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St. Paul Fire & Marine Insurance Co. v. Abhe & Svoboda, Inc.

United States District Court, D. Minnesota

May 24, 2017

St. Paul Fire & Marine Insurance Company, Plaintiff,
v.
Abhe & Svoboda, Inc., Defendant.

          Daniel A. Haws, Esq., and John Paul J. Gatto, Esq., HKM Law Group, and James W. Carbin, Esq., and P. Ryan McElduff, Esq., Duane Morris LLP, counsel for Plaintiff.

          Christopher L. Lynch, Esq., and Thomas C. Mielenhausen, Esq., Barnes & Thornburg LLP, counsel for Defendant.

          MEMORANDUM OPINION AND ORDER

          DONOVAN W. FRANK United States District Judge

         INTRODUCTION

         The plaintiff-insurer filed a complaint seeking a declaration that it was not obligated to cover the defendant-insured's claim for damages arising from its barge sinking. The plaintiff moved for summary judgment and to strike certain claims. (Doc. No. 69.) The defendant moved for partial summary judgment. (Doc. No. 84.) For the reasons outlined below, the Court grants in part and denies in part the plaintiff's motion, and the Court grants the defendant's motion.

         BACKGROUND

         I. Factual Background

         Plaintiff St. Paul Fire & Marine Insurance Company (“St. Paul Fire”) filed a complaint seeking a declaration that it was not obligated to cover the losses of Defendant Abhe & Svodoba, Inc. (“ASI”). ASI is a Minnesota company that repairs and paints “industrial structures, communication towers, dams, bridges and other infrastructure.” (ASI.'s Partial MSJ Br. at 2.)[1]

         In May 2010, ASI was hired to repair and paint Pell Bridge over the Narragansett Bay in Rhode Island. (Id.) In August 2010, ASI chartered two “dumb”[2] barges from Sterling Equipment, Inc. As part of the charter, ASI was required to have the barges professionally surveyed and to repair anything identified by the survey. As relevant here, the survey found that barge SEI-34 (the “Barge”) had “numerous small wastage pinholes about the deck.” (Doc. No. 109 ¶ 16, Ex. 15.) The survey did not recommend any repairs. St. Paul Fire & Marine Ins. Co. v. Abhe & Svoboda, Inc., 798 F.3d 715, 717 (8th Cir. 2015).

         In May 2011, ASI applied to St. Paul Fire for insurance for the Barge (and other ships). St. Paul Fire issued a Marine Hull (generally, the “Hull Policy”) and Protection and Indemnity Policy (generally, the “P&I Policy”) effective July 1, 2011, through July 1, 2012. On October 29, 2011, a severe nor'easter rolled through the Newport area. During the storm, the Barge sank.

         Shortly after the sinking, the Coast Guard informed ASI that the Coast Guard would federalize the wreck if ASI did not remove the wreck by a certain deadline. ASI notified St. Paul Fire. ASI then contacted Donjon Marine Co., Inc.-a marine salvage company-to negotiate a contract to remove the sunken barge. Before the contract was finalized, St. Paul Fire took over the negotiations for the final version. On December 9, 2011, Donjon raised the Barge along with any equipment still attached to it, but Donjon refused to collect any equipment that had fallen off. With the Coast Guard's deadline quickly approaching, ASI hired a second company to remove the equipment.

         Donjon was not fully paid for its work and filed for arbitration. In the arbitration, ASI counterclaimed for the added removal costs caused by Donjon abandoning the project. ASI tendered the defense of the arbitration, but St. Paul Fire denied coverage. ASI ultimately prevailed in the arbitration and recovered some of its costs.

         II. Procedural History

         On June 20, 2012, while the arbitration with Donjon was ongoing, St. Paul Fire filed a complaint seeking declaratory relief. (See Doc. No. 1.) ASI filed four counterclaims, including one that alleged St. Paul Fire negligently negotiated the salvage contract with Donjon.

         On February 28, 2014, St. Paul Fire moved for summary judgment on a number of grounds, including that ASI violated its duty of utmost good faith by failing to disclose the survey of the Barge. On April 29, 2014, Judge Paul A. Magnuson granted summary judgment for St. Paul Fire finding that the insurance policy was void ab initio due to ASI's failure to disclose the survey. (Doc. No. 143 at 7-9.) ASI appealed. (Doc. No. 145.) The Eighth Circuit concluded that a genuine issue of material fact remained regarding whether St. Paul Fire actually relied on ASI's failure to disclose the survey. (Doc. No. 152 at 11.) The Eighth Circuit remanded the case for further proceedings.

         On remand, the parties identified the remaining issues from their motions. Left from ASI's motion for partial summary judgment is whether the P&I Policy contained an express warranty of seaworthiness. Left from St. Paul Fire's motion are the following issues: (1) if the P&I Policy contained an express warranty of seaworthiness, then whether the Barge was seaworthy; (2) whether ASI is collaterally estopped from seeking damages from St. Paul Fire because the arbitrator already found those damages were not recoverable from Donjon; (3) assuming that St. Paul Fire negligently negotiating the Donjon contract, whether St. Paul Fire could be the legal cause of ASI's damages from Donjon breaching the contract; (4) whether ASI is entitled to a jury for any of its claims; and (5) whether ASI can seek its attorney fees for defending this action.

         DISCUSSION

         I. Legal Standard

         Summary judgment is appropriate if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Courts must view the evidence, and the inferences that may be reasonably drawn from the evidence, in the light most favorable to the nonmoving party. Weitz Co., LLC v. Lloyd's of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed ...


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