Swift Spindrift Ltd. v. Alvada Ins. Inc.

• Citation: 175 F.Supp.3d 169
• Decision Date: 29 March 2016
• Docket Number: 09-cv-9342 (AJN)
• Parties: Swift Spindrift Ltd., Plaintiff, v. Alvada Insurance Inc., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

175 F.Supp.3d 169

Swift Spindrift Ltd., Plaintiff,

v.Alvada Insurance Inc., et al., Defendants.

09-cv-9342 (AJN)

United States District Court, S.D. New York.

Signed March 29, 2016

Jeffrey S. King, Luke Martin Reid, K&L Gates LLP, Boston, MA, Michael G. Chalos, K&L Gates LLP (NYC), New York, NY, for Plaintiff.

Joseph G. Grasso, Wiggin and Dana LLP, Stamford, CT, Michael Leo Kenny, Jr., Wiggin and Dana LLP, Michael Barry McCauley, Palmer Biezup & Henderson LLP, Edward Kevin Lenci, Hinshaw & Culbertson LLP, Benjamin Samuel Noren, The Port Authority of New York & New Jersey, New York, NY, Daniel Harold Wooster, Palmer Biezup & Henderson, LLP, Philadelphia, PA, for Defendants.

MEMORANDUM & ORDER

ALISON J. NATHAN

, District Judge

Plaintiff Swift Spindrift Ltd. (“Swift”) brings this suit against two sets of insurance underwriters—referred to as the “Seascope Defendants,” the “B&P Defendants,” and, collectively, “the Underwriters”—and a marine insurance broker, Arthur J. Gallagher Risk Management Services, Inc. (“Gallagher”). Swift, the owner of a bulk cargo vessel known as the M/V Swift Spindrift (“the Swift Spindrift”), seeks damages from the Underwriters for what it alleges were breaches of two insurance policies that provided coverage for the Swift Spindrift. The policies cover certain named perils, including, in certain circumstances, “arrests.” Swift claims that it was entitled to recover under both policies after the Swift Spindrift was arrested in Libya—where it remained for more than six months—pursuant to a commercial dispute between Swift and the importer that had purchased the vessel's cargo.

Each party in this case has filed a motion for summary judgment. Swift has also filed a motion to exclude the Underwriters' proposed expert witness. For the reasons that follow, the Underwriters' motion for summary judgment is GRANTED, Swift's motion for summary judgment is DENIED, and Gallagher's motion for summary judgment and Swift's motion to exclude are DENIED as moot.

I. BACKGROUND

A. Factual Background¹

Swift owned and operated the Swift Spindrift during the time period relevant to this case. Underwriters 56.1 CS ¶ 4. In the fall of 2008, the Swift Spindrift loaded more than 20,000 metric tons of corn in San Lorenzo, Argentina and departed for Tripoli, Libya. Swift 56.1 CS ¶¶ 9, 10. While the vessel was en route to Tripoli, the time charterers (i.e., the entities that had leased the vessel for the period that encompassed the voyage) requested that the ship divert to Antwerp to discharge at least a portion of its cargo. Id. ¶¶ 10, 11. Swift agreed to the request, though it claims it was contractually obligated to do so. Id. ¶ 11. The Libyan entity that was contracted to receive the cargo, Tasharkiat Green Valley Animal Foods Ltd. (“the Importer”), expressed concern when it learned that the vessel was heading to Antwerp. Id. ¶ 12. Swift then discovered that the request to have the Swift Spindrift stop in Antwerp was actually an effort to arrest all of the vessel's cargo there, pursuant to a dispute between the Importer and a company affiliated with the vessel's sub-charterer. Id. ¶ 13. Before the Swift Spindrift reached Antwerp, however, it turned back and proceeded to Tripoli. Id. ¶ 14.

As the vessel was en route to Libya, Swift learned from its Libyan counsel, Taher Shtewi, that the Importer planned to file a multi-million dollar lawsuit and to arrest the Swift Spindrift in Tripoli as a means of securing the claim. Id. ¶ 18. The Importer ultimately did file suit, seeking approximately $2.5 million in damages based, at least in part, on the alleged delay in the Swift Spindrift's arrival in Tripoli. Id. ¶ 16. The vessel made it to Tripoli on November 16, 2008, and was served with legal process on November 24, 2008. Underwriters 56.1 CS ¶¶ 8, 9. Although the parties dispute the exact nature of this process (Swift calls it a “writ of arrest” and the Underwriters call it a “writ of attachment,” see Swift 56.1 CS ¶ 17), they agree that the North Tripoli Court of First Instance (the “Libyan Court”) issued an order requiring that a security of 2.0 million Libyan Dinar (about $1.6 million) be posted to secure the release of the Swift Spindrift. Underwriters 56.1 CS ¶ 10.

How the ensuing legal proceeding in Libya unfolded is the subject of considerable dispute. According to Swift, the Libyan Court indicated that it would accept an irrevocable letter of credit as a form of security. Swift Rule 56.1 Statement ¶ 13. The parties agree that on January 20, 2009, Swift posted such a letter, payable to the Importer, in the amount of $1.6 million. Swift 56.1 CS ¶¶ 15, 16. Swift claims that the Libyan Court ordered the release of the Swift Spindrift, but that the vessel remained under arrest after the Libyan Foreign Bank refused to liquidate the letter of credit. Swift Rule 56.1 Statement ¶¶ 17-20. Swift further contends that when it petitioned the court (again) to release the vessel in March 2009, the court summarily denied the request. Id. ¶ 20. The Underwriters, on the other hand, claim that Swift knew all along that the only sure way to secure the release of the Swift Spindrift was to deposit the required security in cash, and that the Importer would have needed to agree to accept an irrevocable letter of credit in order for the letter that Swift posted to be sufficient. Underwriters Rule 56.1 Statement ¶¶ 20, 21. They claim there is no evidence that the Importer ever made such an agreement. Id. ¶ 25.

Irrespective of what was or was not required to secure the vessel's release, the Swift Spindrift remained in Libya for the duration of the proceedings in Libyan court. On April 7, 2009, the Libyan Court awarded the Importer a judgment of 1.5 million Libyan Dinar (about $1.1 million). Underwriters 56.1 CS ¶ 21. Both the Importer and Swift appealed the court's judgment. Swift 56.1 CS ¶ 37. In January 2010, the appeals court reduced the judgment to 1.1 million Libyan Dinar, which Swift subsequently paid. Id. ¶¶ 39, 40. On June 3, 2010, Swift again petitioned the Libyan Court to order the release of the Swift Spindrift, and the court granted the request on June 21, 2010. Underwriters CS ¶ 26. On June 17, 2010, Swift sold the Swift Spindrift on an “as-is, where-is” basis for $2,299,000 to a third party. Id. ¶ 27. By that point, the Swift Spindrift had been under arrest in Libya for more than eighteen months. Id. ¶ 26.

B. The Insurance Policies and Claims

The Swift Spindrift was covered by two different insurance policies during the course of the events described above, with Swift named as the insured. The group of underwriters known as the Seascope Defendants subscribed to the “Seascope Policy,” which insured the Swift Spindrift from November 1, 2008, until the policy was terminated on December 31, 2008. Underwriters 56.1 CS ¶¶ 39, 43; see also Chalos Decl., Dkt. No. 100, Ex. D (“Seascope Policy”). A second group of underwriters—the B&P Defendants—subscribed to the “B&P Policy,” which provided coverage for the Swift Spindrift from January 1, 2009, to December 31, 2009. Underwriters 56.1 CS ¶ 55; see also Chalos Decl., Dkt. No. 100, Ex. H (“B&P Policy”). Gallagher served as Swift's broker when Swift purchased the B&P Policy. Swift 56.1 CS ¶ 7.²

Both the Seascope Policy and the B&P Policy (together, “the Policies”) were “agreed value” policies, meaning that in the event of a covered total loss or constructive total loss, the Policies would pay Swift an agreed amount for the Swift Spindrift. Underwriters 56.1 CS ¶¶ 49, 64. The agreed value of the Swift Spindrift under the Seascope Policy was $9,900,000, and the agreed value was $9,281,250 under the B&P Policy. Id , Both policies included a provision that allowed Swift to claim the Swift Spindrift as a constructive total loss if the vessel were subject to a covered “arrest” lasting more than six months. Id. ¶¶ 45, 46, 65, 66. On August 6, 2009—more than eight months after the Swift Spindrift had been served with legal process in Tripoli—Swift notified the B&P Defendants that it was claiming a constructive total loss of the vessel under the B&P Policy. Id. ¶ 76. The B&P Defendants declined Swift's Notice of Abandonment. Id. ¶ 77. Two weeks later, Swift notified the Seascope Defendants that it was claiming a constructive total loss under the Seascope Policy. Id. ¶ 78. Seascope likewise rejected Swift's Notice of Abandonment. Id. ¶ 79.

C. Procedural History

Swift filed suit against the Seascope Defendants and the B&P Defendants in November 2009, invoking the Court's admiralty jurisdiction. Compl., Dkt. No. 1, ¶ 1. Swift alleged that the Underwriters had breached their respective insurance contracts because the detention of the Swift Spindrift in Libya, which lasted for more than six months, was a covered peril under the Policies. Id. ¶¶ 60, 61, 90, 91. Swift sought the agreed value of the Swift Spindrift under each policy, as well as “sue and labor expenses,” i.e., the costs of defending, safeguarding, and eventually earning the release of the vessel, in the amount of nearly $4 million. Id. at 24-25. In 2011, Swift amended its complaint to add Gallagher as a defendant and to reduce the damages it was seeking in light of the $2,299,000 it received when it sold the Swift Spindrift in June 2010. Amended Compl., Dkt. No. 21, ¶¶ 38, 64, 95.³ The parties engaged in an extended period of discovery, and on July 24, 2013, Magistrate Judge Maas granted in part and denied in part Defendants' motion to compel Swift to produce certain documents that it had withheld on the basis of attorney-client privilege. See Swift Spindrift, Ltd. v. Alvada Ins., Inc. , No. 09–CV–9342 (AJN) (FM), 2013 WL 3815970 (S.D.N.Y. July 24, 2013)

.

On May 29, 2015, Swift, the Underwriters, and Gallagher each moved separately for summary judgment. Dkt. Nos. 93, 99, 103.⁴ Swift seeks summary judgment with respect to its claims that the Underwriters are liable for the agreed value of the Swift Spindrift and for sue and labor expenses under the...