Greenly v. Mariner Management

• Court: Court of Appeals for the First Circuit
• Decided: September 22, 1999
• Docket: 99-1054
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 99-1054



                        DAVID R. GREENLY,



                      Plaintiff, Appellant,



                                v.



             MARINER MANAGEMENT GROUP, INC., ET AL.,



                      Defendants, Appellees.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                    FOR THE DISTRICT OF MAINE



           [Hon. D. Brock Hornby, U.S. District Judge]


Before



                      Selya, Circuit Judge,

                                

                   Cyr, Senior Circuit Judge,

                                

                   and Boudin, Circuit Judge.


Michael X. Savasuk on brief for appellant.

     Robert J. Murphy and Holbrook & Murphy on brief for appellees.


September 21, 1999


SELYA, Circuit Judge.  This appeal arises out of the

sinking of a 65-foot fishing trawler, the F/V MISS PENELOPE, off

the Maine coast.  The incident spawned a wrongful death claim on

behalf of a crew member who was lost at sea, a bodily injury claim

by an injured seaman, and a claim by plaintiff-appellant David

Greenly (the owner of the vessel) for property damage.  The

defendants, Mariner Management Group, Inc. and Clarendon Insurance

Co. (collectively, "Mariner" or "the insurer"), paid the bulk of

Greenly's claim but withheld $34,370 as a coinsurance penalty

applicable to payments made to settle the seamen's claims under the

protection and indemnity (P&I) provisions of Greenly's policy.

  Asserting admiralty jurisdiction, see 28 U.S.C. 

1333(1), Greenly sued in the federal district court to recover the

withheld amount.  The case was heard on cross-motions for summary

judgment.  A magistrate judge recommended that judgment enter in

Greenly's favor.  Mariner objected.  The district court disagreed

with the magistrate's recommendation in relevant part, concluded

that Mariner's position was well-taken, and granted its motion for

brevis disposition.  See Greenly v. Mariner Mgmt. Group, Inc., Civ.

No. 98-130-P-H, slip op. (D.Me. Sept. 23, 1998) (unpublished).  We

reverse.

  The essential facts are not in dispute.  Greenly had

fished the MISS PENELOPE out of Portland for several years prior to

the mishap.  Although he captained the vessel throughout that

period, he decided to take an impromptu sabbatical in the fall of

1997.  He appointed a member of the crew, Brian Morse, to serve as

captain   an action that the policy allowed him to take without

permission from, or notification to, the insurer.  Morse's stint as

captain was brief, for the vessel sank in heavy weather just a few

months later.  Of the four men aboard when she went down, one was

lost and one was injured.

  Greenly learned of the sinking on January 28, 1998, and

immediately reported it to the insurer.  Mariner balked at paying

the wrongful death and bodily injury claims in full when it learned

that four men were aboard the ship at the time of the accident.  It

cited the insurance policy's Crew Warranty clause, asserting that

this clause contemplated a maximum of three crew members; and that,

although the insured retained the right to add crew members, he

could only assure full coverage by notifying the insurer before the

fact and paying a premium surcharge, neither of which Greenly had

done.  Since the accident occurred with more than three men on

board, Mariner reduced P&I payments in proportion to the ratio

between what it considered to be the stated and actual number of

crew members.  It accomplished this reduction by withholding the

calculated amount from the payment due to Greenly under the

policy's first-party coverage on the vessel's hull and machinery.

  Coverage disputes usually depend upon the language of the

policy, and this case is no different.  The critical provision is

the Crew Warranty clause, which provides:

      In consideration of the premium

  charged, it is warranted that coverage

  hereunder is provided for not more than three

  (3) crew members aboard the insured vessel at

  any one time.  Also, warranted that in the

  event additional crew are to be covered

  hereunder, the Assured shall give prior notice

  to this Company and pay such additional

  premium as is required.  If the Assured shall

  fail to give such prior notice and at the time

  of loss with respect to crew there are more

  crew on board, this insurance shall respond

  only in the proportion that the stated number

  of crew bears to the number on board at the

  time of the accident.



  The key to interpreting this clause lies in the meaning

of the word "crew."  The protagonists read this word quite

differently.  On the one hand, Mariner maintains that the word is

unambiguous and that its common meaning includes the entire

complement of individuals working aboard a vessel in any capacity

(e.g., ordinary seamen, deck hands, the cook, the engineer, the

mate, the captain).  On this reading, Mariner urged the district

court to find that Morse (the captain) necessarily comprised part

of the crew, and that, therefore, his presence, together with that

of three ordinary seamen, breached the warranty.  Greenly, on the

other hand, maintains that the word "crew" at the very least

excludes the ship's captain.  On this reading, he urged the

district court to find that Morse (qua captain) did not comprise a

part of the crew, and that, therefore, the warranty was fulfilled

(i.e., the "crew" on board at the time of the sinking numbered

three).

  The magistrate judge essentially accepted Greenly's

position.  On de novo review, the district judge agreed with

Greenly in the first instance; he found that the word "crew," in

and of itself, was ambiguous.  But this proved to be a Pyrrhic

victory, for the judge went on to rule that, "[r]ead in its

context, the crew warranty objectively manifests an intent to cover

the captain as well as other members of the ship's crew."  The

district judge thereupon rejected the magistrate's recommendation,

denied Greenly's motion for summary judgment, and granted Mariner's

cross-motion.

  We review the district court's entry of summary judgment

de novo.  See Cadle Co. v. Hayes, 116 F.3d 957, 960 (1st Cir.

1997); Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990). 

Like the lower court, we focus on the narrow question of whether

Captain Morse should be deemed a member of the crew for purposes of

the Crew Warranty clause.

  Our first step is to identify the body of law that guides

our interpretative efforts.  Although a court sitting in admiralty

jurisdiction must apply federal maritime rules that directly

address the issues at hand, it may   and should   resort to state

law when no federal rule covers a particular situation.  See

Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 320-21

(1955); Acadia Ins. Co. v. McNeil, 116 F.3d 599, 603 (1st Cir.

1997); see also Restatement (Second) of Conflict of Laws  188

(1971).  This is such a case.  Thus, state law (here, Maine law)

supplies the substantive rules of decision.

  Maine's highest court has observed that the "paramount

principle in the construction of contracts is to give effect to the

intention of the parties as gathered from the language of the

agreement viewed in the light of all the circumstances under which

it was made."  Whit Shaw Assocs. v. Wardwell, 494 A.2d 1385, 1387

(Me. 1985) (citation and internal quotation marks omitted).  As is

the case with other contracts, unambiguous provisions contained in

insurance policies are to be interpreted as written, giving force

to their plain meaning.  See Jack v. Tracy, 722 A.2d 869, 871 (Me.

1999).  Nonetheless, some special rules apply to insurance

policies.  See, e.g., Foundation for Blood Research v. St. Paul

Marine & Fire Ins. Co., 730 A.2d 175, 180 (Me. 1999) (reaffirming

time-honored tenet that insurance policies are liberally construed

in favor of the insured).

  Ambiguous policy provisions present an area in which this

liberality thrives.  Insurance policies are contracts of adhesion,

and amphibolous language is to be construed against the insurer and

in favor of maximizing coverage.  See Foundation for Blood

Research, 730 A.2d at 180; Geyerhahn v. United States Fid. & Guar.

Co., 724 A.2d 1258, 1261 (Me. 1999); Johnson v. Allstate Ins. Co.,

687 A.2d 642, 645 (Me. 1997).  Of course, an insurance policy is

not considered ambiguous merely because a dispute arises over the

meaning of a particular provision.  If, however, an ordinary person

would not understand, with some degree of assurance, that the

provision has a single accepted meaning, ambiguity looms.  See

Craig v. Barnes, 710 A.2d 258, 261 (Me. 1998); Peerless Ins. Co. v.

Brennon, 564 A.2d 383, 386 (Me. 1989).  Put another way, if the

language used by the insurer is susceptible to two or more

plausible but not functionally synonymous interpretations, then

that language can be found ambiguous.  See  Allen v. Adage, Inc.,

967 F.2d 695, 700-01 (1st Cir. 1992); Cambridge Mut. Fire Ins. Co.

v. Vallee, 687 A.2d 956, 957 (Me. 1996).

  In this instance, our review of the relevant policy

language leads us to conclude that the Crew Warranty clause

contains an ambiguity as to the captain's status.  No less an

authority than the Supreme Court observed some six decades ago that

courts historically have been unable to attach "an absolutely

unvarying legal significance" to the word "crew."  South Chicago

Coal & Dock Co. v. Bassett, 309 U.S. 251, 258 (1940).  Moreover,

the passage of time has done little to demystify the term.  See,

e.g., Tonnesen v. Yonkers Contracting Co., 82 F.3d 30, 33 (2d Cir.

1996).  Lexicographers have had no better luck at pinning down a

single meaning for the word.  See, e.g., Black's Law Dictionary 334

(5th ed. 1979) ("'Crew' does not have an absolutely unvarying legal

significance or any well-defined factual significance."); Funk and

Wagnalls New Standard Dictionary of the English Language (1934)

(defining "crew" as "[t]he company of seamen belonging to one ship

or boat:  sometimes including officers"); Webster's Tenth New

Collegiate Dictionary 274 (10th ed. 1993) (defining "crew" as

"[t]he whole company belonging to a ship sometimes including the

officers and master").

  The demonstrated malleability of the word "crew" renders

the precise meaning of the Crew Warranty clause uncertain.  While

it leaves room for the insurer's interpretation   that, by

operation of the clause, the insured warrants that the vessel will

be manned by a company of three, counting the captain   it makes

equally plausible the insured's interpretation   that, by operation

of the clause, the insured warrants that the vessel will be manned

by a company of three, not counting the captain.

  The district court believed that in this instance context

removed the latent uncertainty and gave a singular meaning to the

otherwise ambiguous term.  In this vein, the court pointed

principally to the policy's P&I coverage, noting that the owner

would have an additional exposure to liability for maintenance and

cure or for Jones Act damages to a non-owner captain, and that this

fact "would thus be within the parties' contemplation when

contracting for P&I coverage."  The gist of the district court's

conception   with which we agree   is that the insurance company,

from a risk and premium standpoint, probably envisioned that it was

insuring three, not four, persons serving the vessel, and would

have wanted higher premiums for a fourth such person (whether an

ordinary seaman or a non-owner captain).

  There is some further albeit thin support for this view,

urged by the insurer, in the language of the binder that preceded

the policy's issuance.  Without going into detail, this language

can be read as juxtaposing the premium to be charged with the

proposition that the coverage is for three crew members, excluding

the captain (because he is an owner).  However, the policy itself

did not incorporate that language, and the terms contained in a

binder only regulate coverage until the actual policy issues (at

which time they are supplanted by the terms of the policy).  See 1

Couch on Insurance 3d  13:1 (1997); see also United States Fire

Ins. Co. v. Producciones Padosa, Inc., 835 F.2d 950, 956 (1st Cir.

1987).  While the fact that the policy supersedes the binder does

not necessarily render the binder irrelevant in construing

ambiguous policy wording, the binder itself is not crystal clear

and the omission of the language to which Mariner points can easily

be taken to mean that the parties rejected the notion.

  Although the question is close, we reject the district

court's analysis.  Admittedly, a knowledgeable insurer might

reasonably take the policy as intending to provide coverage for

injury as to three individuals   and three individuals only  

aboard the vessel.  But a lay person would have no reason to share

this perspective   and the fact remains that the term "crew," both

in general usage and in the context of this particular policy, is

patently ambiguous.  In parsing insurance policies, Maine courts

must scrutinize policy language "from the perspective of an average

person, untrained in the law or the insurance field, in light of

what a more than casual reading of the policy would reveal to an

ordinarily intelligent insured."  Peerless Ins. Co. v. Wood, 685

A.2d 1173, 1174 (Me. 1996).  Here, the insured reasonably could

have thought that a non-owner captain was not considered part of

the crew, and that he was fully protected despite the introduction

of a new captain.

  Accordingly, this case is governed by the well-settled

rule that, in doubtful situations involving genuine ambiguities,

policy language is to be construed against the insurer (who drafted

the policy and thus could have avoided the ambiguity) and in favor

of maximizing coverage.  See Foundation for Blood Research, 730

A.2d at 180; Geyerhahn, 724 A.2d at 1261; Wood, 685 A.2d at 1174. 

We believe this canon carries decretory significance in the instant

case   a case in which a policy term that controls the extent of

the insured's coverage is both ambiguous and reasonably susceptible

to alternative interpretations.

  We need go no further.  We conclude that the policy

contains an inherently ambiguous term.  Because we find the

insured's interpretation of this term as plausible as the

insurer's, we see no principled basis for departing from the

default rule that requires courts to resolve such ambiguities in

favor of coverage.  Consequently, we reverse the judgment of the

district court.



Reversed.