Henry's Marine Service, Inc. v. Fireman's Fund Insurance

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
May 23, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 04-30469
HENRY’S MARINE SERVICE, INC.,
Plaintiff - Appellee,
versus
FIREMAN’S FUND INSURANCE COMPANY; ET AL,
Defendants,
FIREMAN’S FUND INSURANCE COMPANY,
Defendant - Appellant.
-------------------------------
FIREMAN’S FUND MCGEE MARINE UNDERWRITERS,
Plaintiff-Appellant,
versus
HENRY’S MARINE SERVICE, INC.,
Defendant-Appellee.
Appeals from the United States District Court
for the Eastern District of Louisiana
Before GARWOOD, SMITH and DeMOSS, Circuit Judges.
GARWOOD, Circuit Judge:*
Fireman’s Fund Insurance Company (Fireman’s Fund) appeals the
district court’s judgment for Henry’s Marine Service, Inc. (Henry’s
Marine) complaining of the court’s summary judgment on policy
coverage, its refusal to allow Fireman’s Fund to amend its
pleadings, and its refusal to exclude evidence of damages presented
by Henry’s Marine. We affirm.
I. Facts and Proceedings Below
Henry’s Marine is a boat brokering/chartering business located
in Morgan City, Louisiana. From February 12, 2000 to February 12,
2003, Fireman’s Fund insured Henry’s Marine under a Hull &
Machinery policy and a Boat Broker’s policy, both of which were
renewed annually. During this period, Henry’s Marine was also
insured by New York Marine and General Insurance Company (New York
Marine) under a Marine General Liability policy.1
The policy’s exclusion of, and extension for, assumed
contractual liability
*
Pursuant to 5TH CIR. R. 47.5 the Court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
1
In addition, Henry’s Marine was insured under a Protection and Indemnity
policy and a Pollution Liability policy underwritten by other insurers. Those
policies, however, were not placed at issue in this case.
2
The principal issue involved in this appeal is the coverage
provided to Henry’s Marine for assumed contractual liability under
Fireman’s Fund’s Boat Broker’s policy. The “exclusions” clause of
the Boat Broker’s basic policy states that “this insurance does not
apply” to some ten different listed matters, the second of which
(“B”) is “[t]o liability assumed by the Assured [Henry’s Marine]
under any contract or agreement but this exclusion shall not apply
if the Assured would have been liable irrespective of such contract
or agreement.” On the other hand, the Boat Broker’s policy also
includes as a separate page entitled “contractual liability (hold
harmless/indemnity) extension” the following provision:
“Underwriters hereon agree to give their permission for
the Insured [Henry’s Marine] to enter into Time or Voyage
Charter Agreements whereby the Insured agrees to hold
harmless and indemnify the Time or Voyage Charterer for
any and all sums said Time or Voyage Charterer may be
legally obligated to pay including legal and other
expenses arising out of the use, management or operation
of such Time or Voyage chartered vessels by the Insured.
This insurance is extended to cover the Insured for any
such sums as the Insured may be legally obligated to pay
including legal and other expenses as a result of the
signing of such Time or Voyage Charter Agreements by the
Insured.
However, the language of this or any other endorsement to
this policy shall not be construed to extend the
Underwriters’ agreement to indemnify the Insured for any
type of claim not otherwise covered by the Boat Broker’s
Policy.”
Tetra Applied Technologies, L.P. (Tetra) is Henry’s Marine’s
largest customer. Until March 1, 2000, Tetra chartered vessels
from Henry’s Marine under an oral charter agreement. On March 1,
3
2000, Henry’s Marine and Tetra formalized the oral charter
agreement by entering into a written Master Time Charter Agreement
(MTCA). Thereafter, Tetra chartered vessels from Henry’s Marine
under the MTCA. Under both the oral charter agreement and the
MTCA, Henry’s Marine agreed to defend, indemnify, and hold Tetra
harmless for, among other things, injuries to third parties in
connection with a chartered vessel.
The Underlying Lawsuits – Francis, Moutinho, and Sellers
In 1999, Henry’s Marine chartered the M/V Tampa Bay to Tetra
under the oral charter agreement. Daniel J. Francis, Jr., a seaman
who worked aboard the M/V Tampa Bay, sued Tetra on June 7, 2001,
alleging that he suffered serious physical injuries attempting to
retrieve a tow line in September 1999. Tetra subsequently demanded
that Henry’s Marine defend and indemnify Tetra in this action.2
Henry’s Marine, in turn, notified Fireman’s Fund and requested that
Fireman’s Fund provide coverage under the Contractual Liability
Extension of the Boat Broker’s policy. Fireman’s Fund denied
coverage for Henry’s Marine in the Francis action against Tetra.
On January 3, 2001, Henry’s Marine chartered the M/V Diana
McCall to Tetra under the MTCA. In April 2001, Troy Moutinho, the
captain of the M/V Diana McCall, sued his employer, Cameron
2
We note that the date of Francis’s alleged injury is prior to February 12,
2000, the beginning date for coverage of Henry’s Marine under the policies issued
by Fireman’s Fund. On the other hand, Francis’s lawsuit against Tetra and
Tetra’s demand on Henry’s Marine occurred during the coverage period. Fireman’s
Fund’s amended complaint for declaratory judgment states that its Boat Broker’s
policy applies to the Francis action. As the parties have not made an issue of
the date of Francis’s injury, nor shall we.
4
Offshore Boats, Inc. (Cameron), alleging that he suffered serious
physical injuries as he loaded scaffolding boards onto the tug in
January 2001. In May 2001, Cameron filed a third-party petition
against Tetra, which demanded that Henry’s Marine defend and
indemnify Tetra in accordance with the MTCA. Henry’s Marine
notified Fireman’s Fund of Tetra’s demand and requested coverage.
In December 2001, Moutinho amended his petition to join Tetra as a
primary defendant. On February 27, 2002, Fireman’s Fund, relying
on the base policy’s contractual liability exclusion, denied
coverage for Henry’s Marine in the Moutinho action against Tetra.
On July 6, 2001, Wayne Sellers, a seaman who worked aboard the
M/V Diana McCall, sued his employer Cameron alleging that he was
injured in February 2001 during docking operations. In December
2001, Cameron filed a third-party petition against Tetra, which
demanded that Henry’s Marine defend and indemnify Tetra in
accordance with the MTCA. In February 2002, Sellers amended his
petition to join Tetra as a primary defendant. On February 27,
2002, Fireman’s Fund, relying again on the policy’s exclusion for
contractually assumed liability, denied coverage for Henry’s Marine
in the Sellers action against Tetra.
The Two Declaratory Judgment Suits
On September 20, 2002, Fireman’s Fund filed an action in the
United States District Court for the Southern District of Texas
seeking a declaration that no coverage existed under the Boat
5
Broker’s policy for Henry’s Marine’s claims related to the Sellers
action. On December 13, 2002, Henry’s Marine filed suit against
both Fireman’s Fund and New York Marine in the United States
District Court for the Eastern District of Louisiana seeking a
declaration that coverage existed under both insurers’ policies for
Henry’s Marine’s obligations to defend and indemnify Tetra in all
three of the underlying actions against Tetra. Henry’s Marine also
brought bad faith claims against both insurers under Louisiana law.
Meanwhile, in the Southern District of Texas, Fireman’s Fund was
ordered to amend its complaint to include the Francis and Moutinho
actions in addition to the originally pled Sellers action.3 On
3
In its amended complaint with regard to all three of the underlying
actions, Fireman’s Fund sought a declaration that:
“a. No coverage exists for Henry’s Marine’s claims for defense and
indemnity pursuant to the Boat Brokers’ Liability Insurance, because
the Policy does not provide coverage to defend and indemnify Henry’s
Marine for any type of claim not otherwise covered by the Boat
Brokers’ Policy;
b. No coverage exists for Henry’s Marine’s claim for defense of
Tetra, in the Seller’s [sic] action, the Francis action or the
Moutinho action, because the Policy does not provide coverage for
defense of Tetra. The Policy provides coverage for defense of suits
against Henry’s Marine . . . ;
c. No coverage exists for Henry’s Marine’s claim for defense and
indemnification of Tetra, resulting from an alleged contract or
agreement between Henry’s Marine and Tetra, because the Policy
excludes liability assumed by Henry’s Marine under any contract or
agreement, except if Henry’s Marine would have been liable
irrespective of such contract or agreement, and there would be no
liability on behalf of Henry’s Marine, irrespective of the Master
Time Charter Agreement, for the negligence alleged against Cameron
and Tetra.
d. The policy does not provide hull insurance and/or P&I insurance
on vessels not owned by Henry’s Marine, and specifically scheduled
in the Policy, as Henry’s Marine has contracted to do. The M/V
DIANA MCCALL is not owned by Henry’s Marine, or scheduled in the
Policy. To the extent the vessels at issue in the Francis action
and the Moutinho action are not owned by Henry’s Marine, those
vessels are not covered vessels as scheduled in the Policy.”
6
June 27, 2003, Fireman’s Fund’s action was transferred from the
Southern District of Texas to the Eastern District of Louisiana,
where, on July 14, 2003, it was consolidated with the action
brought by Henry’s Marine. Jurisdiction in these actions was
properly based on diversity of citizenship. 28 U.S.C. § 1332.
Fireman’s Fund’s answer to Henry’s Marine’s complaint
consisted of a denial of all allegations, plus some inapplicable
boilerplate invoking negligence by Henry’s Marine or third parties,
unavoidable accident, act of God, weather conditions, inscrutable
fault, and/or intervening or superseding events. In its answer,
Fireman’s Fund also pleaded that it owed no duty and breached no
duty to Henry’s Marine that proximately caused the alleged damages.
Fireman’s Fund’s answer did not plead that Henry’s Marine had
breached any of its warranties under the Boat Broker’s policy. The
court’s scheduling order required that all amendments to pleadings
be filed by July 21, 2003. No amended answer was filed.
Summary Judgment for Henry’s Marine
Henry’s Marine and Fireman’s Fund both moved for summary
judgment on the question of coverage for the defense and indemnity
claims made by Tetra. Henry’s Marine’s summary judgment argument
relied upon the “Contractual Liability (hold harmless/indemnity)
Extension” to the Boat Broker’s policy, while Fireman’s Fund’s
argument relied primarily upon that policy’s exclusion for
contractually assumed liability. In addition to the exclusion,
7
Fireman’s Fund also argued the policy did not cover these claims
because the vessels in question were not scheduled under the base
policy’s Loss Payable Clause and also because the base policy’s
Privilege to Charter Clause prevented any party from being “deemed
an Additional Assured . . . unless that party is actually engaged
or involved in the operations at the time of the loss, if any.”
The district court rejected Fireman’s Fund’s arguments related to
the Loss Payable Clause and the Privilege to Charter Clause and
found that the Boat Broker’s policy’s exclusion for contractually
assumed liability was in direct conflict with the policy’s
“contractual liability (hold harmless/indemnity) extension.” In
addition, the district court found that the language of the second
paragraph of the policy’s said extension was ambiguous and subject
to more than one reasonable interpretation, and therefore must be
construed against Fireman’s Fund and in favor of coverage. The
court noted that Fireman’s Fund had offered no reasonable
explanation of what the extension covers and that Fireman’s Fund’s
interpretation would lead to the absurd result of rendering the
extension redundant and meaningless. On October 22, 2003, the
district court granted Henry’s Marine’s motion for summary
judgment, declaring that coverage existed for the defense and
indemnity claims made by Tetra against Henry’s Marine under the
Boat Broker’s policy issued by Fireman’s Fund.
8
Fireman’s Fund’s Rule 59 motion and other post-summary
judgment proceedings
On October 27, 2003, Fireman’s Fund filed a Rule 59 motion for
a new trial or, in the alternative, reconsideration. In this
motion, Fireman’s Fund not only repeated its argument that the
Exclusion precludes coverage for any contractually assumed
liability, but also argued that, assuming the policy language was
ambiguous, the district court should have applied the reasonable
expectations doctrine, under which “[t]he court should construe the
policy ‘to fulfill the reasonable expectations of the parties in
the light of the customs and usages of the industry.’” Louisiana
Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., 630 So.2d 759, 764
(La. 1994) (quoting Trinity Industries, Inc. v. Ins. Co. of North
America, 916 F.2d 267, 269 (5th Cir. 1990)). In its motion for a
new trial, Fireman’s Fund argued that the policy interpretation
adopted by the district court could not have been the intent of the
parties because it results in Fireman’s Fund, for a premium of only
$3,500, becoming the primary liability insurer for any company that
charters a vessel from Henry’s Marine — an “unreasonable position”
considering that Fireman’s Fund charged a premium of $82,069 to
Henry’s Marine for Hull & Machinery coverage for only three
scheduled vessels. In the motion for a new trial, Fireman’s Fund
also offered an explanation and examples of what the policy
Extension does cover under its interpretation. The final argument
offered by Fireman’s Fund in its motion for a new trial was that
9
Henry’s Marine did not show that it had complied with its
obligations under paragraph 13 of the Boat Broker’s policy to
obtain $1,000,000 in Protection & Indemnity coverage naming Henry’s
Marine as an additional assured.4
On December 15, 2003, the district court denied Fireman’s
Fund’s motion for new trial or reconsideration. With respect to
Fireman’s Fund’s argument that Henry’s Marine had not shown its
compliance with certain terms in the policy, the court noted that
Fireman’s Fund had “ample opportunity to assert these provisions”
in earlier filings. The district court also noted that, in
Louisiana, an insurer-defendant relying on the breach of a material
warranty must plead specially this defense and then carry the
burden to prove it by a preponderance of the evidence.5 The court
found that Fireman’s Fund had not met its burden.
4
Paragraph 13 of the Boat Broker’s policy provides:
“IT IS A WARRANTY OF THIS POLICY THAT:
All vessels chartered must have Hull Insurance to value and a
minimum of US $1,000,000.00 or Hull Value whichever is the greater,
Protection and Indemnity including Collision and Towers Liability of
US $1,000,000.00 or to Hull Value whichever the greater. This
insurance to be carried at Owners [sic] expense. Said policy must
name INSURED as an Additional Assured and waive rights of
subrogation against INSURED[.] Certificate of Insurance to be
obtained/on file with Gulf Coast Marine, Inc.”
5
In this the district court relied on Rodriguez v. Northwestern Nat. Ins.
Co., 358 So.2d 1237, 1241 (La. 1978) (“Breach of warranty is a special defense
which the insurer has the burden of proving by at least a preponderance of
evidence.”); Lee v. Travelers Fire Ins. Co., 53 So.2d 692, 695 (La. 1951) (“‘The
Supreme Court has stated . . . that, where an insurance company seeks to avoid
liability because of the breach of a material warranty contained in the policy,
the defense must be pleaded specially and that the insurer has the burden of
proving by a preponderance of evidence that the breach did increase the moral
hazard of the risk.’” (quoting Rickerfor v. Westchester Fire Ins. Co. of New
York, 186 So. 109, 112 (La.App. 1939)); and Benjamin v. Connecticut Indem. Ass'n,
11 So. 628, 629 (La. 1892).
10
Fireman’s Fund thereafter moved for leave to file a second
amended complaint and first amended answer to assert the “warranty”
provision of the Boat Broker’s policy. After these motions were
denied by the magistrate judge on January 8, 2004, Fireman’s Fund
moved for a review of the magistrate judge’s ruling. On February
5, 2004, the district court affirmed the magistrate judge’s denial
of leave to amend, finding that Fireman’s Fund had not shown “good
cause” as required by Rule 16(b), which “governs amendment of
pleadings after a scheduling order deadline has expired.” S&W
Enterprises, L.L.C. v. SouthTrust Bank of Alabama, 315 F.3d 533,
536 (5th Cir. 2003).
On January 30, 2004, Fireman’s Fund moved to exclude Henry’s
Marine’s evidence of damages pursuant to Federal Rules of Civil
Procedure 26 and 37. On February 10, 2004, the district court
denied this motion, finding no abuse of the discovery process by
Henry’s Marine. On February 9 – 10, 2004, the district court
conducted a bench trial on the amount of damages and on the
question of bad faith denial of claims. On April 8, 2004, the
court ruled that Henry’s Marine was entitled to defense and
indemnity costs from Fireman’s Fund of $425,972.00 plus additional
attorneys’ fees through trial. The court also ruled that Fireman’s
Fund and New York Marine had not denied Henry’s Marine’s claims in
bad faith in violation of La. Rev. Stat. § 22:1220(B)(1). On May
17, 2004, the district court vacated its award to Henry’s Marine
11
for the attorneys’ fees incurred in litigating this matter, and, on
June 2, 2004, the district court entered judgment in favor of
Henry’s Marine for $378,371.92 plus interest from that date as well
as for costs in the additional amount of $4,883.53. Fireman’s Fund
appeals.
II. Discussion
On appeal, Fireman’s Fund raises five points of error. First,
Fireman’s Fund asserts that Henry’s Marine failed to satisfy all
conditions precedent, including policy warranties, to prove that it
is entitled to coverage under the policy. Second, Fireman’s Fund
argues that the district court abused its discretion by not
allowing Fireman’s Fund to amend its pleadings. Third, Fireman’s
Fund claims error by the district court in finding coverage under
the Boat Broker’s policy. Fourth, Fireman’s Fund claims error by
the district court in failing to exclude Henry’s Marine’s evidence
of damages under Federal Rule of Civil Procedure 37(c)(1). Fifth,
Fireman’s Fund argues that Henry’s Marine failed to prove that its
alleged loss was covered by the Boat Broker’s policy.
A. Whether Henry’s Marine satisfied all conditions precedent to
prove that it is entitled to coverage under the Boat
Broker’s policy
Fireman’s Fund argues that the district court erred as a
matter of law in finding coverage for Henry’s Marine’s claims in
spite of the fact that Henry’s Marine did not prove that it had
satisfied all conditions precedent, including the explicit
12
warranties, under the Boat Broker’s policy. The district court
found that the substantive law of Louisiana governs this dispute.6
As the district court noted, the Supreme Court of Louisiana has
said that an insurer has the burden to prove, by at least a
preponderance of the evidence, that the insured breached a warranty
in the insurance policy. Rodriguez v. Northwestern Nat. Ins. Co.,
358 So.2d 1237, 1241 (La. 1978). The policy provision that
Fireman’s Fund now relies upon is an explicit warranty. In fact,
it begins with the words, “It is a warranty of this policy that .
. . .” Supra note 4. Therefore, Rodriguez places the burden on
Fireman’s Fund to prove that Henry’s Marine breached this
warranty.7 Because Fireman’s Fund presented no evidence to show a
6
Both Fireman’s Fund and Henry’s Marine cite to Louisiana cases in support
of the arguments in their appellate briefs. At oral argument, however, Fireman’s
Fund appeared to contest the application of Louisiana law, pointing instead to
maritime law. In its brief, on the other hand, Fireman’s Fund argued that
“Louisiana law does not conflict with maritime law” on this issue. Because
neither party appealed the district court’s decision that Louisiana law governs
this dispute, we will rely on Louisiana law.
7
In its brief and at oral argument, Fireman’s Fund relied on the Second
Circuit’s opinion in Commercial Union Ins. Co. v. Flagship Marine Services, Inc.,
190 F.3d 26 (2d Cir. 1999). In Commercial Union, the Second Circuit noted,
“Under the federal rule and the law of most states, warranties in maritime
insurance contracts must be strictly complied with, even if they are collateral
to the primary risk that is the subject of the contract, if the insured is to
recover.” Id. at 31. Fireman’s Fund makes much of the Second Circuit’s strict-
compliance language. Although we do not disagree with the Second Circuit’s
statement of the general rule requiring strict compliance, the Commercial Union
opinion does not discuss the appropriate burden of proof and, therefore, it does
not help Fireman’s Fund on this issue. Moreover, the insurer-defendant in
Commercial Union raised the warranty defense when it initially denied coverage
and again in the litigation at the trial court. For this reason, Commercial
Union stands in stark contrast to this case, where Fireman’s Fund did not deny
coverage based on a warranty defense and did not raise the warranty defense until
after losing the coverage issue on summary judgment.
13
breach, we agree with the district court that Fireman’s Fund did
not meet its burden.
Presumably to avoid Rodriguez, Fireman’s Fund nonetheless
argues that “[t]he jurisprudential treatment of insurance law
provides that the terms ‘warranty’ and ‘condition precedent’ are
often used interchangeably,” and that “[i]t has been widely held in
American jurisprudence that the burden to prove compliance with a
condition precedent of an insurance policy is on the insured.”
Fireman’s Fund supports this statement by citing to state cases
from Iowa, Connecticut, Virginia, and Nebraska and to federal
district court cases from New York, Vermont, Delaware and Illinois.
Fireman’s Fund also points to a 1937 Louisiana intermediate court
opinion that quoted a treatise the stated, “‘A warranty is in the
nature of a condition precedent . . . .’” City Bank & Trust Co. v.
Commercial Casualty Co., 176 So. 27, 30 (La. App. 2d Cir. 1937)
(quoting 14 Ruling Case Law, p. 1026, § 206). Even assuming
arguendo that we were willing to treat the warranty at issue in
this case as a condition precedent and place the ultimate burden of
proof of compliance on Henry’s Marine, Fireman’s Fund’s argument
still fails because it did not timely make the “condition
precedent” an issue in the coverage dispute. In every case cited
by Fireman’s Fund to support its argument that the burden to prove
compliance with a condition precedent is on the insured, the
insurer had timely raised the insured’s lack of compliance as a
14
defense to coverage in the trial court. In this case, however,
Fireman’s Fund raised the alleged lack of compliance by Henry’s
Marine only after it lost the coverage issue on cross-motions for
summary judgment.
B. Whether the district court erred by not allowing Fireman’s
Fund to amend its pleadings
After the district court granted summary judgment for Henry’s
Marine on the issue of coverage and denied Fireman’s Fund’s motion
for new trial/reconsideration, Fireman’s Fund moved for leave to
amend its pleadings to assert the warranty as a defense. The
motion for leave to amend was denied by the district court. A
district court’s denial of leave to amend is reviewed for an abuse
of discretion. Martin's Herend Imports v. Diamond & Gem Trading,
195 F.3d 765, 770 (5th Cir. 1999).
Fireman’s Fund argues that the district court abused its
discretion because Federal Rule of Civil Procedure 15(a) requires
the trial court to freely grant leave to amend. Rule 15(a),
however, is not the correct rule to apply in this situation.
Instead, because Fireman’s Fund’s motion for leave to amend was
filed almost five months after the deadline for amendments set by
the scheduling order, Rule 16(b) applied, requiring Fireman’s Fund
to show “good cause.” See S&W Enterprises, L.L.C. v. SouthTrust
Bank of Alabama, 315 F.3d 533, 536 (5th Cir. 2003). The district
court noted Fireman’s Fund admission that the reason it did not
plead the warranty defense earlier was that it thought it would
15
prevail on its other argument. We agree with the district court’s
observation that “[t]his is not good cause for not having timely
asserted all of its possible defenses in its declaratory complaint
or in its answer to plaintiff’s declaratory complaint.”
Moreover, even under the more lenient standard of Rule 15(a),
the district court did not abuse its discretion by denying
Fireman’s Fund leave to amend. “A busy district court need not
allow itself to be imposed upon by the presentation of theories
seriatim.” Freeman v. Continental Gin Co., 381 F.2d 459, 469 (5th
Cir. 1967). “Further, after summary judgment has been granted, the
court has ‘even more reason for refusing to allow amendment.’”
Union Planters Nat. Leasing v. Woods, 687 F.2d 117, 121 (5th Cir.
1982) (quoting Freeman, 381 F.2d at 469). In Freeman, we held that
“a district court does not abuse its discretion in refusing to
allow amendment of pleadings to change the theory of a case if the
amendment is offered after summary judgment . . . and no valid
reason is shown for failure to present the new theory at an earlier
time.” Id. at 470. “We have consistently followed Freeman.”
Briddle v. Scott, 63 F.3d 364, 380 (5th Cir. 1995); see also
Wentwood Woodside I, LP v. GMAC Commercial Mortg., 419 F.3d 310,
318 (5th Cir. 2005). The district court noted that Fireman’s Fund
had agreed that the issue of coverage was ready for summary
judgment. In addition, the district court noted that Fireman’s
Fund had failed to raise the warranty defense at least four times
16
prior to summary judgment.8 We hold that the district court did
not abuse its discretion in denying Fireman’s Fund’s motion for
leave to amend its pleadings.
C. Whether the district court erred by granting summary judgment
to Henry’s Marine on the issue of coverage
Fireman’s Fund also claims error by the district court in
granting summary judgment for Henry’s Marine on the issue of
coverage in spite of the policy’s exclusion for contractually
assumed liability. We review the district court’s grant of summary
judgment and its interpretation of the insurance policy de novo,
applying the same standards as the district court. American Guar.
and Liability Ins. Co. v. 1906 Co., 129 F.3d 802, 805 (5th Cir.
1997).
Fireman’s Fund based its motion for summary judgment on three
legal arguments. First, Fireman’s Fund argued to the district
court that coverage was precluded because the vessels involved in
the underlying lawsuits, although they had been chartered from
Henry’s Marine by Tetra, were not listed in Henry’s Marine’s policy
and, therefore, coverage did not extend to these vessels. The
district court determined that the policy’s Schedule of Vessels and
Loss Payable Clause was applicable only to the Hull & Machinery,
8
The four opportunities noted by the district court: (1) Fireman’s Fund’s
complaint for declaratory relief (which was also amended once); (2) Fireman’s
Fund’s answer to Henry’s complaint for declaratory relief; (3) Fireman’s Fund’s
motion for summary judgment in the consolidated cases; and (4) Fireman’s Fund’s
response to Henry’s Marine’s motion for summary judgment.
17
Protection & Indemnity, and the Pollution Liability sections of the
policy, not to the Boat Broker’s section of the policy. Fireman’s
Fund does not appeal the district court’s determination on this
issue. Second, Fireman’s Fund argued to the district court that
Henry’s Marine’s claims for coverage failed because the policy’s
Privilege to Charter Clause states that “no party shall be deemed
an Additional Assured or favored with a waiver of subrogation of
any vessel(s) insured hereunder, unless that party is actually
engaged or involved in the operations at the time of the loss, if
any.” The district court determined that this clause was not
applicable because Henry’s Marine was not asserting that Tetra was
an additional assured. Fireman’s Fund also does not appeal this
determination.
Fireman’s Fund’s final argument to the district court in its
motion for summary judgment was that the Boat Broker’s policy
explicitly excluded coverage for “liability assumed by Henry’s
Marine under any contract or agreement unless Henry’s Marine would
be liable irrespective of the agreement.” Therefore, Fireman’s
Fund urged the district court to find coverage precluded as a
matter of law because Henry’s Marine was neither the owner nor the
operator of the vessels in question and so “Henry’s Marine could
not be found liable irrespective of any agreement.” The district
court determined that the language of the exclusion was in direct
conflict with the first paragraph of the contractual liability
18
(hold harmless/indemnity) extension, which granted permission for
Henry’s Marine to enter into charter agreements under which Henry’s
Marine would agree to hold harmless and indemnify a charterer “for
any and all sums said . . . Charterer may be legally obligated to
pay including legal and other expenses arising out of the use,
management or operation of such . . . chartered vessels by the
Insured.” Fireman’s Fund argued to the district court that,
pursuant to the Extension’s second paragraph, it does not extend
coverage to types of claims not otherwise covered by the Boat
Broker’s policy. The district court noted that Fireman’s Fund’s
“interpretation would lead to absurd results” because it “would
render the Extension redundant and meaningless.” After observing
that Fireman’s Fund had offered no reasonable explanation of what
the Extension covers, the district court noted that “a reasonable
interpretation of the second paragraph of the Extension is that
coverage is provided for contractual liability, unless it runs
afoul of some bar other than the contractual liability exclusion in
the body of the policy.”
After summary judgment was granted to Henry’s Marine,
Fireman’s Fund offered a different interpretation of the policy.
In Fireman’s Fund’s Rule 59 motion for a new trial or
reconsideration, it argued for the first time that the policy does
provide coverage for Henry’s Marine’s assumed contractual
liability, but only for liability based on Henry’s Marine’s
19
agreement to indemnify the charterer for Henry’s Marine’s
negligence or fault as a boat broker. Fireman’s Fund repeats this
new argument on appeal, but we do not consider it because it was
not raised below. “These [Rule 59] motions cannot be used to raise
arguments which could, and should, have been made before the
judgment issued. Moreover, they cannot be used to argue a case
under a new legal theory.” Simon v. U.S., 891 F.2d 1154, 1159 (5th
Cir. 1990) (quotations omitted). Considering the construction of
the policy urged in support of the summary judgment, we hold that
the district court did not err in determining that the “contractual
liability (hold harmless/indemnity) extension” would be rendered
meaningless by Fireman’s Fund’s pre-summary judgment interpretation
of it and the base policy exclusion. In any event, Fireman’s
Fund’s new argument is unpersuasive as it does not provide any
example of coverage which would have been excluded by the base
policy exclusion for contractually assumed liability but was added
by “contractual liability (hold harmless/indemnity) extension.”
The examples suggested by Fireman’s Fund are all ones that it
characterizes as being instances in which “Henry’s Marine could
have independent liability” – i.e., liability irrespective of the
contractual assumption of liability – “to any beneficiary of the
chartered party.” But such examples would be ones not within the
base policy exclusion (which excepts instances where the insured
“would have been liable irrespective” of the contractual assumption
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of liability) and hence do not suffice to give independent meaning
to the “contractual liability (hold harmless/indemnity) extension.”
The district court did not err in granting summary judgment on the
issue of coverage to Henry’s Marine.
D. Whether the district court erred by refusing to exclude
Henry’s Marine’s evidence of damages pursuant to Rule 37(c)
Fireman’s Fund contends that the district court erred in
refusing to exclude Henry’s Marine’s evidence of damages pursuant
to Federal Rule of Civil Procedure 37. We review for an abuse of
discretion the district court’s decision not to exclude evidence
under Rule 37. Primrose Operating Co. v. National American Ins.,
382 F.3d 546, 563 (5th Cir. 2004); Texas A&M Research Foundation v.
Magna Transp., 338 F.3d 394, 402 (5th Cir. 2003).
Fireman’s Fund claims that Henry’s Marine violated the
disclosure requirements of Rule 26(a)(1)(C) by not providing a
computation of damages in its initial disclosure. Rule 26 requires
that a party disclose “information then reasonably available to
it.” FED. R. CIV. P. 26(a)(1). The district court noted that Henry’s
Marine stated that its damages consisted of the defense and
indemnity expenses owed to Tetra and the legal expenses for
pursuing coverage from its insurers. At the time of initial
discovery, the coverage dispute was ongoing as were two of the
three underlying lawsuits against Tetra, and so Henry’s Marine
could not provide an exact amount of damages. We agree with the
district court that Henry’s Marine’s “response was not perfect but
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it was not a failure to disclose.” Fireman’s Fund also argues that
Henry’s Marine violated Rule 26(a)(1)(C) by failing to provide it
with any of the documents or evidentiary material to support its
claim for damages until less than three weeks before the trial.
Rule 26(a)(1)(C) requires only that the party make this evidence
available for inspection and copying as under Rule 34. There is
nothing to indicate that Henry’s Marine did not make this evidence
available to Fireman’s Fund. On the contrary, the district court
noted that Fireman’s Fund never attempted to inspect or copy
Henry’s Marine’s damages documents. After reviewing the discovery-
related conduct by both parties, the district court determined that
exclusion of Henry’s Marine’s damages evidence under Rule 37 was
not warranted. We find no abuse of discretion in this
determination.
E. Whether the district court erred in finding that Tetra Applied
Technologies, L.P. is the successor to Tetra Applied
Technologies, Inc.
Fireman’s Fund contends that the district court erred in
finding coverage for Tetra’s claims against Henry’s Marine because
the demands were made by Tetra Applied Technologies, L.P. (Tetra
L.P.) but the Master Time Charter Agreement obligated Henry’s
Marine to defend and indemnify Tetra Applied Technologies, Inc.
(Tetra Inc.). Fireman’s Fund also argues that Henry’s Marine paid
Tetra L.P.’s claims pursuant to an Asset Purchase Agreement, not
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the Master Time Charter Agreement contemplated by the Boat Broker’s
policy. These arguments are without merit.
As the district court noted, Tetra merely changed its name
from Tetra Inc. to Tetra L.P. The district court identified
specific evidence in the record that shows that Tetra Inc. and
Tetra L.P. were the same business enterprise.9 Moreover, as the
district court also noted, the Master Time Charter Agreement
between Henry’s Marine and Tetra Inc. provided that Henry’s Marine
agreed to indemnify parents, subsidiaries and affiliates of Tetra
Inc. The district court’s determination that Tetra L.P. is the
successor to Tetra Inc., or at least its affiliate, is not clearly
erroneous, and nothing in the record suggests otherwise.
The district court also found that the Asset Purchase
Agreement between Henry’s Marine and Tetra L.P. merely acknowledged
Henry’s Marine’s existing obligation under the Master Time Charter
Agreement to defend and indemnify Tetra.10 There is no basis to
disturb the district court’s determination that the payments made
by Henry’s Marine to Tetra L.P. were made pursuant to the Master
9
One example the district court mentioned is Tetra’s pleading in the
underlying Francis lawsuit. Although Tetra originally answered as Tetra, Inc.,
its first supplemental petition began with the following: “NOW INTO COURT,
through undersigned counsel, comes Tetra Applied Technologies, L.P., formerly
Tetra Applied Technologies, Inc. . . .”
10
Supporting this finding is the explicit language of the Asset Purchase
Agreement, which provides, “Pursuant to Article 11 of that certain Master Time
Charter dated March 1, 2000 (the “Time Charter”) by and between the Parties,
Henry’s is required to indemnify TETRA Applied . . . .” (emphasis added).
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Time Charter Agreement that was contemplated in — and covered by —
Henry’s Marine’s Boat Broker’s policy with Fireman’s Fund.
Conclusion
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.
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