Iag LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh Pa., Case No: 8:13-cv-1675-T-36TBM

• Decision Date: 03 September 2015
• Docket Number: Case No: 8:13-cv-1675-T-36TBM
• Court: U.S. District Court — Middle District of Florida
• Parties: IAG LLC, Plaintiff, v. NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH PENNSYLVANIA, Defendant.

IAG LLC, Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH PENNSYLVANIA, Defendant.

Case No: 8:13-cv-1675-T-36TBM

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

September 3, 2015

ORDER

This matter comes before the Court upon Defendant's Motion for Summary Judgment (Doc. 50), Plaintiff's response thereto (Doc. 73), Defendant's reply (Doc. 77), Plaintiff's Motion for Summary Judgment (Doc. 51), Defendant's response thereto (Doc. 71), and Plaintiff's reply (Doc. 74). Oral argument on the motions for summary judgment was held on May 6, 2015 (Doc. 93). Upon due consideration of the parties' submissions, including deposition transcripts, affidavits, memoranda of counsel and accompanying exhibits, and for the reasons that follow, Defendant's Motion for Summary Judgment (Doc. 50) will be denied and Plaintiff's Motion for Summary Judgment (Doc. 51) will be granted in part and denied in part.

I. STATEMENT OF UNDISPUTED MATERIAL FACTS ¹

For purposes of summary judgment only, the following facts are undisputed.

a. In May of 2010, Defendant National Union Fire Insurance Co. of Pittsburgh Pennsylvania ("National Union") issued a maritime insurance policy (No. 051763302) to Plaintiff IAG, LLC ("IAG"). Doc. 50 at p. 2; Doc. 50-1.

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b. The policy was an "all risks" policy which provided $1,000,000.00 in first-party property damage coverage for "accidental, direct physical loss or damage, except as specifically excluded in this policy" to the 2004 Carver Marquis vessel named It's All Good. Doc. 50 at p. 2; Doc. 50-1.

c. The It's All Good is owned by the Plaintiff, IAG. Doc. 53 at 18:14-19.

d. Howard Paul Becker ("Becker") is the owner of IAG. Doc. 53 at 9:4-24.

e. Captain Marty Ebding was employed as the skipper of the It's All Good. Becker Depo. at 18:25-19:16.

f. On August 13, 2010, the It's All Good, a six year old vessel, partially sank while docked in St. Petersburg, Florida. Doc. 50 at p. 3; Doc. 73 at p. 2.

g. On September 17, 2010, the vessel was inspected by Sam Techton, who was retained by National Union. See Doc. 50-4.

h. On September 30, 2010, the vessel was examined again by Techton and a marine surveyor retained by IAG named Duane Ives. See Doc. 50-5.

i. The air conditioning cooling coil was removed from the vessel and then inspected by Nicholas Biery. Doc. 73 at p. 4.

j. National Union declined coverage of the damage due to exclusions in the policy for damage caused by wear and tear, corrosion, gradual deterioration, or weathering. Doc. 50 at p. 2-3.

k. In 2013, IAG had the evidence examined by three additional experts: Peter Layson, Orion Keifer, and Steve Hebert.

l. Water entered the vessel through holes in the inner cupronickel tubing of the vessel's air conditioning coil. Doc. 50 at p. 1; Doc. 73 at p. 2.

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m. The likely cause of the penetrations in the inner tube is erosion/impingement attack. Doc. 77 at pp. 2-3; Doc. 73 at pp. 6-7.

n. The water then escaped through holes in the outer copper tubing of the cooling coil. Doc. 50 at p. 1; Doc. 73 at p. 3.

o. The holes in the outer tubing of the air conditioning coil were caused by erosion. Doc. 50 at p. 6.

p. The vessel's bilge pump capacity was adequate to keep the vessel afloat. Doc. 71 at p. 5; Doc. 73 at p. 3.

q. At some point, there was an interruption of shoreside electricity to the vessel. Doc. 50 at p. 1; Doc. 73 at p. 7.

r. The vessel's bilge pumps eventually failed due to depletion of the vessel's batteries. Doc. 71 at p. 5; Doc. 73 at p. 7.

s. The vessel would not have sunk but for the failure of the bilge pumps to remove water from the vessel. Doc. 50 at p. 7, Doc. 73 at p. 7.

II. The Experts

A. Sam Techton

In his original report, dated September 17, 2010, Techton explained the "cause of loss" as follows:

The Cruisair SXF5/1-RMT evaporator cooling coils experienced salt water corrosion over time. The raw water circuit for the air conditioners uses a 4700 gallon per hour Scott pump #6078. The raw water from the pump leaked out of the evaporator cooling coils into the pan below the unit. The pan overflowed into the bilge. The 2000 gallon per hour bilge pump could not keep up with the water incursion. As the vessel took on more water it possibly filled up with additional water through the Glenn Dinning access portals on the port side of the swim platform and into bilge area.

Doc. 50-4 at p. 3. On September 30, 2010, Techton issued a second report which stated that "[t]he

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leak to the coils suggests that there was galvanic corrosion between the side of the evaporator and the copper evaporator coil." Doc. 50-5 at p. 3. On October 14, 2010, Techton issued another report following a test of the bilge pump. See Doc. 50-8. Based on these tests, Techton determined that the bilge pump was operable and that water had likely spilled into the bilge compartment at a rate of 600 gallons per hour - a drastically different estimate than in his original report. Doc. 50-8 at p. 1. This report concluded that the inner copper coil corroded causing the raw water leak. Doc. 50-8 at p. 2. This raw water leak led to the corrosion of the outside copper coil, aluminum shroud, and heat sink fins. Doc. 50-8 at p. 2. Techton defines "corrosion" as the "deterioration of metal." Doc. 50-10 at 14:4-8. Techton appears to use the terms erosion and corrosion interchangeably. Doc. 50-10 at 14:4 - 15:11.

B. Duane "Dewey" Ives

Ives is an accredited marine surveyor who works in three different disciplines: Pre-purchase surveys, insurance risk surveys, and damage claims. Doc. 54 at 6:24 - 7:7, 12:19-22. Ives has been doing insurance claims work since 1989, determining the causes and value of losses. Doc. 54 at 7:8-19. However, he has never been retained as an expert witness or testified in court. Doc. 54 at 8:23 - 9:8. Here, he was hired as a consultant by Becker. Doc. 54 at 9:10-21.

Ives produced two consultation reports regarding the partial submersion of the It's All Good, one on October 4, 2010 and another on October 19, 2010. Doc. 54 at 9:16 - 10:19. The October 4th report was based on Ives' inspection of the ship on September 30, 2010. Doc. 54 at 20:17-20. Techton showed Ives the air conditioning unit, identifying it as the source of the leak. Doc. 54 at 21:2-7. Ives noticed a level of corrosion on the air intake screen "consistent with the level of water believed to be in the . . . condensing tray." Doc. 54 at 21:17-21. Ives observed that, when the seawater pump was activated, water could be seen leaking from the evaporator/fan tray.

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Doc. 54 at 22:25 - 23:8, 24:23 - 25:1. Ives inspected the seawater feed and discharge fittings and observed no leaks. Doc. 54 at 25:2-3. Thus, Ives concluded that the leak had to be inside the evaporator/condenser/fan compartment of the unit. Doc. 54 at 25:9-12. Ives had a technician open up the unit so he could see inside. Doc. 54 at 25:13-19. This was the first time Ives had looked inside one of these units. Doc. 54 at 26:16-17. Ives observed water "profusely flowing from the condenser coil." Doc. 54 at 25:24 - 26:1; Doc. 54-1 at p. 3. Ives also observed significant corrosion "where the copper alloy tubes of the condenser coils were lying directly against the aluminum condenser/evaporator/fan compartment casing." Doc. 54 at 26:25 - 27:4; Doc. 54-1 at p. 3. Ives indicated that the source of the most severe leak were holes in the condenser coil which had been corroded through. Doc. 54 at 27:12-24; Doc. 54-1 at pp. 3-4. Ives testified that it appeared that the condensation tray drain was not functioning properly, which allowed water to accumulate rather than drain to the sump box. Doc. 54 at 28:13-25; Doc. 54-1 at p. 4. The drain hose was not clogged. Doc. 54 at 34:7-12. However, the sump pump was not working. Doc. 54 at 29:4-21. If the pump had been working, water would not have accumulated in the tray. Doc, 54 at 31:9-15. Ives also concluded that the failure of the sump pump contributed to the corrosion of the unit because it allowed water to build-up in the fan housing. Doc. 54 at 37:4-24. Ives also concluded that at least one of the bilge pumps was not running at the time of the loss. Doc. 54 at 40:18 - 41:17.

Ives ultimately concluded that, even if the bilge pumps had been functioning, the inoperative sump box system would have led to the build-up of corrosion. Doc. 54 at 66:7-18. Ives testified that the proximate cause of the failure of the condenser core was corrosion. Doc. 54 at 72:1-12.

The pictures taken of the air conditioning unit were taken after the boat had been partially submerged on August 13, 2010. Doc. 54 at 81:1-20. Accordingly, some of the corrosion shown in

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the photos could be a result of the submersion. Doc. 54 at 81:21 - 82:17. However, Ives does not believe that the holes in the coil appeared after the submersion. Doc. 54 at 82:21 - 83:1.

C. Peter Layson

Layson and Orion Kiefer are both principals of Applications Engineering Group, Inc. ("AEGI"). Doc. 58 at 5:14-17; Doc. 59 at 9:23 - 10:3. They both prepared a report on the It's All Good, dated May 28, 2014. Doc. 58 at 18:8-25; Doc. 59 at 11:14-23, 20:15 - 21:4.

Layson has a bachelor's degree in physics, with a minor in mathematics, from Jacksonville University. Doc. 59 at 7:3-9...