Monday, November 28, 2011

Egan Marine Corporation v. Great American Insurance Co. of NY

Nov 23: In the U.S. Court of Appeals, Seventh Circuit, Case Nos. 11-1266 & 11-1346. Appealed from the United States District Court for the Northern District of Illinois, Eastern Division. Egan Marine Corporation (EMC) and Service Welding and Shipbuilding, LLC (SWS) are embroiled in a contract dispute with their insurance company, Great American Insurance Company of New York (GAIC). The dispute centers on the terms and scope of the plaintiffs' insurance policy, which indemnifies them against liability under several Federal environmental protection laws or those laws' state-law equivalents. EMC and SWS attempted to invoke their policy for up to $10 million in coverage following an explosion on one of their vessels that resulted in an oil spill in the Chicago Sanitary and Ship Canal. They intended to apply that amount against any legal liability and costs they incurred as a result of the incident. GAIC contends that, under the terms of the policy, the spill rendered available only $5 million in coverage.
    Additionally, the parties disagree about the amount GAIC owes EMC and SWS pursuant to a post-explosion agreement between them that EMC and SWS would provide cleanup and spill management services on their own behalf -- a function contractually designated to GAIC. Under this arrangement, EMC and SWS agreed to charge GAIC at "cost," but each party disputes the other's understanding of and method of calculating "cost." The Appeals Court affirmed the judgment of the district court.
    In this complicated and detailed case, the district court granted GAIC judgment on the pleadings with respect to the following: (1) it owed $5,000,000 per vessel, per incident and had fully honored the policy with respect to the EMC 423; (2) it owed no
coverage for either the Lisa E or the EMC 423 for in rem liability ["with respect to the thing itself" (i.e., the collateral)]. It denied any further judgment on the pleadings. The district court then granted EMC and SWS's motion for summary judgment on their breach of contract claim, finding that GAIC owed $5,000,000 in coverage for the Lisa E, was obligated to pay defense costs up to that amount, and had breached its contract by not doing so. It denied summary judgment on their claim that GAIC breached its duty of good faith and fair dealing.
    Access the complete opinion (click here). [#Remed, #CA7]

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