Great Southern Wood Preserving, Inc. v. American Home Assurance Co. , 292 F. App'x 8 ( 2008 )


Menu:
  •                                                                    [DO NOT PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT
    FILED
    -------------------------------------------U.S. COURT OF APPEALS
    No. 07-14446                    ELEVENTH CIRCUIT
    AUG 22, 2008
    Non-Argument Calendar
    -------------------------------------------- THOMAS K. KAHN
    CLERK
    D.C. Docket No. 06-00708-CV-C-1
    GREAT SOUTHERN WOOD PRESERVING, INC.,
    Plaintiff-Appellant,
    versus
    AMERICAN HOME ASSURANCE COMPANY,
    AIG,
    AMERICAN INTERNATIONAL UNDERWRITERS
    CORPORATION,
    AMERICAN INTERNATIONAL MARINE AGENCY,
    Defendants-Appellees.
    ----------------------------------------------------------------
    Appeal from the United States District Court
    for the Middle District of Alabama
    ----------------------------------------------------------------
    (August 22, 2008)
    Before EDMONDSON, Chief Judge, TJOFLAT and BLACK, Circuit Judges.
    PER CURIAM:
    Plaintiff-Appellant Great Southern Wood Preserving, Inc. (“Great
    Southern”) appeals the grant of summary judgment in favor of Defendant-
    Appellee American Home Assurance Company (“American Home”) on Great
    Southern’s insurance claims. No reversible error has been shown; we affirm.
    Great Southern imports raw lumber which it chemically treats at one of its
    domestic treatment facilities and then resells to retail and independent business
    customers. The imported lumber is delivered by ship and discharged at ports in
    the United States. American Home issued Great Southern a Marine Open Cargo
    Insurance Policy effective 2 June 2005 (the “Policy”). Two shipments of raw
    lumber received by Great Southern at the Port of Gulfport in August 2005 are at
    issue in this case.
    Because trucking lanes are limited at the Port of Gulfport, the logistics of
    picking up a large load of cargo is difficult. Great Southern entered into a
    warehouse lease with the Mississippi State Port Authority to allow the short-term
    storage by Great Southern of lumber discharged at the Port of Gulfport. On 3
    August 2005, the Kestral Arrow arrived at Gulfport bearing 4,056 packs of lumber
    for Great Southern. On 8 August 2005, Great Southern began transporting these
    packs to its treatment facilities. On 25 August 2005, the Sanko Stream arrived at
    2
    Gulfport bearing approximately 100 tractor-trailer loads of raw lumber for Great
    Southern. On 29 August 2005, Hurricane Katrina hit the Port of Gulfport. The
    warehouse in which Great Southern stored its shipments was destroyed. Great
    Southern suffered the loss of the entire Sanko Stream shipment; also lost was that
    portion of the Kestral Arrow shipment – 28 per cent – that had not yet been
    transported from the warehouse.
    Great Southern filed a claim under the Policy for the lost lumber. American
    Home denied the claim contending that coverage under the Policy had ceased
    before the time of loss. In the light of that denial, Great Southern brought suit
    asserting claims of breach of contract and bad faith.
    The Policy contained a “warehouse-to-warehouse” provision that is
    oftentimes included in marine cargo insurance:
    This insurance attaches from the time the goods leave the
    Warehouse and/or Store at the place named in the
    Declaration and/or Certificate for the commencement of
    transit and continues during the ordinary course of
    transit, including customary transshipment, if any, until
    the goods are discharged overside from the overseas
    vessel at the final port. Thereafter the insurance
    continues whilst the goods are in transit and/or awaiting
    transit until delivered to the final warehouse at the
    destination named in the policy or until the expiry of 15
    days (or 30 days, if the destination to which the goods
    are insured is outside the limits of the port) whichever
    shall first occur.
    3
    According to Great Southern, the lumber it imported into Gulfport had as its
    final destination one of Great Southern’s treatment facilities;1 so, under the
    warehouse-to-warehouse clause, the Policy insured the cargo until the cargo was
    delivered to a Great Southern treatment facility (assuming – as is the case here –
    the 30-day period had not yet expired).2 Great Southern maintained that the whole
    phrase in the Policy “in transit and/or awaiting transit until delivered to the final
    warehouse at the destination named in the policy” was ambiguous; and “Alabama
    law instructs that ambiguities in insurance contracts are to be interpreted in favor
    of the insured.” Twin City Fire Ins. Co., Inc. v. Ohio Cas. Ins. Co., Inc., 
    480 F.3d 1254
    , 1264 (11th Cir. 2007).
    But the district court recognized no ambiguity: warehouse-to-warehouse
    clauses are standard throughout the marine insurance industry;3 the contract
    language had a settled meaning in the industry. And under that settled meaning,
    1
    Great Southern concedes that it sometimes sells raw lumber to other manufacturers directly from
    the Gulfport warehouse.
    2
    Although the Policy references the final warehouse at the destination named in the policy, the
    Policy named no such destination.
    3
    As the district court explained, although diversity jurisdiction applied, the suit also was
    cognizable under admiralty jurisdiction by virtue of the maritime contract at issue. “When a contract
    is a maritime one, and the dispute is not inherently local, federal law controls the contract
    interpretation.” Norfolk Southern Railway Co. v. Kirby, 
    125 S. Ct. 385
    , 392 (2004).
    4
    once the insured exercised dominion and control over the cargo it no longer was in
    transit and coverage ceased. We agree.
    Lumber & Wood Products, Inc. v. New Hampshire Ins. Co., 
    807 F.2d 916
    (11th Cir. 1987), involved similar facts. A shipment of lumber of the insured
    reached the private dock of a third-party consignee in good order. The lumber was
    off-loaded and had to be moved about ninety feet to be placed in the consignee’s
    warehouse. The consignee had responsibility for and control over the lumber once
    it was off-loaded from the vessel; and it had a practice of sometimes selling some
    of the off-loaded lumber directly from its dock. Because an earlier shipment
    occupied the warehouse space at the dock, the lumber remained on the dock
    outside the warehouse; a hurricane came through and damaged the exposed
    lumber. At issue was whether the lumber was “in transit” within the meaning of
    the warehouse-to-warehouse clause.
    We determined that, once the consignee “exercised dominion and control
    over the lumber in storing and processing on its dock, coverage under the policy
    expired;” “a transit policy of insurance should not be stretched or tortured to
    provide coverage for losses which take place after delivery at the consignee’s
    facility.” 
    Id. at 920.
    5
    As was the case with the consignee in Lumber & Wood Products, Great
    Southern exercised dominion and control over the lumber once it was off-loaded
    from the vessel and placed in the warehouse space leased at the Port of Gulfport.
    According to the deposition testimony of Great Southern’s import manager, he and
    other Great Southern employees made all decisions on the future destination for
    the temporarily-stored lumber. The warehouse operated as a staging area.
    Inventory levels and other supply and demand considerations were weighed by
    Great Southern’s inventory management team to determine the Great Southern
    facility to which the lumber would be transported. And, again as was the case
    with the consignee in Lumber & Wood Products, from time to time Great Southern
    sold lumber directly from the Gulfport warehouse to other manufacturers. The
    district court concluded correctly that – as a matter of law – Great Southern
    exercised dominion and control over the lumber once it was off-loaded at the Port
    of Gulfport; at that point, for purposes of the warehouse-to-warehouse clause, the
    lumber had reached it “final warehouse” and “transit” had ceased.
    Great Southern argues that the lumber off-loaded from the Sanko Stream
    could not be under Great Southern’s dominion and control because the United
    States Department of Agriculture (“USDA”) had not as yet cleared and released
    that lumber when the hurricane hit. Federal regulations restrict imported lumber
    6
    to the port of entry until a USDA inspector affirms that the regulated article is in
    compliance with applicable regulations. See 7 C.F.R. § 319.40-9. According to
    Great Southern, the USDA hold on the Sanko Stream lumber prevented Great
    Southern from exercising custody and control; the lumber consequently, was still
    “in transit” for insurance purposes.
    The district court concluded – and we agree – that the restrictions imposed
    by the USDA regulations did not annul the dominion and control exercised by
    Great Southern over the goods held exclusively in its possession. A government
    hold on goods in the possession, custody and control of an insured does not render
    the goods “in transit” for purposes of insurance coverage. See Fireman’s Fund
    Ins. Co. v. Service Trans. Co., 
    466 F. Supp. 934
    (D.C. Md. 1979) (rejecting claim
    that coffee shipment that was subject to a Federal Drug Administration hold was
    “in the ordinary course of transit” when it was destroyed by fire at trucking
    company’s terminal).
    For the reasons stated by the district court, Great Southern’s bad faith claim
    is without merit.
    AFFIRMED.
    7