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London v. Bear LLC

United States District Court, S.D. California

April 21, 2017



          BARRY TED MOSKOWITZ Chief Judge, United States District Court.

         Plaintiff Certain Interested Underwriters at Lloyd's, London ("Underwriters") has filed a motion for summary judgment. (Underwriters' Mot. Summ. J. ("Underwriters' MS J"), ECF No. 70.) For the reasons set forth below, the motion is granted.


         This action arises out of a marine insurance coverage dispute relating to the destruction of a 102-foot motor vessel ("the Polar Bear") owned by Defendant, Bear, LLC ("Bear").

         A. Procuring the 2013 Policy

         In 2010 and 2011, Larry Jodsaas ("Jodsaas"), the owner and managing member of Bear, and Roger Trafton ("Trafton"), the Polar Bear's captain, sought Marsh USA's ("Marsh") agent, Kathy Johnson's ("Johnson") assistance in securing an insurance policy for the Polar Bear. (Underwriters Ex. A-5, ECF No. 70-3, ¶ 24.) Marsh submitted requests for insurance quotes for the Polar Bear to several insurers, including Underwriters through Marsh's London broker, Ropner Insurance Services ("Ropner"). (Underwriters Ex. A-6, ¶ 26.) Bear chose to purchase the policy quoted by Underwriters. (Underwriters Ex. E-293, ECF No. 70-3.) The policy was renewed twice more in 2012 and 2013. (Underwriters Ex. F-294, ECF NO. 70-3; Ex. G-295, ECF No. 70-3.)

         The 2013 policy ("the Policy") contained the following relevant provisions: CONDITIONS PRECEDENT

         Maintenance and Repair Clause

It is hereby understood and agreed that this insurance will remain in full force whilst your yacht is undergoing annual maintenance, repair of any part or replacement of any part like for like.
Notwithstanding the foregoing it is a conditions precedent that if the vessel is currently undergoing or may undergo major refit or repairs, alterations, remodeling or where hot work is being undertaken (other than soldering) or that the yard has requested a waiver of subrogation from the Owner or his Legal Representative(s), then prior agreement must be obtained from participating insurers hereunder.
Furthermore the Owner or his Legal Representative(s) must provide a copy of the current shipyards Ship Repairers Legal Liability insurance documentation and a full update or schedule of works being carried out during the period of this insurance and obtain Underwriters specific agreement (in writing).
Underwriters participating hereon reserve their rights to amend the terms and conditions of this insurance and to charge an appropriate additional premium.

It is agreed by the Assured to report immediately to the Assurers or to their representatives who shall have issued this Policy every occurrence which may become a claim under this Policy, and shall also file with the Assurers or their representative, a detailed sworn proof of loss and proof of interest and/or receipted bills in case of a partial loss, within ninety (90) days from date of loss.

The Assured shall co-operate with the Assurers and shall not assume any obligation, admit any liability or incur any expense for which the Assurers may be liable, without the written approval of the Assurers, except as may be necessary and permitted to safeguard the Yacht under the "SUE AND LABOR" clause in section "A" of this policy.
And in case of any loss of misfortune, it shall be lawful and necessary for the Assured, their factors, servants and assigns, to sue, labor and travel for, in and about the defense, safeguard and recovery of the said yacht or any part thereof, without prejudice to this insurance; the charges whereof we, the Assurers, will pay. And it is especially declared and agreed that no acts of the Assurer or Assured in recovery, saving or preserving the property insured shall be considered a waiver or acceptance of abandonment.

(Underwriters Ex. K-427, K-433, K-434, K-439, ECF NO. 70-3.)

         On August 22, 2013, Trafton, who acted as Jodsaas' agent, signed an "Acknowledgment Form, " taking notice of "important policy terms and conditions" in the Policy. (Underwriters Ex. Y-569, ECF No. 70-4.) On August 28, 2013, Marsh sent Bear a "Cover Note" from Ropner, evidencing insurance coverage under the Policy. (Underwriters Ex. K-415.) On October 9, 2013, Marsh sent Jodsaas a letter which enclosed the Policy for the Polar Bear providing coverage from August 26, 2013 to August 25, 2014. (Underwriters Ex. G.)

         B. Destruction of the Polar Bear

         On May 4 or 5, 2014, the Polar Bear's forward stabilizer and its actuator failed during a voyage from Cabo San Lucas, Mexico to San Diego, California. (Underwriters Ex. A-15, ¶ 67.) On May 6, 2014, the Polar Bear ran aground at the entrance of the San Diego Harbor damaging the bottom of the hull, port and starboard sides of the keel, and the aft port stabilizer shaft. (Id. at ¶ 68.) Because of the damage, water began to come in through the damaged area around the stabilizer shaft. (Id.) The Polar Bear traveled on its own to the Marine Group Boat Works, LLC ("MGBW") boatyard in Chula Vista where it was to be repaired on May 7, 2014. (Id. at ¶ 69.) As a safety measure, the Polar Bear was accompanied by a diver and two small towboats. (Id.) MGBW was the only repair facility for pleasure yachts in San Diego capable of lifting the Polar Bear. (Underwriters Ex. A-16, ¶70.)

         On May 7, 2014, just before the Polar Bear was hauled out, Trafton signed a written contract with MGBW. (Id. at ¶ 71.) The service contract provided that the Polar Bear would be hauled out, blocked and launched for a total of $3500. (Underwriters Ex. A-162.) The contract was double-sided but Trafton only signed the front-side. (Underwriters Ex. A-163.) The back-side contained several provisions, including an "owner assumption of risk" clause, an "owner's exclusive remedy" clause, and an "indemnity, insurance and waiver of subrogation" clause. (Id.) Bear did not notify nor acquire Underwriters1 consent prior to signing the contract.

         From May 22, 2014 through early June, 2014, Trafton executed numerous work change orders for repairs to the Polar Bear, including the May 22, 2014 order for hot work repairs to the hull. (Underwriters Ex. A 165-71.) Bear did not notify nor acquire Underwriters' consent prior to executing the work change orders. (Underwriters Ex. B2-251, ECF No. 70-4 639:6-18.) On June 17, 2014, Jodsaas spoke with Patrice M. Grossinger of Marsh and informed her that the Polar Bear hit some rocks as it traveled back from Mexico. (Underwriters Ex. KK-653, ECF No. 70-4.) He communicated to her that it resulted in $250, 000 in damages, but had not filed a claim with Kathy Johnson. (Id.) Grossinger advised him to file a claim if costs got any higher. (Id.) On June 19, 2014, the Polar Bear caught fire while MGBW subcontractors were performing hot work repairs to the steel hull. (Underwriters Ex. A-21.) The fire resulted in the Polar Bear's total loss. (Id.)

         C. Communications After the Fire

         On June 19, 2014, Bear communicated a notice of loss to Marsh. (Underwriters Ex. N-490, ECF No. 70-4, ¶ 23.) On June 30, 2014, Underwriters acknowledged Bear's notice of loss, subject to a reservation of rights, and requested information and documentation. (Underwriters Ex. A-173.) On August 6, 2014, Underwriters sent Bear a reservation of rights letter. (Underwriters Ex. A-179-88.) On March 20, 2015, Underwriters denied coverage on the ground that Bear had failed to satisfy the conditions precedent set forth under the Maintenance and Repair Clause ("Repair Clause"). (Underwriters Ex. A-202.)

         On March 20, 2015, Underwriters filed this action seeking a declaration that coverage does not exist under the Policy for Bear's claim relating to the loss to the Polar Bear. (Compl. ECF No. 1.) Bear filed counterclaims against Underwriters for declaratory relief, breach of contract and implied covenant of good faith and fair dealing, as well as a third-party complaint against Marsh. (Bear's Second Countercl. and Second Third-Part Compl., ECF No. 63.)

         II. ...

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