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Atlantic Specialty Insurance Co. v. Mr. Charlie Adventures, LLC

United States District Court, S.D. Alabama, Southern Division

November 7, 2014



CALLIE V. S. GRANADE, District Judge.

This matter is before the court on Plaintiff's motion for partial summary judgment (Doc. 37), Defendants' amended motion for summary judgment (Doc. 44), Defendants' opposition to Plaintiff's motion for partial summary judgment (Doc. 52), Plaintiff's opposition to Defendants' motion for summary judgment (Doc. 54), Plaintiff's reply in support of its motion for partial summary judgment (Doc. 57), Defendants' reply in support of its motion for summary judgment (Doc. 60), Plaintiff's motions to strike testimony of experts David Stegall and Richard Schiehl (Docs. 58 & 59), Defendants' motion for oral argument (Doc. 62), Defendants opposition to Plaintiff's motions to strike (Docs. 65 & 66), and Plaintiff's reply in support of its motions to strike (Doc. 67). After review of the pending motions, the court finds that oral argument is not necessary and therefore denies said motion. The court further finds that for the reasons stated below, Plaintiff's motion for partial summary judgment should be granted and Defendant's motion for summary judgment should be granted in part and denied in part.


This case involves an insurance claim for damage to Defendants' yacht, the "Mr. Charlie, " and its contents by a fire that occurred on March 3, 2013. Plaintiff, Atlantic Specialty Insurance Company ("Atlantic") filed its complaint seeking a declaration that it does not owe coverage for the fire and Defendants asserted counterclaims for breach of contract and bad faith. (Docs. 1, 16).

Atlantic issued a yacht-insurance policy to Mr. Charlie Adventures, LLC effective June 15, 2012 to June 15, 2013. (Doc. 36-3). Defendant Kim P. Kornegay is named in the policy as additional "Insured Person." (Doc. 36-3, p. 6). The policy covered the yacht up to an agreed value of $800, 000 and for personal effects such as the contents of the yacht up to $5, 000. (Doc. 36-3, p. 3). The policy covered "[a]ccidental, direct physical loss of or damage to the insured property" but contained an exclusion stating that it would not pay "any loss, damage or expense caused by or resulting from:"

1. Wear and tear; gradual deterioration; weathering; bubbling; osmosis; blistering; delamination of fiberglass or plywood; corrosion; rusting; electrolysis; mold; rot; inherent vice; vermin; insects or marine life;
2. Your failure to maintain the covered yacht in good condition and repair;

(Doc. 36-3, p. 11).

On March 3, 2013, while Mr. Kornegay was operating the yacht, it reportedly caught fire and burned to the waterline. (Doc. 16, p. 3). Atlantic was notified of the fire the next day and the claim was assigned to Atlantic's Senior Claims Adjuster, Rita Boggan. (Doc. 33-1, p. 182). Ms. Boggan's supervisor, Joe Gallagher, is responsible for making the final decision on whether to pay or deny the claim. (Doc. 44-2, pp. 3-4). On March 4, 2013, Atlantic hired Guy Plaisance, a marine surveyor, to investigate the loss. (Doc. 44-5, p. 3). On March 19, 2013, Atlantic hired Gary Jones, a fire investigator, to determine cause and origin of the fire. (Doc. 44-8, p. 3). On March 29, 2013, Plaisance wrote to Atlantic stating that he believed the starboard main engine severely overheated as a result of the raw water inlet strainer on the bottom being heavily impacted with marine growth. (Doc. 44-5, p. 35). Plaisance further stated that the overheating condition could have created an intense exhaust heating which would have melted the neoprene rubber hose connecting the fiberglass exhaust tube to the riser and discharge tube. (Doc. 44-5, p. 36).

Atlantic retained mechanics Tom Elliot and Ralph Holloway of Middleton Marine to examine the engines. (Doc. 33-1, p. 88; Doc. 44-5, p. 9). On April 18, 2013 Middleton tore down the starboard engine for inspection and found the engine did not show signs of overheating. (Doc. 32-5, p. 11; Doc. 44-5, pp. 230-231). The engine was later stored at the Dog River Marina outside, exposed to the weather. (Doc. 44-5, pp. 4-5). On April 20, 2013, Plaisance sent an email to Gary Jones, Tom Elliot and Ralph Holloway with a copy going to Rita Boggan asking whether it was possible for the exhaust temperature to get above 257 degrees Fahrenheit with limited seawater flow through the engine and the engine not drastically overheat to a point of failure, yet the hot exhaust gas start burning the hose and gas pipe. (Doc. 34-1, pp. 27-31). His email stated that this was his primary question. Plaisance did not know if he ever got an answer to his question. (Doc. 34-1, p. 32-33). Plaisance is sure somebody concurred, whether in writing or orally, but Gary Jones did not respond, there is no record of a response from anyone else and Plaisance does not remember whom or if anyone responded. (Doc. 34-1, pp. 32-34). Boggan and Gallagher were aware that the engines did not overheat. (Doc. 44-4, p. 9; Doc. 44-2, pp. 8-9).

Atlantic retained Dr. Kendall Clarke, a metallurgist, to determine the percent reduction in flow area on both the starboard and port seawater intake screens. (Doc. 44-9). On June 28, 2013, Gary Jones issued a report classifying the fire as undetermined, pending the materials testing to be completed by Dr. Clarke. (Doc. 44-8, p. 7). Dr. Clarke determined that the intake screen from the port engine had an open area of 3.55 inches squared and the starboard screen had an open area of 3.85 inches squared. (Doc.44-9, p. 3). Plaisance relied on an employee of the company that manufactures the intake screens to calculate whether the pump would flow enough water through the screens. (Doc. 44-10, p. 18). However, Plaisance did not know Moran's qualifications and only spoke to Moran over the phone. (Doc. 34-1, pp. 36-38, 57-58). Additionally, Plaisance initially sent Mr. Moran the data sheet for a different engine than is at issue here. (Doc. 34-1, pp. 36-38). Plaisance later realized the mistake and informed Moran, but Moran did not recalculate the flow rate. (Doc. 34-1, p. 44). Jones recommended to Plaisance that several items be inspected because they "will provide physical documentation to prove or disprove this theory" but Jones did not know if they were ever done. (Doc. 35-1, pp. 14-18).

Guy Plaisance and Gary Jones ultimately concluded that the fire originated in the engine compartment in the vicinity of the aft end of the starboard engine and resulted from the seawater intake screen for the starboard strainer being restricted by marine growth. (Docs. 34-2, 35-6). Atlantic denied the insurance claim based on the reports of Jones and Plaisance. Atlantic concluded that coverage was excluded by the policy because the loss results from "marine life" and/or Defendants' "failure to maintain the covered yacht in good condition and repair."

Defendants moved to exclude the opinions of Guy Plaisance and Gary Jones under Rules 403 and 702. (Docs. 34 & 35). This court granted Defendants' motions to exclude, finding that Plaisance and Jones' determination of the cause of the fire did not stem from a reliable methodology, sufficient ...

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