Filed: Jun. 26, 2014
Latest Update: Mar. 02, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1495 AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, INC., Plaintiff - Appellant, v. DANN OCEAN TOWING, INC., in personam; THE TUG CAPTAIN DANN, in rem; DANN TOWING COMPANY, Defendants - Appellees. Appeal from the United States District Court for the District of Maryland, at Baltimore. Catherine C. Blake, District Judge. (1:08-cv-02195-CCB) Argued: May 13, 2014 Decided: June 26, 2014 Before WILKINSON, K
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1495 AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, INC., Plaintiff - Appellant, v. DANN OCEAN TOWING, INC., in personam; THE TUG CAPTAIN DANN, in rem; DANN TOWING COMPANY, Defendants - Appellees. Appeal from the United States District Court for the District of Maryland, at Baltimore. Catherine C. Blake, District Judge. (1:08-cv-02195-CCB) Argued: May 13, 2014 Decided: June 26, 2014 Before WILKINSON, KE..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1495
AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY
ASSOCIATION, INC.,
Plaintiff - Appellant,
v.
DANN OCEAN TOWING, INC., in personam; THE TUG CAPTAIN DANN,
in rem; DANN TOWING COMPANY,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Catherine C. Blake, District Judge.
(1:08-cv-02195-CCB)
Argued: May 13, 2014 Decided: June 26, 2014
Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Judge Wilkinson and Judge Diaz joined.
ARGUED: David H. Fromm, BROWN GAVALAS & FROMM LLP, New York, New
York, for Appellant. Allen K. von Spiegelfeld, BANKER LOPEZ
GASSLER, PA, Tampa, Florida, for Appellees. ON BRIEF: Patrick
R. O'Mea, BROWN GAVALAS & FROMM LLP, New York, New York, for
Appellant. James W. Bartlett, III, Alexander M. Giles, SEMMES,
BOWEN & SEMMES, Baltimore, Maryland, for Appellees.
BARBARA MILANO KEENAN, Circuit Judge:
In this appeal, we consider whether the district court
erred in concluding that a choice-of-law provision in a maritime
insurance contract required use of New York’s six-year statute
of limitations, rather than the equitable doctrine of laches
ordinarily applied under maritime law, to determine the
timeliness of certain claims brought under the insurance
contract. Upon our review, we hold that the district court
properly determined that the choice-of-law provision in the
parties’ contract required application of New York’s statute of
limitations to the claims at issue. Therefore, we affirm the
district court’s judgment.
I.
The American Steamship Owners Mutual Protection and
Indemnity Association, Inc. (the Club) is a non-profit provider
of protection and indemnity insurance, which insurance covers
vessel owners and charterers against third-party liabilities
arising from the ownership and operation of insured vessels.
Members of the Club pay insurance premiums and assessments,
which the Club uses to reimburse members for covered losses.
The Club issues to each of its members a Certificate of Entry,
which reflects that the member has entered into a marine
2
insurance contract with the Club subject to the Club’s By-Laws
and Rules (Rules).
The Club’s Rules include a choice-of-law provision
selecting New York law and a two-year statute of limitations for
claims against the Club, in addition to requirements for
exhausting insurance disputes and selecting a forum for
litigation. The relevant section of the Rules reads as follows:
If any difference or dispute shall arise between a
Member and the [Club] concerning the construction of
these Rules, or the insurance afforded by the [Club]
under these Rules, or any amount due from the [Club]
to the Member, such difference or dispute shall in the
first instance be referred to and adjudicated by the
Board of Directors. No Member shall be entitled to
maintain any action, suit or other legal proceedings
against the [Club] upon any such difference or dispute
unless and until the same has been submitted to the
Directors and they shall have given their decision
thereto, or shall have been in default for three
months in so doing. These Rules and any contract of
insurance between the [Club] and a Member shall be
governed by and construed in accordance with the law
of the State of New York. In no event shall suit on
any claim be maintainable against the [Club] unless
commenced within two years after the loss, damage or
expense resulting from liabilities, risks, events,
occurrences and expenditures specified under this Rule
shall have been paid by the Member. Any such suit
against the [Club] shall be brought in the United
States District Court for the Southern District of New
York. (Emphasis added.)
Dann Ocean Towing, Inc. (Dann) was a member of the Club
between 1995 and 2001. Dann obtained insurance through the Club
for a tugboat, which damaged a barge when the tugboat ran
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aground on a coral reef in 1998. The barge’s owner asserted a
claim against Dann for property damage, and the United States
asserted a claim against Dann for environmental damage to the
reef. Dann settled both parties’ claims in November 2001 for a
total amount of $2,170,000.
The Club originally agreed to contribute $1,170,000 toward
the settlement. However, one of the underwriters for Dann’s
liability insurance became insolvent and could not pay its
portion of the settlement, in the amount of $278,552.55 (the
shortfall). Although both Dann and the Club denied
responsibility for the shortfall, the Club paid the shortfall to
preserve a settlement offer that it considered “extremely
favorable,” but indicated that the Club would seek reimbursement
from Dann.
Dann refused to reimburse the Club for the shortfall. In
response, the Club declined to reimburse Dann for certain
insurance claims that otherwise would have been payable to Dann,
and withheld a total amount of $131,085.43 in covered losses
that the Club later used to offset the shortfall. Thereafter,
Dann refused to pay its insurance premiums to the Club for the
policy years 1999, 2000, and 2001. The total amount of Dann’s
unpaid premiums was $452,610.23.
In August 2008, the Club filed a civil action against Dann
and the tugboat, alleging that Dann breached the insurance
4
contract by failing to reimburse the Club for the shortfall and
by failing to pay the overdue insurance premiums. Dann filed a
counterclaim against the Club, alleging that the Club breached
the insurance contract by failing to indemnify Dann for covered
losses. The Club and Dann each alleged that the respective
claims against them were time-barred, posted $500,000 bonds as
security and counter-security for the various claims, 1 and filed
cross-motions for summary judgment.
In August 2010, the district court initially ruled that the
equitable doctrine of laches, rather than New York’s six-year
statute of limitations for contract claims, governed the
timeliness of the Club’s claims against Dann. The court found
that all the Club’s claims, except one involving an unpaid
insurance premium in the amount of $76,925.56, accrued more than
six years before the Club filed suit. In its laches analysis,
the court concluded that the Club’s claim relating to the
shortfall was not barred because the Club’s delay in filing suit
was reasonable, in that the Club made various out-of-court
attempts to obtain reimbursement from Dann and the delay did not
prejudice Dann.
1
Dann posted a $500,000 vessel release bond as security for
the claims against the tugboat, and the Club posted a $500,000
bond as counter-security for Dann’s claims.
5
In May 2012, however, upon further briefing by the parties,
the district court reconsidered its ruling. The court observed
that although there is a “typical presumption that courts
sitting in admiralty jurisdiction apply the equitable doctrine
of laches rather than a specific statute of limitations,” the
choice-of-law clause in the parties’ contract “compels the
application of the elected jurisdiction’s statute of
limitations.” Accordingly, the district court held that “claims
arising from the maritime insurance contract between [Dann] and
the Club are subject to New York’s six-year statute of
limitations,” which barred all the Club’s claims except for the
one concerning the $76,925.56 premium.
Because the parties’ contract expressly provided that
claims brought against the Club were subject to an even shorter
two-year limitation, the court ruled that Dann’s indemnity
claims against the Club were time-barred under the parties’
contract, but that those claims could be employed defensively
under the doctrine of recoupment to offset the entirety of the
Club’s surviving claim for the $76,925.56 unpaid insurance
premium. Thus, although the court granted summary judgment to
the Club on its surviving unpaid insurance claim and dismissed
the parties’ other claims, the court ultimately held that
“neither party can recover against the other,” granted Dann’s
motion to reduce the amount of its bond from $500,000 to
6
$100,000, and directed that the case be closed. The Club timely
appealed.
II.
We consider on appeal whether the district court erred in
concluding that the timeliness of the Club’s contract claims
against Dann is governed by New York’s six-year statute of
limitations for contract actions, based on the parties’
agreement that the insurance contract “shall be governed by and
construed in accordance with the law of the State of New York.”
The Club contends that because this case arises under admiralty
jurisdiction, the district court was required to apply the
doctrine of laches as the procedural law of the maritime forum,
rather than New York’s statute of limitations. We disagree with
the Club’s argument.
Laches is an equitable doctrine that can be raised by a
defendant as an affirmative defense to a claim, and requires
that the defendant show “(1) lack of diligence by the party
against whom the defense is asserted, and (2) prejudice to the
party asserting the defense.” Giddens v. Isbrandtsen Co., 355
F.2d 125, 127 (4th Cir. 1966) (citation and internal quotation
marks omitted). In assessing the timeliness of a maritime
claim, the doctrine of laches typically applies rather than any
fixed statute of limitations. See
id. at 126-27. However,
7
there are many examples of exceptions to this general rule, such
as statutory provisions that impose time bars on personal injury
actions arising out of maritime torts, see 46 U.S.C. § 30106, on
certain cargo loss contract claims under the Carriage of Goods
by Sea Act, see 49 Stat. 1207, 1209 (1936) (codified at 46
U.S.C. § 30701 note), and on maritime salvage actions, see 46
U.S.C. § 80107(c).
In this case, the district court ultimately agreed with
Dann that parties to a maritime insurance contract may elect to
avoid the doctrine of laches by including in their contract an
enforceable choice-of-law provision that requires application of
another jurisdiction’s law and, implicitly, that jurisdiction’s
statute of limitations. The court based its analysis on two
cases, namely, Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151
(11th Cir. 2009), and Italia Marittima, S.P.A. v. Seaside
Transportation Services, LLC,
2010 WL 3504834 (N.D. Cal. Sept.
7, 2010) (unpublished).
In Cooper, the Eleventh Circuit considered a claim for
indemnification and contribution brought by a ship owner against
a ship builder for injuries sustained by a worker on the ship.
The parties’ contract provided that “all disputes arising out of
or in connection with [the contract] . . . shall be construed in
accordance with and shall be governed by the Dutch law.” 575
F.3d at 1162. The court held that this provision was “clearly
8
meant to be read broadly” and that the parties’ choice of Dutch
law governed not only the timeliness of pure contract claims,
but also the timeliness of the indemnification and contribution
action for related tort claims. Id.
Similarly, in Italia Marittima, a district court considered
claims for negligence and breach of contract arising from the
performance of stevedoring services aboard a vessel that
sustained a loss of cargo during inclement weather.
2010 WL
3504834, at *1-3. The court held that California’s statutes of
limitations applied to both the breach of contract claims and
the negligence claims based on a choice-of-law provision in the
parties’ contract stating that the contract “shall be construed,
interpreted and enforced in accordance with the laws of the
State of California without reference to the laws of any other
jurisdiction, except to the extent that the laws, rules and
regulations of the United States of America shall apply.”
Id.
at *8. Because the choice-of-law clause clearly “promote[d]
California law,” and because laches is a common law doctrine
rather than codified federal law, the court reasoned that the
contract required application of California’s statutes of
limitations.
Id.
We do not discern any contrary authority preventing a
federal court sitting in admiralty from enforcing a valid
choice-of-law provision in a maritime contract incorporating a
9
statute of limitations, in place of the traditional doctrine of
laches. Accordingly, we agree with the district court, and with
the reasoning of the decisions in Cooper and Italia Marittima,
that an otherwise valid choice-of-law provision in a maritime
contract is enforceable and may require application of a
jurisdiction’s statute of limitations, in lieu of the doctrine
of laches, to govern issues regarding the timeliness of claims
asserted under that agreement.
We find no merit in the Club’s alternative argument that
the decisions in Cooper and Italia Marittima are distinguishable
because, in contrast to the provision before us, the choice-of-
law clauses interpreted in those cases were sufficiently
detailed to incorporate the “procedural” rules in addition to
the “substantive” rules of the chosen jurisdictions. Even
assuming that New York’s statute of limitations constitutes a
“procedural” rule of law in this context, the Club’s argument is
unpersuasive because, under New York law, we must accord
unambiguous provisions of an insurance contract their plain and
ordinary meaning. See, e.g., White v. Cont’l Cas. Co., 878
N.E.2d 1019, 1021 (N.Y. 2007). The plain language of the
contract before us unambiguously provides that the contract
shall be “governed by” New York law. This phrase clearly
signals the parties’ intent that, subject to any exceptions
stated in the contract, New York law will be applied as
10
“governing” the timeliness of claims asserted under the
contract. Because the claims at issue in this case are
contractual in nature and are not subject to the stated
exception for claims brought against the Club, the parties’
choice-of-law clause amply encompasses the present claims.
Thus, the plain language of the parties’ contract fails to
contain any indication that the parties intended to preserve
application of the doctrine of laches for any claims brought
under the contract.
Additionally, even if we were to assume, without deciding,
that the choice-of-law provision is ambiguous regarding the
parties’ intent to incorporate New York’s statute of limitations
for contract actions, we would, under basic principles of
contract interpretation, resolve any such ambiguity against the
insurer and in favor of the insured party. See id. (stating
that if the terms in an insurance contract are ambiguous, any
ambiguity must be construed in favor of the insured and against
the insurer); see also McCarthy v. Am. Int’l Grp., Inc.,
283
F.3d 121, 124 (2d Cir. 2002) (observing that under New York law,
courts construe ambiguities in insurance contracts against the
drafter). Here, it is undisputed that the Club, as insurer,
supplied Dann with the contract of insurance and drafted the
Rules governing the parties’ insurance contract. Therefore, we
construe any ambiguity regarding the intended breadth of the
11
choice-of-law provision against the Club and in favor of
applying New York’s statute of limitations to the Club’s claims
against Dann.
III.
Accordingly, we hold that the district court correctly
applied New York’s six-year statute of limitations to the Club’s
claims arising under its maritime insurance contract with Dann.
We therefore affirm the district court’s judgment. 2
AFFIRMED
2
In affirming the district court’s judgment, we also affirm
the court’s decision granting Dann’s motion to reduce the amount
of its bond. Although Dann requested in its brief that we
discharge the bonds posted by both parties, we do not address
this issue because Dann did not seek a full discharge of the
bonds from the district court in the first instance, and did not
appeal the district court’s order. Therefore, Dann’s request
for relief is not properly before us on appeal.
12
