IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

EASTERN DIVISION

GREAT SOUTHERN WOOD )

PRESERVING, INC., )

)

Plaintiff, )

)

v. ) CIVIL ACTION NO. 1:06cv708-CSC

) (WO)

AMERICAN HOME ASSURANCE )

CO., et al., )

)

Defendants. )

MEMORANDUM OPINION

In 2005, Hurricane Katrina wreaked havoc in New Orleans and along the Louisiana,

Mississippi and Alabama gulf coasts. This lawsuit is part of Katrina’s unwanted legacy. The

plaintiff, Great Southern Wood Preserving, Inc., brings claims of breach of contract and bad

faith concerning the denial of insurance coverage for the loss of lumber shipments at the Port

of Gulfport, Mississippi during Katrina on August 29, 2005. The defendants are American

Home Assurance Company, AIG, American International Underwriters Corporation, and

American International Marine Agency. The parties have consented to a United States

Magistrate Judge conducting all proceedings in this case and ordering the entry of final

judgment, pursuant to 28 U.S.C. § 636(c)(1) and M.D. Ala. L.R. 73.1.

Now pending before the court is the defendants’ motion for summary judgment.

(Doc. No. 21.) The court has carefully considered the motion, the supporting and opposing

evidentiary materials and the arguments of counsel heard on August 14, 2007. The court

concludes that the motion for summary judgment is due to be granted. 

Case 1:06-cv-00708-CSC Document 36 Filed 08/21/2007 Page 1 of 20
1

Marty Goff is an import manager for Great Southern Wood.

2

Apparently, the term “unfurnished lumber” means wood which has not been prepared, i.e. wood

which is untreated.

2

I. THE FACTS

Great Southern Wood Preserving, Inc., (“Great Southern Wood”) is in the business

of treating lumber which it then markets as “Yella Wood” to customers such as Home Depot

and local hardware stores. (Doc. No. 22-2, Goff’s Dep., p. 11.)1

 Great Southern Wood

acquires most of its lumber domestically; however, ten to fifteen percent of its lumber is

imported. (Id.) 

In June 2005, American Home Assurance Company issued a marine open cargo policy

to Great Southern Wood. (Doc. No. 1, Pl’s Ex. 1.) The policy insured “lawful goods and/or

merchandise suitably packed for export, consisting principally of UNFURNISHED

LUMBER. . . .” (Id., p. 3.)2

 The policy included a shore clause, which provided:

Unless broader terms and conditions have been provided for in

Clause 17 or elsewhere herein; where this insurance by its terms

covers while on docks, wharves, or elsewhere on shore, and/or

during land transportation, it shall include the risks of collision,

derailment, overturning or other accident to the conveyance,

fire, lightning, sprinkler leakage, cyclones, hurricanes,

earthquakes, floods (meaning the rising of navigable waters)

and/or collapse or subsidence of docks or wharves, even though

the insurance be otherwise Free of Particular Average.

(Id., p. 6.) 

The policy also included a Warehouse to Warehouse Clause, providing as follows:

This insurance attaches from the time the goods leave the

Warehouse and/or Store at the place named in the Declaration

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 Goff stated that untreated wood is occasionally sold directly to Georgia Pacific. (Goff’s Dep., p.

(continued...)

3

and/or Certificate for the commencement of the transit and

continues during the ordinary course of transit, including

customary transshipment, if any, until the goods are discharged

overside from the overseas vessel at the final port. Thereafter

the insurance continues whilst the goods are in transit and/or

awaiting transit until delivered to the final warehouse

destination named in the policy or until the expiry of 15 days (or

30 days, if the destination to which the goods are insured is

outside the limits of port) whichever shall first occur. The time

limits referred to above to be reckoned from midnight of the day

on which the discharge overside of the goods hereby insured

from the overseas vessel is completed. Held covered at a

premium to be agreed in the event of transshipment, if any, other

than as above and/or in the event of delay in excess of the above

time limits arising from circumstances beyond the control of the

ASSURED.

(Id., p. 8.) In addition, a marine extension clause provided that the “insurance attaches from

the time the goods leave the Warehouse at the place named in the Policy, Certificate or

Declaration for the commencement of transit and continues until the goods are delivered to

the final Warehouse at the destination named in the Policy, Certificate or Declaration. . . .”

(Id.)

During the period of coverage, several ships transported wood purchased by Great

Southern Wood from South America to various ports along the Gulf of Mexico. Generally,

after the wood was discharged from the vessel, it was placed in a warehouse at a designated

port. Trucks owned and operated by Great Southern Wood then hauled the lumber to the

company’s treating facilities or, on rare occasions, transported the untreated wood directly

to a customer from a port warehouse.3

 Generally, all ports along the Gulf of Mexico provide

Case 1:06-cv-00708-CSC Document 36 Filed 08/21/2007 Page 3 of 20
3

(...continued)

63.)

4

 In other words, the amount of wood transported from the Gulfport warehouse was limited by the

nature of the trucking lanes and the number of trucks that are permitted to enter the port each day. 

(Goff’s Dep., p. 30.)

5

 The agreement also included a “Care, Custody, and Control” provision, which stated:

(continued...)

4

thirty (30) days of free space to transport shipped products out of port warehouses. (Id., p.

29.) However, due to “inland logistics,” Great Southern Wood was “always under pressure

to get the amount of cargo . . . out of . . . [the] small port” of Gulfport, Mississippi.4

 (Id., p.

30.) Great Southern Wood discussed this problem with Mississippi Port Authority officials

and asked for additional time to move its cargo from the port. (Id.) After their discussion

on August 1, 2005, Great Southern Wood and the Mississippi Port Authority entered into a

“Space Assignment Agreement.” (Doc. No. 22-5.) 

The agreement specified that the Mississippi Port Authority would provide an

assigned space which would accommodate the storage of up to 3,000 tons of cargo per month

and that, “[i]n consideration of this space, Great Southern Wood Preserving [would]

guarantee a three month volume of 3,000 short tons of lumber at a wharfage rate of $1.70 per

short ton.” (Id.) In addition, the Mississippi Port Authority agreed to provide “[f]ree time

. . . in the amount of forty-five (45) days from the date of receipt of each shipment from

vessel.” (Id.) The agreement stated that Great Southern Wood’s assigned space would “only

be used for the receipt and short-term storage of lumber and related products in support of

the cargo operations of the Customer at the Port of Gulfport.”5

 (Id.) (Emphasis in original.)

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(...continued)

The sole responsibility for the care, custody, control and protection of customer’s

cargo shall be the Customer or, as appropriate, the person designated as the Responsible

Party. The Mississippi State Port Authority has no responsibility for the care, custody,

control or protection fo Customer’s cargo. If the party responsible for the care, custody,

control and protection of Customer’s cargo is someone other than the Customer, then

please identify the responsible party for care, custody, and control.

(Doc. No. 22-5.)

5

After entering into the space assignment agreement, Great Southern Wood continued

receiving shipments of lumber in Gulfport. 

The Vessel Kestrel Arrow delivered approximately 3850 bundles or packages of

lumber to Gulfport on August 3, 2005, and completed discharge of her cargo on August 6,

2005. (Doc. No. 26, Ex. G; Goff’s Dep., p. 85.) The following day, the United States

Department of Agriculture (“USDA”) approved the release of the lumber. (Goff’s Dep., p.

85.) At that time, Great Southern Wood’s trucks began picking up the lumber from the

warehouse and delivering the wood to its various treating plants. Approximately 73 units of

lumber were trucked per day. (Id., p. 93.) (Id.) 

On August 23, 2005, a tropical storm over the Bahamas was gradually developing into

Hurricane Katrina. As Katrina crossed over the State of Florida into the Gulf of Mexico, the

Vessel Sanko Stream was sailing across the Gulf toward the Port of Gulfport with another

load of Great Southern Wood’s lumber. She arrived in Gulfport safely, and delivered

approximately 4060 bundles or packages of wood on August 25, 2005. (Id., p. 84, 86.) The

ship discharged her cargo on August 27, 2005. (Id.) As Hurricane Katrina grew stronger and

headed toward the Louisiana and Mississippi coastline, Great Southern Wood awaited

Case 1:06-cv-00708-CSC Document 36 Filed 08/21/2007 Page 5 of 20
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clearance from the USDA to begin transport of the Sanko Stream cargo. By August 29,

2005, Great Southern Wood had moved seventy-two percent of the Kestrel Arrow cargo out

of the warehouse. On the morning of August 29, 2005, Hurricane Katrina slammed into the

coast, destroying the remainder of the cargo from the Kestrel Arrow and all of the cargo from

the Sanko Stream. (Id., p. 86.) On October 4, 2005, United States Customs released the

USDA’s hold on the Sanko Stream cargo. (Id.) 

On August 31, 2005, Great Southern Wood reported the loss of lumber to American

Home Assurance Company. (Doc. No. 22-5, Ho’s Affid., p. 1.) The insurance company

retained SGS North American/Marine Services, an independent marine surveyor, to

investigate the claim. (Id.) On May 23, 2006, American Home Assurance Company

determined that Great Southern Wood’s claim should be denied for the following reasons:

The losses presented in [this] claim occurred on August 29,

2006, when the Mississippi State Port Authority Warehouse in

Gulfport, Mississippi where the lumber products were stored

was destroyed by Hurricane Katrina. Given that these losses did

not occur during the ocean voyage, but during a period of

storage after discharge of the vessels, we direct your attention to

the [warehouse to warehouse] provision of the policy. . . .

We note that the Policy is a Marine Open Cargo Policy and does

not provide separate warehouse coverage, nor was such

coverage ever requested.

The information submitted establishes that Great Southern used

the warehouse at the pier as a storage facility for its lumber after

vessel discharge, and the lumber was removed by Great

Southern from the warehouse as it was needed at Great

Southern’s various processing facilities. We have also been

advised that occasionally the material was sold and shipped to

customers directly from the Gulfport warehouse. The

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In Celotex Corporation v. Catrett, 477 U.S. 317, 322 (1986), the court stated:

(continued...)

7

spreadsheets we received indicate that it typically takes Great

Southern 90 days or longer to remove the lumber delivered by

a particular vessel completely from the Gulfport warehouse.

The contract between Great Southern and the Mississippi State

Port Authority establishes that Great Southern assumed all

responsibility for the care, custody, control and protection of the

cargo. SSA is the designated stevedore, cargo handler and

terminal operator on behalf of Great Southern. In addition, all

of the bills of lading show that the place of delivery is the Port

of Gulfport, and the space designated for “Place of delivery by

on carrier” is blank. The Commercial invoices for each

shipment show the “destination” as Gulfport.

These facts establish that Great Southern exercised full

dominion and control over the lumber once it was discharged

from the vessels and placed into the warehouse in Gulfport.

Therefore, the ordinary course of transit had ceased, and the

lumber had been delivered to its final destination warehouse

within the meaning of the Policy.

We conclude there is no coverage for these losses under the

Policy because the losses occurred after coverage under the

Policy had ceased.

(Doc. No. 22-5, Ex. 4.) On August 9, 2006, Great Southern Wood filed the instant lawsuit

against the defendants. (Doc. No. 1.)

II. THE STANDARD OF REVIEW

 Under FED.R.CIV.P. 56(c) summary judgment is proper “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is entitled to

a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).6

 The

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(...continued)

"[W]here the nonmoving party will bear the burden of proof at trial on a dispositive

issue...Rule 56(e)...requires the nonmoving party to go beyond the pleadings and

by...affidavits, or by the "depositions, answers to interrogatories, and admissions on file,"

designate "specific facts showing that there is a genuine issue for trial...We do not mean

that the nonmoving party must produce evidence in a form that would be admissible at

trial in order to avoid summary judgment...Rule 56(e) permits a proper summary

judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule

56(c) except the mere pleadings themselves....

Id. at 324.

8

party moving for summary judgment “always bears the initial responsibility of informing the

district court of the basis for its motion, and identifying those portions of the ‘pleadings,

depositions, answers to interrogatories, and admissions on file, together with the affidavits,

if any,’ which it believes demonstrate the absence of a genuine issue of material fact.” Id.

at 323. The movant may meet this burden by presenting evidence showing there is no

dispute of material fact, or by showing that the nonmoving party has failed to present

evidence in support of some element of its case on which it bears the ultimate burden of

proof. Id. at 322-324. If the movant succeeds in demonstrating the absence of a material

issue of fact, the burden shifts to the non-movant to establish, with evidence beyond the

pleadings, that a genuine issue material to the non-movant's case exists. See Fitzpatrick v.

City of Atlanta, 2 F.3d 1112, 1115-17 (11th Cir. 1993); see also FED.R.CIV.P. 56(e). ("When

a motion for summary judgment is made and supported ... an adverse party may not rest upon

the mere allegations or denials of [his] pleading, but [his] response ... must set forth specific

facts showing that there is a genuine issue for trial."). What is material is determined by the

substantive law applicable to the case. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248

Case 1:06-cv-00708-CSC Document 36 Filed 08/21/2007 Page 8 of 20
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(1986). A dispute of material fact "is 'genuine' . . . if the evidence is such that a reasonable

jury could return a verdict for the nonmoving party." Id. at 248 (1986). The non-movant

"must do more than simply show that there is some metaphysical doubt as to the material

facts." Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather,

the non-movant must present "affirmative evidence" of material factual conflicts to defeat

a properly supported motion for summary judgment. Anderson, 477 U.S. at 257. If the

non-movant's response consists of nothing more than conclusory allegations, the court must

enter summary judgment for the movant. See Holifield v. Reno, 115 F.3d 1555, 1564 n. 6

(11th Cir.1997); Harris v. Ostrout, 65 F.3d 912 (11th Cir. 1995). However, if there is a

conflict in the evidence, the plaintiff’s evidence is to be believed and all reasonable

inferences must be drawn in his favor.” Anderson, 477 U.S. at 255; Molina v. Merritt &

Furman Ins. Agency, 207 F.3d 1351, 1356 (11th Cir. 2000). After the nonmoving party has

responded to the motion for summary judgment, the court must grant summary judgment if

there remains no genuine issue of material fact and the moving party is entitled to judgment

as a matter of law. FED.R.CIV.P. 56(c). With these principles of law in mind, the court will

determine now whether summary judgment is appropriate and should be granted.

III. DISCUSSION

A. Breach of Contract

Under the terms of the Warehouse to Warehouse Clause of the marine open cargo

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 In its complaint, Great Southern Wood invokes the diversity jurisdiction of the federal courts

pursuant to 28 U.S.C. § 1332(A)(1). The court notes that the plaintiff has “refrained from asserting

admiralty jurisdiction under 28 U.S.C. § 1331(1), apparently in order to obtain a jury trial, which,

although not generally available in admiralty, can be had if there is also a basis for diversity jurisdiction.” 

(continued...)

10

policy, “the insurance continues whilst the goods are in transit and/or awaiting transit until

delivered to the final warehouse . . . ” Great Southern Wood contends that American Home

Assurance Company’s denial of its claim is a breach of the terms of the policy. 

Great Southern Wood maintains that the policy term “final warehouse at the

destination named in the policy” is ambiguous because the final warehouse or destination is

not listed in the policy, and the term is not defined within the policy. Great Southern Wood

argues that the final destination of its product is at its various manufacturing plants to which

the lumber is shipped from the port. The defendants argue that the policy does not cover the

loss because Great Southern Wood took complete custody and control over the lumber when

it was moved into the plaintiff’s assigned warehouse at the port. The defendants argue the

warehoused lumber had reached its final destination and, therefore, was no longer in transit.

Thus, the fundamental issue in this case focuses on the proper construction of the Warehouse

to Warehouse Clause of the Marine Open Cargo Policy and whether the lumber was “in

transit” or had reached its “final warehouse . . . destination” within the meaning of the clause.

How the fundamental issue is resolved will be largely determined by the applicable

law in this case. With respect to this court’s jurisdiction, the parties are all in the same boat.

The defendants assert, and Great Southern Wood concedes, that this case falls squarely

within the admiralty jurisdiction of the federal courts.7

 (Doc. No. 26-1, p. 7.) Of course, the

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7

(...continued)

Harville v. Johns-Manville Products Corp., 731 F.2d 775, 779 (11th Cir. 1984) (citing Fitzgerald v.

United States Lines Co., 374 U.S. 16 (1963)). There is clearly a basis for diversity jurisdiction in this

case.

11

parties cannot by agreement confer jurisdiction on the court, but in this instance, as we will

see, they are right. Great Southern Wood also asserts that state law should be applied to its

breach of contract claim because a controlling rule of admiralty law is not implicated in this

case. (Id.) Unfortunately for Great Southern Wood, that claim doesn’t hold water. In

Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004), the Supreme Court considered

a case in which there was a train wreck involving a shipment of machinery from Australia

to Huntsville, Alabama, pursuant to a bill of lading. The Court found that the bill of lading

was a maritime contract, holding that “so long as a bill of lading requires a substantial

carriage of goods by sea, its purpose is to effectuate maritime commerce – and thus it is a

maritime contract.” Id., 458 U.S. at 27. Importantly for present purposes, the Court further

held that “[w]hen a contract is a maritime one, and the dispute is not inherently local, federal

law controls the contract interpretation.” Id., 543 U.S. at 22-23. The Court emphasized the

importance of uniformity of the general maritime law, specifically noting that “‘[i]t certainly

could not have been the intention [of Article III’s grant of admiralty jurisdiction] to place the

rules and limits of maritime law under the disposal and regulation of the several States, as

that would have defeated the uniformity and consistency at which the Constitution aimed on

all subjects of a commercial character affecting the intercourse of the States with each other

or with foreign states.’” Id., 543 U.S. at 28, quoting American Dredging Co. v. Miller, 510

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8

Whether Weisberg and Steelmet’s approach to the question of applying state law vel non is valid

after Kirby is an interesting question but one which the court need not resolve.

12

U.S. 443, 451 (1994).

Unquestionably, this suit was properly brought in diversity; however, this case can

also be sustained under admiralty jurisdiction by virtue of the maritime contract involved.

See Norfolk Southern Railway Co., supra. The nature and subject-matter of the marine open

cargo insurance policy in this case obviously involves a maritime contract. Assuredly, the

dispute is not inherently local; indeed, it involves an international shipment of lumber

purchased in South American and shipped to Mississippi. In Steelmet, Inc. v. Caribe Towing

Corp., 779 F.2d 1485, 1488 (11th Cir.1986),8

 the Eleventh Circuit explained that in deciding

whether to apply state law in an admiralty case, a court must identify the state law involved,

determine if an admiralty principle conflicts with that law and if there is not admiralty

principle determine if an admiralty rule should be fashioned. If not, then the state rule should

be followed. “But, when neither statutory nor judicially created maritime principles provide

an answer to a specific legal question, courts may apply state law provided that the

application of state law does not frustrate national interests in having uniformity in admiralty

law.” All Underwriters v. Weisberg, 222 F.3d 1309, 1312 (11th Cir. 2000) (quoting Coastal

Fuels Mktg., Inc. v. Florida Express Shipping Co., Inc., 207 F.3d 1247, 1251 (11th

Cir.2000)). The plaintiff argues that the general contract law of Alabama applies, that the

applicable terms of the warehouse to warehouse clause are ambiguous and, therefore,

summary judgment is impermissible because there is a triable issue of fact. There are several

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13

problems with this argument. The parties do not identify any admiralty principle in conflict

with state law or suggest to the court that some principle should be developed. More

importantly, the plaintiff has not identified any specific state or local interest at stake relating

to the interpretation of the policy. Thus, even though the court should look to state law in

determining marine insurance contract issues, Great Southern Wood’s ambiguity argument

cannot create an ambiguity in contract language which is well settled in the industry. As the

court will explain, warehouse to warehouse clauses are standard throughout the marine

insurance industry. See generally Donald T. Rave & Stacy Tranchina, Marine Cargo

Insurance: An Overview, 66 TUL. L. REV. 371 (1991). The court concludes that there is no

ambiguity in the contract language sufficient to create a disputed issue of fact for resolution

by a trier of fact.

The critical question, therefore, devolves into whether Great Southern Wood exercised

dominion and control over the untreated lumber. The defendants, citing Lumber & Wood

Products, Inc. v. New Hampshire Insurance Co., 807 F.2d 916 (11th Cir. 1987), argue that

coverage ceased when Great Southern Wood began “exercis[ing] dominion and control over

the goods” in the Gulfport warehouse. In Lumber & Wood Products, supra, the Court

determined that the consignee of lumber destroyed by Hurricane Frederic exercised control

over the goods because the consignee, as a practice, sold lumber directly from its dock and

had the exclusive right to make all decisions concerning the lumber after off-loading. 807

F.2d at 919-20. 

The parties concede that the issues concerning dominion and control, including

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9

 During oral argument, both parties conceded that the facts in this case are undisputed and that

the legal issues concerning the Warehouse to Warehouse Clause are for the court to decide. 

10 Although Great Southern Wood argues that the contract is ambiguous because the final

destination is not named in the policy, it is clear that the central issue is whether the plaintiff exercised

dominion and control over the lumber. Moreover, the court notes that, due to the numerous ports and the

variety of manufacturing plants involved in Great Southern Wood’s importing business, the parties would

face difficulties specifying the final destination of all shipments in an efficient manner. Additionally, the

terms of the insurance policy indicate that Great Southern Wood was required to name its final destination

to the insurance company. Given that the sole issue in this case is whether Great Southern Wood

exercised dominion and control over the lumber, this court will forego floundering in a sea of contract

terminology with respect to any alleged ambiguities.

14

whether the goods were no longer in transit, are questions of law to be determined by the

court.9

 Thus, this court must determine whether Great Southern Wood exercised control and

dominion over the goods at the Gulfport warehouse. 

Because warehouse-to-warehouse clauses are standard in open marine cargo policies,

and there is a considerable amount of case law interpreting these clauses see e.g., Pacific Tall

Ships Co. v. Kuehne & Nagel Inc., 76 F.Supp.2d 886, 893 (N.D. Ill. 1999), this court is not

sailing in unchartered waters. Generally, when an insured has exercised dominion and

control over a shipment by accepting delivery, the goods have reached their final destination

and coverage under the policy ceases, even if the goods were not delivered into the insured’s

warehouse.10 Rave & Tranchina, supra at 379. A warehouse to warehouse clause establishes

that “once the cargo [is] delivered to the [insured] and once it exercises dominion and control

over the cargo, treating it as its stock in trade, the final warehouse ha[s] been reached.”

Lumber & Wood Products, 807 F.2d at 919. The question of whether a loss is covered by

a marine open cargo policy turns on whether the insured “‘had exercised dominion over the

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15

goods so that it might be said that delivery had occurred.’” Id., quoting Budco Associates,

Inc. v. Royal Exchange Assurance of America, 53 A.D.2d 568, 384 N.Y.S.2d 819, 820

(1976). See also Jomark Textiles, Inc. v. Int’l Fire and Marine Ins. Co., Ltd., 771 F.Supp.

577, 580 (S.D.N.Y. 1989)(holding that, because the plaintiff “exercised dominion and control

over the goods, they were no longer in-transit as a matter of law, and therefore, were no

longer covered by the Marine Cargo policy.”). A warehouse-to-warehouse clause in “a

transit policy of insurance should not be stretched or tortured to provide coverage for losses

which take place after delivery.” Lumber & Wood Products, Inc., 807 F.2d at 920. An

insured cannot indefinitely avail itself of coverage by storing lumber conveniently in an area

which is not designated in the policy, such as outside a warehouse, and then claim that the

cargo is allegedly “in transit.” Id. Once the final destination is reached, transit must cease.

Id. Consequently, coverage must also cease. Id. 

In this case, the undisputed facts demonstrate that Great Southern Wood exercised

dominion and control over the lumber after it was unloaded of the ships at the Gulfport

warehouse. In his deposition, Maty Goff, an import manager for Great Southern Wood,

testified that he and other members of inventory management determined where to transport

the lumber after the cargo was placed in the warehouse. (Doc. No. 22-2, Goff’s Dep., p. 59.)

Goff acknowledged that he and other Great Southern Wood employees “ultimately . . . make

the final call” with respect to where to transport the lumber from the warehouse, that

inventory levels and other “supply and demand” issues were some of the factors he

considered when determining which manufacturing plant should receive a certain amount of

Case 1:06-cv-00708-CSC Document 36 Filed 08/21/2007 Page 15 of 20
11 Great Southern Wood has processing facilities in Mobile, Abbeville, Muscle Shoals, Conyers,

Jessup, and Lake Panasofkee. (Goff’s Dep., p. 12.)

16

wood, and that no one else had control over the cargo. (Id., at 59, 88, 91.) Moreover, it is

undisputed that Great Southern Wood’s subsidiary trucking company would routinely

transport the lumber from Gulfport to one of the plaintiff’s manufacturing plants11 selected

by Goff or another employee. The parties also do not dispute that Great Southern Wood

occasionally sold its lumber to other manufacturers directly from the Gulfport warehouse.

Given that Great Southern Wood held the goods at the port until Great Southern Wood’s

inventory managers, according to the needs of the company and in their discretion,

designated where the wood should be sent and that the company’s usual practice was to

transport the lumber to more than one manufacturing plant, the court concludes that as a

matter of law Great Southern Wood exercised dominion and control over all of the lumber

stored in the Gulfport warehouse. 

Consequently, when the lumber was discharged overside from the Sanko Stream and

the Kestrel Arrow and was placed in the Gulfport warehouse, the lumber was no longer “in

transit.” The lumber had arrived at its “final warehouse.” Under the undisputed facts of this

case, the court concludes that Great Southern Wood should not look to the defendant’s

marine open cargo policy for recompense for this loss. 

Great Southern Wood’s argument that it did not have any control over the Sanko

Stream cargo because the United States Department of Agriculture had not released the

shipment prior to the arrival of Hurricane Katrina lacks merit. A government hold on goods

Case 1:06-cv-00708-CSC Document 36 Filed 08/21/2007 Page 16 of 20
12 In its response to the defendants’ motion for summary judgment, Great Southern Wood also

asserts that it is entitled to recover under the theory of “abnormal” bad faith. (Doc. No. 26, p. 16.) 

Specifically, Great Southern Wood contends that American Home failed to conduct a proper investigation

of its insurance claims. (Id.) Great Southern Wood, however, did not allege facts or list this contention

as a claim against the defendants in its complaint. Consequently, any claim that the defendants acted in

bad faith by failing to investigate in an appropriate manner is not before this court.

17

in the possession, custody, and control of the insured does not render the goods “in transit”

for insurance purposes. See Fireman’s Fund Ins. Co. v. Service Trans. Co., 466 F.Supp. 934

(D.C. Md. 1979) (holding that coffee shipment which was temporarily delayed in customs

due to the FDA’s order was no longer “in the ordinary course of transit” under the meaning

of the policy). 

Based on the foregoing, the court concludes that the motion for summary judgment

with respect to this breach of contract claim is due to be granted.

B. Bad Faith

Great Southern Wood asserts that American Home Assurance Company acted in bad

faith by “intentionally refus[ing] to pays its claim . . . without any reasonably legitimate,

arguable, or debatable reasons for that refusal to pay.” (Doc. No. 1, p. 5.) This claim is a

state law claim and determined by state law.

Under Alabama law, there seemingly are two types of bad faith claims. An insurance

company may be liable for either “normal” bad faith or “abnormal” bad faith. State Farm

Fire & Casualty Co. v. Slade, 747 So. 2d 293, 306 (Ala. 1999). In its complaint, Great

Southern Wood asserts a claim of “normal” bad faith.12 A plaintiff alleging that an insurance

company committed “normal” bad faith must demonstrate the following:

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(a) Existence of an insurance contract and a breach

by the insurer;

(b) Intentional failure to pay the insured’s claim;

(c) Absence of legitimate or arguable reason for

refusal;

(d) The insurer’s actual knowledge of the absence of

an arguable reason; and

(e) If the intentional failure to determine the

existence of a lawful basis is the theory relied

upon, the insured must prove the insurer’s

intentional failure to determine whether there was

a legitimate or arguable reason to pay the claim.

Cont. Elec. Co. v. Am. Employers’ Ins. Co., 518 So. 2d 83, 86 (Ala. 1987). “‘Normal’ bad

faith claims are often referred to as ‘directed verdict on the contract’ claim[s],’ . . . because

a plaintiff must show that he is entitled to a directed verdict on the breach of contract claim

in order to have his bad faith claim submitted to a jury.” Mut. Serv. Cas. Ins. Co. v.

Henderson, 368 F.3d 1309 (11th Cir. 2004) (citing Employees’ Benefit Assoc. v. Grissett, 732

So. 2d 968, 976 (Ala. 1995)); Blackburn v. Fid. & Deposit Co. of Md., 667 So. 2d 661, 668

(Ala. 1995); Nat’l Sav. Life Ins. Co. v. Dutton, 419 So. 2d 1357, 1362 (Ala. 1982)). As

previously discussed, the court finds that Great Southern Wood exercised dominion and

control over the lumber and that the cargo had reached its final destination. Thus, Great

Southern Wood is not entitled to a directed verdict on the breach of contract claim.

Consequently, Great Southern Wood has failed to establish a bad faith claim against

American Home Assurance Company. 

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C. The Abandoned Claims

In their motion for summary judgment, defendants AIG, American International

Underwriters Corporation, and American International Marine Agency argue that they are

entitled to summary judgment because “[Great Southern Wood] does not claim any benefits

due under any policy with these remaining defendants and therefore does not assert any claim

against these defendants.” (Doc. No. 22-1, p. 16.) In its response, Great Southern Wood

does not list any enumerated claims or brief the issue concerning its failure to assert any

claim for benefits due under a policy with the aforementioned defendants. (Doc. No. 26.)

Great Southern Wood alleges no facts and makes no argument in response to the defendants’

motion for summary judgment with respect to any claims against these defendants. (Doc.

No. 26.) In addition, Great Southern Wood does not address the defendants’ argument that

it has failed to assert a claim against defendants AIG, American International Underwriters

Corporation, and American International Marine Agency. 

The burden is on the parties to formulate arguments, and a plaintiff’s failure to list an

enumerated claim and brief an issue in a memorandum of law in opposition to a defendant’s

motion for summary judgment is deemed an abandonment of that claim. See Iraola & CIA,

S.A. v. Kimberly-Clark Corp., 325 F.3d 1274 (11th Cir. 2003); Thomas v. Alabama Council

on Human Relations, Inc., 248 F.Supp.2d 1105, 1107 n.1 (M.D. Ala. 2003). Cf. Road

Sprinkler Fitters Local Union No. 669 v. Indep. Sprinkler Corp., 10 F.3d 1563, 1568 (11th

Cir. 1994). Accordingly, the court concludes that Great Southern Wood has abandoned its

claims against defendants AIG, American International Underwriters Corporation, and

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American International Marine Agency. Consequently, the defendants’ motion for summary

judgment with respect to the claims against the aforementioned defendants is due to be

granted.

The court has earlier entered an order granting summary judgment. A separate final

judgment will be entered contemporaneously with this opinion.

Done this 21th day of August, 2007.

 /s/Charles S. Coody 

CHARLES S. COODY

CHIEF UNITED STATES MAGISTRATE JUDGE

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