Greenly v. Mariner Mgmt Group Inc.

Decision Date21 September 1999
Docket NumberNo. 99-1054,99-1054
Parties(1st Cir. 1999) DAVID R. GREENLY, Plaintiff, Appellant, v. MARINER MANAGEMENT GROUP, INC., ET AL., Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE

[Copyrighted Material Omitted]

Michael X. Savasuk on brief for appellant.

Robert J. Murphy and Holbrook & Murphy on brief for appellees.

Before Selya, Circuit Judge, Cyr, Senior Circuit Judge, and Boudin, Circuit Judge.

SELYA, Circuit Judge.

This appeal arises out of the sinking of a 65-foot fishing trawler, the F/V MISS PENELOPE, off the Maine coast. The incident spawned a wrongful death claim on behalf of a crew member who was lost at sea, a bodily injury claim by an injured seaman, and a claim by plaintiff-appellant David Greenly (the owner of the vessel) for property damage. The defendants, Mariner Management Group, Inc. and Clarendon Insurance Co. (collectively, "Mariner" or "the insurer"),1 paid the bulk of Greenly's claim but withheld $34,370 as a coinsurance penalty applicable to payments made to settle the seamen's claims under the protection and indemnity (P&I) provisions of Greenly's policy.

Asserting admiralty jurisdiction, see 28 U.S.C. § 1333(1), Greenly sued in the federal district court to recover the withheld amount. The case was heard on cross-motions for summary judgment. A magistrate judge recommended that judgment enter in Greenly's favor. Mariner objected. The district court disagreed with the magistrate's recommendation in relevant part, concluded that Mariner's position was well-taken, and granted its motion for brevis disposition. See Greenly v. Mariner Mgmt. Group, Inc., Civ. No. 98-130-P-H, slip op. (D.Me. Sept. 23, 1998) (unpublished). We reverse.

The essential facts are not in dispute. Greenly had fished the MISS PENELOPE out of Portland for several years prior to the mishap. Although he captained the vessel throughout that period, he decided to take an impromptu sabbatical in the fall of 1997. He appointed a member of the crew, Brian Morse, to serve as captain -- an action that the policy allowed him to take without permission from, or notification to, the insurer. Morse's stint as captain was brief, for the vessel sank in heavy weather just a few months later. Of the four men aboard when she went down, one was lost and one was injured.

Greenly learned of the sinking on January 28, 1998, and immediately reported it to the insurer. Mariner balked at paying the wrongful death and bodily injury claims in full when it learned that four men were aboard the ship at the time of the accident. It cited the insurance policy's Crew Warranty clause, asserting that this clause contemplated a maximum of three crew members; and that, although the insured retained the right to add crew members, he could only assure full coverage by notifying the insurer before the fact and paying a premium surcharge, neither of which Greenly had done. Since the accident occurred with more than three men on board, Mariner reduced P&I payments in proportion to the ratio between what it considered to be the stated and actual number of crew members. It accomplished this reduction by withholding the calculated amount from the payment due to Greenly under the policy's first-party coverage on the vessel's hull and machinery.2

Coverage disputes usually depend upon the language of the policy, and this case is no different. The critical provision is the Crew Warranty clause, which provides:

In consideration of the premium charged, it is warranted that coverage hereunder is provided for not more than three (3) crew members aboard the insured vessel at any one time. Also, warranted that in the event additional crew are to be covered hereunder, the Assured shall give prior notice to this Company and pay such additional premium as is required. If the Assured shall fail to give such prior notice and at the time of loss with respect to crew there are more crew on board, this insurance shall respond only in the proportion that the stated number of crew bears to the number on board at the time of the accident.

The key to interpreting this clause lies in the meaning of the word "crew." The protagonists read this word quite differently. On the one hand, Mariner maintains that the word is unambiguous and that its common meaning includes the entire complement of individuals working aboard a vessel in any capacity (e.g., ordinary seamen, deck hands, the cook, the engineer, the mate, the captain). On this reading, Mariner urged the district court to find that Morse (the captain) necessarily comprised part of the crew, and that, therefore, his presence, together with that of three ordinary seamen, breached the warranty. Greenly, on the other hand, maintains that the word "crew" at the very least excludes the ship's captain. On this reading, he urged the district court to find that Morse (qua captain) did not comprise a part of the crew, and that, therefore, the warranty was fulfilled (i.e., the "crew" on board at the time of the sinking numbered three).

The magistrate judge essentially accepted Greenly's position. On de novo review, the district judge agreed with Greenly in the first instance; he found that the word "crew," in and of itself, was ambiguous. But this proved to be a Pyrrhic victory, for the judge went on to rule that, "[r]ead in its context, the crew warranty objectively manifests an intent to cover the captain as well as other members of the ship's crew." The district judge thereupon rejected the magistrate's recommendation, denied Greenly's motion for summary judgment, and granted Mariner's cross-motion.

We review the district court's entry of summary judgment de novo.3 See Cadle Co. v. Hayes, 116 F.3d 957, 960 (1st Cir. 1997); Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990). Like the lower court, we focus on the narrow question of whether Captain Morse should be deemed a member of the crew for purposes of the Crew Warranty clause.

Our first step is to identify the body of law that guides our interpretative efforts. Although a court sitting in admiralty jurisdiction must apply federal maritime rules that directly address the issues at hand, it may -- and should -- resort to state law when no federal rule covers a particular situation. See Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 320-21 (1955); Acadia Ins. Co. v. McNeil, 116 F.3d 599, 603 (1st Cir. 1997); see also Restatement (Second) of Conflict of Laws § 188 (1971). This is such a case. Thus, state law (here, Maine law) supplies the substantive rules of decision.

Maine's highest court has observed that the "paramount principle in the construction of contracts is to give effect to the intention of the parties as gathered from the language of the agreement viewed in the light of all the circumstances under which it was made." Whit Shaw Assocs. v. Wardwell, 494 A.2d 1385, 1387 (Me. 1985) (citation and internal quotation marks omitted). As is the case with other contracts, unambiguous provisions contained in insurance policies are to be interpreted as written, giving force to their plain meaning. See Jack v. Tracy, 722 A.2d 869, 871 (Me. 1999). Nonetheless, some special rules apply to insurance policies. See, e.g., Foundation for Blood Research v. St. Paul Marine & Fire Ins. Co., 730 A.2d 175, 180 (Me. 1999) (reaffirming time-honored tenet that insurance policies are liberally construed in favor of the insured).

Ambiguous policy provisions present an area in which this liberality thrives. Insurance policies are contracts of adhesion, and amphibolous language is to be construed against the insurer and in favor of maximizing coverage. See Foundation for Blood Research, 730 A.2d at 180; Geyerhahn v. United States Fid. & Guar. Co., 724 A.2d 1258, 1261 (Me. 1999); Johnson v. Allstate Ins. Co., 687 A.2d 642, 645 (Me. 1997). Of course, an insurance policy is not considered ambiguous merely because a dispute arises over the meaning of a particular provision. If, however, an ordinary person would not understand, with some degree of assurance, that the provision has a single accepted meaning, ambiguity looms. See Craig v. Barnes, 710 A.2d 258, 261 (Me. 1998); Peerless Ins. Co. v. Brennon, 564 A.2d 383, 386 (Me. 1989). Put another way, if the language used by the insurer is susceptible to two or more plausible but not functionally synonymous interpretations, then that language can be found ambiguous. See Allen v. Adage, Inc., 967 F.2d 695, 700-01 (1st Cir. 1992); Cambridge Mut. Fire Ins. Co. v. Vallee, 687 A.2d 956, 957 (Me. 1996).

In this instance, our review of the...

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