OPINION AND ORDER
On August 20, 2009, оne of the world’s largest drydocks, the AFDB-5 (the “Dry-dock”), sank at its berth in calm waters in Port Arthur, Texas. Fireman’s Fund Insurance Company (“FFIC”), One Beacon
I. Background
A. Factual Background
The following facts are drawn from the parties’ Local Civil Rule 56.1 Statements and other submissions made in connection with the instant motions. They are undisputed unless otherwise indicated.
1. Signal
Signal is a marine repair and fabrication company that came into existence in 2003 when it purchased the offshore repair division of Friede Goldman Halter in bankruptcy. The division consisted of six facilities in Mississippi and Texas, including a dockyard in Port Arthur, Texas (“dockyard”). Initially, Signal was predominantly involved in the repair, upgrade, and conversion of offshore drilling rigs. In 2006, it expanded its business model to include marine fabrication — performing new construction from engineering plans. By 2009, more than sixty percent of its revenue was derived from new construction projects. In 2010, Signal entered the ship repair business by purchasing the assets of Bender Shipbuilding in Alabama.
2. The Life and Death of a Drydock
In connection with its 2003 asset purchase, Signal assumed a lease with the Port Arthur Navigation District Industrial Development Corporation (“PANDIDC”) to operate the AFDB-5 drydock at the Port Arthur dockyard. The Drydock was built by the United States Navy during World War II for the purpose of repairing naval vessels, and acquired by the Port of Port Arthur (“Port”) in 1984. Later that year, the Port entered into a Lease Agreement to lease the dockyard from the City of Port Arthur (“City”) and assigned its leasеhold interest to PANDIDC, which contemporaneously entered into a Project Agreement with Bethlehem Steel Corporation (“Bethlehem”) for the latter to operate the Drydock at the dockyard. Under the Project Agreement, the Drydock operator — first Bethlehem, and ultimately Signal — assumed all of the Port’s obligations under the Lease Agreement. The Lease Agreement was for a term of twenty-five years, with an option for the operator to renew for another twenty-five years provided it gave two years’ notice to PANDIDC, the Port, and the City.
The Drydock consisted of eight pontoons designated “A” through “H.” Each pontoon was 240 feet long, 101 feet wide, and twenty-three and a half feet deep, with a fixed wing wall at one end and a removable wing wall at the other. The wing walls rose 48 feet above a pontoon deck, and each had a watertight level called the safe
Signal became aware soon after acquiring the Drydock that it was nearing the end of its useful life and in need of serious renovation.
Consistent with, this observation is an April 2003 staff study conducted by Signal to determine whether it would be economically justifiable to purchase the Drydock from the Port. On the one hand, if Signal
In a subsequent C & V survey dated September 2003, ABS observed that Pontoon H was “the most deteriorated pontoon” and had “very serious hull leakage,” such that pumps were used constantly to maintain ballast levels. (Zacharow Decl., Ex. 6 (“Sept.2003 ABS Survey”) at 5.) The survey went on to state that since ABS’s January 2000 recommendation, “no major, permanent, hull plating repairs have been accomplished,” and “even with the repairs and maintenance that have been done, the overall rate of drydock deterioration appears to be progressing at an ever increasing rate,” such that “the drydock is now well past the point where a major restoration effort would be economically practical.” (Id. at 7.) “At the time of inspection, repair personnel were actively looking for deck fractures over pontoon machinery areas and were affixing doublers as necessary,” and “due largely to excessive leakage in ‘H’ pontoon, it appeared that unsafe drydock operations were being conducted and ... that it [was] the Operator’s intention to continue the same.” (Id. at 5-6 (emphasis in original).) The survey concluded by “highly recommending] that drydock Owners advise Operators not to conduct additional drydockings until substantial repairs are made to the ‘H’ pontoon and the repairs are verified.” (Id. at 6 (emphasis removed).) In light of the survey’s conclusions, PANDIDC held an emergency meeting on September 30, 2003 to address the Drydock’s condition. As a result of that meeting, Signal and PANDIDC entered into an agreement whereby Signal made various commitments, including that it would remove the Drydock from service no later than October 2003 to perform the repairs mentioned in the survey. (Zacharow Deck, Ex. 9.)
In March 2005, Signal purchased the Drydock from the Port for $10 pursuant to a Conditional Bill of Sale. (Zacharow Deck, Ex. 19 (“CBOS”).) Under the CBOS, Signal continued to bear the burden of disposal and was required to make payments to PANDIDC in varying amounts depending upon Drydock usage. However, its obligations to make such payments ceased “at the end of the useful life” of the Drydock. (Id.) It also now paid rent under the Lease Agreement to the Pleasure Island Commission (“PIC”), an arm of the City.'
In December 2005, marine surveyors Dufour, Laskey, and Strauss (“DLS”) issued a report finding that the Drydock “had significant water in most compart
In 2007, Signal began investigating alternatives to extend the useful life of the Drydock. In February, its docking master, Jim Booker, contacted Heger about replacing the pontoons two at a time and refurbishing the wing walls. Heger subsequently conducted an inspection of the wing walls to determine whether they were suitable for refurbishment and issued a report in May 2007. That report concluded that the wing walls were in “fair to poor” condition and the ballast tanks and safety tanks had lost their protective coating and needed to be repainted; otherwise, any attempt to continue using the wing walls “would result in an extremely limited useful life for the wings.” (Zacharow Deck, Ex. 24 (“May 2007 Heger Report”) at 31.) In a report issued, in June 2007, Heger observed that “[p]ontoon sections E, F, G, and H are in, very poor condition throughout and need complete replacement if long term use is to be considered,” and recommended that Signal build new pontoons as “repair of the pontoons is not economically justifiable.” (Zacharow Deck, Ex. 25 (“June 2007 Heger Report”) at 28, 32.) In July, in response to an inquiry from Signal about what repairs were necessary for the Drydock’s continued safe operation, Heger reiterated that the deck plate for the pontoons needed to be replaced and observed that, in addition to other issues requiring repair, the “[p]ontoon deck is extremely thin with many holes and cracks” and “[a] blow out ... could rapidly flood the machinery compartment.” (Zacharow Deck, Ex. 27 at 2-3.)
On September 24, 2007, two days before expiration of the Lease Agreement, Signal sent a letter to PANDIDC, the Port, and PIC indicating its desire to renew. • However, citing the fact that the Drydock was approaching “the end of its useful life and ... [would] likely not be operational for the entirety of the renewal period,” Signal rejected the twenty-five year renewal term and proposed a term that would automatically expire “in the event that the Drydock must be disposed of prior to the current expiration of the renewal period and a suitable dry dock cannot be obtained.” (Dkt. No. 250, Ex. 7.) In October 2007, DLS issued a C & V survey that essentially parroted the observations in its 2005 and 2006 surveys, but concluded that the Drydock was in “satisfactory” rather than fair condition, and recommended that the pontoons be drydocked and repaired “[a]s soon as practical within the succeeding eighteen months ... in order to render
In May 2008, having determined that it would not be economically feasible to replace the pontoons, Signal proposed a plan to Heger to extend the Drydock’s life by removing the two worst pontoons — H and E — and converting the Drydock to a 6-pontoon configuration. Heger stated that this configuration would not be stable without certain modifications and reiterated that “it is our opinion that all sections need major repair work before they can be safely used,” and therefore “[a]ny designs we perform will be provided with the understanding that the dock will no[t] be operated with our ‘blessing’ unless all sections are repaired to our satisfaction.” (Zacharow Deck, Ex. 33 at 2.) On June 9, Heger provided Signal with design options for reconfiguring the Drydock to a 6- or 7-pontoon configuration. Signal directed Heger to develop the design for the 7-pontoon configuration, which called for the removal of Pontoon H, and began work on the project around December 2008.
In January 2009, Stephen Heller & Associates, Inc. (“Heller”) issued a 2009 Property Risk Assessment Report concluding that “the Signal International facilities reviewed are rated as an ‘Above Average’ risk.” (Dkt. No. 260 (“Morano Deck”), Ex. 2 (“2009 Heller Report”) at 8.) This was the second highest rating possible, defined as “[ajcceptable standards including some best industry practices.” (Id.) The report also described the risk of the Drydock becoming a total loss as one of “extremely low probability and frequency based on previous industry experience.” (Id. at 36-37.) In April 2009, Heger warned Signal that “it is imperative that all [pontoons] and original connection plates be adequately repaired according to our reports of May 18, 2007 ... and June 28, 2007” prior to reconfiguring the Dry-dock. (Zacharow Deck, Ex. 39 at 2.) Despite this warning, Signal proceeded to reconfigure the Drydock without making such repairs, beyond the continued periodic installation of new insert plates. (Straus Deck, Ex. 15 at 55:2-56:15; Ex. 23 at 207:15-208:7; Ex. 24 at 77:19-80:1, 102:13-23.)
In a letter dated August 12, 2009, PIC’s lawyers informed Signal that, because it was in default of the Léase Agreement for various reasons, PIC was exercising its contractual right to terminate, effective September 15, 2009, and demanding in accordance with the lease two years’ rent representing liquidated damages. On August 18, representatives from Signal and PIC signed a proposal for an extension of the lease, which reflected mutual agreement upon a six-year lease extension with specified annual rent, and two options to renew for additional six-year terms with rent to be determined. By its own terms, the proposal was “to be presented to each entity for approval” and PIC was to respond by September 3, 2009.
On August 20, 2009, Signal reached the point in the reconfiguration where it was ready to remove Pontoon H. Shortly before 3:00 p.m., it removed and drydocked Pontoon H on blocks situated on Pontoons G, F, and E.
3. The Policies and Underwriting Process
At the time of the sinking, Signal held five insurance policies that potentially pro
The PPI and EPI Policies insure loss or damage to real and personal property listed in a property schedule, as well as business interruption and “extra expenses.” Business interruption covers loss resulting from interruption or reduction of business operations due to loss or damage to insured property; extra expenses áre the reasonable and necessary costs incurred to temporarily continue the business pending recovery. The Pollution Policy provides coverage for pollution liability based upon discharges into navigable waters arising under the Oil Protection Act (“OPA”),'the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), the Federal Water Pollution Control Act (“FWPCA”), and corresponding state law. Pursuant to an endorsement, the policy also provides coverage for “the on-water removal of materials of a non-OPA and non-CERCLA nature which has been mandated by an authorized public authority and is the result of a defined single, sudden and accidental event.” (Dkt. No. 215, Ex. 4 (“Pollution Policy”) at GAI2279.) In addition to the Drydock,. the Pollution Policy covers the Dual Carrier, Signal’s fleet of twenty-five barges and tugs that were used in connection with its Drydock operations, and any vessels that were on the Drydock for business purposes.
Signal obtained these policies through its insurance broker, Willis of Alabama, Inc. (‘Willis”). From its inception, Signal insured its drydocks under its property insurance program. However, prior to soliciting property coverage from MSI, it attempted to obtain hull insurance on the Drydock in 2005. In connection with applications to Trident Marine (“Trident”) and FFIC, Willis submitted the 2002 Heger Report. Both underwriters singled out the report’s description of the poor condition of the pontoon deck plating and asked Willis if any work had been done. The FFIC underwriter stated that he would need a description of the repairs done or else he would “have a tough time convincing anybody that this is worth $5,000,000.” (Zacharow Decl., Ex. 15 at 2.) The Trident underwriter similarly remarked that “[w]e would need confirmation from the assured that [the pontoon deck of all sections and Pontoon H has been replaced or fixed] before we would commit to cover it.” {Id. at 4.) Willis indicated that Signal had “performed a great deal of work” but it did not know the specifics; offered to obtain a new C & V survey; and requested a quote assuming receipt of an acceptable survey. (Dkt. No. 215, Ex. 16 at 2.) The Trident underwriter responded that he “c[ould not] support any pricing without some feedback from the assured detailing what work had been done on the Drydock.” (Dkt. No. 215, Ex. 17 at 2 (emphasis added).)
Signal subsequently sought property insurance on the Drydock. In connection with the solicitation of coverage for the
Signal held pollution coverage with Great American beginning in 2004. In connection with its soliсitation of coverage for the 2009-10 year, Willis, on behalf of Signal, submitted a Vessel Pollution Liability Application and an attached Vessel Schedule. The Vessel Schedule identified the pieces for which Signal sought coverage, including the Drydock, and described, among other things, the age of each item. Willis did not submit any surveys or reports regarding the condition of the Dry-dock.
4. After the Sinking
The Drydock was declared a constructive total loss. Signal subsequently made demand upon its insurers and notified the Texas General Land Office (“GLO”) of the sinking. In a letter dated September 2, 2009, the GLO notified Signal that it had determined that the Drydock “could be a threat to health, safety, or welfare and a threat to the environment,” noted the potential consequences of abandonment, and inquired as to what actions Signal would take “to minimize pollution impacts to waters of the state.” (Dkt. No. 19, Ex. 5 (“Sept.2009 GLO Letter”).) The GLO cited as authority the Oil Spill Prevention Act of 1991 (“OSPRA”), which prohibits a person from leaving a wrecked structure in coastal waters if the GLO finds it to be involved in an actual or threatened discharge of oil; a threat to public health, safety, or welfare; a threat to the environment; or a navigation hazard. (Id. (citing Tex. Nat. Res.Code § 40.108).)
On September 8, Signal’s Chief Financial Officer, Chris Cunningham, sent a letter to PIC informing it that the Drydock had sunk, and because Signal would not be purchasing a replacement, it would not be entering into a new lease. Effective September 25, 2009, Signal and PIC executed a First Amendment and Lease and Release Agreement, which reflected Signal’s withdrawal of its September 24, 2007 notice of intent to renew; extended the lease for six months to March 25, 2010 for the purpose of removal and cleanup; and required Signal to pay PIC $800,000 for rent through March 25, 2010 and in resolution of its alleged breaches under the lease.
In January 2010, Westchester paid Signal the full $10 million coverage under the PPI Policy, without allocating the payment between coverage for the value of the Dry-dock and coverage for removal costs. MSI also eventually paid Signal $3.6 million less deductible as the remainder of the cash value of the Drydock. However, MSI and Great American took the position that their respective policies did cover removal costs. FFIC, as lead insurer for the liability policies, took the position that removal and cleanup were covered under the property and pollution policies, and if the liability policies responded at all, it was not until the other policies were exhausted or at least contributed. In due course, the
In late January 2010, Signal issued a request for best and final proposals for removal and cleanup of the Drydock, which provided that there were known and documented hazardous materials on the Drydock when it sank, including asbestos, transite, PCBs, and oil. In June 2010, Signal contracted with Weeks Marine, Inc. (“Weeks”) for the removal of the Drydock, including “possible friable asbestos containing materials, oils and/or petroleum products.” (Zacharow Decl., Ex. 66 at 14.) Weeks subcontracted ESCO Marine, Inc. (“ESCO”) to remove all hazardous materials and process them in accordance with regulatory requirements. Representatives of the GLO and the United States Coast Guard were present at the Drydock removal kick-off meeting on July 1, 2010 due to concerns over emissions of hazardous materials into the water. In connection with the project, ESCO removed and properly disposed of 70.5 fifty-five gallon drums of petroleum-based materials, 443,290 pounds of PCB bulk, 90,080 pounds of non-friable asbestos, and approximately 6.5 million pounds of contaminated soil.
The removal of the Drydock and cleanup of the location were completed by March 2012. Plaintiffs ultimately paid Weeks $12,395,026 on Signal’s behalf. In a letter dated March 5, 2012, the GLO informed Signal that “the sunken structure and all associated debris that could create a navigation or environmental hazard have been removed from Texas coastal waters,” and therefore the incident was closed. (Dkt. No. 225, Ex. 7 (“2012 GLO Letter”).)
B. Procedural Background
Plaintiffs initiated this action on March 2, 2010, invoking this Court’s admiralty jurisdiction and seeking declaratory relief. (Dkt. No. 1.) Signal subsequently filed crossclaims against MSI for failure to cover business interruption and extra expenses, and for mishandling its insurance claims in violation of state law. (Dkt. No. 79.)
On August 10, 2012, after discovery, Plaintiffs moved for summary judgment seeking a declaration that the EPI Policy must contribute on a prorated basis for removal and cleanup of the Drydock, and Signal moved for partial summary judgment seeking a declaration that the EPI Policy is not a maritime contract subject to uberrimae fidei (Dkt. Nos. 159 & 162.) On January 25, 2013, the Court held that because the Drydock was not a “vessel” under Lozman v. City of Riviera Beach, Fla., — U.S. -,
The eight pending motions relate exclusively to the Pollution and EPI Policies. With respect to the former, Plaintiffs and Signal jointly move for summary judgment seeking a declaration that the policy is not a maritime contract subject to uberrimae fidei, and is not otherwise void for misrepresentation, concealment, or material nondisclosure. (Dkt. No. 226.) Plaintiffs also independently move for partial summary judgment seeking a declaration that the policy covers removal of the Drydock. (Dkt. No. 230.) Great American cross-moves for summary judgment on the same issues. (Dkt. Nos. 242 & 244.) With respect to the EPI Policy, Signal moves for partial summary judgment seeking a declaration that the policy is not void for fraud, misrepresentation, concealment, or material non-disclosure, and MSI cross-moves for summary judgment on the same. (Dkt. Nos. 226 & 257.) MSI also moves for summary judgment to dismiss Signal’s business interruption crossclaim, and for an order reconsidering or altering this Court’s March 25 Order. (Dkt. Nos. 249 & 253.)
II. Legal Standards
A. Summary Judgment
Summary judgment is appropriate when “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 fact is material if it “might affect the outcome of the suit under the governing law,” Anderson v. Liberty Lobby, Inc.,
The initial burden of a movant on summary judgment is to provide evidence on each element of his claim or defense illustrating his entitlement to relief. Vt. Teddy Bear Co. v. 1-800 Beargram Co.,
A motion to alter judgment pursuant to Federal Rule of Civil Procedure 59(e) may be granted “only if the movant satisfies the heavy burden of demonstrating an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.” Hollander v. Members of the Bd. of Regents of the Univ. of the State of New York,
III. Discussion
A. The Pollution Policy
1. Admiralty Jurisdiction Over Marine Insurance
Article III, Section 2 of the Constitution vests federal courts with jurisdiction over “all Cases of admiralty and maritime Jurisdiction.” U.S. CONST, art. III, § 2, cl. 1; see also 28 U.S.C. § 1333(1) (granting federal district courts exclusive original jurisdiction over all civil admiralty and maritime cases). Pursuant to this grant, federal courts have developed decisional law governing maritime contracts. Norfolk S. Ry. Co. v. James N. Kirby, Pty. Ltd.,
Maritime contracts are those which “relate to the navigation, business or commerce of the sea.” Jeffcott v. Aetna Ins. Co.,
In conducting this conceptual inquiry, “[precedent and usage are helpful insofar as they exclude or include certain common types of contract.” Kossick,
Historically, admiralty jurisdiction existed over a contractual dispute only if the contract was “purely maritime” in nature. Sirius Ins. Co. (UK) Ltd. v. Collins,
2. The Doctrine of Utmost Good Faith
Marine insurance is “a contract uberrimae fidei, and the principles which govern it, are those of an enlightened moral policy.” McLanahan v. Universal Ins. Co.,
“A non-disclosed fact is material if it would have affected the insurer’s decision to insure at all or at a particular premium.” N.Y. Marine & General Ins. Co. v. Tradeline (L.L.C.),
Thus, what has generally been described as the “materiality” element consists of two questions, one objective, one subjective: (i) would a reasonable insured believe that the disclosure would be material to the insurer’s decision; and (ii) was the non-disclosure in fact material to the insurer’s decision?
3. The Threshold Inquiry
Prior to Kirby, courts in this Circuit were required to conduct a “threshold inquiry” to determine “whether the subject matter of the dispute is so attenuated from the business of maritime commerce that it does not implicate the concerns underlying admiralty and maritime jurisdiction.” Atl. Mut. Ins. Co. v. Balfour Maclaine Intern. Ltd.,
It would seem that if the inquiry continues to play a role, it must be as a useful tool in assessing whether the primary objective of the contract is maritime commerce, rather than an independent basis for declining jurisdiction. See Marubeni Int’l Petroleum (Singapore) Pte Ltd. v. Prestige Marine Servs. Pte Ltd.,
Here, too, the dispute concerns an insurance claim based on the loss of a drydock, located in navigable waters, which was designed for and predominantly engaged in the repair of vessels, a business that has “long been recognized as maritime.” Id. (citations omitted). It is therefore “fair to say” that when the Drydock sank, giving rise to a potential threat to the navigation and environment of commercial waters, it “became a casualty of the business of maritime commerce.” Id. (citation omitted).
4. The Pollution Policy is Marine Insurance
In its January 25 Order, the Court held that the PPI and EPI Policies were not maritime contracts because the “predominant item” insured — the Dry-dock — was not a vessel. Fireman’s Fund,
It does not follow that the vessel status of the Drydock is also dispositive of a policy that insures pollution liability arising out of Signal’s general business operations, rather than property damage or loss. On the contrary, the fact that a vessel was not involved in a dispute or is not the predominant object of a contract generally will not answer the jurisdictional question. See, e.g., Kirby,
i. Severability
As a preliminary matter, it is necessary to determine the scope of the inquiry. The Pollution Policy is clearly severable. The scheduled interests are listed separately and each has its own premium. See, e.g., Atl. Mut. Ins. Co. v. Balfour Maclaine Intern. Ltd.,
Under the traditional severability analysis, this Court would sever the Drydock coverage and consider it in isolation to determine whether maritime law governs its interpretation. “Yet Kirby by its terms requires analysis of the maritime contract as a whole.” Tradhol International, S.A. v. Colony Sugar Mills Ltd., No. 09 Civ. 0008KRJH),
Recognizing this problem, the Ninth Circuit has disavowed the severability exception in light of Kirby. See Sentry Select Ins. Co. v. Royal Ins. Co. of Am.,
This Court is also doubtful that the severability exception is not abrogated or at least altered by Kirby, since it too can lead to a spatial rather than conceptual focus. Indeed, if the incidental exception must be reformulated to the “principal or primary purpose exception” — which seems to be just another way of asking whether the “principal objective óf a contract is maritime commerce” — then it is hard to see why the severability exception should not also yield to this purposive inquiry. Notwithstanding these issues, because the exception remains the law of this Circuit, the Court proceeds to analyze the Drydock coverage as a separate component of the policy. See Tradhol,
ii. Folksamerica and Marine Pollution Insurance
The conclusion, though made, is in any event academic. Even when viewed in isolation, the Drydock coverage has a “genuinely salty” flavor. Kossick,
On appeal, the Second Circuit reversed, holding that the policy was marine insurance because its principal objective was to establish marine insurance. With respect to the CGL section, the Court was mindful of developments in industry practice, recognizing that “[w]hile CGL insurance originally may not have been intended to serve as marine insurance, the far flung activities of major corporate insureds has brought a number of maritime exposures within its scope,’’ and “[issuance of CGL-like insurance policies to maritime busi
The pollution coverage was one aspect of the section that was “decidedly marine.” Id. at 323. “Pollution coverage is widely recognized as marine in nature,” particularly since “some level of pollution coverage is often included in [traditional marine] P & I insurance policies.” Id. at 321 (citations omitted). As “[i]t became obvious to the petroleum and tanker trades ... that extraordinary sources of financial protection would be necessary to meet the increasingly prohibitive costs of pollution clean-up and remediation activities,” “[standard CGL policies include[d] a pollution exclusion clause,” but some policies offered a limited “buy back” provision for reinstatement of coverage at an additional cost. Id. at 321 (citations and quotations omitted). Clean Water had taken advantage of such an option because its “business operations in oil and cargo transportation rendered] pollution coverage potentially significant.” Id. (citations omitted). Other aspects of the CGL section were likewise marine “in the context of ship repair and maintenance businesses.” Id. at 320. The SLL section— relevant to an analysis of the contract as a whole — was also marine because it insured damage to vessels undergoing maintenance, a quintessential aspect of maritime commerce. Id. at 323. The court thus concluded that “[t]he two sections of the Policy together operate seamlessly to provide coverage that is primarily marine in nature,” and admiralty jurisdiction was therefore proper. Id. at 323-24.
In this case, it is undisputed that a principal component of Signal’s business is vessel repair and maintenance. Signal was primarily involved in such work in the beginning, and even in 2009, when its focus had shifted to new construction, vessel repair and maintenance continued to constitute some thirty to forty percent of its business. It is also undisputed that the Drydock was designed for and substantially, if not predominantly, involved in such work. In the months leading up to the sinking, it was used to drydock two drilling rigs for repairs.
Under Folksamerica, insurance covering marine pollution liabilities arising out of marine business operations is, naturally, “decidedly marine.”
Plaintiffs attempt to distinguish Folksamerica in several respects. They note, for instance, that the Court could not have intended that all environmental pollution insurance — much of which covers purely landside pollution — is marine. Even so, they tellingly omit any analysis of the Pollution Policy’s terms, which extend coverage to statutory liability arising out of pollution discharges from Signal’s marine business operations. Granted, there will be close calls, but this is not one of them. The Pollution Policy clearly insures maritime risks.
Plaintiffs also observe that marine pollution insurance cases (including Folksamerica) have historically involved coverage on vessels. That may be true, but there is no reason to infer that only pollution insurance on vessels is sufficiently related to maritime commerce to fall within the admiralty jurisdiction. On this view, jurisdiction would exist if the source of pollution had been one of the twenty-five
Finally, Plaintiffs read Folksam-erica and other cases to require that maritime risks bear a direct relation to vessels. That is often how the standard is formulated. See, e.g., Kossick,
Admittedly, the various formulations of the standard have spawned unnecessary confusion. But it seems beyond controversy that there are maritime subjects besides vessels. See, e.g., Collins,
Plaintiffs warn that this holding will lead to a parade of horribles, opening the jurisdictional door to insurance on graven dry docks (which are dug into land), marine
iii. The Fixed Structure Distinction
Some cases have drawn a “conceptual distinction between a contract relating to a particular vessel involved in a commercial operation as opposed to the overarching operation of a fixed structure that happens to involve boats.” NHIC,
In Royal Insurance Co., the Ninth Circuit addressed whether insurance on a floating dock and breakwater was marine, and concluded that the objects insured were not maritime interests.
At the outset, even if these cases did establish a bright-line rule, they are not controlling in this Circuit and this Court would decline to follow them. On the subject of admiralty jurisdiction, the Supreme Court has consistently eschewed unyielding rules in favor of a conceptual, purpose-based approach. See, e.g., Kirby,
In the instant case, Plaintiffs’ reliance upon the distinction is puzzling, since it appears to support rather than undermine jurisdiction. The Pollution Policy provides coverage not only to the non-vessel fixed structure Drydock, but also to Signal’s fleet of twenty-five vessels and any vessel undergoing repairs on the Drydock. Thus, unlike the policies in Royal Insurance Co. and NHIC, the policy insures “particular vessel[s] involved in a commercial operation.” NHIC,
5. The Dispute is Not Inherently Local
Having determined that the Pollution Policy is a maritime contract, the Court considers whether the dispute is nevertheless “inherently local” such that state law should apply. See, e.g., Kirby,
In this Circuit and most others that have considered the issue, the doctrine of utmost good faith is firmly entrenched federal law. See, e.g., AGF Marine Aviation & Transport v. Cassin,
Plaintiffs suggest that the Court can and should decline to apply the doctrine because the Drydoek was a shore-side object that could have easily been inspected by Great American. The sole case they cite in support, however, concluded that the contract was not maritime; since there was no basis for applying maritime law, there was no exercise of discretion involved. See In re Balfour Maclaine Intern. Ltd.,
6. Application of Uberrimae Fidei
Great American is entitled to void the policy if it can show that Signal failed to disclose material information— i.e., information that would have affected its decision to insure at all or even at a particular premium. While materiality is ordinarily a question of fact for the jury, summary judgment is appropriate where the evidence is beyond reasonable dispute. See, e.g., Inlet Fisheries,
As an initial matter, Plaintiffs cannot seriously contest that a reasonable insured would know that the undisclosed information would have some bearing on an insurer’s decision. The 2002 Heger Report described the value of the Drydock as below zero and documented the need for “extensive repairs” to make it operational. (2002 Heger Report at 7-8.) The March 2003 ABS Survey similarly found that the Dry-dock was rapidly deteriorating and warned that it could become “unserviceable” within five years, yet Signal was only performing temporary repairs to keep it operational in the short term. (Mar.2003 ABS Survey at 3-5.) Signal itself recognized that the Drydock was not worth purchasing from the Port because it was expected to become inoperational within five years absent $22 million in repairs, and disposal costs “could run into the millions or even tens of millions of dollars.” (Staff Study at 2-5.) The September 2003 ABS Survey went so far as to alert PANDIDC that Drydock operations should be stopped forthwith until “substantial repairs” were made, prompting PANDIDC to hold an emergency meeting regarding the Dry-dock’s condition. (Sept.2003 ABS Survey at 5-7.) If there were any doubt that the Drydock was, “[i]n the Port’s own words ... too much potential liability,” (Staff Study at 4-5) Signal purchased the Dry-dock from the Port in 2005 for $10 (and continued to bear the potentially multimillion burden of disposal). (CBOS.) Subsequent documentation leading up to the Drydock’s demise continued to stress the need for serious repairs, the bulk of which Signal did not undertake before the Dry-dock sank during reconfiguration. Finally, Signal structured its decisionmaking around these observations, as evidenced by its notice of intent to renew the lease in which it rejected the twenty-five year renewal term and proposed a term ending, essentially, once the Drydock made its final voyage into the abyss.
There is therefore ample evidence to conclude, on the basis of the withheld surveys and reports alone, that Signal’s nondisclosure was material. In addition, Great American has offered testimony from two of the three underwriters on Signal’s account indicating that the documents in Signal’s possession would have resulted in a different decision. Cindy Stringer, who underwrote the policy from 2005 through the 2009-10 year, testified that if she had seen the surveys and reports, she “definitely would have been concerned” and likely would have informed Signal that she would not approve the policy until the completion оf all recommended repairs. (Dkt. No. 289, Ex. B at 141:14-18, 142:19-143:3.) Ms. Stringer also testified that if the insured had information that a vessel was “ready to collapse or something like that,” it would be material information that should be brought to the attention of the insurer through the broker. (Id. at 188:9-21.) Reese Lever, who assisted Ms. Stringer with the Signal account by requesting renewal information for the 2009-10 year and became the underwriter on the account beginning in 2010-11, testified that if the interests insured had problems or were undergoing significant repairs, he would want to be made aware of those facts. (Dkt. No. 289, Ex. A at 157:9-19, 174:8-14.) He also testified that if a surveyor told the insured that all of the pontoons should be separately removed for repairs, it would be
Great American has also provided affidavit evidence from Steve Weber, the underwriting officer of the Houston office, and Captain Ed Wilmot, Vice President of its Ocean Marine Division, both of whom were periodically involved with the Signal account.
There is thus substantial evidence to conclude not only that the omitted information was material in the objective sense, but also that it actually would have affected Great American’s decision. While it is true that testimony from underwriters is inescapably “self-serving,” that fact does not preclude summary judgment where “the materiality of the misrepresentation is such that reasonable minds could reach only one conclusion,” and Plaintiffs cannot rely upon “mere allegations or denials” to satisfy their burden. Gasaway v. Northwestern Mut. Life Ins. Co.,
In the face of this overwhelming evidence, Plaintiffs cite testimony purportedly reflecting that this was not the kind of information Great American would use to decide whether to underwrite a risk. Ms. Stringer, for instance, testified that the fact that property and P & I insurance had been placed made her satisfied that acceptable reports had been produced or, alternatively, that the items insured were in acceptable condition. (Nicoletti Aff., Ex. 6 (“Stringer Tr.”) 229:9-230:14.) She also testified that under Great American’s underwriting guidelines, the relevant factors in setting the premium are generally the type of vessel, its weight, and the size of the fleet. (Dkt. No. 275, Ex. 2 at 67:4-69:9.) Plaintiffs further note that the insurance application did not inquire into the condition of any of the vessels, and cite testimony from Mr. Lever stating that the only information Great American deems necessary to its decision to underwrite a risk is set forth in the application itself. (Dkt. No. 275, Ex. 1 (“Lever Tr.”) at 53:15-22.)
This evidence is not probative because it assumes that the applicant is seeking insurance on an ordinary risk, not a decaying structure on its last leg of life. None of the cited testimony addresses the issue whether Great American considered the undisclosed information to be material, and the underwriters have specifically testified that it was. Moreover, ubérrimas fidei requires the insured to affirmatively disclose any material information, regardless of whether it is specifically requested. The underwriters’ testimony merely reflects their assumptions based upon the law. Knight,
Plaintiffs also offer testimony from Mr. Lever indicating that if Signal had disclosed certain information to Great American, namely, the recommendations that the pontoons be separately removed and dry-docked for inspection and repairs and that the decking be replaced, he would have underwritten the policy provided Signal promised to make such repairs. (Lever Tr. at 172:20-175:21.) Yet Mr. Lever did not have authority to decide whether to underwrite the 2009-10 policy; Ms. Stringer did, and she unambiguously testified that the omitted information would have made a difference. Moreover, Mr. Lever was not asked what he would do if he had been given the various other surveys and reports indicating that the Drydock was at serious risk of sinking. In any event, even if Mr. Lever’s testimony could create a genuine issue of fact, he clearly indicated that the informаtion would have been material to his decision. Without it, he would have approved coverage without qualification; with it, he would have elicited a promise from Signal to make the recommended repairs. Information is material if it would have affected the decision to insure at all, which includes information that is relevant to the “calculation of the insurance risk.” HIH,
Finally, Plaintiffs rely upon Great American’s actions with respect to another dry-dock to argue that it would not have considered the omitted information relating to this Drydock material. When Signal sought coverage on a drydock acquired as part of the assets of Bender Shipbuilding, Great American requested additional information regarding the drydock’s condition. Although the surveys recommended certain repairs, Great American insured the asset without reservation or confirmation that the repairs had been made. (Nicoletti 35 at 45:5-10, 77:19-80:22.)
This evidence presents a closer question, but it does not create a genuine issue of fact in light of the overwhelming evidence to the contrary. As an initial matter, the evidence cuts both ways. On the one hand, the fact that Great American did not charge a higher premium or even confirm that the requested repairs had been made suggests that it would not have charged a higher premium or excluded coverage if it had known the undisclosed information relating to the Drydock. On the other hand, the fact that Great American requested such information on the Bender Shipbuilding drydock indicates that it realistically could have affected its decision to insure or
At bottom, this is not a case where an insurer is attempting to underwrite after the fact or exaggerate minor omissions. The non-disclosures were egregious and go to the very heart of the value and severity of the risk. Plaintiffs’ contention that such information is immaterial simply does not hold water. Because no reasonable juror could conclude that Signal did not violate its duty of utmost good faith, Great American’s motion for summary judgment must be granted.
B. The EPI Policy
1. Motion for Reconsideration and Alteration
MSI seeks reconsideration or alteration of the Court’s March 25 Order, which held that the EPI Policy must contribute to removal and cleanup of the Drydock because coverage was triggered under the PPI Policy and the EPI Policy is written on a following basis. MSI relies upon newly acquired testimony from Mr. Cunningham, Signal’s Chief Financial Officer, as well as other extrinsic evidence purportedly overlooked by the Court, and contends that the Court can and should consider extrinsic evidence because it considered dictionary definitions to interpret the policies. (Dkt. No. 256, Ex. 1 at 124:11-126:17.) MSI is mistaken for two reasons.
First, the March 25 Order provides, in relevant part:
MSI argues that [the] PPI Policy’s coverage of “debris removal” does not include costs associated with the removal of the wrecked Drydock. Whether or not the wrecked Drydock constitutes “debris,” however, subsection (b) of the “Debris Removal and Cost of Clean Up” section unambiguously covers the cost of cleanup “at the ‘location’ ” resulting from “physical loss, damage or destruction of the property” covered by the policy; the Drydock indisputably suffered such physical loss, thereby “mak[ing] necessary” cleanup at the location.
Second, even if the “debris” dicta were necessary to the holding, under New York law dictionary definitions are not extrinsic evidence. See, e.g., Fed. Ins. Co. v. Am. Home Assur. Co.,
2. MSI’s Rescission Claim
MSI also seeks to void the EPI Policy for fraud, concealment, and material misrepresentation pursuant to the following provision:
This Coverage Part is void in any case of fraud by [the insured] as it related to this Coverage Part at any time. It is also void if [the insured], at any time, intentionally conceal[s] or misrepresent[s] a material fact concerning: 1. This Coverage Part; 2. The Covered Property; ... or 4. A claim under this Coverage Part.
(Dkt. No. 250, Ex. 18 (“EPI Policy”) at WILLIS00792.)
i. Choice of Law
Initially, the Court must determine what law governs the policy’s interpretation. “A federal court exercising diversity jurisdiction must apply the choice of law analysis of the forum state.” GlobalNet Financial.Com, Inc. v. Frank Crystal & Co., Inc.,
In Mississippi, clauses such as the one in the EPI Policy are known as concealment clauses. See, e.g., Watkins v. Continental Ins. Co.,
Mississippi also recognizes a cause of action for material misrepresentation, undеr which “misstatements of material fact in an application for insurance provide grounds for declaring a policy issued in reliance thereon void ab initio.” Republic Fire & Cas. Ins. Co. v. Azlin,
In Texas, to rescind a policy an insurer must demonstrate that it relied upon a misrepresentation of material fact that was made by the insured with an intent to deceive. See, e.g., Mayes v. Mass. Mut. Life Ins. Co.,
There is, therefore, a conflict of laws. Under Mississippi law, the concealment clause, rather than being ambiguous, has a settled legal meaning under which intent to deceive is not necessary to rescind the policy. Mississippi also recognizes a claim for material misrepresentation, which is comparable to uberrimae fidei. In contrast, under Texas law, MSI must prove intent to deceive and rebanee, and any ambiguity will be construed in favor of coverage. In light of this conflict, the Court must determine which state’s law applies under New York choice-of-law principles.
In contract cases, New York applies the “center of gravity” or “grouping of contacts” analysis to determine which state has the most significant rela
The value of the assets insured under the EPI Policy is almost evenly split between Mississippi and Texas. Since the risk insured by the policy is spread across multiple states, the state of the insured’s domicile is determinative. The policy lists the insured as Signal International, LLC, and lists its address as Mississippi. (EPI Policy at WILLIS00697; see also id. at WILLIS00713 (listing Signal International, LLC as the insured under the PPI Policy).) Thus, Mississippi law applies. It is not necessary to consider the remaining factors. Foster Wheeler,
Plaintiffs raise two objections to this conclusion. First, they contend that the policy is severable because it lists each property and its respective location, and the parties therefore intended for the law of each state where the particular property is located to apply. Put differently, Plaintiffs argue that the “insured risk” for purposes of the conflicts analysis is the Dry-dock — not all property under the policy— and since the Drydock is located entirely in Texas, that state’s law applies. Foster Wheeler and its progeny preclude this argument.
In Foster Wheeler, the Appellate Division considered what law governed the interpretation of excess liability insurance policies providing coverage for asbestos-related injury claims arising throughout the nation.
The Second Circuit applied the Foster Wheeler rule to insurance claims arising out of property damage in Maryland Casualty Co. The issuе before the court was what law governed the construction of three insurance policies for pollution liability arising out of twenty-six waste disposal sites spread across twelve states.
As in Foster Wheeler and Maryland Casualty Co., the risks insured under the EPI Policy are spread across multiple states. Although the risks were not spread throughout the nation, or even across twelve states, there is no reason that the conflicts analysis should vary depending upon the number of states in which the insured risk is located. See, e.g., Md. Cas. Co.,
The several cases cited by Plaintiffs are inapposite because they address severability in different contexts. See Balfour,
Plaintiffs’ second objection is that even if the domicile of the insured controls, the actual insured is Signal International Texas, LLP, whose principal place of business is located in Texas. Yet Plaintiffs fail to cite any support in the record for this assertion, and the policy lists only Signal International, LLC and refers to “the Insured” in the singular. (See, e.g., EPI Policy at WILLIS00701.) Signal International, LLP is therefore the insured under the policy. See Narragansett,
ii. Application of Mississippi Law
MSI asserts claims to rescind the policy for material misrepresentation and, alternatively, breach of the concealment clause. Plaintiffs contend that MSI’s material misrepresentation claim must fail because there was no “application” for insurance-&emdash;only an exchange of emails in which AmWins provided MSI with certain information&emdash;and because neither AmWins or Signal provided MSI with any “answers” because MSI never asked any questions. Carroll,
At the outset, the material misrepresentation rule is not just about insurance contracts. It is based upon the precept that “any contract induced by a misrepresentation or concealment could be avoided by a party,” which is in turn “simply a general principle of contract law which the special nature of insurance contracts does not alter.” Pedersen v. Chrysler Life Ins. Co.,
Turning first to “applications,” it is implicit to the transaction of a contract for insurance that the insured requests or “applies” for insurance from the insured. There is no reason, however, that this process must be formalized in writing. If the misrepresentation rule is intended to protect insurers who rely upon information provided in the application process, it should protect them whether that information is communicated verbally or in writing. In line with this reasoning, several Mississippi courts have permitted insurers to void policies even where the application process was verbal. See, e.g., Dukes v. S.C. Ins. Co.,
The “answers” language is more significant, but it does not go as far as Plaintiffs would like. Through the “answers” requirement, material misrepresentation defines the scope of materiality in light of the insurer’s own representations of what is important. Thus, an insurer:
has no right to rescind the policy because there wаs information, not asked for on the application and not volunteered by the applicant, the knowledge of which would have caused the company to refuse to insure. If the company intends to rely exclusively on the application, it should ask questions tailored to elicit all the information that it needs.
Mattox v. Western Fidelity Ins. Co.,
It does not follow, however, that an insurer must expressly ask questions in order to invoke the protections of the material misrepresentation rule. If the format of insurance applications can vary depending upon the type of insurance, the nature of the insureds, and the relationship between the parties, there is no reason why the application process cannot also be tailored to the circumstances. The application process for the EPI Policy -is, again, a case in point. The policy is not a homeowner’s or fire insurance policy between an insurer and individual. It is a “short fuse,” multi-million dollar account between an insurer and a sophisticated insurance broker on behalf of a major corporation. (Dkt. No. 167, Ex. 12 at TRIPM0049.) There were no questions&emdash; and thus no “answers”&emdash;because AmWins proactively reached out to MSI to “review and advise quickly if you can authorize in these excess layers.” (Id. at TRIPM0050.) Implicit in AmWins’s request was the understanding&emdash;through industry practice and course of dealing&emdash;that the attached information was precisely the sort of information that MSI and other insurers would consider material in deciding whether to approve the application and insure the risk. Plaintiffs would have the material misrepresentation claim fail based upon the fact that MSI did not first reach out to AmWins requesting certain information, and consequently there no questions to which AmWins provided “answers” or requests for information to which AmWins responded. Application of the rule ought not depend upon such matters of happenstance, nor should an insurer be penalized for relying upon the affirmative representations of an insurance broker.
Summary judgment may be appropriate on a claim for material misrepresentation if the insurer can point to clear and convincing evidence establishing the elements, but not if the insured points to specific, probative facts that could reasonably support a conclusion to the contrary. See, e.g., Carroll,
In contrast to Carroll, the instant case is appropriate for resolution on summary judgment. The 2009 Heller Report gave Signal’s facilities the second best rating possible (Above Average) and described the possibility of the Drydock sinking as an event with an “extremely low probability and frequency based on previous industry experience.” (2009 Heller Report at 36-37) (emphasis added). The Statement of Values also listed the Drydock’s value at $13.6 million, despite a prior survey estimating its value as negative and multiple others indicating that it was in need of serious and costly repairs. In light of the information which Signal failed to provide MSI, the Court concludes that it is beyond genuine dispute, by clear and convincing evidence, that the 2009 Property Submission was incomplete, misleading, and arguably false. Because the standard is formulated in the disjunctive, it is enough that the submission did not provide a complete picture of the value and condition of the Drydock.
The Court further finds as a matter of law — and by clear and convincing evidence — that the undisclosed information was material in that it might have led a prudent insurer, at the very least, to require a higher premium to cover the Dry-dock. This conclusion follows, in large part, from the Court’s analysis of the Pollution Policy. It is bolstered by the testimony of James Morano, the policy’s underwriter, indicating that the 2009 Heller Report was a “favorable inspection with no recommendation” that gave a “rosy description of the drydock” in light of the omitted surveys and reports, and although he “didn’t see anything in there that would preclude [him] from writing the excess policy,” he would have wanted documents reflecting the Drydock’s poor condition. (Nicoletti Aff., Ex. 11 (“Morano Tr.”) 32:17-20, 86:2-88:18, 131:3-7 (emphasis added).) Mr. Morano also attested that if the information had been provided in the application, he would have either declined coverage entirely or conditioned approval of the policy upon exclusion of the Dry-dock, and if such information had been provided after issuance of the policy, MSI would have exercised its right of cancellation under the policy. (Morano Decl. ¶¶ 10, 12; EPI Policy at WILLIS00710.) Finally, Joyce Johnson, Willis’s Client Manager, specifically testified that if the valuation of the Drydock had been different, it would have affected the premium. (Nicoletti Aff., Ex. 8 at 269:11-18.)
Plaintiffs’ counterevidence is that Mr. Morano also testified that Signal’s submission was “a typical package that [he] would receive in deciding to write an excess insurance policy”; that he had “all of the information [he] needed to decide to un
Testimony from Mr. Morano and Cody Whittington that certain actions were not “fraud” is also irrelevant. (Morano Tr. at 195:23-196:7; Nicoletti Aff., Ex. 12 ■ at 367:13-19.) As this case has revealed, the question of what constitutes “fraud” can vary immensely depending upon the applicable state law. MSI’s material misrepresentation claim — which does not require any evidence of intent or reliance — is not the same as fraud. Nor is such testimony relevant to the question whether fraud was committed as a legal matter. Finally, Mr. Morano’s testimony regarding misrepresentation does not defeat summary judgment because it merely reflects that Am-Wins provided all of the information Signal had provided to it and that that appeared to be a complete submission. (Morano Tr. at 45:5-13, 91:13-14.) It was not.
In sum, Plaintiffs have failed to offer any probative evidence to refute the substantial evidence that the omitted information would have been material to a prudent insurer, and specifically would have affected MSI’s decision.
IV. Conclusion
For the foregoing reasons, it is hereby ORDERED that:
Plaintiffs and Signal’s motion for partial summary.judgment (Dkt. No. 226) is DENIED;
Signal’s motion for partial summary judgment (id.) is DENIED;
Plaintiffs’ motion for partial summary judgment (Dkt. No. 230) is DENIED;
Great American’s cross-motion for summary judgment (Dkt. No. 244) is GRANTED;
MSI’s motion for summary judgment (Dkt. No. 249) is DENIED;
MSI’s motion for reconsideration or alteration of judgment is DENIED (Dkt. No. 253); and
MSI’s cross-motion for summary judgment (Dkt. No. 257) is GRANTED.
The Clerk of Court is directed to terminate the motions at docket numbers 226, 230, 242, 244, 249, 253, and 257.
SO ORDERED.
Notes
.Plaintiffs and Signal raise a litany of evidentiary objections to consideration of the following surveys and reports, as well as testimony related to these reports and the condition of the Drydock. (Dkt. No. 275, Ex. 15.) The Court has considered these objections and overrules them in their entirety, including for the reasons stated by Great American in its response. (Dkt. No. 288.) The Court has also considered Plaintiffs’ letter requesting that certain portions of Great American’s response be stricken because they contain improper arguments relating to the merits. (Dkt. No. 300.) This request is denied as moot; the Court has relied upon Great American's response only to the extent necessary to consider Plaintiffs’ and Signal's evidentiary objections.
.' Signal was in possession of the 2002 Heger Report at least as early as March 2004, when it submitted the report to PANDIDC during lease renegotiations. (2002 Heger Report.)
. The Court highlights only a sample of the descriptions and recommendations contained in the documents in Signal’s possession in order to illustrate the type of information not disclosed. A discussion of every potential red flag in those materials would unduly lengthen the facts section and is not necessary to the decision.
. There is no indication in the record that such repairs were ever made.
. These were the same pontoons described as being in "very poor condition throughout and need[ing] complete replacement if long term use is to be considered.” (June 2007 Heger Report at 28.)
. Signal received a follow-up letter from the GLO dated November 5, 2009, which requested an update of its removal plans. This letter notified Signal of the GLO's determination that the Drydock "pose[d] a threat to public health, safety and welfare and the environment.” (Dkt. No. 19, Ex. 6 ("Nov.2009 GLO Letter”).)
. Plaintiffs voluntarily dismissed their claims against Signal on October 15, 2010. (Dkt. No. 70.)
. Courts usually do not analyze the subjective component of materiality, which raises a question whether inducement is a distinct inquiry, or is rather inherent to — or presumed upon — proof of the .objective component. 2 Schoenbaum § 19-14 ("Many courts ... blur the objective and subjective aspects of th[e] test and fail to distinguish whether they are applying it to the prudent underwriter or the particular underwriter in question. Presumably what is meant is that the ‘controlling’ or ‘decisive influence’ test,” under which "at a minimum 'the risk must be increased so as to enhance the premium,' ” "satisfies both aspеcts.") (citations omitted). In Puritan Insurance Co., which continues to be the leading case on inducement in this Circuit, the insurer failed to prove inducement because its actions had not changed once it learned of the allegedly material information.
. Plaintiffs contend that the Drydock was not a hazard to navigation, but there can be no doubt that the GLO believed that the Drydock and its debris posed a potential threat to navigation. (See 2012 GLO Letter (''[T]he sunken structure and all associated debris that could create a navigation or environmental hazard have been removed from Texas coastal waters.”).) Plaintiffs also argue that this dispute has no connection to maritime commerce because Signal’s potential liability arose under Texas law; Signal sought coverage under a state law extension; and only the GLO, a state agency, “ordered” Signal to remove the Drydock. Plaintiffs cite no authority for the proposition that the source of liability — federal or state — is relevant, much less determinative over the factors already discussed by the Court. Moreover, the GLO did not "order” Signal to take any actions; it described the law and the potential consequences for failing to remove the Drydock in the event that it made a formal determination of abandonment. The GLO’s involvement in the incident was therefore comparable to that of the Coast Guard, whose representatives were present at the July 2010 removal kick-off meeting due to concerns regarding the removal project’s impact upon coastal waters.
. For sake of convenience, unless otherwise indicated, the Court will collectively refer to Plaintiffs and Signal as "Plaintiffs.”
. Great American asserts that the use of itemized premiums was for accounting purposes only. It also argues that the severability doctrine applies to "obligations,” and there was only one, non-severable obligation under the policy' — coverage for statutory pollution liability arising from Signal’s business operations. Both claims are in tension with the ordinary practice of relying upon the existence of separate premiums to determine severability. Regardless, in light of the Court's holding, they are moot.
. Drilling rigs that are not permanently attached to the ocean floor have generally been recognized as vessels. 1 Schoenbaum § 3-6; Barker v. Hercules Offshore, Inc.,
. Although not dispositive, it is also telling that the policy is self-titled "Ocean Marine'' insurance. (Pollution Policy at GAI2264.) See, e.g., Catlin,
. NHIC relied upon Cope v. Vallette Dry-Dock Co.,
. The Court questions the utility of the distinction in the context of marine pollution insurance, since marine pollution bears a sub- ' stantial relationship with maritime commerce and navigation regardless of whether the source of pollution is a fixed structure or vessel. For the sake of argument, however, it assumes the distinction is relevant.
. Even if the Pollution Policy were not a maritime contract, uberrimae fidei would apply because the policy requires that it “shall be construed pursuant to, and the rights of the parties hereto shall be governed and controlled by, the general maritime law of the United States," and expressly incorporates uberrimae fidei in all but name, stating that “[a]ny concealment or misrepresentation ... of any material fact or circumstance relating to this insurance, or any claim or incident hereunder, will void the policy completely ... whether such concealment or misrepresentation is deliberate, negligent, inadvertent, innocent, or otherwise.” (Pollution Policy at GAI2270.). In New York, there is a "strong public policy favoring individuals ordering and deciding their own interests through contractual arrangements” and "[i]t is well settled that courts will enforce a choice of law clause so long as the chosen law bears a reasonable relationship to the parties or the transaction.” Lupien v. Lupien,
. Although Ms. Stringer testified that only she and Mr. Lever were involved in the underwriting of the policy for the 2009-10 year, (Nicoletti Aff., Ex. 6 (“Stringer Tr.”) 237:15-21), Mr. Lever testified that Mr. Weber was also involved in the underwriting process (Nicoletti Aff., Ex. 35 ("Nicoletti 35”) at 150:19-151:19.) This testimony is not inconsistent, as Ms. Stringer spoke of the 2009-10 policy alone, while Mr. Lever spoke of the policy without reference to a particular year. To the extent that this creates an arguable issue of fact, however, the Court deems the remaining testimony and affidavit evidence, as well as its own analysis of what, a reasonable insured would believe, sufficient to support summary judgment.
. Plaintiffs perplexingly cite an exchange between counsel and Mr. Lever in which he testified that neither he nor Ms. Stringer was asked, prior to this lawsuit, whether they considered the omitted information material. The testimony does not address whether either of them actually considered this information material. (Nicoletti 35 at 152:4-23.) The Court does not view this as relevant.
. Having determined that the policy is void ab initio, the Court denies as moot the parties' respective motions concerning whether the policy has been triggered.
.Signal asserts that the policy was also delivered in Texas. This is supported by the policy's terms. (See EPI Policy at WILLIS00720.) However, in its opposition to MSI's Rule 56.1 Statement, Signal did not cite any evidence for its counterstatement, and has therefore arguably conceded that the policy was delivered in Mississippi alone. (Dkt. No. 277, at 61.) Local Civil Rule 56.1(c) — (d). Even assuming the contract was delivered to Texas too, the remaining contacts mandate application of Mississippi law.
. It is not clear from the record whether premiums were paid from Mississippi (by Signal International, LLC) or from Texas (by Signal International Texas, LLP).
. Neither party discusses the place of contracting, which is where the last act necessary to form the contract was performed. Presumably, it was either Virginia, where MSI was located, or Mississippi, where the insured was located.
. That Signal never directly communicated with MSI is irrelevant since AmWins was acting on its behalf.
. The Court notes that there does not appear to be a reliance requirement under the material misrepresentation claim. However, assuming there is, reliance has been proven in this case.
. In light of the Court’s holding that the EPI Policy is void ab initió, the motions for summary judgment as to business interruption and extra expenses are denied as moot.