United States District Court, M.D. Florida, Jacksonville Division
TIMOTHY J. CORRIGAN, United States District Judge
insurance coverage dispute is before the Court on Defendant
National Union Fire Insurance Company of Pittsburg,
Pennsylvania's converted Motion for Summary Judgment,
(Doc. 15), to which Plaintiff Crowley Maritime Corporation
responded. (Docs. 20, 40). With the Court's permission
National Union filed a reply. (Docs. 25, 43). On June 20,
2017, the Court held a hearing on the motion, the record of
which is incorporated herein. (Doc. 49). The Magistrate Judge
then conducted a settlement conference, but the parties
impassed. (Doc. 52). Thus, the case is ready for a decision.
Union issued an Executive and Organization Liability
Insurance Policy to Crowley in November, 2007. (Doc. 1 ¶
6; Doc. 1-1 at 2). The Policy limits coverage to
“Claims that are first made . . . during the Policy
period and reported in writing to the insurer pursuant to the
terms herein.” (Doc. 1-1 at 2). The Policy has a term
of November 1, 2007 through November 1, 2008, and a six year
run-off period to report Claims, referred to as the Discovery
Period, which expired on November 1, 2013. (Doc. 1-1 at 59).
The Policy also contains a relation back provision, which
If during the Policy Period or during the Discovery Period
(If applicable) an Organization or an Insured shall become
aware of any circumstances which may reasonably be expected
to give rise to a Claim being made against an Insured and
shall give written notice to the Insurer of the circumstances
. . . then a Claim which is subsequently made against such
Insured and reported to the Insurer alleging, arising out of,
based upon or attributable to such circumstances . . . shall
be considered made at the time such notice of such
circumstances was given.
(Doc. 1-1 ¶ 7(c)). The written notice upon which a Claim
can relate back is referred to as a “notice of
circumstances.” (Doc. 36 at 18).
Policy provides that the “criminal . . . investigation
of an insured person” triggers coverage once the
“insured person is identified in writing” by an
“investigating authority as a person against
whom” a criminal proceeding has commenced. (Doc. 1-1
¶ 2(b)(3)(i)). The “return of an indictment,
information or similar document” commences a covered
criminal investigation. (Doc 1-1 ¶ 2(b)(2)). The Policy
defines an “Insured Person” as any
“executive of an organization; employee of an
organization; or outside entity executive.” (Doc. 1-1
¶ 2(o)). Regarding coverage of defense costs, the Policy
provides, “[o]nly those . . . Defense Costs which have
been consented to by the Insurer shall be recoverable as loss
under the terms of this Policy.” (Doc. 1-1 ¶ 8).
The Policy further states that “[t]he Insurer's
consent shall not be unreasonably withheld.” (Doc. 1-1
Department of Justice Search Warrant
April 17, 2008, the Department of Justice executed a search
warrant at Crowley Liner Services, a wholly owned subsidiary
of Crowley. (Doc. 1 ¶ 15). The search warrant sought to
collect various documents from Crowley Liner and four named
Crowley Liner employees. (Doc. 36-2 at 2, 7). Tom Farmer, a
vice president of Crowley Liner, was one of the named
employees. (Doc. 36-2 at 2). Farmer was also issued a
subpoena on April 17, 2008. (Doc. 36-19 at 4-5).
support the issuance of the search warrant, FBI Special Agent
Byron Thompson wrote an Affidavit. (Doc. 36-2 at 10). The
Affidavit listed Farmer as a “subject” of the
investigation. (Doc. 36-2 at 17). However, the Affidavit was
filed under seal and remained sealed until 2015. (Doc. 1
¶ 17; Doc. 36-17 at 2).
Dispute Over Coverage and Arbitration
April 25, 2008, Crowley provided National Union notice of a
Claim under the Policy and sent National Union copies of the
search warrant and Farmer's subpoena. (Doc. 36-5 at 2).
Crowley also informed National Union that the Affidavit was
sealed. (Doc. 1 ¶ 18; Doc. 36-5 at 4). Crowley requested
that National Union advance Farmer's defense
costs. (Doc. 36-5 at 4). On May 27, 2008,
National Union responded to Crowley's notice of the DOJ
investigation, asserting that “based on the
documentation currently available” the Policy did not
provide coverage for Farmer because it did not identify
Farmer “in writing as a target of any
investigation.” (Doc. 36-6 at 4). However, National
Union accepted Crowley's communication as “a
[N]otice of [C]ircumstances that may give rise to a Claim
being made against an Insured . . . .” (Doc. 36-6 at
4). Following this response, Crowley continued to assert it
had reported a Claim and National Union maintained its
position that the documents Crowley submitted did not amount
to a Claim. (See, e.g., Docs. 36-19, 36-20, 36-21).
it was entitled to coverage, Crowley commenced an arbitration
action on March 7, 2012, to recover Farmer's defense
costs. (Doc. 1 ¶ 21). The parties did not obtain the
Affidavit during the arbitration, and, although discussed
during the proceeding, its content was not used to determine
whether Crowley had submitted a Claim. (See, e.g.,
Doc. 36-9 at 5-6, 25-26). In a decision dated January 29,
2013, the arbitrators determined that from 2008 through 2012,
“[t]he materials Crowley submitted to National Union
[which did not include the sealed Affidavit] did not
constitute a Claim for Injured Persons as the term
‘Claim' is defined in the Policy.” (Doc. 36-7
Farmer's Acquittal and Crowley's Lawsuit
this time, the DOJ investigation continued, and in February,
2013 the government offered Farmer a plea deal, which
identified him in writing as a target of a government
investigation. (Doc. 36-11 at 2-3). Consequently, beginning
in February, 2013, National Union agreed to cover
Farmer's subsequent defense costs because the plea deal
materialized before the end of the Discovery Period. (Doc.
36-11 at 3).
did not accept the plea deal, and a jury acquitted him on May
8, 2015. (Doc. 36-32 at 2). Following Farmer's acquittal,
Crowley obtained a copy of the unsealed Affidavit. (Doc.
36-32 at 2). Crowley then asked National Union to cover
Farmer's defense costs from the original notice of a
potential claim in 2008 until February, 2013 because in 2008
the Affidavit identified Farmer as the subject of an
investigation. (Doc. 36-32 at 2).
Union continues to deny coverage and, thus, has not advanced
the defense costs Farmer accrued from April, 2008 to
February, 2013, which are alleged to be in excess of $2.5
million. (Doc. 36-33 at 2-3). Crowley filed this breach of
contract action to recover Farmer's defense costs. (Doc.
1). National Union moved to dismiss the complaint on the
grounds that the action was precluded by the prior
arbitration and barred by the statute of limitations. (Doc.
15). The Court converted the motion to dismiss into one for
summary judgment. (Doc. 28). The parties conducted discovery
and filed supplemental briefing. The Court held a hearing on
the motion. (Doc. 49).
Union seeks summary judgment on three grounds. First,
National Union claims the arbitration award determined that
Crowley had no duty to pay Farmer's defense costs from
2008 through 2012 and thus precludes this
action. (Doc. 16 at 7-9). Second, National Union
asserts that this breach of contract action is barred by the
five-year statute of limitations because it alleges a breach
occurring in 2008, but was not filed until 2016. (Doc. 16 at
10). Third, National Union argues that the claim is ...