IUI v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 05 April 2004
• Docket Number: No. 51497-1-I.,51497-1-I.
• Citation: 122 Wn. App. 736,87 P.3d 774,122 Wash. App. 736
• Court: Washington Court of Appeals
• Parties: INTERNATIONAL ULTIMATE, INC., Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, a foreign insurance corporation; Compagnie D'Assurance Maritimes Aeriennes et Terrestres, a foreign insurance corporation; Protector Insurance Co., Ltd, a foreign insurance corporation; Donna R. Zeller and John Doe Zeller, wife and husband and marital community composed thereof; Sea-Pac Insurance Managers, Inc., a Washington corporation, Respondents.

87 P.3d 774

122 Wn. App. 736

122 Wash. App. 736

INTERNATIONAL ULTIMATE, INC., Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, a foreign insurance corporation; Compagnie D'Assurance Maritimes Aeriennes et Terrestres, a foreign insurance corporation; Protector Insurance Co., Ltd, a foreign insurance corporation; Donna R. Zeller and John Doe Zeller, wife and husband and marital community composed thereof; Sea-Pac Insurance Managers, Inc., a Washington corporation, Respondents.

No. 51497-1-I.

Court of Appeals of Washington, Division 1.

April 5, 2004.

Gregory Mann Miller, Robert G. Nylander, Seattle, WA, Charles A. Kimbrough, Attorney at Law, Bellevue, WA, for Appellant.

Mark Edward Mills, Clarke Bovingdon Et Al, Seattle, WA, for Respondent Compagnie D'Assurance.

John Patrick Hayes, Kenneth M. Roessler, Seattle, WA, for Respondent St. Paul et al.

BAKER, J.

International Ultimate, Inc. (IUI) brought this suit after its insurers denied coverage for a fishing vessel and its cargo. IUI appeals the trial court's decision granting the defendants' summary judgment, arguing that its loss arose because of barratry—a covered peril. In the alternative, IUI claims that had its insurance broker obtained a war risk policy as directed, the amended policy would have covered IUI's loss. IUI also argues that the trial court improperly considered inadmissible documents when granting summary judgment. Finally, IUI claims that the insurer and one of its employees are liable under the Consumer Protection Act¹ (CPA) for negligently investigating and denying its claim.

We hold that any alleged error admitting documents is harmless, and that although the master's actions may have been barratrous, barratry was not the efficient proximate cause of IUI's eventual loss. Because IUI has failed to show that a war risk policy would have covered its loss, we dismiss its claim against the insurance broker. IUI fails to present any evidence that its insurers acted negligently or in bad faith when denying its claim. Accordingly, we reject IUI's CPA claim against the insurers. Finally, we conclude that the CPA is not a vehicle for insureds to sue adjusters in their individual capacity.

I

IUI purchased three fishing vessels in early 1995 and wrote its insurance broker, Sea-Pac, requesting coverage. Sea-Pac obtained hull and machinery insurance and cargo insurance for IUI through several underwriters (St.Paul). The hull policy covered vessel losses arising from certain named perils. The policy did not insure against all risks, and contained a "war strikes and related exclusions" section excluding losses due to "[c]apture, seizure, arrest, restraint or detainment [of a vessel], or any attempt threat." The policy specifically covered losses arising from barratry. Both the hull and cargo policies were in effect at the time of the alleged loss.

IUI wished to fish in Russian economic territorial waters. To facilitate this, IUI entered into several interrelated agreements with a Russian corporation, Moskam.² The first contract, titled "Bareboat Charter," transferred possession and control of the three vessels to Moskam. The agreement required Moskam to pay for maintenance and supplies for the three ships, including fuel and oil. The agreement also required that Moskam procure, manage, and pay for the crew. At the end of the charter period Moskam would then own the three boats. The agreement required that Moskam and IUI resolve any disputes by submitting the claim to the Sea Arbitration Commission of the Russian Federation, whose decision would be final and binding on both parties.

The second contract, titled "Vessel Management Agreement," appointed IUI as the exclusive manager for operating the ships under the bareboat charter agreement. Under the agreement, IUI operated the ships and coordinated "delivery, distribution, and sale of all seafood and seafood products harvested by the Vessels." The agreement also required IUI to pay all operating expenses, including wages, out of proceeds from selling the seafood products.

From the start, IUI and Moskam had a difficult business relationship. By early summer 1997, Moskam and IUI disagreed about disbursements due under the agreements. IUI contended that Moskam had breached the agreements and owed it over $12 million. Moskam claimed that IUI owed it money for past crab and flatfish catches, and that IUI was not making timely payments on invoices from fish sales. In June 1997, IUI withheld vessel regulatory documents because it had not received bareboat charter payments from Moskam.

In mid-July, the salmon season ended and the three boats began their journey back to South Korea, fully loaded with product. Moskam instructed all three vessels to go to a neutral control point to await IUI's payment of the back invoices. IUI then sent a communication to the vessels demanding that they return to South Korea. Moskam sent a contradictory notice that they should proceed to the Russian port of Petropavlovsk. The Ultimate I and II returned to Pusan, and the Ultimate III went to Petropavlovsk.

The Ultimate III remained at Petropavlovsk from July 1997. IUI and the insurers disagree about whether the ship was arrested by Moskam or detained by the Russian government.

At the end of July, IUI apparently notified Sea-Pac, its insurance broker, that one of its boats "had been taken." IUI did not formally present a claim until mid-march 1998— nearly nine months after Moskam diverted the Ultimate III to Petropavlovsk. At that time, IUI explained to Sea-Pac that "we ... request that you notify the hull insurers of the ULIMATE NO. 3 and its cargo insurers of possible claims arising from barratry of its master and crew." The letter does not mention any arrest by Moskam or seizure by Russian authorities, stating only that "Moskam has refused to redeliver the vessel to us," and that "we have lost possession and control of the vessel."

Following an investigation, St. Paul concluded that the hull policy did not cover IUI's loss. St. Paul took the position that the loss had been due to a business dispute, not barratry. IUI then brought suit against the underwriters, Donna Zeller (an employee of St. Paul) in her personal capacity, and Sea-Pac Insurance Managers, Inc. The complaint alleged breach of contract, insurer bad faith, CPA violations, fault or negligence, and requested a declaratory judgment establishing coverage under the hull and cargo policies.

During discovery, IUI provided a number of documents, including the vessel management agreement, contracts for purchasing seafood product, ledger sheets, copies of the Russian arbitration decision and affiliated documents, letters exchanged between IUI and Moskam, and the assignment of the Ultimate III to Moskam. The defendants submitted these documents in support of their motions for summary judgment. Before the hearing, IUI moved to strike all of these documents, arguing that the defendants had not properly authenticated the documents and that the defendants did not have personal knowledge of the matters contained in them.

After extensive briefing and argument, the trial court admitted all of the challenged documents. The court then granted the summary judgment motions.

II

When reviewing an order granting summary judgment, we engage in the same inquiry as the trial court.³ We will affirm an order granting summary judgment only if there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law.⁴ In reviewing summary judgment orders, we consider supporting affidavits and other admissible evidence that is based on the affiant's personal knowledge.⁵ A party may not rely on mere allegations, denials, opinions, or conclusory statements but, rather must set forth specifics indicating material facts for trial.⁶

Evidentiary Challenges to Summary Judgment

A trial court's decision to admit or exclude evidence lies within its sound discretion. We will not overturn evidentiary rulings unless the trial court has manifestly abused its discretion.⁷ Although a "ruling on a motion to strike is discretionary with the trial court," a "court may not consider inadmissible evidence when ruling on a motion for summary judgment."⁸

IUI challenges a number of documentary exhibits submitted by the defendants with their summary judgment motions. IUI contends that the trial court erred by failing to strike portions of the three insurers' affidavits together with attachments, because the defendants did not have the personal knowledge required by ER 602. ER 602 provides that:

A witness may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter. Evidence to prove personal knowledge may, but need not, consist of the witness' own testimony. This rule is subject to the provisions of rule 703, relating to opinion testimony by expert witnesses.[⁹]

ER 602 is not the appropriate vehicle to challenge these documents. ER 602 requires witnesses testifying to have personal knowledge unless they are experts. But the challenged affidavits only list the documents submitted in support of the insurers' motions for summary judgment, and state that the documents are true and accurate copies of the originals. The proper objection is either lack of authentication under ER 901, or hearsay under ER 801-04.

IUI also objects to several of the documents because the defendants failed to properly authenticate them. IUI cites to the requirement of CR 56(e) that supporting affidavits be made on personal knowledge and set forth such facts as would be admissible in evidence. But CR 56(e) allows an attorney to base his or her affidavit on documents properly before the court. And this includes documents already in the court files, as well as additional documents presented by the parties in a motion for summary judgment.¹⁰

Underlying CR 56(e) is the requirement that documents the parties...