Hartford Fire Ins. Co. v. Harborview Marina & Yacht Club Cmty. Ass'n, Inc.
| Decision Date | 09 December 2016 |
| Docket Number | Civ. No. PJM 16-769 |
| Parties | THE HARTFORD FIRE INSURANCE COMPANY Plaintiff and Counter-Defendant v. THE HARBORVIEW MARINA & YACHT CLUB COMMUNITY ASSOCIATION, INC. Defendant and Counter-Claimant |
| Court | U.S. District Court — District of Maryland |
Plaintiff and Counter-Defendant The Hartford Fire Insurance Company (the "Hartford") and Defendant and Counter-Claimant The Harborview Marina & Yacht Club Community Association, Inc. ("Harborview") are in a dispute over the collapse of a pier in Baltimore owned by Harborview and insured by the Hartford. In its Complaint, the Hartford seeks a declaratory judgment in admiralty to the effect that (1) there is no coverage for the collapse of the pier under the relevant policy, (2) Harborview's claim is not covered for want of fortuity, (3) coverage is precluded because Harborview breached the Conditions of Coverage under the policy, and (4) coverage under the policy is void and unenforceable. Harborview counterclaims that the Hartford breached the insurance contract and failed to act in good faith when it denied coverage under the policy.1
The Hartford argues that the Court has jurisdiction over the dispute based on both admiralty jurisdiction and diversity jurisdiction. In its Motion for Partial Dismissal for Lack ofSubject Matter Jurisdiction (ECF No. 6), Harborview asks that the Court dismiss any claim based on admiralty jurisdiction and that it proceed solely pursuant to diversity jurisdiction.
On July 18, 2016, the Court held a motions hearing on Harborview's Motion. For the following reasons, the Motion will be GRANTED.
In 2014, the Hartford, an insurance company, through its broker Insurance, Inc. approached Harborview about purchasing insurance coverage for Harborview's docks and piers at Harborview Drive, Baltimore, Maryland. Compl. ¶ 8, ECF No. 1. Harborview was looking to insure a number of its piers, including one that began beyond the eastern side of the building at Pierside Drive and extended into the Baltimore harbor. Id. ¶ 9. To that end, Harborview obtained a "Marina Operators Legal Liability and Boat Dealer Policy," Policy No. 30 ML HS9073 (the "Policy"), effective June 26, 2014 to June 26, 2015 providing aggregate combined coverage of $5.1 million. Compl., Ex. 1, ECF No. 1-1. The Policy provided Harborview with two types of coverage: (1) "Coverage D - Floating Docks, Piers," amended to include "all docks or piers that are owned by Insured and scheduled on the Declarations page of [the] [P]olicy;" and (2) coverage against "certified acts of terrorism." Id. As part of Coverage D, the Policy covered "all risks of physical loss or damage except as may be [] excluded," as well as "salvage charges." Id.
The Policy's Schedule of Property3 lists piers, roadways, walkways, benches, flag poles, pool equipment, and furniture, among other non-marine components. Id. The parties do notdispute that the insured property consists solely of Harborview's fixed docks and piers, and does not include any floating docks, floating piers, or vessels docked at Harborview's property.4 Nor do the parties dispute that prior to the collapse, the Baltimore Water Taxi (the "Water Taxi") called at the pier and used it as appoint of embarkation.5 Plf.'s Resp. Opp'n ("Plf.'s Resp."), Ex. B, ECF No. 15-B.
According to the Hartford, when Harborview applied for insurance, the pier was in a state of advanced deterioration, and was inherently defective in design and/or construction. Compl. ¶ 10. Despite these deficiencies, says the Hartford, Harborview represented to it that the pier was of substantially newer construction, reconstruction, or refurbishment and in substantially new, or as good as new condition. Id. ¶ 11. According to the Harford, Harborview never disclosed the true condition of the pier. Id. ¶ 12.
On November 22, 2014, the pier failed. Id. ¶ 17. Harborview subsequently made a claim for $5.1 million related to the pier's failure (the "Claim"). Id. ¶ 18. Pursuant to its rights under the Policy, the Hartford investigated the Claim, id. ¶ 19, but at the conclusion of its investigation, determined that the Claim was not covered because the pier failure was due to age, wear and tear, gradual deterioration, wasted condition, inherent vice or defective repair, not due to a fortuity or any covered risk. Id. ¶¶ 20-21. The Hartford issued a denial of coverage under the Policy. Id. ¶ 20.
On the basis of these facts, the Hartford, in its Complaint, seeks a declaratory judgment that (1) there is no coverage for the claim under the Policy, (2) the claim is not covered for want of fortuity, (3) Harborview breached the Conditions of Coverage under the Policy, and (4) coverage for the pier under the Policy is void and unenforceable. Id. ¶¶ 25, 29, 35, 38.
Harborview counterclaims, alleging breach of contract under the Policy and failure to act in good faith by an insurance company, and seeks damages in the amount of $5.1 million. Id. ¶¶ 41, 43, 46, 49, 51, 60. Harborview submits that prior to issuing the Policy, the Hartford failed to survey or investigate the pier and the rest of the insured property, and therefore failed to draft a policy that properly accounted for Harborview's freestanding piers. Def's. Counterclaims ¶ 12, ECF No. 10. According to Harborview, the Hartford also failed to properly or fully investigate the cause of the collapse, ignoring the role played by a third-party contractor. Id. ¶ 21. Harborview further submits that the Hartford reinterpreted the Policy in a way that created exclusions to coverage that did not exist at the time of the suffered loss. Id. ¶ 20.
At this stage of the proceedings, the merits of the Hartford's claims and Harborview's counter-claims must be put on hold while the Court makes a threshold determination regardingadmiralty jurisdiction. While both parties agree that the Court has jurisdiction to hear this matter on some basis, they disagree as to what the basis of the Court's jurisdiction is. The Hartford contends that jurisdiction is based on both admiralty and diversity. Harborview argues that jurisdiction is not based on admiralty, but instead, solely on diversity. Harborview filed a Motion for Partial Dismissal for Lack of Subject Matter Jurisdiction, requesting that the Court dismiss the case from the Court's admiralty jurisdiction and proceed solely pursuant to its diversity jurisdiction.6
Because the parties are completely diverse and the amount in controversy exceeds $75,000, diversity jurisdiction unquestionably exists.7 Accordingly, the Court will retain jurisdiction over the case on that basis regardless of its resolution of Harborview's motion. For purposes of this case, the potential substantive differences between admiralty and diversity jurisdiction are the availability of a jury trial and the application of federal admiralty law, such as the maritime doctrine of uberrimae fidei. Therefore, the Court will consider whether admiralty jurisdiction applies.
Federal courts have limited subject matter jurisdiction. They "possess only the jurisdiction authorized them by the United States Constitution and by federal statute." SeeUnited States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2009) (citing Bowles v. Russell, 551 U.S. 205, 127 S. Ct. 2360, 168 L.Ed.2d 96 (2007)). In addition to federal question and diversity cases, federal district courts possess original jurisdiction over matters arising out of admiralty or maritime law. See U.S. CONST. art. III, § 2; 28 U.S.C. § 1333. See also Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 23, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004).
When subject matter jurisdiction is challenged, the plaintiff bears the burden of proving, by a preponderance of evidence, that jurisdiction exists. Robb Evans & Assocs., LLC v. Holibaugh, 609 F.3d 359, 362 (4th Cir. 2010); Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999); see also United States ex. rel. Vuyyuru v. Jadhau, 555 F.3d 337, 347 (4th Cir. 2009), cert. denied, 558 U.S. 875 (2009).
In considering whether to dismiss for lack of jurisdiction, the court may consider "evidence outside of the pleadings without converting the proceeding into one for summary judgment." White Tail Park, Inc. v. Stroube, 413 F.3d 451, 459 (4th Cir. 2005) (quoting Richmond, Fredericksburg & Potomac R.R. Co., 945 F.2d at 768); see also Williams v. United States, 50 F.3d 299, 304 (4th Cir. 1995) ().
The Hartford says that, in addition to diversity jurisdiction, the Court has subject matter jurisdiction by virtue of the federal courts' original jurisdiction over admiralty cases. See 28 U.S.C. § 1333(1). Federal courts' "authority to make decisional law for the interpretation of maritime contracts stems from the Constitution's grant of admiralty jurisdiction to federal courts." Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 23, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004); seeU.S. Const. art. III, § 2, cl. 1 ().
Admiralty jurisdiction involving an insurance policy hinges on whether the Policy is a maritime contract. See id. See also South Carolina State Ports Authority v. Silver Anchor, S.A., 23 F.3d 842, 846 (4th Cir. 1994) () (citations omitted) (quoting Exxon Corp. v. Central Gulf Lines, 500 U.S. 603, 612 (1991)). However, courts acknowledge that there are few "clean lines between maritime and nonmaritime contracts," recognizing that "the boundaries of admiralty jurisdiction over contracts—as opposed to torts or crimes—being conceptual rather than spatial, have always been difficult to draw." Id. at 23. This...
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