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Tilcon New York Inc. v. Indemnity Insurance Co. of North America

United States District Court, D. Connecticut

May 10, 2017

TILCON NEW YORK, INC., Plaintiff,
v.
INDEMNITY INSURANCE CO. OF NORTH AMERICA, Defendant.

          RULING ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

          Janet Bond Arterton, U.S.D.J.

         Plaintiff Tilcon New York, Inc. ("Tilcon" or "Plaintiff) brings this action against Defendant Indemnity Insurance Co. of North America ("UNA" or "Defendant") alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Connecticut Unfair Insurance Practices Act ("CUIPA"), Conn. Gen. Stat. § 38a-815, in connection with Defendant's refusal to cover a claim under a bumbershoot insurance policy (a type of umbrella marine insurance policy providing excess coverage) that Plaintiff purchased to supplement a Protection & Indemnity policy it held with American Home. By Ruling on the Motion to Transfer/Dismiss State Court Claims, the Court determined that the UNA Bumbershoot policy is a maritime contract and that it had subject matter jurisdiction pursuant to 28 U.S.C. 1331(1) (maritime jurisdiction), that federal choice-of-law rules apply and that to the extent federal admiralty law does not apply, Connecticut law would apply, and dismissed Plaintiffs claims under CUIPA and portions of its claims concerning the breach of the implied covenant of good faith and fair dealing dependent on an alleged, but unsupported, duty to defend. (Ruling on Mot. to Transfer/Dismiss [Doc. # 40] at 8-9, 14.) The case proceeded on the question of breach of contract and breach of the implied covenant in other respects. (Id. at 14.) The parties now cross-move for summary judgment [Docs. ## 69, 72]. For the reasons set forth below, the Court DENIES the parties' cross-motions for summary judgment.

         I. Background

         A. The Underlying Injury and Commencement of Underlying Lawsuit

         Tilcon is a New York-based company that provides road construction services, operates quarries and asphalt plants, and produces construction materials that are transported throughout New York and New Jersey by truck, barge, and rail. (Ruling on Mot. to Transfer/Dismiss at 2.) Tilcon owns and operates a quarry and a maritime terminal in Clinton Point, New York on the Hudson River where it loads gravel and stone aggregate onto barges for delivery to construction sites. (Pl.'s D. Conn. L. Civ. R. 56(a) 1 Stmt. ("Pl.'s 56(a) 1") [Doc. # 72-11] ¶Â¶ 1-2; Def.'s D. Conn. L. Civ. R. 56(a)2 Stmt. ("Def.'s 56(a)2") [Doc. # 76] ¶¶ 1-2.) The barges themselves have no engines or ability to steer, and Tilcon uses tugboats (called "push boats") to maneuver the barges to the dock. (Pl.'s 56(a) 1 ¶ 10; Def.'s 56(a)2 ¶ 10; Ex. 4 to Stern Decl. ("Kechejian Tr.") [Doc. 70-1] at 13:4-23.) Once a barge is maneuvered up to the dock for loading, it is affixed to the dock by a set of cables. These cables, which are tightened and loosened by a winch, propel the barge along the dock so that, as it moves, the gravel being loaded into the barge is evenly distributed. (Pl.'s 56(a) 1 ¶¶ 15-17; Def.'s 56(a)2 ¶¶ 15-17.) Another set of cables runs between the barge and the dock. The lines are shackled to the dock in such a way that they permit the barge to move along the dock but prevent it from drifting away from the dock. As aggregate is loaded into the barge, two Tilcon employees rake it to a flat surface so that purchasers can better estimate volume; the employees who perform this job are called "trimmers." (Pl.'s 56(a) 1 ¶¶ 19-20; Def.'s 56(a)2 ¶¶ 19-20.)

         In the underlying lawsuit, Ronkese v. Tilcon New York et al, Tilcon employee Richard Ronkese alleged that on October 15, 2004, while working as a trimmer aboard a barge called the Nicola Lizza, he was struck by a cable that snapped, causing injury. (Pl.'s 56(a) 1 ¶ 42; Def.'s 56(a)2 ¶ 42; Ex. I ("Ronkese Complaint") to Pl.'s 56(a) 1 [Doc. # 72-26] ¶Â¶ 16-18; Def.'s D. Conn. L. Civ. R. 56(a) 1 Stmt. [Doc. # ("Def.'s 56(a) 1") [Doc. # 70] ¶ 15; Pl.'s D. Conn. L. Civ. R. 56(a)2 Stmt. ("Pl.'s 56(a)2") [Doc. # 72-12] ¶ 15).[1]

         In Mr. Ronkese's complaint, he alleged that he was injured "when a cable snapped/parted, striking plaintiffs body .. . [and] propelling his body with great force and velocity to the deck of the barge. (Ronkese Complaint ¶ 18.)[2] This allegation coheres with Tilcon's expert's description of the accident, drawn from a "Lost Time Injury Report" prepared by Tilcon after the accident. The expert recounts that "Mr. Ronkese was struck in the face/head by a line attached to a 200 foot-long 7/8 inch diameter steel stationary cable running parallel to the dock." (Ex. K ("Junge Report") to Pl.'s 56(a) 1 [Doc. # 72-28] at 8.) The line that struck Mr. Ronkese was one of the lines that permitted the barge to move along the dock but that prevented it from drifting away.

         Mr. Ronkese filed suit on September 7, 2007-just shy of three years after his injury-in New York Supreme Court, Ulster County, alleging that the snapped cable caused him to suffer shoulder and neurocognitive injuries. (Ronkese Complaint ¶ 18.) In the years between the injury and the suit, Mr. Ronkese collected $260, 000 in New York State Workers Compensation benefits. (Def.'s 56(a) 1 ¶ 16-17; Pl.'s 56(a)2 ¶¶ 16-17.)

         At the time of the suit, there was dispute at Tilcon about the severity of Mr. Ronkese's injuries. David Toolan, Deputy General Counsel for Tilcon's parent and Assistant Secretary of Tilcon, testified as 30(b)(6) witness for Tilcon that it had received Mr. Ronkese's workers compensation file, complete with summaries of independent medical examination reports indicating that Mr. Ronkese had suffered neurocognitive injuries, but he also testified that Mr. Ronkese's coworkers had seen him at the gym lifting weights without apparent difficulty. (Toolan 30(b)(6) Tr. 57:13-58:22.) Cross motions for summary judgment were filed in the underlying action on April 30, 2012, and after the court denied the motions on Sept. 28, 2012, Tilcon settled with Mr. Ronkese for $3.25 million.

         B. Ownership of the Barge Nicola Lizza

         At the time of Mr. Ronkese's injury, Tilcon did not own the barge Nicola Lizza. Rather, the barge was held in trust for the benefit of Buchanan Marine, L.P. (Ex. 6 ("Declaration of the Buchanan Trust # 54") to Stern Decl. [Doc. #70-1] (setting forth terms of trust); Ex. 7 ("Bareboat Charter") to Stern Decl. [Doc. # 70-1] (setting forth in Schedule A the list of vessels, including the Nicola Lizza, held in trust and subject to the bareboat charter).)

         This trust, the Buchanan Trust # 54, was established by Buchanan Marine, Inc. as grantor and names A.P. Franz Jr. as trustee and Buchanan Marine, L.P. as beneficiary. (Declaration of the Buchanan Trust # 54.) Under a separate bare-boat charter agreement, the trust then licenses the vessels it holds to Buchanan Marine, L.P. and gives Buchanan Marine, L.P. the rights to "man, victual, navigate, operate, supply, fuel, maintain and repair" the vessels, including the Nicola Lizza, while ensuring that the trustee retains full legal title. (See Bareboat Charter, § 8(a)-(b)).

         At the time of the underlying accident, through common corporate parentage, Plaintiff Tilcon New York was an affiliate of both the grantor of the trust, Buchanan Marine, Inc., and the beneficiary and bare-boat charterer, Buchanan Marine, L.P., in virtue of the following corporate relations: Plaintiffs parent corporation Tilcon, Inc. wholly owned two subsidiaries, Plaintiff Tilcon New York, Inc., and a sister corporation that is not a party to this action, Tilcon Connecticut, Inc. (Ex. 2 to Stern Decl. ("Toolan 30(b)(6) Tr.") [Doc. # 70-1] at 10:11-13, 11:1-17.) Tilcon Connecticut, Inc. wholly owned Buchanan Marine, Inc., the grantor of the trust and former owner of the vessels in the fleet. (Id. at 11:20-22.) Buchanan Marine, Inc., was a 25% limited partner in Buchanan Marine, L.P., the beneficiary of the trust and the bare-boat charterer. (Id. at 12:20-21.)[3]

         C. The Underlying Insurance Policy

         The underlying "Protection & Indemnity" ("P&I") policy, Number B215204, was issued by American Home Insurance Company for the period July 20, 2004 to July 20, 2005 to the Named Assureds "Buchanan Marine, LP and/or Northeast Bulk Material Movers, Inc., Richard Jurczak as General Partner, Buchanan Marine, Inc., and Tilcon of NY." (Ex. D., Tab 2 to Toolan Decl., ("American Home Policy") [Doc. # 72-19] at 2-3.)[4]

         The underlying P&I policy insured 14 specifically enumerated kinds of risk (including mutiny, plague, and damage to docks or piers) and with regard to personal injury, the policy declared:

The Assurer hereby undertakes to make good to the Assured ... all such loss and/or damage and/or expense as the Assured shall as owners of the vessel named herein have become liable to pay and shall pay on account of the liability, risks, events and/or happenings herein set forth:
(1) liability for loss of life of, or personal injury to, or illness of, any person, excluding, however, unless otherwise agreed by endorsement herein, liability under any Compensation Act to any employee of the Assured (other than a seaman) or in case of death to his beneficiaries or others----
Protection hereunder for loss of life or personal injury arising in connection with the handling of cargo of the vessel named herein shall commence from the time of receipt by the Assured of the cargo on dock or wharf or on craft alongside the said vessel for loading thereon and shall continue until delivery thereof from dock or wharf of discharge or until discharge from the said vessel on to another vessel or craft.

(Id. at 3 (first emphasis added; second emphasis in original).) Under the first sentence of this clause, the policy only covers Assureds for losses they incur "as owners of the vessel named herein " Thus, absent amendment, this policy only covers the Assureds insofar as they own the vessels at issue. The parties concede that Tilcon owned two vessels, the Ike and the Paige E, and counsel for Defendant suggested at oral argument that Tilcon would have been covered under the P&I policy for injuries occurring aboard those two vessels.

         Ten endorsements accompanied the policy.[5] The list of insured vessels was attached to the policy as an endorsement and included the Nicola Lizza for a premium of $466.00. (Id. at 14.) The fifth endorsement, a so-called "Affiliated Companies Clause" that appears to expand coverage and which is the focus of the parties' interpretive dispute, declared:

         Affiliated Companies Clause

It is agreed that the following additions to, and amendments of, the printed form of this policy are, hereby, made a part of the policy:
A. In respect of the vessel insured hereunder, this policy also covers the Assured and affiliated, subsidiary, interrelated and associated companies and persons, be they owners, or bareboat charterers, sub-charterers, or operators, including stockholders, officers, directors, partnerships, limited liability partnerships or corporations, executors, estates trustees, fiduciaries, and any other associated, owned, affiliated, allied or subsidiary entities or persons as now exist or may hereafter be constituted and shall continue to cover, notwithstanding the provisions of this policy with respect to change of ownership or management. Provided however, that in the event of any claim being made by any affiliated, subsidiary or interrelated company under this clause, it (they) shall not be entitled to recover in respect of any liability to which it (they) would not be subject if it (they) were the owner of the vessel and not to a greater extent than an owner would be entitled in such event to recover... .

(Id. at 17.)

         D. The Bumbershoot Policy

         In addition to this primary policy, Buchanan Marine L.P. contracted with Defendant UNA to provide a commercial marine bumbershoot[6] policy, No. 1174538 (the "Bumbershoot Policy"). On its application, Buchanan Marine L.P. stated that its business was "towing" and that it leased a small shipyard in New Haven as well as "staging areas" throughout New York, New Jersey, and Connecticut. (Ex. 11 ("Bumbershoot Application") to Stern Decl. [Doc. # 70-1] at 1.) The Bumbershoot Policy listed the Named Assureds as "Buchanan Marine LP, Buchanan Marine Inc., Northeast Bulk Material Movers, Inc., Tilcon NY Inc." and extended from July 20, 2004 to July 20, 2005. It provided the following coverage:

This policy is to indemnify the Assured in respect of the following (including such expenses as are set out in the definition of "Ultimate Net Loss"):
(a) all Protection and Indemnity risks of whatsoever nature including, but not limited to, those covered by the underlying Protection & Indemnity Insurances
(c) All other sums which the Assured shall become legally liable to pay or by contract or agreement become liable to pay in respect of claims made against the Assured for damages of whatsoever nature, on account of:
(i) Personal Injuries, including death at any time resulting therefrom;
(ii) Property Damage;
caused or arising out of each occurrence happening anywhere in the world. Notwithstanding the foregoing, this insurance shall not cover liabilities arising by reason of insolvency or inadequacy of capital.

(Ex. D, Tab 1 ("Bumbershoot Policy") to Pl.'s 56(a) 1 [Doc. # 72-18].)

         The policy set forth certain conditions on coverage, including a notice provision that required:

Whenever the Assured has information from which the Assured may reasonably conclude that an occurrence covered hereunder involved injuries or damages which in the event that the Assured should be held liable, is likely to involve this Policy, notice should be sent to [INAMAR Marine Claims] as soon as practicable, provided, however, that failure to notify the above firm of any occurrence which at the time of its happening did not appear to involve this ...

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