Yu v. Albany Ins. Co.
| Decision Date | 07 February 2002 |
| Docket Number | No. 99-16194.,99-16194. |
| Parties | Jacinta YU; Yu & AAS Corporation, Plaintiffs-Appellants, v. ALBANY INSURANCE COMPANY; Gre Insurance Company, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Ronald G.S. Au, Honolulu, HI, for the plaintiffs-appellants.
Richard B. Miller, Honolulu, HI, for the defendants-appellees.
Appeal from the United States District Court for the District of Hawaii; Susan Oki Mollway, District Judge, Presiding.
Before: B. FLETCHER, CANBY, JR., and PAEZ, Circuit Judges.
This case involves a dispute over a marine insurance policy. The plaintiffs, Jacinta Yu and Yu & AAS Corporation ("the Yus"), owned the fishing vessel "Liberty," half of which was insured by defendant Albany Insurance Company. When the Liberty sank, the Yus submitted a claim to Albany. Albany denied the claim on the ground that the Yus had failed to comply with the policy's "Captain Warranty," which provided that the policy would be suspended when the vessel's captain was replaced unless Albany had approved the new captain in advance. The Yus then filed suit in the district court, claiming that Albany had breached its contract. The district court awarded summary judgment to Albany, reasoning that the Yus had failed to comply with the unambiguous "Captain Warranty," and were thus not entitled to recover on the policy. We agree with the district court's conclusion, and affirm the grant of summary judgment to Albany.
In October 1996, the Yus approached a broker, Ocean Marine Insurance Agency, Inc., to obtain insurance on their fishing vessel, the Liberty. Through its principal, Patrick Kudlich, Ocean Marine obtained a policy for the Yus that was partly underwritten by Albany Insurance Company. The policy contained a "Captain Warranty," which provided:
It is understood and agreed that the Captain of the vessel is Gregory P. Walker, and it is warranted by the Assured that Gregory P. Walker shall be aboard at all times the vessel is navigating. If Gregory P. Walker is not aboard the vessel while it is navigating, and if Underwriters have not previously agreed to a suitable replacement, coverage under this policy shall be suspended until Gregory P. Walker returns to the vessel.
In January 1997, Kudlich forwarded the policy to the Yus, and included a one-page cover letter, in which he advised the Yus to review the policy, particularly the Captain Warranty. The letter stated:
Please review the policy and its endorsements carefully, paying particular attention to ... the Special Terms/Conditions endorsement paragraph 3 — Captain Warranty. The Captain Warranty is very important, that you must tell me the name of any new captain that replaces Greg Walker prior to the new captain operating the vessel. Failure to abide by this warranty could null and void the insurance policy.
A month later, the Yus orally requested that Kudlich add Frank Dorhofer as captain of the Liberty. Kudlich requested the Yus to provide Dorhofer's resume, which they did. It reflected that Dorhofer had 13 years experience as captain of a fishing vessel. After receiving the request and resume, Albany agreed in an endorsement to the policy that Dorhofer was an "additional approved operator" under the Captain Warranty. This agreement was retroactive to January 1, 1997.
In December 1997, the Liberty sank in waters off the coast of Hawaii. At that time, the Captain of the Liberty was neither Greg Walker nor Frank Dorhofer, but another individual — Jorge Perez. When the Yus tendered a claim to Albany for the loss of the vessel, Albany refused to pay. Albany observed that it had not agreed to Perez as a captain, and that the Yus were therefore not in compliance with the Captain Warranty.
The Yus argue that they complied with the Warranty. They asserted that in July 1997, Eric Yu had left a telephone message on their insurance broker's (i.e., Kudlich's) answering machine indicating that Jorge Perez was to be the new captain of the Liberty. According to the Yus, leaving this message was all they needed to do to comply with the Captain Warranty.1 Kudlich, on the other hand, asserted that he was never informed about the Yus' desire to add Perez as a captain, and that he therefore never requested a resume of Perez's qualifications to get approval from Albany. Because we are reviewing a summary judgment, we accept as true for purposes of decision Eric Yu's statement that he left his telephone message with Kudlich. The Yus offered no evidence, however, that they supplied Perez's resume to Kudlich or Albany.
The district court granted summary judgment to Albany on the Yus' claim that Albany had impermissibly refused to cover the loss. The court concluded that because the Yus had failed to comply with the policy's requirement that they obtain Albany's agreement to any new captain of the Liberty in order to maintain coverage under that policy, coverage had been suspended at the time the Liberty sank. This appeal followed.
The district court had jurisdiction in admiralty over this case of marine insurance. 28 U.S.C. § 1333; see La Reunion Francaise SA v. Barnes, 247 F.3d 1022, 1024-25 (9th Cir.2001). We have jurisdiction of the appeal pursuant to 28 U.S.C. § 1291. Disputes arising under marine insurance contracts are governed by state law, in this case Hawaii law, unless an established federal rule addresses the issues raised, or there is a need for uniformity in admiralty practice. Kiernan v. Zurich Cos., 150 F.3d 1120, 1121 (9th Cir.1998). We review de novo the district court's grant of summary judgment. Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 390 (9th Cir.2000).
The Yus argue that they raised a triable issue of fact that they had complied with the Captain Warranty. They also argue alternatively that, if they did not comply, they are nevertheless entitled to recover because of ambiguity in the Warranty, a course of dealing negating the terms of the Warranty, and an absence of evidence that their non-compliance caused the loss of the vessel. They also contend that they are entitled to relief under a statute governing representations, and on a principle of estoppel. We reject all of these contentions.
The Yus did not raise a triable issue of compliance with the Warranty. The policy required that Albany "agree to" a replacement captain in order for the vessel to be covered, a requirement that was made evident not only by the policy's plain language, but also by the fact that, prior to extending coverage to replacement Captain Dorhofer, Albany executed a written endorsement "agreeing" that Dorhofer was an acceptable replacement. Here, it is undisputed that Albany never "agreed to" Captain Perez, as it had with Dorhofer. A telephone message to the broker does not meet the requirements of the Warranty. Consequently, the district court was correct in ruling as a matter of law that the Yus were in breach of the Warranty.
The Yus' next (and least persuasive) contention is that, even if they breached the Captain Warranty, the warranty is unenforceable because it is ambiguous and inconspicuous.2 It is true that under Hawaii law,3 insurance policies must be construed as liberally as possible in favor of the insured and all ambiguities must be resolved against the insurer. Masaki v. Columbia Cas. Co., 48 Haw. 136, 395 P.2d 927, 929 (1964). But this rule does not mean that the court should "create ambiguity where none exists." State Farm Mut. Auto. Ins. Co. v. Fermahin, 73 Haw. 552, 836 P.2d 1074, 1077 (1992) (citations omitted). Here, there was nothing ambiguous about the Captain Warranty, with its statement that "coverage under this policy shall be suspended until [an approved captain] returns to the vessel."
The Yus' contention that the Captain Warranty was inconspicuous is equally unpersuasive. The Captain Warranty was printed in bold, underlined, capitalized letters, making it conspicuous. The Captain Warranty was also conspicuous because it had blanks filled with the name "Gregory P. Walker," which was typed in a different font and size from the lettering on the rest of the page, drawing one's attention to it. Moreover, the Captain Warranty was one of only six special conditions placed on that page. Finally, when the policy was forwarded to the Yus by Kudlich, Kudlich's letter specifically called the Yus' attention to the Captain Warranty, warning the Yus that "[f]ailure to abide by this warranty could null and void the insurance policy."
The Yus' next contention is that the parties' prior course of dealing waived the requirement that Albany agree to any change of captain.4 The Yus base their contention on the fact that when Albany agreed to Captain Dorhofer as a replacement captain, on February 26, 1997, Albany allowed for coverage to be retroactive to January 1, 1997. As a result, the Yus contend, Albany was allowing Dorhofer to be covered for January, even though Albany had not approved Dorhofer during that entire month. Consequently, the Yus contend, Albany was waiving its requirement that a captain be "agreed to" for coverage to continue.
We reject this contention. At most, this incident showed that Albany would consider extending retroactive coverage after it had agreed to an acceptable replacement captain; this incident did not waive the Captain Warranty altogether. Were we to take the Yus' position to its logical conclusion, Albany's extension of retroactive coverage to Dorhofer would mean that the Yus suddenly had unbounded discretion to choose any replacement captain, regardless of qualifications, without having Albany agree to such a replacement. We reject this unreasonable proposi...
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