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Crowley Maritime Corp. v. National Union Fire Insurance Company of Pittsburg, PA

United States District Court, M.D. Florida, Jacksonville Division

February 8, 2018



          TIMOTHY J. CORRIGAN, United States District Judge

         This 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.

         I. BACKGROUND

         A. The Policy

         National Union issued an Executive and Organization Liability Insurance Policy to Crowley in November, 2007. (Doc. 1 ¶ 6; Doc. 1-1 at 2).[1] 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 states:

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).

         The 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 ¶ 8).

         B. Department of Justice Search Warrant

         On 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).

         To 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).

         C. Dispute Over Coverage and Arbitration

         On 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.[2] (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).

         Believing 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 at 10).

         D. Farmer's Acquittal and Crowley's Lawsuit

         During 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).

         Farmer 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).

         National 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).

         National 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.[3] (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 ...

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