Faulkner Walsh Constructors v. National Casualty Co.
| Decision Date | 11 July 2022 |
| Docket Number | 3:20-cv-0270-HRH |
| Parties | FAULKNER WALSH CONSTRUCTORS; H2W CONSTRUCTORS, INC.; and FOUNDATION SERVICES, INC., Plaintiffs, v. NATIONAL CASUALTY COMPANY; ATLANTIC SPECIALTY INSURANCE COMPANY; AGCS MARINE INSURANCE COMPANY; and ZURICH AMERICAN INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — District of Alaska |
Defendants move for summary judgment.[1] Plaintiffs cross-move for partial summary judgment.[2] Both motions are opposed.[3] At defendants' request, the court heard oral argument.[4]
Although the parties dispute the legal significance of the facts in this case, the underlying facts themselves are not generally in dispute. In June 2012, plaintiff Faulkner Walsh Constructors obtained a marine insurance policy, No GIS-12-080-HP, from defendants National Casualty Company Atlantic Specialty Insurance Company, AGCS Marine Insurance Company, and Zurich American Insurance Company. Faulkner Walsh procured the policy through MCM, an insurance brokerage in Seattle. The policy, which provided coverage from June 1, 2012, to June 1, 2013, covered Faulkner Walsh's fleet of nine vessels: three tugs (War Horse, Frances Snow, and Centaur), five barges (David Nook, Cornell #10, Afognak 22, Delta Viking, and Delta Chief), and a pusher boat (Mac). It provided $1 million of protection and indemnity (P&I) coverage for each vessel, plus several hundred thousand dollars of hull and machinery (H&M) coverage for each of the three tugs. Plaintiffs paid premiums to defendant totaling $72,710.00, comprised of $49,770.00 for the P&I coverage and $22,940.00 for the H&M coverage.[5]
The P&I policy for Faulkner Walsh's vessels provided, in relevant part, that:
The policy also provided that defendants had the “option” of naming and directing attorneys to defend Faulkner Walsh in litigation over covered claims.
This Company shall have the option of naming the attorneys who shall represent the assured in the prosecution o[r] defense of any litigation or negotiations between the assured and third parties concerning any claim covered by this policy, and shall have the direction of such litigation or negotiations ....The assured shall at the option of this Company permit this Company to conduct, with an attorney of this Company's selection, at this Company's cost and expense and under its exclusive control, a proceeding in the assured's name to limit the assured's liability to the extent, and in the manner provided by the present and any future statutes relative to the limitation of a shipowner's liability.[7]
Besides the usual marine insurance provisions, the policy also contained a provision entitled “Information.” The provision reads:
The reason for the “Information” appears to have been a ship survey performed in 2011 in connection with the previous year's policy. The surveyor, Jack McFarland, had observed watertightness problems in a few of Faulkner Walsh's vessels, including the barge Delta Chief. McFarland opined that the Delta Chief was “still usable in the riverway,” but recommended that it be drydocked and made watertight.[9]
In an email discussion regarding renewing the policy for 2012-13, the account manager at MCM told Faulkner Walsh that the Delta Chief's watertightness needed to be determined if it wished to purchase the new policy.[10] Faulkner Walsh responded simply, “Let's bind the quote,” without mentioning the compliance letter.[11] The insurance broker bound the quote and followed up with Faulkner Walsh several times about a compliance letter or certificate of watertightness for the Delta Chief.[12]
On June 22, 2012, MCM wrote Faulkner Walsh to ask when it could expect to receive the Delta Chief's compliance letter and mentioned alternative methods of hull repair.[13] Faulkner Walsh responded with a request for a copy of the compliance survey form.[14] MCM provided the form, saying, “[i]n lieu of dry-docking [the Delta Chief], just a confirmation by a surveyor that she is watertight should work."[15] MCM followed up again on October 2, 2012, asking, in relevant part, [16] Faulkner Walsh responded, “[a]s for delta [chief], not sure what happened there.”[17] The Faulkner Walsh employee who had been communicating with MCM forwarded the October 2 inquiry to another employee, saying, “? Don't really remember this.”[18] The parties do not dispute that Faulkner Walsh never provided any compliance documentation for the Delta Chief.[19]
On October 4, 2012, the Delta Chief sank in a branch of the Kuskokwim River. Faulkner Walsh reported the Delta Chief's sinking to MCM on February 11, 2013,[20] and MCM informed defendants of it later that day.[21] Faulkner Walsh's initial efforts to raise the Delta Chief failed, although it managed to recover several trucks and loaders the barge had been carrying. In October 2013, the State of Alaska's Department of Environmental Conservation (DEC) sent Faulkner Walsh a “Notice of Violation” requiring it to submit a plan for remediating the environmental contamination the sunken barge was causing.[22] Faulkner Walsh told the State on two separate occasions in late 2013 and early 2014 that it would recover the barge as soon as conditions allowed.[23] But Faulkner Walsh had still not recovered the barge by the spring of 2016, prompting the DEC to refer the matter to the Alaska Department of Law for commencement of legal proceedings.[24]
On November 3, 2016, the State filed suit against Faulkner Walsh and the other two plaintiffs, H2W Constructors, Inc., and Foundation Services, Inc., in Alaska superior court.[25] The State alleged that plaintiffs had committed negligence, negligent trespass, intentional trespass, public nuisance, statutory natural-resource strict liability, and statutory unlawful abandonment of a vessel.[26]
Although defendants had been advised of the sinking of the Delta Chief on February 12, 2013, plaintiffs did not inform defendants of the State's lawsuit until May 2017, when plaintiffs' lawyer emailed defendants' adjuster to ask for information on the policy.[27] In late August 2017, after some mis-communication between the parties, defendants recognized plaintiffs' insurance claim for the Delta Chief's sinking and their tender of the defense of the State's lawsuit.[28] On September 15, 2017, defendants denied coverage and refused to defend plaintiffs against the State's suit.[29] Defendants told plaintiffs that the Delta Chief's sinking was not covered under the policy due to Faulkner Walsh's “failure to comply with condition precedent to coverage” and “failure to provide prompt notice of claim.”[30] Defendants concluded that “because no coverage exists, [we] have no duty to defend Faulkner Walsh against [the State]'s suit.”[31]
After two rounds of summary judgment motion practice and a one-day bench trial in December 2019 - at which plaintiffs neither filed a trial brief nor called any witnesses[32]- the superior court found plaintiffs liable to the State for $4,234,414.00 in damages.[33]The superior court later amended its judgment to include an additional $877,686.42 in interest, $150,000.00 in attorney fees, $3,754.73 in costs, and $12,755.19 in other fees.[34]
On September 14, 2020, plaintiffs filed the present suit against defendants in the Anchorage superior court. Defendants removed the case to this court on October 20, 2020.[35] Shortly before commencing this suit, plaintiffs and the State signed an agreement in which the State promised not to execute on the superior court's judgment while plaintiffs pursued their case against defendants here. In exchange, plaintiffs agreed to diligently pursue this case and to assign to the State any damages or settlement money they recover from defendants until the superior court's judgment is satisfied.[36]
Rule 56 of the Federal Rules of Civil Procedure allows parties to move for summary judgment on their claims or defenses or any parts thereof. Fed.R.Civ.P. 56(a). District courts “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. S. Cal. Darts Ass'n v Zaffina, 762 F.3d 921, 925 (9th Cir. 2014) (citations omitted) (quoting Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248 (1986)). Parties may...
To continue reading
Request your trial