey and damaged the bridge. (Pl.'s SMF at ¶ 12.) Conrail owns and operates the bridge, which was built in the 1900s, and is partially moveable. (Doc. No. 57-1 ( ) at ¶¶ 1, 25.) Specifically, it contains a part that is designed to "swing like a door" to allow the Creek's marine traffic to pass through. (Id. at ¶ 1.) The derailment, however, left the swing bridge's movable element inoperable. (Pl.'s SMF at ¶ 14.)
Repair efforts followed, though not without issue. To restore railroad traffic, Conrail fixed the bridge in place. (Id. at ¶ 15.) But this repair made the draw of the swing bridge inoperable and prevented most marine traffic from passing through. (Id. at ¶ 17.) In this condition, with the bridge's low steel not movable and sitting slightly above the Creek's mean high-water elevation, the swing bridge did not comply with federal law requiring that it remain in the open position from March through November, and that it open with four hours' notice from December through February. (Id. at ¶¶ 16, 18.)
Conrail retained engineers Modjeski & Masters ("M&M") in early December 2012 to assist with the bridge repair. (Defs.' SMF at ¶ 12.) On December 17, 2012, Conrail instructed M&M to provide a "proposal to install a permanent movable bridge over the Mantua Creek."(Id. at ¶ 13.) M&M considered different types of bridges, including a vertical lift bridge which was eventually chosen. (Id. at ¶¶ 14, 16.) By December 19, 2012, M&M sent Conrail a conceptual design of a new lift bridge to replace the existing swing bridge. (Id. at ¶ 16.)
Conrail also began corresponding with the Coast Guard, the agency responsible for approving certain bridge work across waters of the United States.3 On January 29, 2013, Conrail advised the Coast Guard that Conrail intended to design and construct a new draw span and had already taken steps toward that end. (Id. at ¶ 19.) Conrail requested that the Coast Guard allow the draw of the bridge to remain closed to the passage of marine vessels until September 2014 to account for the time needed to design, obtain approval for, construct, and put into operation a new draw span for the bridge. (Pl.'s SMF at ¶ 20.)
In the meantime, Conrail continued planning with M&M. On January 31, 2013, M&M sent Conrail a "technical priced proposal" and summarized its understanding of "key issues driving" the bridge reconstruction project. (Doc. No. 57-10 at 2-5.) Among other things, M&M noted that such issues included that the Coast Guard would require Conrail to provide a 25-foot minimum vertical under-clearance, that Conrail was "interested in determining the feasibility of raising the low steel elevation of the bridge superstructure to an elevation that is above the 100-year flood elevation," and that "repurposing another movable bridge to this site is not in the plan, and a new movable bridge like that of the existing bridge is not an option." (Id. at 4.)
Thereafter, M&M communicated about its early stage efforts for the development project. On March 8, 2018, for example, M&M sent Conrail a "pro & con" comparison from its "early stage" considerations between a vertical lift bridge and another type of bridge—but the document did not discuss rebuilding the swing bridge as it existed before the derailment. (Doc.No. 57-11 at 1-4.) M&M suggested that the vertical lift bridge "offer[ed] the best overall project solution when cost, serviceability, reliability, installation and rail operations are considered." (Id. at 4.) On March 28, 2013, M&M provided Conrail with a "list of reasons why the existing swing span should be replaced with a new vertical lift" based on its "early stage" efforts and its "initial[] assess[ment]." (Doc. No. 57-12 at 1, 2.) Although M&M stated that it considered "the virtues of rehabilitating the existing swing span," it concluded that a vertical lift bridge offered several advantages over the old swing design, but did not list compliance with laws or ordinances among the early reasons. (Id. at 2-3.)
In March of 2013, Conrail heard back from the Coast Guard about its intention to design and construct a new bridge span. Specifically, on March 13, 2013, the Coast Guard reminded Conrail of its responsibility to operate, maintain, and repair the bridge "in accordance with the applicable statutes and regulations" and stated that in its fixed position, the bridge created "an unreasonable obstruction and hazard to navigation" and thus violated 33 U.S.C. § 494—Obstruction of navigation. (Doc. No. 31-7 at 2.) Under the threat of civil penalty, the Coast Guard ordered Conrail to take several step, including submitting preliminary "plans for a replacement drawbridge" within ninety days; submitting definitive engineering plans and a timetable for a "replacement drawbridge" within six months; and commencing construction on a "new drawbridge" within one year of receipt of the letter. (Id.) The Coast Guard's Office of Bridge Programs defines the term "drawbridge" to include six different types, including "swing" drawspans that "open[] by rotating horizontally on a central axis." (Defs.' SMF at ¶ 38.) The Coast Guard also enclosed a copy of its Bridge Permit Application Guide. (Doc. No. 31-7 at 2.)
In late March 2013, Conrail began finalizing its proposal. On March 29, 2013, Conrail requested that M&M prepare a "final official proposal for design" that Conrail intended tosubmit to its Board of Directors. (Defs.' SMF at ¶¶ 23-24.) In April 2013, Conrail gave M&M a notice to proceed with the lift bridge, and they did. (Id.)
The crux of the parties' current dispute implicates what repairs the law and Coast Guard required Conrail to make. One of the documents relevant to that issue is the Coast Guard's Bridge Permit Guide enclosed in the Coast Guard's March 13 letter to Conrail. (Doc. No. 31-8.)
The Bridge Permit Guide is intended to assist agencies and members of the public when applying for a Coast Guard permit to "construct a new bridge or causeway or reconstruct or modify an existing bridge or causeway across the navigable waters of the United States." (Id. at 4.) By its own terms, however, the Bridge Permit Guide's "guidance is not a substitute for applicable legal requirements, nor is itself a...
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