Insurance Law
Admiralty & Maritime Law
Breach of the Prompt Notice Requirement
Louisiana Law
RLI was actually prejudiced by the delayed notice from both A&T Maritime and Alexis Marine, as the damage worsened over time and the opportunity to settle for a lower amount was lost.
Appeal from the United States District Court for the Eastern District of Louisiana - USDC No. 2:21-CV-476.
A&T Maritime Logistics, Inc. had an insurance contract with RLI Insurance Company and a bareboat charter agreement with Alexis Marine, L.L.C. While A&T Maritime was operating the M/V Uncle John (a vessel owned by Alexis Marine), the ship allided with an embankment. Thinking the damage to be minimal, A&T Maritime did not remedy the situation. After a lawsuit was filed, RLI was notified of the claim. A&T Maritime and Alexis Marine filed claims against RLI requesting defense and ongoing indemnification for defense costs. RLI denied coverage under the insurance contract. On summary judgment, the district court upheld the denial. Because RLI was actually prejudiced by the delayed notice of a possible claim, we affirm.
(“An allision is defined as the ‘running of one ship upon another that is stationary—distinguished from collision.’ A collision is defined as ‘the action or an instance of colliding, violent encounter, or forceful striking together typically by accident and so as to harm or impede.’ Therefore, an allision occurs when a ship strikes a stationary object while a collision involves two moving vessels or objects.” Trico Marine Assets Inc. v. Diamond B Marine Servs. Inc., 332 F.3d 779, 786 n.1 (5th Cir. 2003). Fn. 1).
On March 10, 2020, while A&T Maritime was operating the Uncle John in the course of its work for Russell Marine, the Uncle John struck an embankment. The embankment fronts Bayou Black and the Gulf Intracoastal Waterway in Houma, Louisiana. At the time of the allision, the embankment was a portion of property belonging to Mildred Dampeer. A&T Maritime took some pictures of the resulting damage, but A&T Maritime “did not consider the allision to be significant.” A&T Maritime’s owner, Tayhika Manuel, engaged in discussions with Dampeer about resolving the issue. As part of these talks, A&T Maritime offered to send a repairman and offered payment of $3,500. According to Manuel’s deposition, the $3,500 was an agreed-upon amount. Dampeer later testified that she did not and would not have agreed to accept $3,500. Regardless, no payment was actually made, and the matter was “forgotten about more or less over a period of time.” On August 30, 2020 (over five months after the allision), Dampeer sent a letter to Manuel and attached an inspection of the embankment. In the letter, Dampeer expressed her concern that the damage resulting from the allision was worsening. Further, she stated, “I know you said you didn’t want to involve your insurance company. So please respond so we can keep the damage from getting worse.” Still, no settlement was reached, and A&T Maritime states that “the matter dropped for [sic] A&T’s radar until A&T was served with a lawsuit.”
Robert Champagne III and Elizabeth Champagne bought the property at issue from Dampeer. Based on an assignment in the purchase agreement, the Champagnes filed a lawsuit against A&T Maritime and Alexis Marine in personam and against the Uncle John in rem on March 8, 2021. The Champagnes also successfully moved for the arrest of the Uncle John. Alexis Marine filed a crossclaim against A&T Maritime and a third-party demand against RLI. A&T Maritime similarly filed a crossclaim against RLI requesting defense, indemnity, and ongoing reimbursement for defense costs. RLI was not notified about the allision until the lawsuit had been filed by the Champagnes. Once notified of the lawsuit, RLI filed counterclaims against A&T Maritime, Alexis Marine, and the Uncle John, seeking a declaration that, under the insurance policy, RLI had no duties to those parties for the incident at issue in the case.
The Champagnes’ claims were settled on November 18, 2021, for a settlement amount of $200,000. Alexis Marine was the sole party in this lawsuit to fund the settlement agreement with the Champagnes.
This is likely because Alexis Marine had the strongest incentive to settle the case. As the owner of the Uncle John, Alexis Marine was losing potential revenue while the vessel was under arrest (Fn. 4).
(…) RLI argued, among other things, that the Uncle John was not a covered vessel under the insurance policy because only the Uncle Blue was listed on the policy. The district court disagreed and concluded that A&T Maritime and Alexis Marine correctly relied on the policy’s automatic attachment clause for coverage of the Uncle John.
Federal law generally “governs the interpretation of a policy of marine insurance.” Elevating Boats, Inc. v. Gulf Coast Marine, Inc., 766 F.2d 195, 198 (5th Cir. 1985). If there is no federal statute or general maritime law on an issue, “the law of the state where the marine insurance contract was issued and delivered is the governing law.” Id. The parties agree that Louisiana law, which requires an insurer to demonstrate actual prejudice resulting from delayed notice before it can deny coverage on that ground, provides supplemental rules of decision here. See id. (applying the Louisiana rule).
“Where the requirement of timely notice is not an express condition precedent,” to deny coverage based on late notice, “the insurer must demonstrate that it was sufficiently prejudiced by the insured’s late notice.” Peavey Co. v. M/V ANPA 971 F.2d 1168, 1173 (5th Cir. 1992); see also Elevating Boats, 766 F.2d at 198 (stating that under Louisiana law, “an insurer must demonstrate that an insured's failure to comply with a notice of claim or proof of loss provision actually prejudiced its interest" before it can deny coverage under the policy).
(…) Elevating Boats, 766 F.2d 195. In that case, the insurer was not notified of the potential claim until two weeks before trial. Id. at 198. We held that this delay was prejudicial for three independent reasons. Id. at 199–200. First, the insurer lost the opportunity to negotiate a settlement. Id. at 199. Second, the insurer was deprived of the chance to make a third-party demand. Id. at 199–200. Third, the insurer was denied “the basic opportunity to investigate adequately the facts and circumstances surrounding the accident.” Id. at 200.
The reasoning of Elevating Boats does not turn on the stage of litigation at which notice is given to the insurer. Instead, we simply evaluated whether the delay in notice prejudiced the insurer. Thus, A&T Maritime cannot merely point to earlier notice than that in Elevating Boats to make a successful argument.
(U.S. Court of Appeals for the Fifth Circuit, Feb. 4, 2025, A&T Maritime Logistics v. RLI Insurance Co., Docket No. 23-30078)
No comments:
Post a Comment