New Hampshire Ins. Co. v. Martech USA, Inc., s. 92-2368
| Decision Date | 28 June 1993 |
| Docket Number | Nos. 92-2368,92-2459 and 92-2621,s. 92-2368 |
| Citation | 993 F.2d 1195 |
| Parties | , 26 Fed.R.Serv.3d 127 NEW HAMPSHIRE INSURANCE CO., et al., Plaintiffs-Appellees, v. MARTECH USA, INC., f/k/a Martech International, Inc., Defendant-Third-Party Plaintiff-Appellant, v. TTP OF HOUSTON, INC., etc., et al., Third-Party Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Jack D. Ballard, Hutcheson & Grundy, Houston, TX, for appellant in Nos. 92-2459 and 92-2621.
Jack D. Ballard, Mary H. Greer, Pamela K. Estes, Hutcheson & Grundy, Houston, TX, for appellant in No. 92-2368.
Robert B. Boemer, Harold K. Watson, Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, TX, for New Hampshire Ins. Co., et al.
James R. Old, Jr., William E. Junell, Jr., Andrews & Kurth, Houston, TX, for TTP.
Appeals from the United States District Court for the Southern District of Texas.
Before POLITZ, Chief Judge, REAVLEY and BARKSDALE, Circuit Judges.
This appeal poses a question about the allocation of burdens of proof on a claim under an all-risk marine insurance policy. Martech USA, Inc. appeals an adverse summary judgment and the denial of Fed.R.Civ.P. 60(b) relief. Finding no error, we affirm.
Martech provides underwater diving services and equipment for construction and repair of offshore drilling platforms and pipelines. Martech retained TTP, an insurance brokerage firm, to secure insurance coverage for its equipment and for claims arising out of its business operations. TTP obtained two contractors' equipment all-risk marine insurance policies underwritten by New Hampshire Insurance Co., American Home Assurance Co., and National Union Fire Insurance Co.: (1) policy BMF-10231, effective April 24, 1986 to April 24, 1987, 1 and (2) policy BMF-10260, effective April 24, 1987 to April 24, 1988. 2 The policies covered:
[E]quipment, mobile cranes or diving equipment, and related spare parts, materials and supplies usual to the business and owned by [Martech] and/or similar property of others for which [Martech] may be liable while situated and/or being used, including transit anywhere in the world.
In 1984, Martech leased certain equipment to Aquaservice, Ltd., a Brazilian company providing diving repair services for Petrobras, the Brazilian national oil company. Under the lease agreement, Martech shipped from its Louisiana office to Aquaservice in Brazil: the No. 1 and No. 2 SAT Systems, 3 the ROV Scorpio, 4 and the SIMRAD System. 5
In February 1987, Martech was orally notified by one of its mechanics who inspected the equipment in Brazil that some of the components of the No. 2 SAT System were missing. The mechanic did not report any damage to the remaining Martech equipment. 6 The No. 2 SAT System was taken out of service in March 1987. 7
In January 1988, Martech received unconfirmed information that other pieces of its equipment had been damaged. Martech's president, Benjamin Tisdale, met with Pete Barbara, a TTP insurance agent, to discuss the problems. At the time, however, Tisdale could confirm neither that the losses had occurred nor the extent of any damage. Barbara instructed Tisdale to prepare written documentation of the losses and to forward that information so he could prepare a claim.
It was more than a year later, in March of 1989, that Martech sent Barbara a report of its losses after it inspected and inventoried damage when the equipment was returned to the United States. Martech contends that much of the delay was caused by the Brazilian government's failure to cooperate in the return of the equipment to the United States. Barbara submitted a claim under the policies which the insurance companies denied, citing: (1) untimely notice of claim, (2) lack of proof that the loss occurred during the policy period, and (3) certain policy exclusions. 8
The insurance companies filed a declaratory judgment action, seeking a declaration that they had no liability to Martech under the policies. Martech counterclaimed, alleging that the insurance companies arbitrarily and wrongfully denied coverage. Martech also filed a third-party action alleging that TTP was negligent in two respects: (1) failing to provide notice to the insurance companies in January 1988 that Martech had suffered a loss for which they may make a claim, and (2) failing to inform Martech that delay in making a claim might lead to the claim's rejection.
The district court granted summary judgment in favor of the insurance companies and TTP. Martech later moved for 60(b) relief on the ground that it had newly discovered "evidence" which would establish that the losses occurred during the policy period. The district court found this new "evidence" unpersuasive and denied the motion. From these orders, Martech timely appealed.
We review a summary judgment de novo, viewing the evidence and inferences therefrom in the light most favorable to the nonmoving party. 9 "[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." 10
The threshold issue in this appeal is whether Texas or federal maritime law should control the burdens of proof. A marine insurance contract is indisputably a marine contract within federal admiralty jurisdiction. 11 In most instances, however, regulation of marine insurance is a matter properly left to the states. 12 In determining whether federal maritime law governs an issue the court must consider three factors: (1) whether the federal maritime rule constitutes "entrenched federal precedent"; (2) whether the state has a substantial, legitimate interest in application of its law; and (3) whether the state's rule is materially different from the federal rule. 13
The district court, finding no entrenched federal precedent, applied Texas law and placed the burden on Martech to demonstrate that the loss occurred within the policy period and that policy exclusions did not apply. The court granted summary judgment in favor of the insurers, finding that Martech failed to come forward with evidence on these issues. Martech contends that the district court erred in not applying federal maritime law. We need not decide whether federal maritime law or Texas law applies because the same result obtains under either standard.
Under federal maritime law, the insurer has the burden of proving the applicability of policy exclusions. 14 At the time of the hearing on the motion for summary judgment, Texas law placed the burden on the insured to prove the non-applicability of the policy exclusions invoked by the insurer. 15 Texas law changed, however, while the motion for summary judgment was pending. Effective September 1, 1991, Article 21.58 of the Texas Insurance Code was amended to provide in pertinent part:
(b) In any suit to recover under a contract of insurance, the insurer has the burden of proof as to any avoidance or affirmative defense that must be affirmatively pleaded under the Texas Rules of Civil Procedure. Any language of exclusion in the policy and any exception to coverage claimed by the insurer constitutes an avoidance or an affirmative defense.
Thus, under either federal maritime law or Texas law, the burden is on the insurer to prove the applicability of policy exclusions.
The essential question for purposes of this appeal is which party bears the burden of proving that the loss occurred within the policy period. Under Texas law, both before and after the amendment, proof that the loss occurred within the policy period is a precondition to coverage and, thus, the insured's responsibility. 16 The parties disagree on who bears that burden under federal maritime law. They agree, however, that we should look to Morrison Grain for our answer.
The insurers rely on the interpretation of Morrison Grain by the Eleventh Circuit in Banco Nacional v. Argonaut Ins. Co.: 17
The plaintiff in a suit under an all-risks insurance policy must show a relevant loss in order to invoke the policy, and proof that the loss occurred within the policy period is part and parcel of that showing of a loss. Rather than being an exception to coverage, as an inherent vice or defect would be, proof that a loss occurred within the policy period is a predicate to the application of the policy. Thus, as Morrison [Grain] indicates, the burden of proving that the loss occurred during the policy period is properly on the insured[.]
Martech contends that Banco Nacional misreads Morrison Grain. In Morrison Grain, the court found that the insurer had the burden of proving that the loss to the insured shipment was a result of an inherent defect which predated the policy coverage. 18 Thus, Martech contends that pursuant to Morrison Grain the occurrence of the loss outside the policy period is an "exception to coverage," on which the insurer bears the burden of proof.
The answer to this conundrum, as Banco Nacional suggests, is that in Morrison Grain the insured bore the burden of proving that the loss first manifested itself during the policy period; then, the burden shifted to the insurer to prove any policy exclusion, such as an inherent vice or defect which may have caused the loss. Under such a construction, Martech's claim founders. Martech did not present competent evidence to the district court that any of its losses were first manifested during the period covered by either of the insurance policies.
Martech contends that the district court imposed too heavy an evidentiary burden at the summary judgment stage. Now choosing to rely on Banco Nacional, Martech...
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