Sentry Select Insurance v. Royal Insurance Co. of America

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SENTRY SELECT INSURANCE 
COMPANY; LLOYDS SYNDICATES 588,
861 AND 1209; KELLY-RYAN INC.,
Plaintiffs-Appellants, No. 05-35323
v.  D.C. No.
ROYAL INSURANCE COMPANY OF CV-01-01956-RSM
AMERICA; ALASKA NATIONAL
INSURANCE COMPANY,
Defendants-Appellees.

SENTRY SELECT INSURANCE 
COMPANY; LLOYDS SYNDICATES 588,
861 AND 1209; KELLY-RYAN INC.,
Plaintiffs-Appellees,
v. No. 05-35354
ROYAL INSURANCE COMPANY OF
AMERICA,  D.C. No.
CV-01-01956-RSM
Defendant-Appellant, OPINION
and
ALASKA NATIONAL INSURANCE
COMPANY,
Defendant.

Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, District Judge, Presiding
Argued and Submitted
October 17, 2006—Seattle, Washington
3893
3894 SENTRY SELECT INS. v. ROYAL INSURANCE
Filed April 6, 2007
Before: Dorothy W. Nelson, David R. Thompson, and
Richard A. Paez, Circuit Judges.
Opinion by Judge Thompson
SENTRY SELECT INS. v. ROYAL INSURANCE 3897
COUNSEL
Donald K. McLean, Seattle, Washington, for the plaintiffs-
appellants/appellees.
Michael D. Helgren, Seattle, Washington, for the defendants-
appellees/appellants.
OPINION
THOMPSON, Senior Circuit Judge:
Appellants and cross-appellees Kelly-Ryan, Inc., Sentry
Select Insurance Company, and Lloyd’s Syndicates 588, 861,
and 1209 (collectively, “Kelly-Ryan and the P&I Underwrit-
ers”) appeal the district court’s summary judgment in favor of
appellee and cross-appellant Royal Insurance Company
(“Royal”). The district court held that Kelly-Ryan is not enti-
tled to indemnity from Royal under the Marine Coverage
Endorsement (“MEL”) to the Big Shield Commercial Catas-
trophe Liability Insurance Policy (“Big Shield policy”) issued
by Royal, because Kelly-Ryan breached its duty of uberrimae
fidei (utmost good faith) to Royal under federal maritime law.
Kelly-Ryan sought indemnification from Royal after set-
tling a Jones Act suit, 46 U.S.C. § 30104(a) (formerly codi-
fied as 46 U.S.C. § 688(a)), with one of its maritime
employees who was electrocuted during the delivery of a pre-
fabricated house in remote Alaska. The district court held
that, under federal maritime law, the doctrine of uberrimae
fidei required Kelly-Ryan to disclose to Royal the material
fact that employees covered under the MEL endorsement rou-
tinely worked with electrical power lines. Kelly-Ryan had not
made that disclosure.
Kelly-Ryan and the P&I Underwriters contend that the
Royal Big Shield policy and the MEL endorsement do not
3898 SENTRY SELECT INS. v. ROYAL INSURANCE
constitute marine insurance over which we may exercise
admiralty jurisdiction, and as a result the uberrimae fidei doc-
trine does not apply to bar indemnification from Royal. We
agree, but affirm the district court’s summary judgment in
favor of Royal on the ground that Royal is not obligated to
provide indemnity for the injured seaman’s injuries because
those injuries did not occur in an accident covered by the
MEL endorsement.
We do not reach the question whether the injured seaman’s
injuries were covered under the Alaska State Workers’ Com-
pensation Act; whether covered or not under that Act, Royal
is not obligated to provide indemnity for them under the facts
of this case.
We have jurisdiction under 28 U.S.C. § 1291 and we affirm
the district court’s summary judgment in favor of Royal.
I. BACKGROUND
This litigation arises out of an accident which occurred on
land in Napakiak, Alaska during the movement of a modular
prefabricated house from a barge to a remote construction
site. Kelly-Ryan, a construction company based in Seattle,
Washington, shipped prefabricated houses from Washington
and installed them in various Native Alaskan villages under
a contract with the federal government. When the barge carry-
ing the houses reached Alaska, the houses were unloaded
from the barge onto “house movers,” which were large
treaded vehicles used to carry the houses to the construction
sites.
On September 27, 2000, James Okada, a maritime
employee of Kelly-Ryan working on the tugboat Casey
Marie, was electrocuted while he was helping a Kelly-Ryan
shore-based crew deliver a prefabricated house to a building
site located approximately one and a half miles from the
shore. The shore-based crew enlisted Okada to stand on top
SENTRY SELECT INS. v. ROYAL INSURANCE 3899
of the house and lift up what were supposed to be de-powered
electrical power lines so that the house and the house mover
could pass underneath. Unfortunately, the high voltage elec-
trical power line running into Napakiak from another village
had not been de-powered, and Okada was electrocuted, suffer-
ing severe injuries.
Although Okada normally worked as a “seaman,” on the
day of the accident a Kelly-Ryan shore-based crew “bor-
rowed” Okada to help them deliver the houses. For his work
with the shore-based crew, Kelly-Ryan paid Okada “cargo
time” or “lashing pay” in addition to his daily rate as a sea-
man. Okada sued Kelly-Ryan for negligence under the Jones
Act, 46 U.S.C. § 30104(a) (formerly codified as 46 U.S.C.
§ 688(a)), and eventually obtained a settlement in excess of
$5.2 million.
When the accident occurred, Kelly-Ryan had several insur-
ance policies in place covering multiple aspects of its opera-
tions. Sentry Select and Lloyd’s insure Kelly-Ryan’s vessel
operations and crewmembers under a Marine Protection and
Indemnity policy (“P&I policy”). Alaska National insures
Kelly-Ryan for various shore-based risks, including
employee-related injuries. Part One of the Alaska National
policy covers Washington and Alaska State workers’ compen-
sation, unemployment, and disability claims, as well as claims
under the Longshore and Harbor Workers’ Compensation
Act, 33 U.S.C. § 901, et seq. Part Two of the Alaska National
policy, the employers’ liability portion, provides coverage for
bodily injuries arising out of and in the course of employ-
ment, but excludes “any obligation imposed by a workers
compensation . . . law.”
Royal is the excess/umbrella insurer for Kelly-Ryan; its Big
Shield policy provides excess coverage over Part Two of the
Alaska National policy, Kelly-Ryan’s automobile insurance,
and Kelly-Ryan’s Commercial General Liability (“CGL”)
policy with Alaska National. The Big Shield policy does not
3900 SENTRY SELECT INS. v. ROYAL INSURANCE
provide excess coverage over claims under Part One of the
Alaska National policy or the P&I policies, and contains a
workers’ compensation exclusion excepting from coverage
“[a]ny obligation of the insured under a workers compensa-
tion . . . law.” At the time of the accident, Kelly-Ryan paid
a flat yearly premium of $17,000 for the Royal Big Shield
policy.
In 1995, Kelly-Ryan obtained from Royal an MEL
endorsement to Part Two of the Alaska National policy
(employers’ liability) and the Royal Big Shield policy. The
MEL endorsement extended coverage for bodily injuries suf-
fered by a “master or member of the crew of any vessel” per-
forming work “necessary or incidental” to the following tasks:
“Painting and/or scraping of decks of tugs or barges, and
loading and unloading as applicable in Washington and Alas-
ka.” The coverage limit on the MEL endorsement to the
employers’ liability insurance with Alaska National is $1 mil-
lion; any liability in excess of $1 million, so far as applicable
in this case, is covered by the Royal Big Shield policy.
After the accident, Kelly-Ryan, on behalf of Okada, filed
a claim for Alaska workers’ compensation benefits under Part
One of the Alaska National policy. Although Alaska National
initially processed the claim and paid benefits, it notified
Kelly-Ryan on November 9, 2000 that it was controverting
the claim because Okada was a “Jones Act crewman” whose
claim was covered under the P&I policy. Kelly-Ryan con-
tested Alaska National’s denial of coverage under Part One of
the policy. However, rather than challenge the loss of work-
ers’ compensation benefits, Okada in July 2001 filed suit in
the Western District of Washington against Kelly-Ryan for
damages under the Jones Act, 46 U.S.C. § 30104(a), and gen-
eral maritime law.
In May 2001, the P&I Underwriters entered an agreement
with Kelly-Ryan to defend and indemnify Kelly-Ryan for
Okada’s claim in the event Alaska National denied coverage.
SENTRY SELECT INS. v. ROYAL INSURANCE 3901
The P&I Underwriters also agreed to waive two coverage lim-
itations that could have operated to exclude Okada’s claim. In
return, Kelly-Ryan assigned to the P&I Underwriters any and
all causes of action it had against Alaska National.
On December 3, 2001, Kelly-Ryan and the P&I Underwrit-
ers filed the instant suit against Alaska National, requesting a
declaratory judgment on coverage and allocation of liability.
Kelly-Ryan and the P&I Underwriters later stipulated to
Okada’s “seaman” status1 at the time of his injury. On April
18, 2002, Kelly-Ryan and the P&I Underwriters moved for
summary judgment, asking the court to determine that cover-
age for Okada’s injuries fell under Part Two of the Alaska
National policy, the employers’ liability provision, rather than
under the P&I policies. The district court issued an order on
July 11, 2002 directing Alaska National to defend the claim
because Kelly-Ryan was “entitled to look to [Alaska Nation-
al’s] MEL policy for defense and indemnification.” The court
also awarded Sentry Select attorney fees “based on the
Court’s determination that coverage for Okada’s claims are
1
Okada’s status as a “seaman” working aboard the Casey Marie at the
time the accident occurred is important because the Jones Act provides a
cause of action in negligence for “any seaman” injured “in the course of
his employment.” 46 U.S.C. § 30104(a) (formerly codified as 46 U.S.C.
§ 688(a)). “Under general maritime law prevailing prior to the statute’s
enactment, seamen were entitled to ‘maintenance and cure’ from their
employer for injuries incurred ‘in the service of the ship’ and to recover
damages from the vessel’s owner for ‘injuries received by seamen in con-
sequence of the unseaworthiness of the ship,’ but they were ‘not allowed
to recover an indemnity for the negligence of the master, or any member
of the crew.’ ” Chandris, Inc. v. Latsis, 515 U.S. 347, 354 (1995) (quoting
The Osceola, 189 U.S. 158, 175 (1903)). However, with the passage of the
Jones Act, a seaman could elect to bring a suit seeking civil damages and
a jury trial under federal maritime law, even if the situs of the tort was on
land. This is because jurisdiction under the Jones Act “depends ‘not on the
place where the injury is inflicted . . . but on the nature of the seaman’s
service, his status as a member of the vessel, and his relationship as such
to the vessel and its operation in navigable waters.’ ” Chandris, 515 U.S.
at 359-60 (alteration in original) (quoting Swanson v. Marra Bros., Inc.,
328 U.S. 1, 4 (1946)).
3902 SENTRY SELECT INS. v. ROYAL INSURANCE
properly under the Alaska National policy.” The district court
further clarified that although liability had not yet been found,
liability would implicate Kelly-Ryan as the employer of
Okada, and therefore the P&I policy would not cover Okada’s
claims because that policy covered Kelly-Ryan only “as
owner” of the vessel Casey Marie.
Alaska National then moved for reconsideration, arguing
that the district court’s order failed to separate the duty to
defend from the duty to indemnify. The district court denied
the motion for reconsideration, but clarified that the previous
order held only that Alaska National had a duty to defend.
The district court further held it would not look to extrinsic
evidence of the parties’ intent to determine if the Alaska
National policy covered Okada’s claim. Alaska National
sought interlocutory review from our court and on October
14, 2003, we affirmed the district court’s decision. Sentry
Select Ins. Co. v. Alaska Nat. Ins. Co., 72 Fed. Appx. 602,
2004 A.M.C. 1801 (9th Cir. 2003).
In the meantime, on August 23, 2002, Okada settled his
claims against Kelly-Ryan for $5,276,630.47. Following the
settlement, on December 5, 2002, Kelly-Ryan and the P&I
Underwriters moved to amend their complaint to add Royal
as a defendant. They then immediately moved for summary
judgment, asking the court to determine that Alaska National
and Royal were in breach of their policies to the extent that
those insurers “are obligated to defend and/or indemnify
plaintiffs pursuant to their policy of marine insurance” and
sought “a declaration of their rights with respect to the poli-
cies of marine insurance identified above.” On January 24,
2003, the district court issued a stay pending a ruling on the
interlocutory appeal.
The district court lifted the stay on October 27, 2003, and
the plaintiffs again moved for summary judgment, asking the
court to determine the individual insurers’ respective obliga-
tions for reimbursement for the Okada settlement. The district
SENTRY SELECT INS. v. ROYAL INSURANCE 3903
court denied the motion on March 4, 2004, and granted the
parties additional time for discovery.
Alaska National filed a motion for partial summary judg-
ment on September 28, 2004, seeking a declaration that Part
One of the Alaska National policy, the workers’ compensa-
tion provision, did not cover Okada’s claims. Royal opposed
Alaska National’s motion for summary judgment, arguing that
Okada’s claims were properly covered under the Alaska
National workers’ compensation provision and that the work-
ers’ compensation exclusion in its Big Shield policy pre-
cluded liability by Royal for “[a]ny obligation of the insured
under a workers’ compensation . . . or any similar laws.”
Royal filed a motion for summary judgment on October 26,
2004, asserting that: (1) Okada’s claims did not fall within the
MEL endorsement of Part Two of the Alaska National policy;
(2) the May 2001 agreement between Kelly-Ryan and the P&I
Underwriters created other excess coverage and the P&I
Underwriters waived their rights to collect from Royal; and
(3) the MEL endorsement was void ab initio because Kelly-
Ryan violated the federal maritime doctrine of uberrimae
fidei, the duty of utmost good faith, because it failed to dis-
close to Royal several material facts prior to the issuance of
the MEL. Kelly-Ryan and the P&I Underwriters also filed a
motion for summary judgment on October 27, 2004, but the
district court struck the motion as untimely.
On January 13, 2005, the district court granted Alaska
National’s motion for partial summary judgment, ruling that
the Okada settlement was not covered by Alaska workers’
compensation laws because the Okada settlement settled a
Jones Act negligence claim and not a workers’ compensation
claim. The district court stated that “it is well settled that
‘[w]here an action settles prior to trial . . . the duty to indem-
nify must be determined on the basis of the settlement, i.e.,
the undisputed facts set forth in the underlying complaint and
those known to the parties.’ ” (alterations in original) (quoting
Enron Oil Trading & Transp. Co. v. Underwriters of Lloyd’s
3904 SENTRY SELECT INS. v. ROYAL INSURANCE
of London, 47 F. Supp. 2d 1152, 1161 (D. Mont. 1996), aff’d
in part, rev’d in part sub nom. Enron Oil Trading & Transp.
Co. v. Walbrook Ins. Co., 132 F.3d 526 (9th Cir. 1997)).
The district court acknowledged that Royal had alleged
there had been collusion between Sentry Select, Lloyd’s, and
Alaska National which led to the joint stipulation in the first
lawsuit that Okada was a seaman, but found that this was “be-
side the point at this stage in the litigation.” The district court
further noted that “[t]hose arguments go to the reasonableness
of the settlement, which cannot be relitigated” and stated that
the proper time for Royal to have raised the issue of the work-
ers’ compensation exclusion in its Big Shield policy would
have been at the time of the settlement, when it should have
sought to apportion the settlement funds. The court found that
the “parties settled a Jones Act negligence claim, not a work-
ers’ compensation claim, and therefore, the Workers Compen-
sation portion of the Alaska National policy is not implicated
in the allocation of the underlying settlement fund.” Finally,
the court found that the settlement was not intended to include
any potential workers’ compensation monies and that the
clause in the settlement releasing any such claims did not
indicate an actual settlement of such a claim.
The district court issued a separate order on January 13,
2005, granting in part and denying in part Royal’s motion for
summary judgment. The court denied Royal’s motion insofar
as it rejected Royal’s contention that Okada’s injuries fell out-
side the scope of the MEL endorsement. The district court
first found that the terms “loading and unloading” in the MEL
endorsement are ambiguous, and that Washington law
required it to “give effect to the reasonable interpretation most
favorable to the insured.” Because the terms “loading and
unloading” appeared in a clause relating to coverage rather
than exclusion of coverage, the court found that a broad inter-
pretation was appropriate. The court then adopted a definition
of the terms under the “complete operation theory,” which
defines “loading and unloading” as “the entire process
SENTRY SELECT INS. v. ROYAL INSURANCE 3905
involved in the movement of the article, thereby omitting any
distinction between ‘loading’ and preparatory activities or
‘unloading’ and ‘delivery.’ ” (citing Transamerica Ins. Group
v. United Pac. Ins. Co., 92 Wn. 2d 21, 25, 593 P.2d 156(1979), overruled on other grounds by State v. Olson, 126
Wn. 2d 315, 893 P.2d 629 (1995)).
The court next determined that Okada’s employment was
“incidental” to “loading and unloading,” referencing the defi-
nition in the Merriam-Webster online dictionary which
defined incidental as “being likely to ensue as a chance or
minor consequence.” The court then stated: “There is no ques-
tion that part of Mr. Okada’s employment duties was to assist
the shore-based crew move [sic] houses from the tug boat to
the construction site. The Court has already determined that
he was in the process of ‘unloading’ the house at the time he
was injured.” Therefore, the court reasoned, Okada’s claims
fell within the MEL endorsement.
The district court granted Royal’s motion for summary
judgment on uberrimae fidei because it found that Kelly-Ryan
failed to disclose material facts about what type of work its
vessel employees performed. The district court found “disin-
genuous” Kelly-Ryan and the P&I Underwriters’ contention
that the federal maritime law of uberrimae fidei was inappli-
cable because Kelly-Ryan brought the suit in admiralty and
initially argued that the Big Shield policy was marine insur-
ance.
The district court then rejected Kelly-Ryan and the P&I
Underwriters’ argument that, even if federal maritime law
applied, Kelly-Ryan did not have a duty to disclose that its
employees would be handling high-voltage power lines
because it knew only that they would be working with low-
voltage lines. The district court found that this excuse “mis-
characterizes the real issue,” reasoning that “any reasonable
person knows that when handling power lines, whether low
voltage or high voltage, there is a risk of handling a wire that
3906 SENTRY SELECT INS. v. ROYAL INSURANCE
has not been de-powered and injury could occur.” Accord-
ingly, the court determined that Kelly-Ryan had violated the
duty of utmost good faith and that “Royal may void its excess
liability policy as to Mr. Okada’s injuries pursuant to the
uberrimae fidei doctrine.” Finally, because the district court
granted summary judgment in favor of Royal on the issue of
uberrimae fidei, it did not address Royal’s second contention
that the P&I Underwriters waived Royal’s obligation to pro-
vide coverage in excess of the MEL portion when they agreed
to defend and indemnify Kelly-Ryan.
Kelly-Ryan and the P&I Underwriters timely appeal to this
court the district court’s summary judgment in favor of Royal
on uberrimae fidei. Royal timely cross-appeals the district
court’s summary judgment in favor of Alaska National on the
question of workers’ compensation coverage, and in favor of
Kelly-Ryan and the P&I Underwriters on coverage for
Okada’s injuries under the MEL endorsement.
II. STANDARD OF REVIEW
We review de novo whether the district court had subject
matter jurisdiction, and we must accept the district court’s
factual findings on jurisdiction unless they are clearly errone-
ous. Reebok Int’l, Ltd. v. Marnatech Enters., Inc., 970 F.2d
552, 554 (9th Cir. 1992).
“A grant of summary judgment is reviewed de novo. Our
review is governed by the same standard used by the district
court under Fed. R. Civ. P. 56(c).” Certain Underwriters at
Lloyd’s v. Montford, 52 F.3d 219, 221-22 (9th Cir. 1995)
(citation omitted). Under Federal Rule of Civil Procedure
56(c), “[t]he judgment sought shall be rendered forthwith if
the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.”
SENTRY SELECT INS. v. ROYAL INSURANCE 3907
We review de novo the district court’s analysis of contrac-
tual language and its application of principles of contract
interpretation. Miller v. Safeco Title Ins. Co., 758 F.2d 364,
367 (9th Cir. 1985).
III. DISCUSSION
A. Jurisdiction
1. Admiralty Jurisdiction
Royal argues that Kelly-Ryan either waived or is estopped
from raising the argument that the Big Shield policy is not
marine insurance because it brought this action in admiralty,
initially claiming that the policy is a marine insurance con-
tract over which we have admiralty jurisdiction. Royal also
points out that Kelly-Ryan and the P&I Underwriters cannot
have it “both ways”— they cannot simultaneously argue that
the Big Shield policy is not maritime insurance and that it
covers Okada’s Jones Act claim.
[1] We disagree. Although Kelly-Ryan and the P&I Under-
writers did not challenge admiralty jurisdiction until later in
the course of the litigation, their failure to challenge the dis-
trict court’s subject matter jurisdiction earlier did not waive
such a challenge. See Attorneys Trust v. Videotape Computer
Prods., Inc., 93 F.3d 593, 594-95 (9th Cir. 1996). A “disap-
pointed plaintiff” may attack subject matter jurisdiction for
the first time on appeal, id. at 595, and may raise a jurisdic-
tional issue even though it is not of “constitutional magni-
tude.” Clinton v. City of New York, 524 U.S. 417, 428 (1998).
It is inconsequential to our jurisdictional analysis whether
Kelly-Ryan at one point claimed that the policy was a marine
insurance policy, because even a joint stipulation cannot cure
a jurisdictional defect. See Rains v. Criterion Sys., Inc., 80
F.3d 339, 342 (9th Cir. 1996); see also Galt G/S v. Hapag-
Lloyd AG, 60 F.3d 1370, 1373 (9th Cir. 1995) (“[W]e inquire
sua sponte whether admiralty or diversity jurisdiction pro-
3908 SENTRY SELECT INS. v. ROYAL INSURANCE
vided the district court with an independent basis for federal
subject matter jurisdiction . . . .”).
[2] We thus turn to the question whether admiralty jurisdic-
tion exists over Kelly-Ryan’s claim against Royal. Admiralty
jurisdiction hinges on whether the Big Shield insurance policy
with the MEL endorsement is a maritime insurance contract.
See Insurance Co. v. Dunham, 78 U.S. (11 Wall.) 1, 35-36
(1870) (holding that admiralty jurisdiction extends to mari-
time insurance contracts). If the Big Shield policy is maritime,
“and the dispute is not inherently local, federal law controls
the contract interpretation.” Norfolk S. Ry. Co. v. Kirby, 543
U.S. 14, 23 (2004) (citing Kossick v. United Fruit Co., 365
U.S. 731, 735 (1961)).
Unfortunately, it is often difficult to determine whether a
contract is maritime because there are few “clean lines
between maritime and non-maritime contracts,” Norfolk S. Ry.
Co., 543 U.S. at 23, and the separation between the two is
“conceptual rather than spatial,” Kossick, 365 U.S. at 735.
The conceptual boundary is defined by the purpose of the
jurisdictional grant — “the protection of maritime com-
merce.” Exxon Corp. v. Cent. Gulf Lines, Inc., 500 U.S. 603,
608 (1991) (internal quotation marks omitted).
[3] To ascertain whether an insurance policy is maritime,
we must examine the “nature and subject-matter” of the con-
tract, Exxon Corp., 500 U.S. at 611, and “the true criterion is
whether it has reference to maritime service or maritime
transactions,” Norfolk S. Ry. Co., 543 U.S. at 23-24 (internal
quotation marks omitted). Under the old and now outdated
rule, admiralty jurisdiction was said to be reserved to “con-
tracts, claims, and services purely maritime,” Rea v. The
Eclipse, 135 U.S. 599, 608 (1890) (emphasis added). We have
recognized two exceptions to this “purely maritime” rule.
First, admiralty may take jurisdiction of an entire
contract if the nonmaritime obligations are merely
SENTRY SELECT INS. v. ROYAL INSURANCE 3909
incidental to the primary maritime nature of the con-
tract. Second, if the nonmaritime obligations are sub-
stantial, admiralty may take jurisdiction over any
maritime obligations that can be severed from the
nonmaritime obligations and separately adjudicated
without prejudice to the parties.
Simon v. Intercontinental Transp. (ICT) B.V., 882 F.2d 1435,
1442 (9th Cir. 1989) (citations omitted); see also La Reunion
Francaise SA v. Barnes, 247 F.3d 1022, 1025 (9th Cir. 2001).
The Supreme Court’s later decision in Norfolk Southern
Railway Co. v. Kirby, 543 U.S. 14, undercuts the continuing
force of these two exceptions by our court. See Miller v. Gam-
mie, 335 F.3d 889, 899-900 (9th Cir. 2003) (en banc) (holding
that a three-judge panel may depart from circuit precedent
that has not been “expressly overruled” when an intervening
en banc or Supreme Court decision has “undercut the theory
or reasoning underlying the prior circuit precedent in such a
way that the cases are clearly irreconcilable”).
[4] The dispute in Norfolk centered on whether a “through”
bill of lading, a single bill of lading under which “cargo own-
ers can contract for transportation across oceans and to inland
destinations in a single transaction,” was a maritime contract
despite providing for significant land transit by rail. Norfolk
S. Ry. Co., 543 U.S. at 26. The sea leg of the journey was suc-
cessful, but the train carrying the cargo inland derailed en
route, causing approximately $ 1.5 million in damage to the
cargo. Id. at 21. The Supreme Court held that although the
accident occurred during the land portion of the journey, the
entire bill of lading was nonetheless a maritime contract over
which admiralty jurisdiction extended. The Court explained
that courts cannot simply ask “whether a ship or other vessel
was involved in the dispute,” or focus solely on “the place of
the contract’s formation or performance.” Id. at 23-24. Rather,
the dispositive inquiry must be “whether the principal objec-
tive of [the] contract is maritime commerce.” Id. at 25.
3910 SENTRY SELECT INS. v. ROYAL INSURANCE
In articulating the “primary objective test,” the Norfolk
Court explicitly rejected the spatial approach adopted by some
lower federal courts, which had determined whether a con-
tract was maritime by assessing whether its land components
were “incidental” to its maritime components. Id. at 26. The
Court reasoned that “it seems to us imprecise to describe the
land carriage required by an intermodal transportation con-
tract as ‘incidental’; realistically, each leg of the journey is
essential to accomplishing the contract’s purpose.” Id. at 26-
27. The Court then found the “incidental” test inconsistent
with the conceptual approach and overruled it “to the extent
. . . that [it] depends solely on geography.” Id. at 27. In find-
ing that the “through” bill of lading was a maritime contract
governed by federal law, the Court explained that its “primary
objective [was] to accomplish the transportation of goods by
sea from Australia to the eastern coast of the United States.”
Id. at 24. The Court emphasized that the bill of lading’s “char-
acter as a maritime contract is not defeated simply because it
also provides for some land carriage” and that
“[c]onceptually, so long as a bill of lading requires substantial
carriage of goods by sea, its purpose is to effectuate maritime
commerce—and thus it is a maritime contract.” Id. at 27.
Here, Royal argues that the Big Shield policy is a maritime
insurance contract because the maritime obligations contained
in the MEL endorsement can be severed from the Big Shield
policy. However, we find that our “severability” exception
collapses in the wake of the Norfolk Court’s conceptually-
based “primary objective” test. First, severing the maritime
components from the non-maritime components is inconsis-
tent with the Court’s directive that we look to whether the
“principal objective of a contract is maritime commerce.” Id.
at 25. Second, although the Court in Norfolk rejected a purely
spatial approach, the Court stated that “[g]eography [ ] is use-
ful . . . only in a limited sense: [i]f a bill’s sea components are
insubstantial, then the bill is not a maritime contract.” Id. at
27 (emphasis in original). The severability exception incor-
rectly focuses on the severability of the sea components, not
SENTRY SELECT INS. v. ROYAL INSURANCE 3911
on whether they are insubstantial in comparison to the land
components. Third, if the Court had wished to recognize a
severability exception, then there could not have been a better
context in which to fashion this exception than the intermodal
shipment context — the Court could have treated the ocean
shipping leg as maritime and severed the non-maritime land
leg of the bill of lading. Yet instead, the Court employed a
“primary objective” test which examined the contract as a
whole to determine whether its primary purpose was to pro-
tect or affect maritime commerce.
In rejecting the lower courts’ piecemeal approach, the Nor-
folk Court undermined the viability of our “severability”
exception. Id. at 27; see also Folksamerica Reinsurance Co.
v. Clean Water of New York, 413 F.3d 307, 315 (2d Cir. 2005)
(re-working the Second Circuit’s “incidental exception” such
that it focuses “on whether the principal objective of a con-
tract is maritime commerce, rather than on whether the non-
maritime components are properly characterized as more than
‘incidental’ or ‘merely incidental’ to the contract,” and hold-
ing that “admiralty jurisdiction will exist over an insurance
contract where the primary or principal objective of the con-
tract is the establishment of policies of marine insurance”
(internal quotation marks and citations omitted)). Therefore,
we decline to apply the “severability” exception and focus
instead on whether the “primary objective” of the Big Shield
policy was to provide insurance coverage for maritime com-
merce. See Miller, 335 F.3d at 899-900.
[5] When considered as a whole, the Big Shield policy,
even as amended by the MEL endorsement, fails the Norfolk
Court’s “primary objective” test because the principal purpose
of the policy is to provide umbrella coverage in excess of
Kelly-Ryan’s “shore-side” insurance policies, not to protect
Kelly-Ryan’s maritime commerce operations.
Consistent with most shore-side commercial general liabil-
ity (“CGL”) insurance contracts, the Big Shield policy
3912 SENTRY SELECT INS. v. ROYAL INSURANCE
excludes traditional marine risks such as pollution and con-
tains a Watercraft Limitation. The Watercraft Limitation lim-
its liability for any bodily injury or property damage arising
out of “ownership, maintenance, operation, use, loading or
unloading of any watercraft” to that covered by the underly-
ing insurance; the underlying Alaska National policy excludes
“bodily injury’ or ‘property damage’ arising out of the owner-
ship, maintenance, use [including loading or unloading] or
entrustment to others of any aircraft, auto or watercraft owned
or operated by or rented or loaned to any insured.” See 9
Couch on Insurance § 127:37 (3d ed. 2006) (stating that typi-
cal CGL policies “exclude coverage for damages arising out
of the ownership, maintenance, use, loading, or unloading of
a watercraft”).
The only portion of the Big Shield policy relating to mari-
time commerce is the MEL endorsement, which Royal con-
sidered so insignificant that it did not charge an increased
premium when the endorsement was added. While the MEL
endorsement extends coverage for bodily injury to a master or
member of the crew of a vessel, the description of the work
covered under the MEL is confined to the typical shore-side
activities of “[p]ainting and/or scrubbing of decks of tugs or
barges, and loading and unloading as applicable in Washing-
ton and Alaska.” Moreover, Royal itself argued that it never
imagined that the MEL endorsement would cover Jones Act
crewmen or insure against maritime risks because Kelly-Ryan
consistently represented that its marine-related risks were
insured through others. Furthermore, Kelly-Ryan obtained
separate P&I coverage through the P&I Underwriters to cover
personal injury to Kelly Ryan’s crew members, vessels, and
maritime operations.
[6] When considered as a whole, the “sea components [of
the Big Shield policy, even with the MEL endorsement,] are
insubstantial,” Norfolk S. Ry. Co., 543 U.S. at 27, and lack the
“genuinely salty flavor” of a marine insurance contract, id. at
22 (quoting Kossick, 365 U.S. at 742). Moreover, the linkage
SENTRY SELECT INS. v. ROYAL INSURANCE 3913
between the employers’ liability policy and maritime com-
merce is “too tenuous to justify classifying the insurance . . .
as a maritime obligation or interest sufficient to bring the poli-
cies . . . within the pale of admiralty jurisdiction.” Simon, 882
F.2d at 1443. Neither the primary interests insured nor the
principal risks insured against in the Big Shield policy, even
considering as well the MEL endorsement, are fundamentally
maritime in nature; thus, Kelly-Ryan’s claim for indemnity
under the Big Shield policy for the cost of the Okada settle-
ment is not a maritime insurance contract claim over which
we may exercise admiralty jurisdiction.
2. Supplemental Jurisdiction
Although admiralty jurisdiction does not extend to the Big
Shield policy, the district court had supplemental jurisdiction
over Kelly-Ryan’s claim against Royal under 28 U.S.C.
§ 1367. As required under section 1367, the district court had
original jurisdiction in admiralty over the suit because the ini-
tial suit sought a declaratory judgment, in part, on policies of
marine insurance issued by the P&I Underwriters. The district
court had supplemental jurisdiction over Kelly-Ryan and the
P&I Underwriters’ claim against Royal because that claim
was “so related to claims in the action within such original
jurisdiction that they form part of the same case or contro-
versy under Article III of the United States Constitution.” 28
U.S.C. § 1367(a).
B. Application of State Law
[7] Because admiralty jurisdiction does not extend to Kelly-
Ryan’s claim for indemnity against Royal, federal admiralty
law does not apply. See Norfolk S. Ry. Co., 543 U.S. at 23(“[F]or federal common law to apply in these circumstances,
this suit must also be sustainable under the admiralty jurisdic-
tion. Because the grant of admiralty jurisdiction and the
power to make admiralty law are mutually dependent, the two
are often intertwined in our cases.” (citation omitted)). There-
3914 SENTRY SELECT INS. v. ROYAL INSURANCE
fore, we do not apply the federal maritime doctrine of uberri-
mae fidei.
[8] Applying Washington State law instead, we conclude
that the Big Shield policy and the MEL endorsement are not
void for misrepresentation or for the failure to disclose mate-
rial facts because Kelly-Ryan did not have the requisite intent
to deceive. Under Washington law, “no oral or written mis-
representation or warranty made in the negotiation of an
insurance contract, by the insured or in his behalf, shall be
deemed material or defeat or avoid the contract or prevent it
attaching, unless the misrepresentation or warranty is made
with the intent to deceive.” Wash. Rev. Code § 48.18.090(1);
see also Cutter & Buck, Inc. v. Genesis Ins. Co., 306 F. Supp.
2d 988, 1004 (W.D. Wash. 2004), aff’d, 144 Fed. Appx. 600(9th Cir. 2005). In addition, Royal’s bare allegation that
Kelly-Ryan made false or misleading statements during the
course of negotiations regarding coverage for Jones Act
claims under the MEL endorsement is not sufficient for us to
conclude that Kelly-Ryan knowingly made false material
statements giving rise to the presumption of “intent to
deceive” under Washington law. See Wilburn v. Pioneer Mut.
Life Ins. Co., 8 Wash. App. 616, 620, 508 P.2d 632 (1973).
C. Liability under the MEL Endorsement
[9] Applying Washington State law to the question whether
Royal is obligated to provide indemnity for the Okada settle-
ment, we hold that Royal is not so obligated because Okada’s
injuries did not result from an accident covered by the MEL
endorsement.
[10] The MEL endorsement extended insurance coverage
by Royal for bodily injury suffered by a “master or member
of the crew” of a Kelly-Ryan vessel when such person was
performing work “necessary or incidental” to “Painting and/or
scraping of decks of tugs or barges, and loading and unload-
ing as applicable in Washington and Alaska.” The injured per-
SENTRY SELECT INS. v. ROYAL INSURANCE 3915
son in the present case, Okada, was not injured during the
performance of any of these tasks.
Kelly-Ryan contends, and the district court concluded, that
Okada was injured while “unloading” the prefabricated house
from the barge to the house mover, which included delivery
of the house to the construction site. We disagree.
Although the district court correctly determined that the
term “loading and unloading” is ambiguous under Washing-
ton law, the court erred in failing to consider the definition of
“loading and unloading” contained in the CGL policy as
extrinsic evidence of the parties’ intent. The CGL policy con-
tains a definition of “loading or unloading,” and that policy
was relevant extrinsic evidence because the Big Shield policy,
to which the MEL endorsement applied, was an umbrella pol-
icy of insurance in excess of both the CGL and employers’
liability policy. The nature of this umbrella policy “as an
additional layer of excess coverage suggests the parties
intended to provide the same coverage as the underlying [ ]
policy.” Pub. Util. Dist. No. 1 v. Int’l Ins. Co., 124 Wn.2d
789, 799, 881 P.2d 1020 (1994).
To determine the intent of the parties in the face of ambigu-
ity, we look first to “evidence of the situation and relations of
the parties, the subject matter of the transaction, preliminary
negotiations and statements made therein, usages of trade, and
the course of dealing between the parties.” Berg v. Hudesman,
115 Wn.2d 657, 668, 801 P.2d 222 (1990) (quoting Restate-
ment (Second) of Contracts § 212 cmt. b (1981)). Accord
Pub. Util. Dist. No. 1, 124 Wn.2d at 799 (applying rule of
Berg to interpret a marine insurance contract).
[11] We may examine the underlying CGL policy as evi-
dence of the parties’ intent under Washington law because it
is an “[a]greement[ ] . . . contemporaneous with the adoption
of a writing [that is] admissible in evidence to establish . . .
the meaning of the writing, whether or not integrated.” Berg,
3916 SENTRY SELECT INS. v. ROYAL INSURANCE
115 Wn.2d at 668 (first and fifth alterations in original) (quot-
ing Restatement (Second) of Contracts § 214(c)). The CGL
policy’s definition of “loading or unloading” clearly does not
encompass the delivery of a house on a house mover to a con-
struction site:
11. “Loading or unloading” means the handling of
property
...
c. While it is being moved from an air-
craft, watercraft or “auto” to the place
where it is finally delivered;
but “loading or unloading” does not
include the movement of property by
means of mechanical device, other than
a hand truck, that is not attached to the
aircraft, watercraft or “auto.”
In addition, under the Big Shield policy, the house mover
would be a piece of “mobile equipment” because it is a
“[v]ehicle[ ] that travel[s] on crawler treads” as defined by the
Big Shield policy. Considering both of these definitions, we
conclude that the house mover is a piece of “mobile equip-
ment” under the Big Shield policy and under the CGL policy
it is a “mechanical device . . . that is not attached to the . . .
watercraft.” This strongly supports Royal’s contention that the
parties never intended “unloading” to encompass the move-
ment of a house on a house mover to a construction site.
Furthermore, if any ambiguity remains after resort to the
foregoing extrinsic evidence, the district court should have
looked to evidence of trade usage to assess the reasonableness
of the parties’ interpretations. See Pub. Util. Dist. No. 1, 124
Wn.2d at 799 (“To determine the parties’ intent, the court first
will view the contract as a whole, examining its subject matter
. . . and the reasonableness of [the parties’] respective inter-
SENTRY SELECT INS. v. ROYAL INSURANCE 3917
pretations.”); Berg, 115 Wn.2d at 668 (court may look to
usages of trade). Under Washington law, “the general rule is
that such language [technical or terms of art] is to be given its
technical meaning when used in a transaction within its tech-
nical field.” Berg, 115 Wn.2d at 666 (citing Keeton v. Dep’t
of Soc. & Health Servs., 34 Wash. App. 353, 361, 661 P.2d
982 (1983); Restatement (Second) of Contracts § 202(3)(b)
(1981)).
Expert testimony was presented in this case on the defini-
tion of “unloading” in the maritime context. Experts from
both of the P&I Underwriters answered in the affirmative
when asked if “in the industry generally, unloading cargo is
deemed to mean offloading it from the vessel onto another
dock, wharf or another vessel.” In addition, Alaska National’s
underwriter testified that he too understood the transportation
of the houses on the house movers to be outside the scope of
“unloading” coverage under the MEL.
The district court, however, erroneously borrowed a defini-
tion of “unloading” from the automobile context, defining
“unloading” under a “complete operations theory” as “the
entire process involved in the movement of the article,
thereby omitting any distinction between ‘loading’ and prepa-
ratory activities or ‘unloading’ and ‘delivery.’ ” Transamerica
Ins. Group, 92 Wn.2d at 25. The district court should not have
adopted this definition of “unloading” wholesale from the
automobile insurance context. Coverage under an automobile
insurance policy generally turns on whether an accident arises
out of “operation, maintenance and use” of a vehicle, which
clearly shapes the definition of “loading and unloading.” See
6B-184 Appleman on Insurance Law & Practice § 4322 (1st
ed. 2006) (“[E]ach case must be treated according to the facts
involved, taking into consideration the connection between
the unloading or loading and the operation, maintenance and
use of the vehicle, construing such coverage as an extension
of, rather than a limitation upon, the operation, maintenance,
and use clause.”).
3918 SENTRY SELECT INS. v. ROYAL INSURANCE
Moreover, the Washington State cases on which the district
court relied2 were decided prior to the Washington Supreme
Court’s decision in Berg, 115 Wn.2d at 668-70, in which the
Court adopted the Second Restatement’s context rule that
ambiguities are to be construed in light of extrinsic evidence
of the parties’ intent. The ambiguous use of “unloading” in
this case is resolved by the applicable extrinsic evidence as to
the parties’ intent. The term “unloading” does not include
delivery of the prefabricated house to its construction site, a
mile and a half inland from the wharf where the house was
unloaded from the barge onto the house mover. Therefore,
Okada was not injured during the “unloading” of the house.3
Kelly-Ryan also argues that Okada’s work atop the house
mover fell within the MEL endorsement’s requirement that an
accident occur during work which is “necessary or incidental”
to “unloading.” We disagree. Moving a house on a house
mover over a mile inland is clearly not “necessary” to com-
plete the “unloading” of the house from the barge. Kelly-
Ryan’s contention that delivery to a remote construction site
is “incidental” to “unloading” from the barge is also unper-
suasive because it leads to an unreasonable and strained con-
struction of the word “incidental.” Transcontinental Ins. Co.
v. Wash. Pub. Utils. Dists. Util. Sys., 111 Wn.2d 452, 457,
2
McDonald Indus., Inc., 95 Wn.2d at 914; Transamerica Ins. Group, 92
Wn.2d at 25; Fiscus Motor Freight, Inc. v. Universal Sec. Ins. Co., 53
Wash. App. 777, 770 P.2d 679 (1989).
3
The Washington Supreme Court has acknowledged that there exists a
“a split of authority as to whether ‘loading and unloading’ extends cover-
age to include that time when the goods are ‘at rest’ or until there is a
completed operation.’ ” McDonald Indus., Inc. v. Rollins Leasing Corp.,
95 Wn. 2d 909, 914, 631 P.2d 947 (1981); see also Transamerica Ins.
Group, 92 Wn.2d at 25. The district court erred in adopting a definition
most favorable to the insured because we do not apply the contra-insurer
rule of interpretation where the insured or its broker has drafted the ambig-
uous language, which was what occurred in this case. See Travelers
Indem. Co. v. United States, 543 F.2d 71, 74 (9th Cir. 1976) (stating that
the rule of strict construction “has no applicability when the language is
supplied by the insured, his agent or his broker”).
SENTRY SELECT INS. v. ROYAL INSURANCE 3919
760 P.2d 337 (1988) (“[A] policy should be given a practical
and reasonable interpretation rather than a strained or forced
construction that leads to an absurd conclusion, or that renders
the policy nonsensical or ineffective.”).
Kelly-Ryan’s suggested definition of “incidental” is also
inconsistent with the ordinary meaning of that term. Black’s
Law Dictionary defines “incidental” as “[d]epending upon or
appertaining to something else as primary, something neces-
sary, appertaining to, or depending upon another, which is
termed the principal; something incidental to the main pur-
pose.” Black’s Law Dictionary 686 (5th ed. 1979). Webster’s
similarly defines “incidental” as “[s]ubordinate, nonessential,
or attendant in position or significance: as a: occurring merely
by chance or without intention or calculation . . . b: being
likely to ensue as a chance or minor consequence.” Webster’s
Third New International Dictionary 1142 (1986). The activi-
ties subsequent to the transfer of the prefabricated house to
the house mover — driving the house mover over a mile
inland, dispatching a crew to accompany the mover and
secure the route, coordinating the depowering of multiple
power lines, and unloading the house from the house mover
to the construction site — cannot possibly be considered
“chance or minor consequence[s]” dependent upon or inci-
dental to the “main purpose” of the transfer of the house from
the barge to the house mover.
IV. CONCLUSION
Because the Big Shield policy, even with the MEL endorse-
ment, is not a marine insurance policy over which admiralty
jurisdiction extends, we reverse the district court’s summary
judgment in favor of Royal on uberrimae fidei. Federal law
does not apply to Kelly-Ryan’s claim for indemnity against
Royal. Applying Washington State law, we decline to void
the MEL endorsement because Royal has failed to demon-
strate that Kelly-Ryan acted with the requisite “intent to
deceive” in negotiating and applying for that endorsement.
3920 SENTRY SELECT INS. v. ROYAL INSURANCE
However, Royal is not obligated to provide indemnity for
Okada’s injuries because the accident that caused those inju-
ries was not an event covered by the MEL endorsement or by
the Big Shield policy.
The parties shall each bear their own costs for this appeal.
The district court’s summary judgment in favor of Royal is
AFFIRMED.