New York Marine and Gen. v. Lafarge North America
| Decision Date | 19 February 2009 |
| Docket Number | No. 08 Civ. 3289(CSH).,No. 05 Civ. 9612(CSH).,05 Civ. 9612(CSH).,08 Civ. 3289(CSH). |
| Citation | 598 F.Supp.2d 473 |
| Parties | NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Plaintiff, v. LAFARGE NORTH AMERICA, INC., Defendant. The Northern Assurance Company of America and American Home Assurance Company, Plaintiffs, v. Lafarge North America, Inc. and American Steamship Owners Mutual Protection and Indemnity Association, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Alan Frederick Kaufman, Jennifer Susan Kozar, Thacher Profitt and Wood LLP, John Maynard Woods, Clyde & Co U.S. LLP (NYC), New York, NY, for American Steamship Owners Mutual Protection and Indemnity Association, Inc.
Robert Gerard Clyne, John James Sullivan, Hill, Rivkins & Hayden LLP, New York, NY, for Lafarge North America, Inc.
David H. Fromm, Esq., Brown Gavales & Fromm LLP, New York, NY, for New York Marine & General Insurance Co.
John A.V. Nicoletti, Esq., Nicoletti Hornig & Sweeney, New York, NY, for American Home Assurance Co., and The Northern Assurance Company of America.
This Opinion resolves dispositive motions filed in two consolidated declaratory judgment actions filed in this Court to determine coverage under policies of marine insurance issued to Lafarge North America, Inc. ("Lafarge") with respect to claims asserted against Lafarge following Hurricane Katrina.
Lafarge, a diversified construction materials company and supplier of concrete and cement, obtained policies to insure itself against legal defense costs and liability claims that might arise out of Lafarge's use of vessels transporting cement in inland waterways. In August 2005, Lafarge arranged for the use of Barge ING 4727 (sometimes "the Barge"), owned by Ingram Barge Company ("Ingram"), to carry a cement cargo from Lafarge's plant in Illinois down river for unloading at Lafarge's facility on the Inter Harbor Navigational' Canal in New Orleans, Louisiana.
On August 29, 2005, Barge ING 4727 lay at the Lafarge facility, having discharged her cargo. Hurricane Katrina made landfall at New Orleans that day. The Barge broke free from her moorings. After the storm had subsided, she was found to have come to rest on the land side of the 17th Street Industrial Canal floodwall (or "levee") separating Inner Harbor Navigation Canal from the Lower Ninth Ward in New Orleans. The levee had collapsed, causing massive flooding in the Lower Ninth Ward.
Lafarge has been named as one of several defendants in a number of actions filed in New Orleans by residents and business owners in the Lower Ninth Ward. These actions include claims for wrongful death, personal injury, and property damage. The plaintiffs allege that after Barge ING 4727 broke free of her moorings, she collided with and caused or contributed to the failure of the levee and the consequent flooding of the Lower Ninth Ward. Hundreds of claimants, with claims in the billions of dollars, have sued Lafarge. Various plaintiffs have sought class certification for putative classes numbering 40,000 claimants. One group of plaintiffs has asserted a demand of $100 billion.
Lafarge contends that the failure of the levee occurred before Barge ING 4727 approached it, and that the Barge was merely carried over or drawn through the already breached levee. In other words, the case for Lafarge is that the breakaway of the Barge was not a cause in fact of the flooding.
The merits of these claims will be adjudicated in the United States District Court for the Eastern District of Louisiana. Nevertheless, unless and until the liability issues are decided in its favor, Lafarge will continue to incur high legal defense and investigative expenses, and faces liability claims that substantially exceed the limits of the several insurance policies involved.
Questions of coverage under the several policies obtained by Lafarge have been previously adjudicated by this Court or are resolved in this Opinion. I will summarize the policies in suit.
The policies described in this section were all in effect at the time of the Hurricane Katrina catastrophe and the breakaway of Barge ING 4727.
New York Marine and General Insurance Company ("NYMAGIC") issued to Lafarge a Primary Marine Liabilities Policy of Insurance for the period of May 1, 2005 to May 1, 2006 ("the Primary Policy"). The Primary Policy has an aggregate limit of $5,000,000 for any one incident or occurrence. The policy obligated NYMAGIC to pay for expenses and legal costs incurred by Lafarge as the result of an alleged liability covered by the policy, subject to certain additional provisions considered infra. There is no dispute that Lafarge's potential liability for the damage allegedly caused by her breakaway during Hurricane Katrina is covered by the Primary Policy.
The American Steamship Owners Mutual Protection and Indemnity Association, Inc. ("the American Club") issued to Lafarge a Protection and Indemnity Policy ("P & I") ("the American Club Policy") which, in respect of vessels and incidents covered by the policy, obligated the American Club to pay Lafarge's legal defense costs ("Protection") and indemnify it against claims for liability ("Indemnity"), subject to limitation in amounts as "Per Club Rules."
In an earlier opinion, familiarity with which is presumed, this Court held that Barge ING 4727 was not a covered vessel under the American Club Policy, and consequently the American Club was not obligated to pay Lafarge's costs incurred as a result of the Hurricane Katrina incident or to indemnify it for liability. American Steamship Owners Mutual Protection and Indemnity Association, Inc. v. Lafarge North America, Inc., No. 06 Civ. 3123, 2008 WL 4449353 (S.D.N.Y. Sept. 29, 2008) ("American Club"). Lafarge filed a notice of appeal to the Second Circuit. The appeal is pending.
In addition to issuing the Primary Policy to Lafarge, NYMAGIC also subscribed, together with American Home Assurance Company ("AHAC") and The Northern Assurance Company of America ("NACA"), to an Excess Marine Liability Policy of Insurance issued to Lafarge ("the Excess Policy"). NYMAGIC subscribed to 40% of the risk under the Excess Policy, AHAC to 35%, and NACA to 25%, all on a several and not joint basis. These three companies subscribing to the Excess Policy will sometimes be referred to collectively as "the Excess Insurers." The Excess Policy covered Lafarge for liability and expenses in excess of the coverage provided by the other policies, up to $45,000,000, and under certain circumstances $50,000,000.
The breakaway of Barge ING 4727 during Hurricane Katrina, in addition to generating multi-million dollar damages actions by third parties against Lafarge and others in the Eastern District of Louisiana, also gave rise to three declaratory judgment actions in this Court between Lafarge and its insurers, or between the insurers themselves. These actions pray for declaratory judgments with respect to the several insurers' obligations to pay Lafarge's defense costs and indemnify it against liability. These issues of coverage, turning principally upon the proper construction of the policies themselves, are appropriate for summary disposition. The three actions are summarized as follows.
NYMAGIC brought this action against Lafarge for declaratory relief. NYMAIC's complaint, which relates solely to the Primary Policy, alleges that Lafarge gave NYMAGIC notice of the Barge ING 4727 breakaway; NYMAGIC advised Lafarge it would retain and pay for counsel in New Orleans to protect Lafarge's interests if claims were asserted against it as the result of the incident; Lafarge advised NYMAGIC, before any claims were asserted, that it had retained law firms in New Orleans, New York, and Washington, D.C. to protect its interests, and expected NYMAGIC to pay for or reimburse Lafarge for the fees and expenses of those firms; and NYMAGIC thereafter advised that it had retained a different law firm in New Orleans to defend Lafarge. In these circumstances, NYMAGIC's complaint asserts three causes of action against Lafarge, for judgments declaring:
(1) NYMAGIC has no obligation under the Primary Policy to pay fees and expenses except those for which it specifically agreed to pay (which did not include the three firms Lafarge had retained).
(2) NYMAGIC had the right under the Policy to direct the defense of any action against Lafarge, and had fulfilled its obligations under the Policy by retaining counsel in New Orleans to defend Lafarge.
(3) If NYMAGIC was obligated to pay any fees and expenses other than those for which it had agreed to pay, that obligation was limited to reasonable fees and expenses relating directly to the defense of any claims against Lafarge.
The American Club brought this action against Lafarge for a declaration that the American Club Policy issued to Lafarge did not cover Barge ING 4727 and the claims arising out of the Hurricane Katrina incident. Large contended that the policy did cover the barge. The parties cross-moved for summary judgment. As noted in Part I.B.2., the Court held that the policy issued by the American Club did not cover the barge. Lafarge's appeal from that holding is pending.1
NACA and AHAC, suing as Excess Insurers, brought this action for declaratory relief against Lafarge and the American Club. Their complaint was filed on April 2, 2008, while the American Club action against Lafarge, No. 06 Civ. 3123, for a declaration of non-coverage was pending but not yet decided. NACA and AHAC assert four causes of action, for judgments declaring:
(1) The American Club's denial of coverage to Lafarge...
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N.Y. Marine And Gen. v. Lafarge North Am. Inc
...commenced three separate actions giving rise to this appeal in the United States District Court for the Southern District of New York. Id. at 476-78. In those actions, the insurers sought declaratory with respect to issues of coverage under the primary and excess policies. Id. B. Lafarge's ......