Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00630/USCOURTS-casd-3_15-cv-00630-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1331in Fed. Question: Insurance Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CERTAIN INTERESTED 

UNDERWRITERS AT LLOYD'S, 

LONDON,

Plaintiff,

v.

BEAR LLC,

Defendant.

Case No.: 15cv630 BTM (BLM)

ORDER DENYING THIRDPARTY DEFENDANT’S MOTION 

TO DISMISS

In April 2015 Plaintiff Certain Interested Underwriters at Lloyd’s, London 

(“Underwriters”) filed an Amended Complaint against Defendant Bear LLC 

(“Bear”). In September 2015 Bear filed an Amended Counterclaim against 

Underwriters and an Amended Third-Party Complaint (“ATC”) against Third-Party 

Defendant Marsh USA, Inc. (“Marsh”). Currently before the Court is Marsh’s 

motion to dismiss Bear’s ATC, filed on October 9, 2015. For the reason’s 

discussed below, Marsh’s motion to dismiss is DENIED.

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I. Background

Bear, a Delaware limited liability company with its principal place of 

business in Minnesota, owns the 102-foot-long yacht M/V Polar Bear (“Polar 

Bear”). (ATC ¶ 1.) Marsh, a Delaware corporation with its principle place of 

business in New York, is an insurance broker that helped Bear secure a marine

insurance policy for the Polar Bear with Underwriters. (ATC ¶¶ 4, 15.)

At issue in this case is the insurance policy Marsh brokered with 

Underwriters. Bear specifically alleges that it orally requested Marsh to secure an 

insurance policy that fully insured Bear “against physical loss of, or damage to, 

the [Polar Bear] and its equipment, engines and machinery and everything 

connected thereto.” (ATC ¶ 16.) Bear alleges that its principal, Larry Jodsaas, 

authorized Marsh to purchase a single layer insurance policy that included hull 

coverage in the amount of $17,000,000. (ATC ¶ 20.) The initial policy period 

spanned one year beginning in August 2011. (ATC ¶ 21.) Bear alleges that it 

entered into an oral contract with Marsh to secure renewal of its insurance policy 

in August 2012 and again in August 2013. (ATC ¶¶ 24-26.) 

Bear alleges that instead of securing a single layer insurance policy, Marsh 

instead secured a policy that contained two covers for physical loss or damage. 

(ATC ¶ 30.) While the insured sum totals $17,250,000, the policy breaks the 

amount into two parts: $12,150,000 for “Hull Insurance” (ATC, Ex. A, p. 23), and 

an additional $5,100,000 in the “Increase Value and Excess Liabilities Clauses” 

(ATC, Ex. A, pp. 30-32). 

In May 2014 the Polar Bear ran aground at the entrance to the San Diego 

Harbor, damaging the bottom of the hull. (ATC ¶ 40.) In June 2014 the yacht 

caught fire while undergoing repairs at a shipyard in San Diego, resulting in a 

total loss. (ATC ¶ 54.)

After Underwriters initiated the instant action, Bear filed counterclaims 

against Underwriters and a third-party complaint against Marsh for (1) breach of 

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oral contract, (2) breach of fiduciary duty, and (3) negligence. Marsh moves to 

dismiss, arguing, inter alia, that because the sum of the insurance policy covers 

$17,250,000, Bear was not damaged by any alleged breach.

II. Applicable Law

Underwriters’ declaratory relief claims against Bear trigger admiralty 

jurisdiction because they pertain to a disputed marine insurance policy. See 28 

U.S.C. § 1333; Norfolk S. Ry. Co. v. James N. Kirby, 543 U.S. 14, 26 (2004). 

Bear’s third-party claims against Marsh also fall within the Court’s admiralty 

jurisdiction because they directly relate to the marine insurance policy. See

Stanley T. Scott & Co. v. Makah Dev. Corp., 496 F.2d 525, 526 (9th Cir. 1974) 

(holding that a marine insurance broker’s claims against the insured were 

“integrally related to the marine insurance policy” and therefore fell within 

admiralty jurisdiction). 

In the context of marine insurance policies, state substantive law applies in 

the absence of an established federal maritime rule, federal statute, or a need for 

uniformity in admiralty practice. Certain Underwriters at Lloyds, London v. Inlet 

Fisheries Inc., 518 F.3d 645, 649-50 (9th Cir. 2008). This rule also applies to

contracts for the procurement of insurance and disputes arising between an

insurance broker and its principal. See Illinois Constructors Corp. v. Morency & 

Associates, Inc., 802 F. Supp. 185, 187 (N.D. Ill. 1992). The parties have not 

suggested that an established federal maritime rule or federal statute apply, and 

the Court has not found one. Therefore, state law applies to Bear’s third-party 

claims.

A federal court sitting in admiralty must apply federal maritime choice of law 

rules. Aqua-Marine Constructors, Inc. v. Banks, 110 F.3d 663, 670 (9th Cir. 

1997). “[M]odern choice of law analysis, whether maritime or not, generally 

requires the application of the law of the state with the ‘most significant 

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relationship’ to the substantive issues in question.” Id. at 673 (quoting Albany Ins. 

Co. v. Anh Thi Kieu, 927 F.2d 882, 891 (5th Cir. 1991)). This analysis requires 

“identification of the place of negotiation and execution of the contract as a 

means of determining which states have had sufficient contacts with the parties 

and the transaction to justify application of their law.” Aqua-Marine, 110 F.3d at 

674. 

According to the ATC, Bear’s principal executed a “Confirmation of Binding 

Instructions” (“Agreement”) authorizing Marsh to place insurance on behalf of 

Bear. (ATC, Ex. B.) Bear is a Delaware limited liability company with its principal 

place of business in Minnesota, while Marsh is a Delaware corporation with its 

principal place of business in New York. (ATC ¶¶ 1, 4.) The Agreement was 

executed by Marsh’s Ft. Lauderdale, Florida, office. (ATC, Ex. B.) 

Florida has the most significant relationship to the substantive issues in 

question—namely, the contract and agency relationship between Marsh and 

Bear. Marsh’s representative in the Florida office, Kathleen Harris, allegedly 

reached out to Bear with the hopes of brokering insurance coverage for the Polar 

Bear. (ATC ¶ 15.) Marsh’s Florida office also processed the Agreement which 

authorized Marsh to place insurance on behalf of Bear. (ATC, Ex. B.) Therefore, 

Florida appears to have the most significant relationship to the contract and 

agency issues alleged in Bear’s ATC, requiring the application of Florida law to 

the substantive issues in Bear’s third-party complaint.

III. Discussion

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should 

be granted only where a plaintiff's complaint lacks a "cognizable legal theory" or 

sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police 

Dept., 901 F.2d 696, 699 (9th Cir. 1988). When reviewing a motion to dismiss, 

the allegations of material fact in plaintiff’s complaint are taken as true and 

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construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. 

v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). 

Although detailed factual allegations are not required, factual allegations 

“must be enough to raise a right to relief above the speculative level.” Bell 

Atlantic v. Twombly, 550 U.S. 544, 555 (2007). “A plaintiff’s obligation to prove 

the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 

conclusions, and a formulaic recitation of the elements of a cause of action will 

not do.” Id. “[W]here the well-pleaded facts do not permit the court to infer more 

than the mere possibility of misconduct, the complaint has alleged - but it has not 

show[n] that the pleader is entitled to relief.” Ashcroft v. Iqbal, 565 U.S. 662, 679 

(2009) (internal quotation marks omitted). Only a complaint that states a 

plausible claim for relief will survive a motion to dismiss. Id.

A. Claim Four: Breach of Contract 

A breach of contract claim requires three elements: (1) a valid contract; (2) 

a material breach; and (3) damages. Friedman v. N.Y. Life Ins. Co., 985 So. 2d 

56, 58 (Fla. Dist. Ct. App. 2008). Marsh argues that because the policy it secured 

with Underwriters allegedly provides $17,250,000 in coverage, Bear cannot 

prove damages. 

Bear alleges facts sufficient to state a plausible claim that Marsh breached 

the oral contract. Bear alleges that it entered into an oral contract with Marsh 

whereby Marsh agreed to secure a renewal of the marine insurance policy fully 

insuring Bear against losses or damages to the Polar Bear at an agreed value of 

$17,000,000. Bear alleges that Marsh breached this contract because the actual 

insurance policy provided two separate forms of cover at an agreed value of 

$12,150,000. Further, Bear alleges that it was damaged because it “may have to 

incur fees and costs to prove the amount of its losses on the ‘sum insured’ 

excess value cover, even though it would not otherwise be required to do so.” 

(Opp’n to Mot. to Dismiss, ECF No. 42, at 5.) 

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Marsh requests that the Court interpret the insurance policy to include 

coverage for the total loss of the Polar Bear at an agreed value of $17,250,000. 

However, Underwriters is not a party to this motion, nor has it stipulated to the 

insurance policy’s scope. Such a request is more appropriate for disposition on a 

motion for summary judgment. 

B. Claim Five: Breach of Fiduciary Duty 

Under Florida law, an insurance broker has a fiduciary relationship with the 

insured. See Southtrust Bank v. Export Ins. Srvs., Inc., 190 F. Supp. 2d 1304, 

1308 (M.D. Fla. 2002) (citing Moss v. Appel, 728 So. 2d 199, 201-02 (Fla. Dist. 

Ct. App. 1998)). In general, the broker must not mislead the insured as to the 

scope of the coverage. Southtrust, 190 F. Supp. 2d at 1309 (finding that plaintiff 

had stated a valid claim for breach of fiduciary duty with allegation that insurance 

broker misinformed insured as to effective dates of coverage). 

Bear alleges in the ATC that Marsh breached its fiduciary duty by, inter alia, 

failing to obtain the requested scope of insurance coverage, instead obtaining 

coverage for the Polar Bear under two covers. Furthermore, Bear alleges that 

Marsh never informed Bear that its coverage was under two covers, not a single 

layer. Because Bear alleges that Marsh breached its fiduciary duty by failing to 

obtain a single layer insurance policy at the agreed value of $17,000,000, Bear 

states a plausible claim. 

C. Claim Six: Negligence Claim

An insurance broker has a duty to use reasonable skill and diligence when 

dealing with the insured. Southtrust Bank, 190 F. Supp. 2d at 1310. “An 

insurance broker may be liable for damages when there is an agreement to 

procure insurance and a negligent failure to do so.” Bennet v. Bark, 400 So. 2d 

484, 485 (Fla. Dist. Ct. App. 1981). “[L]iability may result from a negligent failure 

to obtain coverage which is specifically requested or clearly warranted by the 

insured’s express needs.” Warehouse Foods, Inc. v. Co. Risk Magm’t Srvs., Inc., 

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530 So. 2d 422, 424 (Fla. Dist. Ct. App. 1988). 

As noted above, Bear alleges that it specifically requested a single layer 

insurance policy for the Polar Bear at an agreed value of $17,000,000. Marsh 

allegedly procured an insurance policy with two covers at an agreed value of 

$12,150,000. Therefore, Bear states a plausible claim that Marsh breached its 

duty to use reasonable skill and diligence in procuring insurance coverage for the 

Polar Bear. 

IV. Conclusion

For the reasons discussed above, Marsh’s motion to dismiss is DENIED.

Marsh shall have twenty (20) days from the filing of this order to answer Bear’s 

Amended Third-Party Complaint. 

IT IS SO ORDERED.

Dated: April 29, 2016

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