Contractors v. Onebeacon Am. Ins. Co.

• Decision Date: 17 March 2015
• Docket Number: CIVIL ACTION NO: 14-1958 SECTION: R(3)
• Parties: CHET MORRISON CONTRACTORS, L.L.C. Plaintiff, v. ONEBEACON AMERICAN INSURANCE COMPANY; MARKEL AMERICAN INSURANCE COMPANY; AND CONTINENTAL INSURANCE COMPANY. Defendants.
• Court: U.S. District Court — Eastern District of Louisiana

CHET MORRISON CONTRACTORS, L.L.C. Plaintiff, v. ONEBEACON AMERICAN INSURANCE COMPANY; MARKEL AMERICAN INSURANCE COMPANY;AND CONTINENTAL INSURANCE COMPANY. Defendants.

CIVIL ACTION NO: 14-1958 SECTION: R(3)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

March 17, 2015

ORDER AND REASONS

Defendants Onebeacon American Insurance Company and Markel American Insurance Company move the Court to dismiss plaintiff's claims under Federal Rule of Civil Procedure 12(b)(6). The Court grants the defendants' motion because the hull and machinery insurance policy at issue does not provide defense coverage to plaintiff.

I. Background

A. The Underlying "Offshore Marine" Litigation

On October 29, 2010, Offshore Marine Contractors, Inc. filed suit in this Court alleging that Palm Energy Offshore, LLC and Chet Morrison Well Services, LLC failed to pay for the charter of one of Offshore Marine's vessels, the L/B Nicole Eymard. Offshore Marine also claimed that Palm Energy and Chet Morrison breached a separateoral agreement that the parties allegedly formed after one of the legs of the L/B Nicole Eymard became stuck. Under the terms of the alleged oral contract, Palm Energy and Chet Morrison promised to pay Offshore Marine for repair costs and lost charter fees if Offshore Marine cut the legs of the vessel to free it.¹

Chet Morrison later sued Palm Energy and H.C. Resources, LLC ("HCR") alleging that if Chet Morrison were found to have chartered the L/B Nicole Eymard, Palm Energy and HCR were obligated to pay Chet Morrison the cost of the charter, plus a 15% markup and interest for untimely payments. On February 6, 2013, the Court consolidated the two cases for trial.²

On June 24, 2013 the Court conducted a two-day bench trial and summarized its findings as follows:

(1) [Chet Morrison] is liable to [Offshore Marine] for the charter of the L/B Nicole Eymard for the Chandeleur 37 job, which took place from July 15 to July 27, 2008. HCR is in turn liable to [Chet Morrison] for the full amount of those charter fees.

(2) [Chet Morrison] is liable to OMC for the charter of the vessel for the West Delta 55 job, which took place from July 28 to August 18, 2008. [Palm Energy] is in turn liable to [Chet Morrison] for the full amount of those charter fees.

(3) Neither [Chet Morrison] nor [Palm Energy] is liable for the repair costs and downtime charter associated with the decision to cut the leg of the vessel.³

B. The Instant Litigation

Following the conclusion of the Offshore Marine litigation, Chet Morrison sued defendants Onebeacon America Insurance Company, Markel American Insurance Company, and Continental Insurance Company alleging that all three insurance companies failed to undertake Chet Morrison's defense in the Offshore Marine litigation despite Chet Morrison's status as an "additional insured" under the insurance policies underwritten by the defendants. Thus, Chet Morrison seeks remuneration of the amount it was cast in judgment as well as defense costs associated with the Offshore Marine litigation. Chet Morrison also asserts derivative statutory bad faith claims relating to the denial of those defense costs.

Onebeacon and Markel, as the underwriters for the hull and machinery policy ("H&M policy"), now move the Court to dismiss Chet Morrison's claims against them. Onebeacon and Markel contend that the H&M policy provides first-party property insurance and does not contain any provision extending defense or indemnity coverage to Chet Morrison under the circumstances.⁴

C. The Marine Package Policy

The H&M policy at issue is part of a marine package policy, which provides five distinct coverages that are underwritten by different insurers. These coverages include (1) the H&M Policy, (2) an Increased Value Policy, (3) a Protection and Indemnity Policy, (4) a Bumbershoot Liability Policy, and (5) and Excess Bumbershoot Liability Policy, all of which are subject to the terms of the "General Conditions" section.⁵ Although Gulf Coast Marine is the named insured, Chet Morrison is included as an additional insured in the general conditions section. This section provides, in pertinent part:

Permission is hereby granted to charter the vessel(s) to or to broker vessels through Chet Morrison Contractors, Inc. and/or any of their subsidiaries or affiliated companies; and for operations during the period of any such brokerage or charter, either oral or in writing: (a) Chet Morrison Contractors, Inc., or any of their subsidiaries or affiliates, and/or any corporation, partnership or individual operating and/or working the vessel(s), and/or anyone for whom the vessel(s) is/are working or being operated, shall be considered as Additional Insureds under all coverage provided by the policies referenced above, and underwriters' rights of subrogation against the additional insureds are hereby waived,; and (b) contractual liability shall be afforded Chet Morrison under this endorsement, which shall be deemed a written contract, providing defense and indemnity to Chet Morrison for any claims brought by or on behalf of the vessel's owners, employees, invitees, or crew for sickness, disease, personal injury or death, arising out of, directly or indirectly, the charter or brokerage of the vessel regardless if caused or contributed to by the sole or concurrent fault, negligence, or strict liability of Chet Morrison.⁶

The general conditions also contains a "Notice of Claim" section, which provides that

the Assureds must see to it that Underwriters receive written notice of any third party claim or "suit" as soon as practicable and must cooperate with Underwriters in the investigation or settlement of the claim or defense against any "suit". . . .⁷

Although Chet Morrison was included as an "additional insured" under all of the policies contained in the Marine Package Policy, Onebeacon and Markel did not subscribe to all of the individual policies. Instead, Onebeacon and Markel are the underwriters for the H&M Policy only. Thus, Chet Morrison's claims against Onebeacon and Markel are based solely on Chet Morrison's status as an additional insured under the H&M Policy. The H&M Policy provides:

This contract is to indemnify the Assured for loss resulting from loss of or damage to or liability of each vessel which is prima facie covered by the Owners' Policies or Club Entries but in respect of which there is subsequent non-payment . . . .⁸

In the "Perils" clause, the policy identifies the specific risks that the H&M Policy insures against:

Touching the Adventures and Perils which the Underwriters are contented to bear and take upon themselves, they are of the Seas, Men-of-War, Fire, Lightning, Earthquake, Enemies, Pirates, Rovers, Assailing Thieves, Jettisons, Letter of Mart and Counter-Mart, Surprisals, Taking of Seas, Arrests, Restraints and Detainment of all Kings, Princes and Peoples, of what nation, condition, or quality soever, Barratry of the Master and Mariners, and of all other like Perils, Losses and Misfortunes that have or shall come to the Hurt, Detriment or Damage of the Vessel . . . .⁹

The "extended adventures and perils clause" also provides coverage for:

Loss or damage howsoever caused by theft, flood, cloudburst, tidal action, water current, rising water, ice, freezing, rain or other storm, and/or tempest, tornado or windstorm, landslide, falling object, listing, upset, miring down, capsizing, overturn, and shall also include direct loss or damage from pillage and looting and/or blowout and catering as there latter two terms are known in the oil industry.¹⁰

Finally, the H&M policy's "Inchmaree" clause provides that "this insurance also covers loss of or damage to the Vessel" directly caused by a variety of additional risks.¹¹

II. Legal Standard

To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible "when the plaintiff pleadsfactual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 239 (5th Cir. 2009). But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678.

A legally sufficient complaint need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Id. In other words, the face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiff's claim. Lormand, 565 F.3d at 257. If there are insufficient factual allegations to raise a right to relief above the speculative level, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, the claim must be dismissed. Twombly, 550 U.S. at 555.

In considering a motion to dismiss for failure to state a claim, a court must typically limit itself to the contents of the pleadings, including their attachments. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000). "If, on a motion under 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must betreated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d). Nevertheless, uncontested documents referred to in the pleadings may be considered by the Court without converting the motion to one for summary judgment even when the documents are not physically attached to the complaint. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 313 (5th Cir. 2002) (district court properly considered documents not...