Syndicates 1183, 1036, & 2007, Certain Underwriters at Lloyd's, London v. Furie Operating Alaska, LLC, LLC

• Decision Date: 31 March 2023
• Docket Number: 3:21-cv-00252-JMK
• Parties: SYNDICATES 1183, 1036, and 2007, CERTAIN UNDERWRITERS AT LLOYD'S, LONDON subscribing to Charterer's Legal Liability Policy Number GU300630J, Plaintiff, v. FURIE OPERATING ALASKA, LLC, et al., Defendants.
• Court: U.S. District Court — District of Alaska

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SYNDICATES 1183, 1036, and 2007, CERTAIN UNDERWRITERS AT LLOYD'S, LONDON subscribing to Charterer's Legal Liability Policy Number GU300630J, Plaintiff, v. FURIE OPERATING ALASKA, LLC, et al., Defendants.

No. 3:21-cv-00252-JMK

United States District Court, D. Alaska

March 31, 2023

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

IN ADMIRALTY

JOSHUA M. KINDRED, UNITED STATES DISTRICT JUDGE

Before the Court at Dockets 58, 60, and 61 are motions for summary judgment by Cook Inlet Spill Prevention & Response, Inc. and CISPRI Services, LLC (collectively “CISPRI”), Gemini Insurance Company (“Gemini”), and Syndicates 1183, 1036, and 2007 Certain Underwriters at Lloyd's, London (“Underwriters”). The motions are each fully briefed.^[1]Oral argument was requested by Gemini, but the Court deems it unnecessary to its decision.^[2]

I. BACKGROUND

This order resolves a dispute over insurance coverage for an accident caused by a defective mooring device. The facts of this case are straightforward and undisputed. Defendant Furie Operating Alaska, LLC (“Furie”) owned and operated a natural gas extraction platform (“the Platform”) in the Cook Inlet.^[3]To transport workers and supplies to and from the Platform, Furie entered into a contract (the “Time Charter”) with CISPRI to charter vessels on an as-needed basis.^[4] Furie's gas extraction business, including the chartering of vessels to and from the Platform, was insured by three separate contracts relevant to this matter. Two policies from Gemini provide general liability coverage for the risks associated with operating the Platform: (1) the Energy Commercial General Liability Policy No. JGH2002114 (“Primary Policy”), with a limit of $1,000,000 per occurrence, and (2) the Energy Commercial Umbrella Liability Policy No. JUH2001888 (“Umbrella Policy”), with a limit of $10,000,000 per occurrence.^[5]To cover Furie's risks associated with chartering vessels to service the Platform, Underwriters issued Furie the Charterer Legal Liability Policy No. B0702 GU300630j (“Charterer's Policy”), with a limit of $10,000,000 per occurrence.^[6]

On January 8, 2016, the PERSEVERANCE, a vessel owned by CISPRI and chartered by Furie, was transporting supplies to the Platform. The crew attempted to secure the vessel to the platform using the Platform's mooring device (the “Mooring Apparatus”), which included a wire rope sling. The rope parted under tension, snapping back and striking E.H., a deckhand on the PERSEVERANCE. The injuries left E.H. permanently disabled.^[7]All three insurance policies were in effect at the time of the accident.^[8]

As E.H.'s employer, CISPRI paid approximately $1.4 million in benefits to E.H. before ultimately settling his personal injury claim.^[9]In June 2018, CISPRI asserted claims against Furie for

(1) breach of contract under the Time Charter for failure to provide the vessel with a safe berth and for failure to provide appropriate operational plans and documents; (2) contractual indemnity under the Time Charter; (3) contribution for settling E.H.'s claims, on the basis that Furie was negligent in the design and operation of its mooring system.^[10]

CISPRI demanded arbitration pursuant to the Time Charter.^[11]The Final Arbitration Award was entered on August 9, 2021 (the “Award”). In a detailed decision, the Arbitrator reached several relevant findings of fact and conclusions of law:

• The Platform was attached to the seabed and was not a vessel.^[12]

• The maneuvering and movement of the vessel in relation to the Platform was not reckless, out of the ordinary, unusual, or unexpected for a vessel using a Mooring Apparatus,^[13]and the evidence indicates this “was a routine and unremarkable operation to hook up to the Mooring Apparatus.”^[14] • The vessel's captain, and by extension CISPRI, was negligent and proximately caused E.H.'s injuries. The captain was negligent when he:

o Failed to establish an arrangement by which he would know those on the foredeck were out of harm's way before putting tension on the wire;

o Failed to carry out an adequate Job Safety Analysis; and o Neither knew nor attempted to confirm that those on the foredeck were out of harm's way before putting tension on the wire.^[15]

• Furie was negligent and proximately caused E.H.'s injuries when it:

o Installed an “ad hoc make-do solution rather than a designed/engineered connection to the Padeye,” which risked an undesirable bending force in the wire rope sling and “may have contributed to the parting of the Wire Rope Sling”;^[16]

o Used the Mooring Apparatus, including the wire rope sling, which Furie “should have known was unsafe for the use to which Furie put it to hold the Vessel”^[17];

o Installed and used a “Mooring Apparatus without leeway/margin of safety for the range of usual and expected variations of vessel movement during mooring”^[18];

o Failed to know “what vessels (vessel tonnage/size) in what circumstances (state of tide/current, wind force/direction, etc.) it was safe to permit them to use its Mooring Apparatus,” and therefore failed to provide guidance to Platform employees “concerning when to/when to not use the Mooring Apparatus premised upon margins for safe use.”^[19]

• Furie did not breach the Time Charter provision to “exercise due diligence to direct the vessel to safe berths and safe locations, recognizing the risks inherent with vessel operations in the Cook Inlet and surrounding areas ....” because:

o The fact that the Mooring Apparatus was unsafe is different than “the location [being] unsafe”; and

o The Platform was not a “berth.”^[20]

The Arbitrator apportioned sixty-five percent of fault to Furie and thirty-five percent of fault to CISPRI, resulting in a total award to CISPRI of approximately $8.1 million plus interest.^[21]

Both Gemini and Underwriters initially declined to pay any amount of the Award. On November 17, 2021, Underwriters filed this suit seeking a declaratory judgment that the Charterer's Policy did not provide coverage for the accident.^[22]On November 30, 2021, in a separate action, this Court confirmed the Award and a judgment was entered against Furie for the total amount of $8,237,479.81, including pre-judgment interest, attorney fees, and costs.^[23]In March 2022, Gemini tendered the full amount of its Primary Policy ($1,000,000) plus interest, conditioned on CISPRI's agreement that Gemini did not waive its argument that the Umbrella Policy's “Watercraft Exclusion” applied to this accident.^[24]CISPRI then asserted a counterclaim against Underwriters and a crossclaim against Gemini alleging that either or both the Charterer's Policy and the Umbrella Policy provides coverage.^[25]CISPRI also asserted a claim that Gemini is liable for outstanding attorney's fees pursuant to Alaska Civil Rule 82 (“Rule 82”).^[26]Gemini filed its own counterclaim against Underwriters seeking a declaration that the Charterer's Policy provides coverage and that the Umbrella Policy was not triggered and the accident is excluded from coverage.^[27]

CISPRI, Gemini, and Underwriters now move the Court for a summary ruling regarding coverage under the Charterer's Policy and the Umbrella Policy. CISPRI also moves the Court for summary judgment on its claim against Gemini for attorney's fees under Rule 82.

II. LEGAL STANDARD

Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”^[28]A material fact is one that might allow a reasonable jury to return a verdict for the nonmoving party.^[29]A court's function on summary judgment is not to weigh evidence or make credibility determinations, but rather, to determine if there are genuine issues for trial.^[30]

The moving party has the burden of demonstrating that there is no genuine dispute as to any material fact.^[31]If the moving party has met this burden, the nonmoving party must set forth evidence of specific facts showing the existence of a genuine issue for trial.^[32]The nonmoving party's burden “is not a light one.”^[33]If the evidence provided by the nonmoving party is “merely colorable” or “not significantly probative,” then summary judgment is appropriate.^[34]Further, the nonmoving party cannot rely upon conclusory allegations or denials to create a triable issue; it must set forth specific facts that “require a jury or judge resolve the parties' differing versions of the truth at trial.”^[35]Still, all evidence presented by the nonmoving party must be believed for purposes of summary judgment and all justifiable inferences are to be drawn in its favor.^[36]

III. DISCUSSION

Before the Court are two distinct issues: (1) which insurance policy, if any, provides coverage for the judgment obtained by CISPRI as a result of the accident; (2) whether Gemini's tender of the policy limits on the Primary Policy requires Gemini to pay Rule 82 attorney's fees based on the amount of the entire judgment. The Court resolves the issue of coverage first.

A. The Charterer's Policy Does Not Provide Coverage Because Furie's Liability Does Not Arise Out of Its Activities as a Charterer

The Court first discusses the law applicable to the Charterer's Policy and interprets the scope of coverage under the Charterer's Policy before analyzing whether said coverage is triggered by the accident.

1. Applicable law

As a preliminary matter, the Court applies New York law when interpreting the Charterer's Policy. The Charterer's Policy contains a choice of law provision, which provides that disputes relating to the policy shall be governed by New York law.^[37]“In the absence of a contractual choice-of-law clause, federal courts sitting in admiralty apply federal maritime choice-of-law principles . . . But where the parties specify in their...