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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_________________________
No. 99-15090
_________________________
D. C. Docket No. 96-02712-CV-KMM
TRANSAMERICA LEASING, INC.,
Plaintiff-Appellee,
versus
INSTITUTE OF LONDON UNDERWRITERS,
YORKSHIER INSURANCE COMPANY, LTD. "C" ACCOUNT, THREADNEEDLE
INSURANCE COMPANY, LTD., THREADNEEDLE INSURANCE COMPANY, LTD.,
"A" ACCOUNT, LONDON ASSURANCE - "PHOENIX LSA"
ACCOUNT ZURICH RE (UK) LTD., INSURANCE COMPANY OF NORTH AMERICA
(UK) LTD., MARITIME INSURANCE CO., LTD., NORWICH NO. 1 "M"
ACCOUNT, PHOENIX ASSURANCE PLC, COMPAGNIE D'ASSURANCE MARITIMES
AERIENNES ET TERRESTRES, SCOTTISH LION INSURANCE CO., LTD., CORNHILL
INSURANCE PLC, LONDON & EDINBURGH INSURANCE COMPANY LIMITED,
WURTTEMBERGISCHE, FEUERVERSICHERUNGS AG, GERLING-KONZERN ALLGEMEINE
VERSICHERUNGS AG, TERRA NOVA INSURANCE COMPANY, LTD., SKANDIA
MARINE INSURANCE COMPANY (UK) LIMITED, CORNHILL INSURANCE COMPANY
LTD., "D" ACCOUNT, INSURANCE COMPANY OF NORTH AMERICA
(UK) LTD., "G" ACCOUNT,
Defendants-Appellants,
QUANTUM INTERNATIONAL,
Defendant,
ADJUSTERS LIMITED,
Movant.
____________________________
Appeal from the United States District Court
for the Southern District of Florida
____________________________
(October 4, 2001)
Before TJOFLAT, BARKETT and MAGILL*, Circuit Judges.
PER CURIAM:
Transamerica Leasing, Inc. ("Transamerica")
sued several insurance underwriters (the "Underwriters"),
alleging that the Underwriters owe Transamerica damages under
an insurance policy. The district court granted partial summary
judgment to Transamerica, and a jury awarded Transamerica $3,958,981.94
in damages. The Underwriters appeal, and we reverse and remand
for trial.
I.
Transamerica is a lessor of ocean
cargo containers and related equipment. In the early 1990s, Transamerica
entered into various lease agreements with C.A. Venezolana de
Navigacion ("CAVN"), a Venezuelan government shipping
line. Under these agreements, Transamerica leased various equipment
to CAVN, including containers, trailers, and chassis. CAVN used
this equipment to move cargo on routes around the world.
The lease agreements between Transamerica
and CAVN required CAVN to obtain insurance coverage for the leased
equipment, so CAVN acquired "all risk" insurance from
the Underwriters. CAVN's first "slip" insurance policy
with the Underwriters covered the year beginning June 30, 1991,
and named CAVN as the only assured. Subsequently, the parties
executed an addendum that stated:
Noted and agreed as from inception,
Named Assured is more precisely as below and not as previously
advised: C.A. VENEZOLANA DE NAVIGACION and/or Associated and/or
Inter- related Companies and various Lessors. Losses if any are
payable to the Assured as their respective interests may appear
or order. All other slip terms, clauses and conditions remain
unaltered.
The 1991 policy, as well as the
policies that followed, stated that it should be interpreted
according to "English law and practice." The policies
provided all risk coverage for the equipment leased by Transamerica
to CAVN, but listed various exclusions and conditions. One such
exclusion excepted "loss, damage or expense arising from
insolvency or financial default" from coverage.
CAVN again acquired all risk insurance
from the Underwriters for the policy year beginning June 30,
1993. The named assureds were: "C.A. Venezolana de Navigacion
and/or Leasing Companies as Owners and producers of equipment
and/or subsidiary and/or associated and/or affiliated companies."
Addendum number one to the 1993 policy, dated October 4, 1993,
states: "It is hereby noted and agreed to accept the following
as additional assureds/loss payees as their
respective interests may appear; . . . Transamerica Leasing,
Incorporated . . . All other terms, clauses and conditions remain
unaltered." The parties dispute the authenticity of this
addendum.
The Underwriters again provided
CAVN with all risk insurance for the year beginning June 30,
1994, with the policy essentially identical to the 1993 policy.
On November 1, 1994, the policy was cancelled due to CAVN's failure
to pay premiums.
In July 1994, CAVN informed Transamerica
that it had lost track of at least 500 pieces of Transamerica
equipment. Transamerica searched for and recovered some equipment
but could not locate many units. In October 1994, CAVN informed
Transamerica that the units either were lost or damaged and would
not be returned.
On November 10, 1994, Susan Esposito,
Manager of Risk Management for Transamerica, sent a letter to
Rollins Huding Hall, CAVN's United States broker, giving notice
of a claim under the 1994 policy for physical damage and loss
of 944 containers that had been on hire to CAVN. On December
5, 1995, the Underwriters declined coverage, stating:
Due to the volume of claims intimated
against C.A.V.N. under the above policies, the age of several
of the claims and the total lack of assistance insurers have
received from C.A.V.N. in identifying the number of claims lodged
with them, insurers hereby formally decline cover in respect
of any claims of whatsoever nature that may fall for their consideration
under any of the policies referred to above.
Insurers hereby repudiate cover
under the above policies due to late notification and failure
by CAVN to disclose material facts to underwriters at each and
every renewal subsequent to bankruptcy proceedings in the Venezuelan
Supreme Court.
Transamerica does not know how,
or on the precise date on which, the missing and damaged containers
were lost, damaged, or destroyed. CAVN's financial troubles caused
it to cease doing business in July 1994 and to file for protection
under Venezuelan bankruptcy law in October of that year.
In September 1996, Transamerica
sued the Underwriters in Florida state court, alleging that the
1993 and 1994 policies ("together, the Policy") cover
Transamerica's claim for damages resulting from the lost equipment.
The Underwriters removed the case to federal district court under
diversity jurisdiction. In May 1998, the district court granted
partial summary judgment to Transamerica, holding that Transamerica
is entitled to recover under the Policy. First, the district
court held that Transamerica is an additional assured under the
Policy. Second, the court rejected the Underwriters' argument
that alleged CAVN misrepresentations voided the Policy, thereby
preventing Transamerica from recovering. Instead, the court held
that the Policy was severable, so that even if CAVN failed to
disclose material facts when renewing the Policy, the Policy
continued to provide coverage for Transamerica. Third, under
the burden shifting test enunciated in New Hampshire v. Martech
USA, Inc., 993 F.2d 1195 (5th Cir. 1993), the court held
that the Underwriters failed to show that the loss of equipment
occurred outside the Policy period. Finally, the court found
a genuine issue of material fact regarding the issue of damages,
so a jury trial on the damages issue ensued.
Before trial, Transamerica filed
a motion in limine seeking to preclude the Underwriters from
producing any evidence at trial relating to defenses not raised
in the Underwriters' December 5, 1995 declinature letter. The
district court granted Transamerica's motion. The damages trial
resulted in an award of $3,958,981.94 to Transamerica. The Underwriters
appeal.
II.
We review the district court's grant
of summary judgment de novo. Mitchell v. USBI Co., 186
F.3d 1352, 1354 (11th Cir. 1999). A district court may grant
summary judgment "if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment
as a matter of law." Fed. R. Civ. P. 56(c) (2001). Thus,
a court may grant summary judgment only if, viewing the evidence
in the light most favorable to the non-moving party, there is
no genuine issue of material fact. Crawford v. Babbitt,
186 F.3d 1322, 1325 (11th Cir. 1999). As the Policy dictates,
we apply English law.
A.Is Transamerica an Additional
Assured, a Loss Payee, or Both?
The initial issue is whether Transamerica
is an additional assured, a loss payee, or both an additional
assured and a loss payee under the Policy. As the district court
explained:
A coinsured party under an insurance
policy has all the rights afforded to the named assured and can
recover under the policy under its own right. On the other hand,
a loss payee is merely a party designated to receive payment
should the named insured prevail on its claim. In other words,
a loss payee can only recover to the extent the named insured
can recover.
See also
Couch on Insurance § 65:22 (3d ed. 1996) ("Loss
payee's rights under insurance policy are derivative of named
insured's rights; when named insured has no right to recover,
loss payee cannot recover under policy."). The district
court held that Transamerica is both an assured and a loss payee
under the Policy and, therefore, can recover damages under its
own right.
The Policy lists the assured as
"C.A. Venezolana de Navigacion and/or Leasing Companies
as Owners and producers of equipment and/or subsidiary and/or
affiliated companies." (emphasis added). This language seemingly
requires us to find that Transamerica, a leasing company, is
an assured.
However, the Underwriters point
to an addendum to the Policy that states: "It is hereby
noted and agreed to accept the following as additional
assureds/loss payees as their respective interests may
appear; . . . Transamerica Leasing, Incorporated." The Underwriters
argue that the addendum's specific reference to Transamerica
takes precedence over any general Policy terminology to the contrary.
SeeMacgillivray on Insurance Law 277 (9th ed. 1997) (stating
that "clauses of specific application may contradict clauses
of general application which, if they stood alone, would control
the specific subject matter, and the clause of specific application
then controls").
Viewing the evidence and factual
inferences in the light most favorable to the Underwriters, we
hold that the addendum creates an issue of fact necessitating
a jury trial. Transamerica disputes the authenticity of the addendum
and suggests that one of the Underwriters crossed out "additional
assureds." Although Transamerica is free to raise these
points before a jury, this court will not decide such issues
of fact while reviewing a grant of summary judgment. See
Warrior Tombigbee Transp. Co. v. M/V Nan Fung, 695 F.2d
1294, 1296 (11th Cir. 1983) ("A trial court must not decide
any factual issues it finds in the records; if factual issues
are present, the court must deny the motion and proceed to trial.").
B.Did CAVN's Alleged Failure
to Disclose Material Facts to the Underwriters Void Transamerica's
Coverage?
The Underwriters next find fault
with the district court's determination that CAVN's alleged failure
to disclose material information when renewing the Policy does
not void Transamerica's coverage.1 The district court based this determination
on its conclusion that Transamerica is an additional assured.
Therefore, the district court reasoned, Transamerica is not relegated
to recovering only to the extent that CAVN can recover. The district
court then examined whether the Policy is severable so that even
if CAVN's alleged non- disclosure voids its own coverage, Transamerica
still may recover. The court, relying on English law providing
that an insurance policy can be voided only as to the assured
making the non-disclosure, held that the Policy is severable.
See New Hampshire Ins. Co. v. MGN, Ltd., [1996]
CLC 1692.
The doctrine of uberrimae fidei
applies to this maritime case. This doctrine "requires that
an insured fully and voluntarily disclose to the insurer all
facts material to a calculation of the insurance risk."
HIH Marine Servs., Inc. v. Fraser, 211 F.3d 1359, 1362
(11th Cir. 2000); accord Godfrey v. Britannic Assurance
Co. Ltd., [1963] 2 Lloyd's Rep. 515, 528-30. "A misrepresentation
is material if 'it might have a bearing on the risk to be assumed
by the insurer.'" HIH Marine Servs., Inc., 211 F.3d
at 1363; accord St. Paul Fire & Marine Ins. Co.
v. McConnell Dowell Constructors Ltd., [1995] 2 Lloyd's Rep.
116, 121-25.
The Underwriters' claim that CAVN
failed to disclose material facts rests on the following. In
July 1994, CAVN told Transamerica that it had lost track of at
least 500 units of leased equipment. Transamerica then began
to search for its equipment. In August 1994, immediately prior
to "binding" coverage for the 1994 policy, Transamerica's
brokers told the Underwriters that there were "no known
or reported losses." In October 1994, CAVN informed Transamerica
that the missing containers were lost and could not be returned.
On November 10, 1994, Transamerica informed the Underwriters
of the loss.
Because the district court held
that Transamerica is an additional assured and the Policy is
severable as to Transamerica, the court did not analyze whether
CAVN's alleged non-disclosure requires the court to void the
policy altogether. We already have determined that an issue of
fact exists concerning Transamerica's status as an assured or
a loss payee under the Policy. If the jury finds that Transamerica
is an additional assured, or both an additional assured and a
loss payee, then the district court correctly concluded that
CAVN's actions do not affect Transamerica's coverage. On the
other hand, if the jury finds that Transamerica is merely a loss
payee, then the jury must decide whether CAVN failed to disclose
to the Underwriters "all facts material to a calculation
of the insurance risk," thereby negating Transamerica's
coverage. HIH Marine Servs., Inc., 211 F.3d at 1362.2
C.Can the Underwriters Rely on
the "Insolvency or Financial Default" Exclusion?
The Underwriters argue that the
district court erred by ruling that they waived reliance on coverage
defenses not raised in their declinature letter. The declinature
letter stated:
Due to the volume of claims intimated
against C.A.V.N. under the above policies, the age of several
of the claims and the total lack of assistance insurers have
received from C.A.V.N. in identifying the number of claims lodged
with them, insurers hereby formally decline cover in respect
of any claims of whatsoever nature that may fall for their consideration
under any of the policies referred to above.
Insurers hereby repudiate cover
under the above policies due to late notification and failure
by CAVN to disclose material facts to underwriters at each and
every renewal subsequent to bankruptcy proceedings in the Venezuelan
Supreme Court.
Specifically, the Underwriters seek
to rely on a Policy exclusion that precludes coverage for losses
"arising from insolvency or financial default," despite
their failure to cite this exclusion in the declinature letter.
English law does not require insurers
to specify all grounds for denial of coverage in a declinature
letter. SeeMacgillivray on Insurance Law 475-76 (stating
that "no party is required to name all his reasons at once
or any reason at all in the assignment of one reason, for a refusal
to pay cannot be a waiver of any other existing reason").
Moreover, an insurer cannot waive a policy exclusion where coverage
otherwise would not exist. Pentagon Constr. (1969) Co. v.
USF&G Co., [1978] 1 Lloyd's Rep. 93, 104 (B.C. Ct. App.
1977); accordReliance Ins. Co. v. The Yacht Escapade,
280 F.2d 482, 487 (5th Cir. 1960). These principles are well-founded,
for it often is the case that an insurer will not be aware of
all possible defenses at the time it writes a declinature letter.
Therefore, we conclude that the district court erred in ruling
that the Underwriters waived reliance on Policy exclusions not
raised in the declinature letter.
Alternatively, the district court
held that the Policy is severable between Transamerica and CAVN
with respect to the "insolvency or financial default"
exclusion, so that CAVN's insolvency can preclude only CAVN from
recovering. We respectfully disagree with the district court's
holding. The "insolvency or financial default" exclusion
applies, by its terms, to all parties subject to the Policy;
it thus applies to bar coverage for any loss due to insolvency
or financial default, regardless of which party makes the claim.
Transamerica does not defend the
district court's severability analysis. Instead, Transamerica
asks us to affirm the district court due to the Underwriters'
alleged failure to produce sufficient evidence that CAVN's insolvency
caused the loss of equipment. We decline this invitation.
We think that a jury reasonably
could find a causal connection between CAVN's bankruptcy and
the disappearance of the leased equipment. In July 1994, CAVN
informed Transamerica that it had lost track of at least 500
pieces of Transamerica equipment. Also in July 1994, CAVN ceased
doing business. About three months later, CAVN filed for protection
under Venezuelan bankruptcy law. We think that a reasonable jury
could conclude that CAVN's insolvency led to the disappearance
of Transamerica's equipment. Thus, a genuine issue of material
fact exists concerning whether the "insolvency or financial
default" exclusion applies to bar recovery by Transamerica,
requiring a jury trial.3
D.Did the Loss Occur During the
Policy Period?
The Underwriters contend that the
district court erred in ruling that Transamerica's loss occurred
within the Policy period.4 The district court, applying the
burden shifting test enunciated in New Hampshire v. Martech
USA, Inc., 993 F.2d 1195 (5th Cir. 1993), held that the Underwriters
failed to show that the loss of equipment occurred outside the
Policy period. Under Martech, the insured first must show
that the loss occurred during the policy period. Id. at
1200. If the insured succeeds in showing that the loss occurred
within the policy period, then the burden shifts to the insurer
to prove that a policy exclusion excepts the loss from coverage.
Id.
In Banco Nacional
de Nicaragua v. Argonaut Insurance Co., 681 F.2d 1337 (11th
Cir. 1982), this court examined a case involving the shipment
of urea from Romania to Nicaragua. Id.
at 1338-39. The owner of the
urea sued the cargo's insurer, Argonaut Insurance Company, alleging
that the urea was lost or damaged on the voyage. Id. at
1339. We rejected the insured's
argument that Argonaut had the burden
to prove that the loss occurred outside the policy period as
an exception to coverage, holding that the plaintiff in a suit
under an all risk insurance policy must show proof that the loss
occurred within the policy period. . . . Rather than being an
exception to coverage, as an inherent vice or defect would be,
proof that a loss occurred within the policy period is a predicate
to the application of the policy. Thus, as Morrison indicates,
the burden of proving that the loss occurred during the policy
period is properly on the insured. . . . Our holding should not
be read as requiring an insured to prove . . . the precise time
during the policy period at which the loss occurred. We hold
only that the insured must show that a loss did occur at some
time within the policy period, and that the jury may not engage
in speculation in concluding that a loss occurred within that
period. Id. at 1340 & n.5 (citing Morrison
Grain Co. v. Utica Mut. Ins. Co., 632 F.2d 424, 430 (5th
Cir. 1980) (holding that the insured satisfied its burden of
proving a loss by showing that the cargo of urea was in good
condition when the voyage began and in damaged condition when
unloaded from the vessel)).
In Martech, the Fifth Circuit
examined an insurance policy that provided coverage for damages
to the insured's underwater diving equipment. 993 F.2d at 1197.
The court rejected the insured's contention that it satisfied
its burden by showing that its losses "more likely than
not" occurred within the policy period. Id. at 1200.
The court concluded that the insured's evidence did not preclude
the damage to the goods occurring before or after the policy
period, noting: "Proof that the claimed losses occurred
during the policy period is an essential element of Martech's
coverage claim on which it bears the burden of proof. Unconfirmed
rumors of loss are insufficient to satisfy that burden."
Id. The court distinguished Morrison Grain by stating:
"Because the policy covered a discrete shipment of goods
the questions regarding the time of loss are different from those
presented in the instant case." Id. at 1199 n.18.
To satisfy its burden of producing
evidence showing that its loss occurred during the Policy period,
Transamerica produced a May 1993 inventory of equipment on lease
to CAVN. Transamerica then notes that (1) in July 1994, CAVN
informed Transamerica that it had lost track of at least 500
pieces of equipment and (2) in October 1994, CAVN notified Transamerica
that the equipment had disappeared mysteriously and would not
be returned.
We hold that the district court
erred in holding, as a matter of law, that the equipment disappeared
during the Policy period. First, at least some of the loss could
have occurred before the Policy period. The Underwriters point
out that Transamerica's May 1993 inventory was just a list of
equipment on lease to CAVN, many units of which had been on lease
since the 1980s. In other words, the inventory does not necessarily
show that all the equipment listed was still in CAVN's possession
at the beginning of the Policy period. Moreover, although CAVN
informed Transamerica that it had lost track of at least 500
units of equipment in June 1994, this does not necessarily mean
that the loss occurred within the Policy period. Second, at least
some of the loss could have occurred after the Policy period.
On November 10, 1994, nine days after cancellation of the Policy,
Transamerica gave notice of a claim for physical damage and loss
of 944 containers that had been on hire to CAVN. It is conceivable
that some of this loss occurred after the Policy terminated.
Moreover, this case is unlike Banco
Nacional or Morrison Grain, which both involved a
product sent in good condition but arriving at its destination
damaged or lost. In those cases, it is obvious that the loss
occurred sometime during the voyages. SeeMartech, 993
F.2d at 1199 n.18 ("Because the policy [in Morrison Grain]
covered a discrete shipment of goods the questions regarding
the time of loss are different from those presented in the instant
case."). In this case, as in Martech, the equipment
at issue was used before the Policy became effective, so there
is a question of fact concerning when the loss occurred. Therefore,
we reverse the district court and remand for trial to determine
whether the loss occurred within the Policy period.5
III.
We REVERSE the district court and
REMAND for trial. In summary, the jury must determine whether
Transamerica is an additional assured, a loss payee, or both.
If the jury finds that Transamerica is an additional assured,
or both an additional assured and a loss payee, then CAVN's alleged
non-disclosure does not affect Transamerica's coverage because
the Policy is severable. If, on the other hand, the jury finds
that CAVN is merely a loss payee, then the jury must decide whether
CAVN's alleged non-disclosure violates the doctrine of uberrimae
fidei. Regardless of the finding as to Transamerica's status
as an additional assured or a loss payee, the jury also must
determine whether Transamerica's loss occurred due to CAVN's
insolvency or financial default and whether the loss occurred
within the Policy period.
FOOTNOTES
[*]
Honorable Frank J. Magill, U.S.
Circuit Judge for the Eighth Circuit, sitting by designation.
[1]
The Underwriters argue on appeal
that Transamerica failed to disclose material information concerning
the loss of the leased equipment. However, the Underwriters failed
to raise this argument in response to Transamerica's motion for
summary judgment. Therefore, the Underwriters have waived any
argument that Transamerica's purported failure to disclose material
information requires voidance of the policy. See Publishers
Res., Inc. v. Walker-Davis Publ'ns, Inc., 762 F.2d 557, 561
(7th Cir. 1985).
[2]
Should the jury find that Transamerica
is merely a loss payee, then the district court may decide that
there is no genuine issue of material fact concerning whether
CAVN violated the doctrine of uberrimae fidei, thereby permitting
a decision as a matter of law.
[3]
At oral argument, Transamerica argued
that it could not have been CAVN's insolvency that caused the
disappearance of the leased equipment. Insolvency, the argument
goes, does not cause equipment to disappear. Instead, Transamerica
suggests that the equipment must have been stolen. We think Transamerica's
suggestion eminently reasonable. That being said, we do not believe
that insolvency must directly cause a loss for the insolvency
exclusion to apply; were that the case, we would be hard pressed
to imagine any situation where the exclusion would apply. We
instead think that the exclusion applies if a jury concludes
that CAVN's insolvency resulted in the abandonment of Transamerica's
equipment, which eventually led to its misappropriation.
[4]
The parties rely exclusively on
American law in arguing this issue.
[5]
Due to our resolution of the issues
on appeal, we also reverse the jury damages award.
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