Stevanna Towing Inc v. Atlantic Specialty Insurance

Court of Appeals for the Third Circuit·Decided October 21, 2022·No. 21-1420·Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Nos. 21-1420 & 21-2339

*STEVANNA TOWING, INC.

FRANK BRYAN, INC.; GEORGETOWN SAND & GRAVEL, INC.;

M/V TIMOTHY JAMES (Intervenors in D.C.), Appellants

v.

ATLANTIC SPECIALITY INSURANCE COMPANY

*Dismissed Pursuant to Court Order dated 08/19/22

On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 2-15-cv-01419)

District Judge: Honorable David S. Cercone (No. 21-1420)

Magistrate Judge: Honorable Cynthia R. Eddy (No. 21-2339)

Submitted Pursuant to Third Circuit L.A.R. 34.1(a)

June 30, 2022

Before: JORDAN, PORTER, and PHIPPS, Circuit Judges.

(Filed: October 21, 2022)

OPINION**

**

This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.

PHIPPS, Circuit Judge.

These consolidated appeals concern an insurance coverage dispute arising after a

towboat collided with a barge on the Ohio River. That crash caused a deckhand on the

towboat to fall into the empty barge. To recover for his on-the-job injuries, the deckhand sued his employer, a maritime towing company with three personal-injury insurance

policies. The deckhand also sued the owner of the boat and the boat itself, and the employer filed a third-party complaint against the preexisting charterer of the boat.

Those claims proceeded in a different case, which ultimately settled. The employer’s

insurance company believed that the deckhand’s claims were not covered by any of the policies, and on that basis, it did not indemnify the employer or any of the entities who

claimed to be additional insureds for the costs of defending and settling the deckhand’s case.

In this case, the four defendants from the deckhand’s suit have challenged that

denial-of-coverage decision. Those four entities brought claims for breach of contract, bad-faith denial, and declaratory judgment. The parties cross-moved for summary

judgment, and the District Court entered judgment for the insurance company. The four claimants appealed. While on appeal, the employer and the insurance company settled their dispute.

On de novo review of the summary judgment record, the District Court correctly determined that the three remaining claimants cannot recover under the employer’s

insurance policies. For that reason, we will affirm the District Court’s final judgment.

I. FACTUAL BACKGROUND

A. Stevanna’s Insurance Policies Stevanna Towing, Inc. operates towboats. It is incorporated in Pennsylvania and

has its principal place of business in Beaver Falls, Pennsylvania. In 2014, it had three maritime insurance policies with Atlantic Specialty Insurance Company: a protection and

indemnity (‘P&I’) policy, a marine general liability (‘MGL’) policy, and an excess liability policy. Atlantic Specialty is a New York corporation that has its principal place

of business in Atlanta, Georgia.

The P&I policy requires Atlantic Specialty to indemnify Stevanna for personal-

injury claims as well as for the reasonable costs of investigating and defending those

claims. The P&I policy covers only injuries that occur while Stevanna is acting “as owner of the Vessel.” P&I Policy at 2 (Mar. 10, 2014) (JA101). Although the policy’s schedule of vessels lists only two boats – the Savanna Ellise and the John Kushner – the

P&I policy also has an automatic-acquisition clause. That clause automatically extends coverage under the P&I policy to other vessels that Stevanna acquired, purchased, or

chartered:

Subject to the terms, conditions and limits of liability of [the P&I] policy, . . . th[e] policy covers automatically each vessel acquired, purchased, or chartered by [Stevanna].

P&I Policy, Endorsement No. 4 (Mar. 10, 2014) (JA108).

Stevanna also operated another towboat, the Timothy James, which is not specifically mentioned in the P&I policy. That boat was owned by Frank Bryan, Inc., a

Pennsylvania corporation with a principal place of business in McKees Rocks, Pennsylvania. Frank Bryan chartered the boat to a wholly owned subsidiary, Georgetown

Sand & Gravel, Inc., which is a Pennsylvania corporation with a principal place of business in Georgetown, Pennsylvania.

Relevant to the automatic-acquisition clause, Stevanna, Frank Bryan, and

Georgetown Sand & Gravel reached an oral agreement for the use of the Timothy James. Under that agreement, Stevanna would use the Timothy James to move barges for Frank

Bryan and Georgetown Sand & Gravel, and when Stevanna was not doing so, it could use the towboat for its own purposes. The agreement could be revoked at will by any party at

any time. Though Atlantic Specialty disputes the agreement’s terms, Stevanna, Frank

Bryan, and Georgetown Sand & Gravel have argued that their oral understanding included the same terms as those in a written charter that they had entered into for

another vessel, the John Kushner. In the John Kushner charter, Stevanna promised to defend and indemnify Frank Bryan, its affiliates, and the vessel for any claims for personal injury that were “caused in whole or in part by the negligence of Stevanna, its

agents and employees.” Bareboat Charter Agreement for the John Kushner at ¶ 10 (July 15, 2014) (JA320).

Another of Stevanna’s policies, its MGL policy, insures Stevanna against claims of bodily injury and property damage. That policy requires Atlantic Specialty to defend Stevanna and pay its legal obligations for such claims. But the policy contains an

employer-liability exclusion, which denies coverage for an employee’s bodily injury when it “aris[es] out of and in the course of” the employee’s job. MGL Policy at 2

(Mar. 10, 2014) (JA136). That exclusion is not absolute, and the MGL policy insures Stevanna for an employee’s injury if Stevanna has “assumed” liability for that injury “under an ‘insured contract.’” Id. The MGL policy recognizes that Stevanna may form

an insured contract by “assum[ing] the tort liability of another party,” by agreeing “to pay for ‘bodily injury’ . . . to a third person.” Id. at 9 (JA143).

Stevanna’s excess liability policy is aptly named. It increases the coverage limits for the P&I and MGL policies.

B. The Personal Injuries Prompting the Coverage Dispute In 2014, the Timothy James, operated by employees from Stevanna and Georgetown Sand & Gravel, bumped into a barge. That impact caused one of Stevanna’s

employees, a deckhand on the Timothy James, Raymond Robinson, who was removing a line from the barge, to lose his balance and fall into an empty barge hopper. Robinson blamed the injuries that he sustained from that fall on the boat’s pilot, whom Robinson believed was negligent for failing to warn him of the impact.

On a theory of vicarious liability, Robinson sued Stevanna, Frank Bryan (the boat’s owner), and the Timothy James to recover for his injuries. Stevanna filed a third-

party complaint against Georgetown Sand & Gravel (the boat’s preexisting charterer). Robinson settled that suit with each defendant.

Although it resolved Robinson’s grievance, that settlement prompted another dispute. Stevanna requested reimbursement from Atlantic Specialty for the costs that it incurred to defend and settle Robinson’s case. But Atlantic Specialty declined coverage

because the Timothy James is not listed in the P&I policy’s schedule of covered vessels. In denying coverage, Atlantic Specialty did not consider the applicability of the MGL

policy. Because Atlantic Specialty denied coverage to Stevanna, the other three entities could not recover under Stevanna’s policies as putative additional insureds. The denial of

coverage sparked this litigation, in which the four defendants in the Robinson case sued Atlantic Specialty for coverage under each of Stevanna’s three policies.

II. PROCEDURAL HISTORY

Stevanna sued first. It brought claims against Atlantic Specialty for breach of

contract and bad-faith denial of insurance under Pennsylvania law; it also sought a

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