Cigna Property & Casualty Insurance v. Polaris Pictures Corp.

159 F.3d 412, 41 Fed. R. Serv. 3d 1359, 98 Cal. Daily Op. Serv. 7920, 98 Daily Journal DAR 11008, 1999 A.M.C. 1, 1998 U.S. App. LEXIS 26869
CourtCourt of Appeals for the Ninth Circuit
DecidedOctober 22, 1998
DocketNos. 96-56252, 96-56789
StatusPublished
Cited by1 cases

This text of 159 F.3d 412 (Cigna Property & Casualty Insurance v. Polaris Pictures Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cigna Property & Casualty Insurance v. Polaris Pictures Corp., 159 F.3d 412, 41 Fed. R. Serv. 3d 1359, 98 Cal. Daily Op. Serv. 7920, 98 Daily Journal DAR 11008, 1999 A.M.C. 1, 1998 U.S. App. LEXIS 26869 (9th Cir. 1998).

Opinion

THOMPSON, Circuit Judge:

Defendants/appellants Polaris Pictures Corp. (Polaris) and U.S. Inbanco Ltd. (In-banco) appeal from the district court’s judgment granting Cigna Property and Casualty Insurance Company (Cigna) rescission of a marine insurance contract on the ground of fraud.

The insurance contract was for insurance on a yacht. The district court found the insurance was obtained with the fraudulent intent to sink the yacht and collect the proceeds. We affirm the district court’s rescission judgment, but not on the ground of fraud. The pleadings and uncontroverted evidence at trial support a judgment of rescission on the ground of failure to disclose material facts in the insurance application. We affirm the judgment on this ground.

We also affirm the district court’s judgment awarding attorney fees in favor of Cig-na, and the court’s addition of appellant Rex K. DeGeorge as a judgment debtor.

FACTS

A. Prologue

DeGeorge, a Beverly Hills attorney, has the remarkable experience of having owned several yachts which have been lost at sea. Each vessel was adequately insured against such loss, and except for the yacht that sank in this case, DeGeorge collected the insurance proceeds on every one of them.

1. The Tutania and the Coffee Merchant Bandits

DeGeorge began losing yachts almost three decades ago. He had been the owner of the 43-foot yacht, Tutania. In 1970, he was interested in selling it. When a couple of purported Peruvian coffee merchants showed an interest in the yacht, DeGeorge arranged to take them for an overnight test-run. That night, the coffee merchants drugged him and his companion. DeGeorge and his companion, still feeling ill the next morning, escaped and sailed 35 miles back to shore in the yacht’s dinghy while the coffee merchants remained on board the vessel. Five days later, DeGeorge reported the theft to the police. The Tutania and the Peruvian coffee merchant bandits were never seen again.

The Tutania had been insured by the Hartford Insurance Company. After De-George threatened litigation for bad-faith denial of his claim, Hartford paid DeGeorge $43,000, the full policy value.

2. One Moonless Night on The Epini-cia

After he lost the Tutania, DeGeorge bought another vessel, this time a 57-foot racing yacht, the Epinicia. Six years after DeGeorge lost the Tutania, he was sailing the Epinicia off the coast of Italy with Paul Ebeling, a business acquaintance. The two men were sailing along on a starless, moonless night when about midnight they suddenly struck “a low-profile, dark object that was not visible.”

[416]*416Fortunately, DeGeorge had recently purchased a new dinghy. He and Ebeling, immediately realizing the danger, jumped into the dinghy and sailed back to the coast while the Epinicio, sank in about twenty minutes. DeGeorge had insurance on the yacht and he filed a claim with the insurer, Lloyds of London. Lloyds originally declined to pay the claim, but after DeGeorge threatened litigation, they changed their position and paid him $194,000 for the loss of the yacht.

3. A 47-Footer Goes Down

In 1983, DeGeorge was handling a law suit on behalf of a client. The suit involved a business deal potentially worth billions. According to DeGeorge, the parties opposing the suit had decided to pursue a rather unorthodox litigation strategy, i.e., they attempted to lull him. These parties had previously suggested they might in fact nail DeGeorge’s kneecaps to the floor. Although DeGeorge didn’t lose his kneecaps, an attempt was made that year to kill him while he and his wife were sailing off the California coast near Los Angeles. This time, DeGeorge lost a 47-foot yacht insured for $245,000.

According to DeGeorge, a suspicious looking fishing boat circled the yacht. A little later, he and his wife were relaxing in the state room when explosions began to rock the boat. When the explosions stopped, De-George and his wife jumped in a dinghy and escaped the vessel, which sank in shark-infested waters in about half an hour. De-George and his wife returned to Marina del Rey in the dinghy. They did not report the incident to any authorities, but four days later reported the loss to the vessel’s insurer, Fireman’s Fund. Fireman’s Fund eventually paid DeGeorge $245,000, the full amount of the policy.

4. Other Claims

According to Cigna, DeGeorge’s insured losses have not been confined to ocean vessels. Cigna provided the district court with a list of claims DeGeorge made against various insurers between 1970 and 1993. These alleged claims include the following:

Year Claim Amount
1970 Rolex watch stolen from unattended vehicle in Madrid $ 1,500
Personal items and jewelry taken from an unattended taxi cab in Sydney, Australia $ 2,000
1971 Baggage stolen from unattended vehicle in Barcelona, (several identical claims against different combined insurers) more than $20,000 combined
1974 Missing Jensen-Healy automobile unknown
1981 Baggage lost by airline $ 10,000
1990 Baggage lost while traveling in Europe $ 9,000
1991 Baggage lost while traveling in Europe $ 10,000
1992 Paintings and personal property stolen from home $700,000
1993 other losses resulting from 1992 theft undisclosed settlement with second insurer

DeGeorge’s bad luck extended beyond the loss of mere personal property. He also filed twenty-nine insurance disability claims between 1976 and 1990. . In a 1990 claim, De-George sought $11,000 per month because of a “bipolar personality disorder.” The insurer, Monarch Insurance Company (Monarch), sought to rescind the insurance contract alleging DeGeorge had misrepresented and concealed material information in the application. However, after DeGeorge filed a counterclaim asserting breach of contract, bad faith, negligence, fraud, and negligent infliction of emotional distress, Monarch settled the claim for $550,000.

B. The Principe and The Italian Connection

Having outlined this rather incredible background, we now turn to the facts giving rise to the present case: the total loss of a fourth yacht.

In June 1992, DeGeorge contracted for the construction of a 76-foot motor yacht, the Principe di Pictor (.Principe), from Azimut, SpA, an Italian firm, for the purchase price of $1.9 million. While the Principe was still under construction, DeGeorge assigned his end of the construction contract to Continental Pictures Corp. (Continental). Continental was a Panamanian corporation, apparently located in Switzerland. Although Continental allegedly bought DeGeorge’s contract for $3.6 million, Continental never paid anyone any money. In fact, after the contract was assigned to Continental, Azimut looked only to DeGeorge for progress payments. De-[417]*417George continued to make those payments to Azimut with $600,000 of his own money.

Continental then sold the Principe to Polaris Pictures Corp. for $3.62 million.

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159 F.3d 412, 41 Fed. R. Serv. 3d 1359, 98 Cal. Daily Op. Serv. 7920, 98 Daily Journal DAR 11008, 1999 A.M.C. 1, 1998 U.S. App. LEXIS 26869, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cigna-property-casualty-insurance-v-polaris-pictures-corp-ca9-1998.