Atl. Specialty Ins. Co. v. Coastal Envtl. Grp., Inc.
945 F.3d 53
| 2d Cir. | 2019Background
- Atlantic issued a hull and protection & indemnity policy to Coastal and agreed on April 5, 2013 to add the spud barge MIKE B to coverage based on a charter agreement listing a Brooklyn job site; binding occurred before a full on-hire survey.
- Coastal chartered the MIKE B from Sterling to support crane work at Coney Island’s Steeplechase Pier; the barge was spudded alongside the pier on April 11–12, 2013.
- On April 12, unusually rough seas (disputed but found to be ~4–6 ft) led to a bent spud, failed spud well, water ingress, and eventual sinking of the MIKE B; Coastal salvaged the crane and later allowed the barge to sink and be scrapped.
- Atlantic denied coverage and sued for a declaratory judgment contending the policy was void ab initio (breach of uberrimae fidei and warranties of seaworthiness) or that the loss was not a covered peril; Coastal counterclaimed for policy proceeds and related damages.
- Bench trial was held before Judge Wexler, who died before issuing findings; Judge Azrack, the successor judge, certified familiarity with the record under Rule 63, declined to recall witnesses (no party requested mandatory recall), issued findings for Coastal, and entered judgment.
- On appeal Atlantic challenged: (a) the standard of review for successor judge findings, (b) refusal to recall witnesses, (c) findings on nondisclosure/uberrimae fidei, seaworthiness, peril of the sea, and damages and evidentiary rulings.
Issues
| Issue | Plaintiff's Argument (Atlantic) | Defendant's Argument (Coastal) | Held |
|---|---|---|---|
| Standard of review for successor judge’s factual findings | Successor judge (Azrack) did not preside at trial, so her fact findings should get de novo review | Findings by successor judge who certifies familiarity with the record are factual findings entitled to the Rule 52(a)(6) "clearly erroneous" standard | Court: Apply clear-error review under Rule 52(a)(6); affirmed Azrack’s findings |
| Obligation to recall witnesses under Fed. R. Civ. P. 63 | Azrack should have recalled key witnesses (e.g., Gundersen) before issuing findings | Rule 63 obligates the successor judge to recall witnesses only if a party requests it; discretionary otherwise | Court: No independent duty to recall; Atlantic did not make a mandatory recall request; no error |
| Uberrimae fidei / material nondisclosure (location and condition) | Coastal failed to disclose material facts: (1) barge would operate on ocean-facing side; (2) barge was extensively corroded — so policy void | Coastal disclosed the Brooklyn job site and provided survey material (some later); insurer accepted risk when it bound coverage | Court: No clear error — Coastal disclosed location within policy navigation limits; no proof Coastal knew and withheld material defects before binding coverage |
| Seaworthiness (express and implied warranties) | MIKE B was unseaworthy and insurer met burden to prove unseaworthiness | Presumption of seaworthiness; insurer bears burden to prove unseaworthiness; evidence supports seaworthiness and reasonable contingency plans | Court: Insurer bears burden; district court’s credibility choices and findings that MIKE B was seaworthy were not clearly erroneous |
| Peril of the sea / proximate cause of loss | Loss caused by unseaworthiness, not an extraordinary sea peril; Gundersen’s deposition was unreliable | Credible evidence (witnesses, expert modeling) showed unexpectedly violent seas caused spud failure; peril of the sea covers fortuitous severe sea action | Court: Findings that 4–6 ft seas were proximate cause and that loss fell within "perils of the sea" are supported and not clearly erroneous |
| Damages and evidentiary authenticity | Damages (pier repair with withheld contract payments, salvage) rest on unauthenticated invoices/summary; policy excludes contractual liabilities | Withheld payments were for repairs caused by the barge (covered loss); claim materials and invoices were authentic, available earlier to Atlantic, and admissible | Court: District court did not abuse discretion admitting/crediting claim materials; damages award affirmed |
Key Cases Cited
- Anderson v. City of Bessemer City, 470 U.S. 564 (1985) (articulates deferential "clearly erroneous" standard for appellate review of factual findings)
- Mobil Shipping & Transp. Co. v. Wonsild Liquid Carriers Ltd., 190 F.3d 64 (2d Cir. 1999) (discusses standards for appellate review of bench-trial findings)
- Puritan Ins. Co. v. Eagle S.S. Co. S.A., 779 F.2d 866 (2d Cir. 1985) (materiality and reliance elements for breach of uberrimae fidei)
- Fireman’s Fund Ins. Co. v. Great Am. Ins. Co., 822 F.3d 620 (2d Cir. 2016) (uberrimae fidei doctrine summarized)
- Knight v. U.S. Fire Ins. Co., 804 F.2d 9 (2d Cir. 1986) (binding of coverage ends insurer’s right to claim nondisclosure)
- Mergentime Corp. v. Washington Metro. Area Transit Auth., 166 F.3d 1257 (D.C. Cir. 1999) (Rule 63 recall obligations and successor-judge issues)
- R.T. Jones Lumber Co. v. Roen S.S. Co., 270 F.2d 456 (2d Cir. 1959) (definition and scope of "perils of the sea")
- Allen N. Spooner & Son, Inc. v. Connecticut Fire Ins. Co., 314 F.2d 753 (2d Cir. 1963) (sea swells as peril of the sea)
- Cont’l Ins. Co. v. Hersent Offshore, Inc., 567 F.2d 533 (2d Cir. 1977) (peril of the sea and vessel-character analysis)