United States District Court, S.D. Ohio, Western Division
MEMORANDUM OPINION AND ORDER
Stephanie K. Bowman, United States Magistrate Judge.
consolidated case involves multiple disputes but the same
core event: the August 5, 2014 sinking of the Waterfront
Barge (hereinafter “Barge”). A primary dispute
concerns the insurance coverage for that event. Currently
pending is a motion to compel filed by the insured,
Waterfront Associates (“Waterfront”), against its
insurer, United States Fire Insurance Company (“U.S.
Fire”). For the reasons that follow, Waterfront's
motion will be DENIED.
than three years prior to its sinking, the sunken Barge
operated as a floating restaurant. However, on March 11,
2011, the Barge broke away from its moorings in Covington,
Kentucky, and the restaurant closed, never to reopen. Six
months later in September 2011, Waterfront sought and
obtained insurance on the Barge from U.S. Fire. The insurance
policy (“Policy”) was renewed in 2013, with an
effective date through October 1, 2014. (Case No. 1:15-cv-46,
Doc. 1 at ¶12; Doc. 9 at ¶12).
about February 6, 2014, ice caused the Barge to again break
away from its moorings. After that, Waterfront hired C&B
Marine, LLC (“C&B”) to move the Barge from
Covington, Kentucky to Hebron, Kentucky to C&B's
facility. (Id., Doc. 35 at ¶10-12). Waterfront
made a claim against U.S. Fire for damages that arose from
the February incident. Douglas Ottey was the claims handler
assigned to this first claim; Ottey also managed
Waterfront's claim six months later for the sinking of
Fire retained a marine surveyor, Bruce Bacon, to investigate
the February claim. On June 13, 2014, U.S. Fire advised
Waterfront that the Policy did not cover the portion of its
claim that sought recovery for damage to the Barge's
access ramps. Waterfront disputed U.S. Fire's position.
On June 19, 2014, U.S. Fire retained outside counsel from New
York, James Forde, to offer legal advice in connection with
the February 2014 claim. U.S. Fire issued a formal
declination of coverage for the “access ramps”
portion of Waterfront's February claim on July 23, 2014.
alleges in its third-party complaint that on June 26, 2014,
while still under the care, custody and control of C&B,
the Barge was struck by another barge, identified as Barge
AEP 2015 (“Allision”). (Id., Doc. 1 at
¶27; Doc. 9 at ¶17; Doc. 35 at ¶17).
Waterfront asserts that Ottey was notified of the June 2014
incident, but U.S. Fire, pointing to Ottey's deposition
testimony and other documentary evidence, denies receiving
notice of the June collision until August, after the Barge
sank. (See Doc. 59 at 35-37).
August 6, 2014, Waterfront reported the previous day's
discovery that the Barge had sunk at its mooring, under what
U.S. Fire asserts were normal conditions.
August 6 email from Waterfront's insurance agent
reporting the loss to U.S. Fire states in part:
[O]n 6/26/14 the [Barge] was hit by a crane barge being
operated by McGinnis Towing. Supposedly they had the
restaurant/barge inspected and repairs made to the damage
that they caused. On 8/4/14, C&B Marina who insured is
paying to moor/care for the restaurant/barge, moved it from
original mooring location to new location mooring. It was
discovered “sinking” morning of 8/5/04.
Agent believes either McGinnis Towing or C&B Marine are
either partially [or] fully responsible for the loss.
No. 1:15-cv-799, Doc. 61-1 at 2).
immediately, U.S. Fire raised questions about the cause of
the sinking. U.S. Fire expressed concerns about
Waterfront's alleged failure to notify U.S. Fire of the
earlier June collision, whether Waterfront had maintained the
Barge in a seaworthy condition, and/or planned to reopen the
vessel as a restaurant. Claims handler Ottey testified that
the report of the sinking raised “deep concerns”
relating to the Barge's condition, the prior unreported
collision, and the sinking in calm conditions, which Ottey
believed presumptively to be the result of an unseaworthy
condition. (Doc. 59, Ottey Dep. at 106:23-107:3,
110:23-111:16). Several emails referenced a contemporaneous
news story that apparently added to the insurer's
concerns. An email from Ottey, dated August 6, reads in
We have appointed a surveyor to look into the reasons why the
barge sank….The insured [Waterfront] never informed us
of that [June 26] second incident, because it is alleged that
he was pursuing a claim against the vessel that caused the
collision. We are unsure of the seaworthiness of the vessel
after the collision, but our surveyor from the 2/14 incident,
reported that the vessel may have sank because the water pump
may have been turned off. Our surveyor from the first
[February 2014] incident also confirmed the rumor that the
insured intended to scrap the vessel.
61-2 at 1). The record reflects that two marine surveyors
were engaged by U.S. Fire to investigate: Bruce Bacon, who
had previously been engaged for the February claim, and a
second surveyor identified as Armand Cuevas.
August 15, 2014, U.S. Fire expanded Attorney Forde's
retention from the February incident to include legal advice
with respect to the August sinking. Forde has filed an affidavit
attesting that he was not asked to, and did not investigate,
the facts and circumstances of the sinking. (Doc. 62-1).
the Barge sank, U.S. Fire advanced $500, 000.00 of the policy
proceeds to C&B Marine, LLC (“C&B”), to
remove and dispose of the sunken vessel. However, U.S. Fire
advanced that payment under a formal reservation of rights as
to coverage issues. (Doc. 61-5). The August 20, 2014
reservation of rights letter referred to the allegedly
undisclosed June 26, 2014 collision, as well as the fact that
the policy does not cover loss “from want of due
diligence.” (Id. at 2).
August 20, 2014, Waterfront's insurance agent sent an
email alerting the wholesale insurance broker who placed
Waterfront's policy with U.S. Fire that Waterfront
“is talking about filing a bad faith claim in regards
to the 2/6/14 loss and the current [August 5]
loss.” (Doc. 62-5 at 3, emphasis added). The
broker transmitted the same email to U.S. Fire two days
later, on August 22. Waterfront's insurance agent
testified that by August 20, Waterfront's attorneys were
involved with its claim. (Doc. 50, Berger Dep., 96:4-97:24).
stated, U.S. Fire hired marine surveyors Cuevas and Bacon to
inspect the Barge as part of its investigation of the August
claim. On August 27, 2014, U.S. Fire had, through Attorney
Forde, additionally engaged a naval architect, William
Leschaeve. At 4:41 pm that day, Claims Handler Ottey
forwarded the CV of Leschaeve to Cuevas and Bacon, indicating
that U.S. Fire's head of claims “would like you
[to] consider retaining [Leschaeve].” (Doc. 61-6 at 2).
However, Leschaeve's CV had been sent to Attorney Forde
earlier on the same day, and both Ottey and Forde
unequivocally testified and/or averred that it was Forde and
not Cuevas who ultimately retained Leschaeve. Forde's
affidavit further attests that Leschaeve reported directly to
him, and not to Ottey or any other U.S. Fire claim
investigator, and that Cuevas and Bacon likewise did not
report to either Attorney Forde or Consultant Leschaeve.
(Doc. 62-1, at ¶¶ 12-17).
the investigation, and while accompanied by both Laschaeve
and by Waterfront's corporate maintenance manager, Danny
Thomas, Cuevas and Bacon inspected and removed a coupon
(steel section) from the hull of the vessel. The section
removed was part of U.S. Fire's investigation into a
section of the hull that had been previously repaired. On
September 10, 2014, an email from Forde to Leschaeve directs
Laschaeve to “make sure you and [Cuevas] maintain a
chain of custody for any hull material cropped out and have
the divers if possible take pictures as they are
cropping…. We want to avoid spoliation issues as we
progress.” (Doc. 61-9 at 40). Despite the removal and
examination of the coupon section of the hull,
Waterfront's corporate manager testified that, to his
knowledge, the divers did not find a cause for the sinking.
(Doc. 48, Thomas Dep., at 109:8-18).
on September 17, Cuevas communicated to U.S. Fire Claims
Handler Ottey that C&B Marine may be responsible
for the sinking, and U.S. Fire wrote to Waterfront demanding
that it put C&B on notice that it may be potentially
responsible for the loss. (Docs. 61-10, 61-11). The
communications did not ascribe a definite cause for the
sinking, and Ottey and others testified that no definite
cause was ever determined.
November 10, 2014, U.S. Fire notified Waterfront of its
“Named Peril” defense, stating that it “is
the burden of the Assured to show what named peril triggered
coverage….and that such loss or damage was not as a
result of want of due diligence by the Assured.” (Doc.
61-14). In November and December 2014, Claims Handler Ottey
exchanged emails with Waterfront that referred to the ongoing
investigation and Ottey's need to review a report by U.S.
Fire's “forensic engineer.” The meaning of
the reference to a “forensic engineer” is
unclear. Ottey testified that U.S. Fire did not determine the
cause of the ...