GEICO Marine Ins. Co. v. Shackleford
| Decision Date | 19 April 2018 |
| Docket Number | Case No. 8:16-cv-2329-T-27MAP |
| Citation | 316 F.Supp.3d 1365 |
| Parties | GEICO MARINE INSURANCE COMPANY, Plaintiff, v. James SHACKLEFORD, Defendant. |
| Court | U.S. District Court — Middle District of Florida |
Theodore L. Shinkle, GrayRobinson, PA, Melbourne, FL, for Plaintiff.
Craig L. Berman, Berman Law Firm, PA, St Petersburg, FL, for Defendant.
THIS CASE was tried before the Court.
On March 13, 2016, GEICO Marine Insurance Company issued a liability only marine insurance policy for James Shackleford's vessel, Sea the World . On June 17, 2016, the Vessel suffered damage from inclement weather while moored near Fort Lauderdale. GEICO seeks a declaratory judgment that the policy does not cover the loss because Shackleford breached a navigational warranty in the policy, the implied warranty of seaworthiness, and the maritime duty of uberrimae fidei (utmost good faith).
In 2009, Shackleford purchased Sea the World , a 1981 65' Irwin sailing vessel, for approximately $ 120,000. She was insured with Continental Insurance Company. Sea the World was subsequently damaged by a lightning strike. And in 2012, she suffered additional damage as a result of negligent repairs at Sailor's Wharf, a yacht yard on the west coast of Florida. In November 2014, Shackleford settled his claim for damages with CNA and Boat Owners Association of the United States (Boat U.S.), a marine manager that writes, underwrites, and manages claims for insurance companies, including GEICO. (Settlement Agreement, Plaintiff's Ex. 5). In the agreement, the parties agreed that the Vessel was a constructive total loss. In the agreement, CNA and Boat U.S. assigned their rights to pursue claims against Sailor's Wharf to Shackleford. Shackleford sued Sailor's Wharf for damage to the Vessel's hull, the result of improper blocking. The improper blocking resulted in oil canning, or flexing, of her hull. While the lawsuit against Sailor's Wharf was pending, minimal repair work was completed on the Vessel and she remained moored in the water.
In March 2016, Shackleford engaged Taylor Boat Works to haul the Vessel from the water for repairs. Since Taylor Boat Works required liability insurance, Shackleford called GEICO on March 11, 2016 and requested a liability only policy. GEICO issued that policy on March 13, 2016. The next day, GEICO amended coverage to "Port Risk Ashore," which provided "no coverage for navigation, and [that] coverage will only apply to the insured vessel while the boat is out of the water." It is apparent, therefore, and I so find, that at the inception of the policy, GEICO knew of the condition of the Vessel.
GEICO contends that at the inception of the policy, the Vessel was unseaworthy.1 That contention is disingenuous. When the liability only policy was issued, Shackleford had no intention of sailing the Vessel anywhere, and GEICO knew this. His only intention was to have her hauled from the water for repairs, which GEICO also knew. And tellingly, GEICO's policy did not provide coverage for her hull and equipment. She was, therefore, reasonably fit for hauling from the water, the intended use. See Aguirre v. Citizens Cas. Co. of New York , 441 F.2d 141, 144 (5th Cir. 1971). And based on Boat U.S.'s experience with the Vessel, including its participation in Shackleford's prior claim for damages against CNA and the settlement, I find that by inference, GEICO knew that the Vessel required extensive repairs when it issued the policy. Indeed, Shackleford credibly testified that he informed GEICO that she required an extensive refit and repairs.2
The policy provided coverage "[w]hile the boat is afloat within the navigational area shown on the Declarations Page." The Declarations Page did not, however, include a "navigational area." Rather, the March 13 Declarations Page included "Cruising Limits:"
U.S. Atlantic and Gulf Coastal waters and inland water tributary thereto between Eastport, ME and Brownsville, TX, inclusive and the waters of the Bahamas including the Turks and Caicos, however the boat must be north of Cape Hatteras, NC from June 1 until November 1 annually.
(Plaintiff's Ex. 1, Dkt. 71-39). And, as noted, the Cruising Area on the application stated "Coastal and Inland waters of the U.S. & Canada." (Vessel Application, Defendant's Ex. 2, Dkt. 72-2).
The day after the policy was issued, a Port Risk Ashore amendment to coverage was added which provided that "[t]his restriction provides no coverage for navigation, and coverage will only apply to the insured vessel while the boat is out of the water." (Policy, Plaintiff's Ex, 1, Dkt. 71-39). That day, GEICO added hull coverage of $264,000 after determining her value. (Policy, Plaintiff's Ex. 1, Dkt. 71-39; Activity Log, Plaintiff's Ex. 7, Dkt. 71-7). GEICO noted that the Vessel was at NE Taylor Boatworks in Bradenton, Florida. (Activity Log, Plaintiff's Ex. 7, Dkt. 71-1). The intended purpose of the Vessel at the time of the endorsement was noted as out of water storage. Consistent with that, the Navigation Area on the March 14 Endorsement was blank, and the Cruising Limits on the March 14 Declarations Page stated Port Risk Ashore.
When the Vessel was hauled out, the oil canning which had been observed at Sailor's Wharf was reduced from 10-12 inches to approximately half an inch. After observing the hull correction, Shackleford realized that the presumed structural damage from the oil canning was corrected and the Vessel may not be a constructive total loss. On March 14, an out of water survey of the Vessel was completed. (Plaintiff's Ex. 6, Dkt. 71-6). On May 21, 2016, an additional in-water survey was completed. (Defendant's Ex. 5, Dkt. 72-3).
In May 2016, Shackleford requested that GEICO remove the Port Risk Ashore restriction so that he could sail the Vessel to Fort Lauderdale for extensive repairs. He requested "full coverage." GEICO knew, therefore, that the Vessel would be sailed to Fort Lauderdale within a few days for repairs. Shackleford testified that a cruising or navigational limit was "absolutely" not discussed during that conversation, and I find his testimony in that regard credible. Indeed, GEICO's Activity Log is silent on that.3 (Activity Log, Plaintiff's Ex. 7, Dkt. 71-7).
To remove the Port Risk Ashore endorsement, GEICO required a survey. Shackleford provided GEICO with the Rich Parrey survey and Steven Berlin's survey addendum. After reviewing those surveys, GEICO recorded the Vessel's condition as "Good," with a fair market value of $345,000, higher than the insured value. (Activity Log, Plaintiff's Ex. 7, Dkt. 71-7). And, on May 27, GEICO removed the Port Risk Ashore endorsement. (Policy, Plaintiff's Ex. 1, Dkt. 71-39; Activity Log, Plaintiff's Ex. 7, Dkt. 71-7). GEICO emailed Shackleford, confirming receipt of the survey and that it "was able to remove the port risk ashore restriction" and "attached a copy of the updated declarations page outlining the removal of this restriction." (Email, Plaintiff's Ex. 2, Dkt. 71-2).4
The May 27 Endorsement, like the March 14 Endorsement, had a blank space following "Navigation Area." However, the May 27 Declarations Page, unlike the March 14 Declarations Page, stated:
Within a day or two of the May 27 Endorsement, Shackleford sailed the Vessel to Fort Lauderdale. In early June, while she was anchored in Lake Sylvia near Fort Lauderdale, a storm caused her to drag anchor and lodge against a seawall. As a result, she took on water and suffered damage. Shackleford contracted with a boat yard, Cracker Boy, to haul the Vessel out for repairs and filed a claim under the GEICO policy. In August 2016, Michael McCook, a marine loss investigator, inspected the Vessel at Cracker Boy.
McCook was familiar with the Vessel prior to his inspection in August 2016 because he had inspected her as part of Shackleford's prior claim against CNA and Boat U.S. Indeed, GEICO, through its marine manager, Boat U.S., was aware of the prior claim, the damages the Vessel had suffered, and the terms of the settlement in which the Vessel was declared a constructive total loss.
According to McCook, the reasons for the Vessel taking on water were unrelated to his opinion regarding her seaworthiness. According to him, the Vessel took on water during the storm in Fort Lauderdale because a PVC fitting, rather than a bronze cap fitting, had been used on a plug and debris had fallen on the float switch, preventing the bilge pump from operating properly.5
Regarding her seaworthiness, McCook testified that the Vessel was unseaworthy to sail to Fort Lauderdale based on her faulty electrical system and structural damage. His testimony regarding the electrical system was based on a previous survey he reviewed that was not submitted as evidence, "various system failures" Shackleford experienced while sailing, and Shackleford having been shocked by the stove on the Vessel. And, he relied on her state of disarray while she was being repaired at Cracker Boy. McCook's testimony is not persuasive, and does not support GEICO's contentions.
The testimony of Steven Berlin, the marine surveyor Shackleford hired in the Sailor's Wharf litigation, was read into evidence. According to Berlin, the...
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