Grande v. St. Paul Fire & Marine Ins. Co., 05-1734.

• Decision Date: 02 February 2006
• Docket Number: No. 05-1734.,05-1734.
• Court: U.S. Court of Appeals — First Circuit
• Parties: FRANK P. GRANDE, Plaintiff, Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY; Charter Lakes Marine Insurance, Defendants, Appellees.

Page 277

436 F.3d 277

FRANK P. GRANDE, Plaintiff, Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY; Charter Lakes Marine Insurance, Defendants, Appellees.

No. 05-1734.

United States Court of Appeals, First Circuit.

Heard November 8, 2005.

Decided February 2, 2006.

Michael X. Savasuk for appellant.

Mark G. Furey with whom Thompson Bull Furey Bass & MacColl was on brief for appellees.

Before BOUDIN, Chief Judge, STAHL, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Chief Judge.

This appeal concerns a claim for insurance coverage following a maritime loss. The matter was decided by the district judge adversely to the plaintiff, Frank P. Grande ("Frank P."), on the defendants' motion for judgment as a matter of law at the close of plaintiff's case during the trial before a jury. Grande v. St. Paul Fire & Marine Ins. Co., 365 F.Supp.2d 57, 59 (D.Me.2005). We therefore recite the facts based upon the evidence offered by the plaintiff, drawing inferences in his favor. Guilloty Perez v. Pierluisi, 339 F.3d 43, 50 (1st Cir.2003).

Frank P. owned a 25-foot Catalina sailboat called APHRODITE, based in Maine. He had charter insurance for the vessel from St. Paul Fire & Marine Insurance Company ("St.Paul"), obtained through Charter Lakes Marine Insurance ("Charter Lakes"), which was an authorized agent of St. Paul. The latest version of the policy limited coverage to "Atlantic coastal waters of the United States between Eastport, ME and St. Marys, GA, not more than 100 miles from shore, Coastal Atlantic Maine."

In spring 2003, Frank P. found a new sailboat, a 44-foot Irwin named GINA, in Miami, Florida. His cousin, Frank A. Grande ("Frank A."), paid for the vessel, on the understanding that Frank P. would own and operate the vessel and eventually pay Frank A. back the purchase price. Frank P. planned to sail the GINA from Miami back up to Maine and to use it in his charter business in place of the APHRODITE. He contacted Mark VanEpps of Charter Lakes, requesting coverage for chartering the vessel in Maine and for his trip from Florida to Maine.

On or about April 28, 2003, VanEpps faxed an insurance quote and application to Frank P., who filled out the application, listing himself as owner and sole operator, and faxed it back to VanEpps. The quote included one-time trip coverage from Florida to Maine for a $150 premium. According to Frank P., he told VanEpps that he wanted to get the GINA from Florida to Maine "in a timely fashion and as the crow flies."

Prior to Frank P.'s departure from Miami on May 6, 2003, VanEpps reported by telephone to Frank P. (who had not yet received the new policy) that he was now covered by St. Paul and thus was "good to go" with the GINA on his voyage to Maine. On the trip to Maine, the GINA sought to evade bad weather near Cape Hatteras, adjusted her course southeast, and was 150 to 160 nautical miles from shore when Frank P. and crew were rescued by the Coast Guard on May 17. The vessel, although later salvaged, was effectively a total loss.

After the incident, Frank P. received a formal St. Paul policy for the GINA dated May 19, 2003 (the day after he had called Charter Lakes to notify it of the loss), containing an endorsement covering the trip but also stating that the GINA was covered only within 100 miles from shore. When Frank P. filed a claim with St. Paul, it was rejected on the ground that the GINA had been outside the 100-mile limit when the loss occurred.

Several months later, Frank P. brought this diversity suit against St. Paul and Charter Lakes in federal district court in Maine. Frank P.'s contract claim asserted insurance coverage. A separate negligence claim charged Charter Lakes with failing to procure the insurance that Frank P. requested, and with failing to notify him of the supposed 100-mile limit prior to his departure (contrary to its alleged practice in prior dealings with Frank P.). Frank P. also asserted an estoppel claim,¹ arguing that St. Paul was barred from denying coverage because of his justified reliance on their unreasonably misleading conduct.

The case was tried to a jury in April 2005, but after the close of Frank P.'s evidence, the district court granted judgment for the defendants as a matter of law. Grande, 365 F.Supp.2d at 59. In substance, the court said that Frank P. had failed to establish contract coverage for the trip he took; that any insurance coverage he did procure was voidable because of the failure to disclose Frank A.'s interest; and that the negligence and estoppel claims foundered because of the non-disclosure and because Frank P. had failed to show that anyone else would have insured him outside the 100-mile limit. Id. at 62-67.

On this appeal, review is de novo because the district court granted judgment as a matter of law, and we take Frank P.'s evidence in the light most favorable to his case and assume credibility issues in his favor. Guilloty Perez, 339 F.3d at 50. We accept the parties' view that Maine law applies except so far as it might be displaced by a governing federal rule applicable to maritime matters. See Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 319-21, 75 S.Ct. 368, 99 L.Ed. 337 (1955); Greenly v. Mariner Mgmt. Group, Inc., 192 F.3d 22, 25-26 (1st Cir.1999).

We begin with Frank P.'s contract theory, which, if successful, likely looks to liability of St. Paul rather than Charter Lakes; an agent who acts for a disclosed principal is not ordinarily party to the contract or liable for its breach by the principal. See County Forest Prods., Inc. v. Green Mountain Agency, Inc., 758 A.2d 59, 69 (Me.2000). Here, Frank P. has not sought to recover on the policy as issued, regarding that avenue as blocked by the specific endorsement language excluding coverage beyond the 100-mile limit.

Instead, Frank P. argues in substance that the contract in force during his trip was a temporary "binder" contract that filled the gap until a formal policy later issued, and that the formal policy misstated the coverage agreed to for the trip. This binder contract, in Frank P.'s view, was formed by the exchanges between the parties, including VanEpps' ultimate "good to go" assertion, and does not incorporate any 100-mile limit on the trip from Florida to Maine. According to Frank P.'s testimony, he told VanEpps that he was requesting trip insurance and VanEpps told him after receiving the completed application back that he was covered.

Frank P. testified that he told VanEpps that he planned to travel from Florida to Maine in a straight line (specifically, "as the crow flies"). During opening arguments, Frank P.'s counsel stated that such a route would have taken Frank P. outside of the 100-mile limit; although this statement itself was not evidence, United States v. Rose, 104 F.3d 1408, 1416 (1st Cir.1997), cert. denied, 520 U.S. 1258, 117 S.Ct. 2424, 138 L.Ed.2d 187 (1997), Frank P. later submitted into evidence a chart from which the jury could have determined that such a route would naturally have taken the GINA outside of a 100-mile limit between Cape Hatteras and Maine.

Frank P. further testified as to past practice in his dealings with Charter Lakes. He claimed that in the past, navigational limits for the APHRODITE had been cited in Charter Lakes' quote letter, and that the written binder issued thereafter had cited those same limits, which in turn were cited in the formally issued policy. Frank P. testified that during his negotiations with VanEpps, no navigational limit was mentioned by VanEpps as to the trip from Florida to Maine.

In granting judgment for defendants as a matter of law, the district judge took the view that, under general law applicable to insurance, a temporary binder provides only that coverage that is common practice in the industry and that it was Frank P.'s obligation—as the claimant under a binder contract—to establish that such insurance could be procured from St. Paul or others without a 100-mile limit. Grande, 365 F.Supp.2d at 63-64. Admittedly, Frank P. offered no evidence on this issue one way or the other.

Case law does use common practice to fill in missing terms where, as is ordinarily the case, the binder arrangement is a temporary measure and contains little detail of its own. "[W]hen a loss occurs after a binder has been issued, but before a policy is written, the insurer is bound to provide coverage in line with its standard policies referenced in the binder, or policies standard throughout the industry." Pine Ridge Realty, Inc. v. Mass. Bay Ins. Co., 752 A.2d 595, 599 (Me.2000) (citations omitted); see also Acadia Ins. Co. v. Allied Marine Transp. LLC, 151 F.Supp.2d 107, 125 (D.Me.2001). If Frank P.'s binder claim rested on a general request for insurance followed by a standard binder commitment by VanEpps, this would be a different case.

Here, however, Frank P. does not claim merely that he asked that insurance be switched from APHRODITE to GINA, which might easily be understood as importing the existing 100-mile limit contained in the APHRODITE policy or as compelling a search for common practice. Rather, he testified that he also asked VanEpps for coverage for the trip from Florida to Maine and that he told VanEpps that the GINA would follow the most direct course (which a reasonable jury might find—based on the chart submitted into evidence—would take her more than 100 miles offshore).

The "common practice" rule does not apply if a "special agreement" has been made in the course of contracting. Acadia Ins. Co. v. Allied Marine Transp. LLC, 151 F.Supp.2d 107, 125 (D.Me.2001) ("The general rule regarding the terms of an oral binder or contract for temporary insurance pending issuance of a written policy consists, in the absence of a special agreement, of the usual provisions of contracts employed to effect like insurance." (emphasis added)). Thus, when VanEpps said that insurance was in force, a jury could find (although not obliged to do...