Seguros v. Morales-Vázquez

• Decision Date: 07 August 2018
• Docket Number: Civil No. 15-2091 (BJM)
• Parties: QBE SEGUROS, Plaintiff, v. CARLOS A. MORALES-VÁZQUEZ, Defendant.
• Court: U.S. District Court — District of Puerto Rico

QBE SEGUROS, Plaintiff, v. CARLOS A. MORALES-VÁZQUEZ, Defendant.

Civil No. 15-2091 (BJM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

August 7, 2018

OPINION IN A NON-JURY TRIAL

QBE Seguros ("QBE") brought this action under the court's admiralty jurisdiction against Carlos Morales-Vázquez ("Morales"), seeking a judgment declaring that Morales's marine insurance policy is void ab initio under the doctrine of uberrimae fidei, that Morales breached the "warranty of truthfulness" in the application for the insurance policy, thereby excusing QBE from making any payments to Morales on the policy, or that the policy does not cover all of Morales's claimed losses. Docket No. 14 ("Compl."). Morales counterclaimed, alleging breach of contract and entitlement to consequential damages due to QBE's bad-faith adjustment. Docket No. 15. I denied both parties' motions for summary judgment. Docket No. 134. The case then proceeded to a six-day nonjury trial. Transcripts were prepared. Docket Nos. 194, 196, 197, 203, 204, 207, 208, 211. The parties submitted post-trial briefs. Docket Nos. 212, 213. The case is before me on consent of the parties. Docket No. 47. In light of the findings of fact and legal discussion set forth below, QBE's action for declaratory judgment is GRANTED, and Morales's action is DISMISSED.

FINDINGS OF FACT

1. In 2011, Morales applied for and received insurance policy OYP-0000746-00 from Optima Insurance Co. for a 2005 Riviera ("Optima Application). Exhibits M, O. In the Optima Application, Morales did not answer the questions that asked him to describe any prior boating history and "any accidents, claims or losses in connection with any vessel you have sailed, owned or was under your control." Exhibit M. Policy OYP-0000746 was renewed multiple times. Exhibits P, R, HH. 2. QBE is a Puerto Rico corporation authorized by the Puerto Rico Insurance Commissioner's Office to sell ocean marine insurance. It acquired Optima Insurance Co. in 2012.

3. In March 2014, Morales applied for insurance from QBE for his 48' Cavileer yacht ("QBE Application"). Joint Exhibits II, X.

4. The application form ("QBE Application") states that the "statements and answers provided [in the application] are warranted by [the applicant] to be true and correct." Joint Exhibit II. The QBE Application also states, "If incorrect answers are provided (either by error, omission or neglect), I will be in breach of this warranty and the policy, if issued, will be void from inception. I understand I must fill out every question and that no question should remain unanswered. If a question is inapplicable, I am aware that I must write "N/A" to so indicate. I agree that this declaration shall form the basis of the contract of insurance between me and you. I also agree that if the policy is issued, it was issued by you based upon and in reliance of the truthfulness and completeness of the answers provided herein." Joint Exhibit II. The declarations section of the QBE Application states, "All questions asked herein request material information which is indispensable for QBE Optima Insurance Company's assessment of the risk subject of this application." Joint Exhibit II.

5. Section seven of the QBE Application asked, "Have you had any accidents or losses (even if no insurance claim was filed) in connection with any vessel you have operated, owned or was under your control? If yes please provide full details, including dates and amounts paid." Morales checked the box for yes and wrote, "Accident 11 years ago - propeller strike in Las Pelás at Culebra. Propellers were replaced, shaft and rudders rectified." Joint Exhibit II. Morales did not include the fact that he grounded a 40' Riviera Offshore yacht in January 2010 in Fajardo. Joint Exhibits II, X; Transcript 06-28-18 AM at 4:3-5.

6. Section six of the QBE Application required Morales to "give details of boating experience by providing, in chronological order, list of boats owned or operated." Joint Exhibit II. In answer to the question, Morales listed only two of the seven vessels that he had owned and operated. He listed a 2001 40' Riviera 4000 Offshore and a 2005 40' Riviera Sport Fisherman. He did not list a small speedboat with a 35 h.p. engine; a 19' Cobia with a 175 h.p. outboard engine, a Yamaha Jet Boat, a 29' Trophy with twin 225 h.p. outboards; and a 50' Cherokee speedboat powered by diesel engines. Transcript 06-28-18 AM at 18:18-20:2.

7. Morales's digital signature is on the QBE Application. Transcript 06-28-18 AM at 15:6-18.

8. Angel Cruz-Rodriguez submitted Morales's QBE Application to Eribel Casado, an underwriter at QBE, via email. Exhibit W. He wrote that the application was "completed" and that he needed the "premium as soon as possible to make the policy today." Exhibit W.

9. Casado testified that after Cruz sent her Morales's QBE Application, she "evaluated the application from beginning to end" and decided that the risk was "within my authority and capacity[.]" Transcript 6-25-18 at 69:20-25.

10. When deciding whether to issue a quote, underwriters use the Underwriting Guidelines, underwriting worksheets in Excel, and their experience and judgment. Transcripts 6-25-18 at 77:4-17; 6-26-18 AM at 10-12, 48:2-15, 49:1-3.

11. In the underwriting Excel worksheet, it noted that Morales had "more than 15 years" of "owner experience." Joint Exhibit IX.

12. QBE's Underwriting Guidelines, which are used to guide underwriters deciding whether to issue a quote, are "intended to provide exhaustive knowledge about our underwriting guidelines, their interpretation and application to various risks and marinas." Joint Exhibit IV. The Underwriting Guidelines present a list of "minimum information needed in order to quote"; the list does not include the insured's prior losses or boating history. Joint Exhibit IV; Transcript 6-26-18 AM at 48:2-4.

13. Casado testified that "there are other determining factors for you to evaluate a risk [other than what is listed in the guidelines], such as experience and the underwriter's judgment. In this case, prior losses or experience of the prospect are parts of the underwriter's evaluation criteria" because the insurance company could accept or decline the risk or change the amount of the premium based on the prospect's prior losses. Transcript 6-26-18 AM at 48:7-15.

14. Although Morales did report the propeller strike on the QBE Application, the grounding in Fajardo in 2010 was a very different claim. A grounding is a significant loss for this type of insurance and its existence is important in deciding whether to accept the risk or not. Transcript 6-26-18 AM at 46:13-47:6.

15. Thirty-six minutes after receiving Cruz's email, Casado emailed Cruz back and attached a quote for a policy that she "quoted basing [herself] on policy OYP-0000746-02." Exhibit W.

16. Later that day, QBE issued Morales policy OYP-00001077-00 for March 7, 2014 through March 7, 2015. Joint Exhibit I. Following an endorsement, Morales held hull insurance for $550,000 for Making Waves from QBE as well as P&I, medical payments and uninsured boater's coverage, pursuant to all its terms, conditions, limitations and exclusions. Joint Exhibit I; Exhibits J, X, AAA; Docket No. 164 at 68 ("Stipulated Facts").

17. On October 24, 2014, Making Waves sustained damages as a result of a fire, and Morales alerted QBE to the damage. Joint Exhibit X; Stipulated Facts at 68

18. QBE appointed an independent adjustor, Pablo Rios, to investigate and adjust Morales's claim for Making Waves. Transcript 6-28-18 PM at 15:6-11, 21:1-5. Of QBE's employees, Jose Soto, QBE's Vice President of Claims, and Maria Berrios, a property adjustor, also worked on the claim. Transcripts 6-25-18 at 19:3-13, 24:17-25; 7-13-18 at 13:11-14. Berrios was in charge of coordinating meetings, processing documents, and evaluating reports related to the claim. Transcript 7-13-18 at 13:14-17.

19. Rios submitted his first report to QBE on October 28, 2014 after visiting Making Waves. Exhibit DD; Transcript 6-28-18 PM at 25:13-26:10.

20. Rios then hired Edgardo Jimenez, a marine surveyor, to assess the physical condition of Making Waves and to provide an opinion on the cost of repairs. Transcripts 6-26-18 at 6:19-21; 6-25-18 at 25:6-8, 56:2-5; 6-28-18 PM at 25:1-6.

21. In late November 2014 (between November 21 and 26), Soto, Cruz, and Morales met to discuss the claim related to the fire on Making Waves. Joint Exhibit X. During the meeting, Cruz or Morales told Soto that had this claim been made to MAPFRE, it would have already been resolved. Transcripts 6-25-18 at 30:17-22; 6-28-18 AM at 38:1-4.

22. On November 24, 2014, Jimenez issued a Damage Survey Report after inspecting Making Waves three times. Joint Exhibit VIII. The report included an estimate of damages based on discussions with other industry professionals and a contractor's similar jobs. Transcript 6-26-18 at 24:1-13.

23. On December 4, 2015, QBE made its first offer to Morales of $63,774.10 based on Jimenez's report, which Morales rejected the next day. Joint Exhibit X.

24. QBE asked the adjustors and surveyors to keep working on the case to see if they missed anything or if another adjustment could be made. Transcript 6-25-18 at 26:23-27:3.

25. On February 27, 2015, QBE and Morales met again to discuss their difference in opinion on how the electric cables in Making Waves should be repaired and whether there needed to be further tests for potential delamination on the vessel that could have been caused by the fire. Joint Exhibit X; Transcript 6-28-18 AM at 41:24-42:2.

26. On March 21, 2015, QBE made a second offer to Morales of $66,258.03. Joint Exhibit X. The offer increased because QBE received an invoice regarding the emergency management of the fire that increased the expenses. Transcript 6-25-18 at 27:4-15. Morales rejected the offer. Transcript 6-25-18 at 27:16-18.

27. On April 14, 2015, QBE made a third offer to Morales of $113,406, which was then re-stated on May 4, 2015....