1

08-5504-cv

In re: Lafarge N. Am., Inc.

1 UNITED STATES COURT OF APPEALS

2 FOR THE SECOND CIRCUIT

3 August Term 2009

4 Docket Nos. 08-5504-cv (L); 09-1104-cv (CON); 09-1139-cv (CON); 

5 09-1149-cv (CON); 09-1153-cv (CON)

6 Argued: November 16, 2009 Decided: March 15, 2010

7 _____________________________________________________________________________

8 NEW YORK MARINE AND GENERAL INSURANCE COMPANY,

9 Plaintiff-Counter-Defendant-Appellee-Cross-Appellant,

10 - v.-

11 LAFARGE NORTH AMERICA, INC.,

12 Defendant-Counter-Plaintiff-Appellant-Cross-Appellee. 

13 _____________________________________________________________________________

14 AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY

15 ASSOCIATION, INC.,

16 Plaintiff-Counter-Defendant-Appellee, 

17 - v.-

18 LAFARGE NORTH AMERICA, INC.,

19 Defendant-Counter-Plaintiff-Appellant.

20 _____________________________________________________________________________

21 THE NORTHERN ASSURANCE COMPANY OF AMERICA and AMERICAN HOME

22 ASSURANCE COMPANY, 

23 Plaintiffs-Counter-Defendants-Appellants-Cross-Appellees,

24 NEW YORK MARINE AND GENERAL INSURANCE COMPANY,

25 Intervenor Plaintiff-Counter-Defendant-Appellee-Cross-Appellant,

26 - v.-

27 LAFARGE NORTH AMERICA, INC.,

28 Defendant-Counter-Plaintiff-Appellant-Cross-Appellee —
 The Clerk of the Court is directed to amend the official caption in this case to conform *

to the listing of the parties above. 

 Because the Honorable José A. Cabranes recused himself prior to oral argument, this **

appeal is being decided by the remaining two members of the panel pursuant to Second Circuit

Internal Operating Procedure E(b).

2

1 Appellee-Cross-Appellant,

2 AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY

3 ASSOCIATION, INC.,

4 Defendant-Appellee. 

*

5 _____________________________________________________________________________

6 Before: MINER and STRAUB, Circuit Judges.**

7 Insured- and insurers-appellants appeal from an order entered on January 29, 2007, and

8 summary judgments entered on October 27, 2008, and February 19, 2009, in the United States

9 District Court for the Southern District of New York (Haight, J.), the court having, inter alia, (1)

10 dismissed all causes of action brought against insurer-appellee, after concluding that the insurer11 appellee was not responsible under a liability policy for damages allegedly caused by a breakaway

12 barge that was moored to the insured’s facility during Hurricane Katrina; (2) granted the insured

13 the fees and expenses of two of the three law firms it retained, based on a finding that the insurer14 appellant’s policy permitted insured to take reasonable protective measures to minimize exposure

15 to liability arising from the breakaway barge; and (3) denied insured’s motion to transfer and its

16 application for attorneys’ fees incurred in connection with motions before the district court. 

17 Affirmed in part, vacated in part, and remanded. 

18 ANTHONY J. PRUZINSKY, John J. Sullivan, Robert G.

19 Clyne, Hill Rivkins & Hayden LLP, New York, New

20 York, for Lafarge North America, Incorporated. 

21

22 JOHN A.V. NICOLETTI, Nooshin Namazi, Kevin J.B.

23 O’Malley, Nicoletti Hornig & Sweeney, New York,

24 New York, for The Northern Assurance Company

25 of America and American Home Assurance

26 Company.

27 DAVID H. FROMM and Michael P. Naughton, Brown

28 Gavalas & Fromm LLP, New York, New York, for

29 New York Marine and General Insurance Company.

30 JOHN M. WOODS and John R. Stevenson, Clyde &

31 Co. US LLP, New York, New York, for American

32 Steamship Owners Mutual Protection and Indemnity

33 Association, Incorporated. 

34 

35 MINER, Circuit Judge:
3

1 Insured defendant-counter-plaintiff-appellant-cross-appellee Lafarge North America, Inc.

2 (“Lafarge”), intervenor and primary-insurer plaintiff-counter-defendant-appellee-cross-appellant

3 New York Marine and General Insurance Company (“NYMAGIC” or the “primary insurer”), and

4 excess-insurers plaintiffs-counter-defendants-appellants-cross-appellees Northern Assurance

5 Company of America (“NACA”) and American Home Assurance Company (“AHAC” or,

6 collectively with NYMAGIC, in its additional capacity as excess insurer, and NACA, the “excess

7 insurers”), appeal from an order entered on January 29, 2007, and summary judgments entered on

8 October 27, 2008, and February 19, 2009, in the United States District Court for the Southern

9 District of New York (Haight, J.). The District Court, inter alia, (1) dismissed all causes of action

10 brought against insurer plaintiff-counter-defendant-appellee American Steamship Owners Mutual

11 Protection and Indemnity Association, Inc. (the “American Club” or the “Club”); (2) granted

12 Lafarge the fees and expenses of two of the three law firms it retained without the knowledge or

13 consent of the primary insurer; (3) denied Lafarge’s motion for attorneys’ fees incurred in

14 defending against the insurers’ motions for summary judgment; and (4) denied Lafarge’s motion

15 to transfer the American Club action to the United States District Court for the Eastern District of

16 Louisiana. For the reasons that follow, we affirm in part and vacate in part the District Court’s

17 judgments. 

18 I. BACKGROUND

19 A. Barge ING 4727

20 On August 29, 2005, Hurricane Katrina made landfall in New Orleans, Louisiana. The

21 levee protecting the Lower Ninth Ward of New Orleans failed during the hurricane, causing the

22 Mississippi River to flood the area. Widespread devastation and death ensued. In the course of

23 the disaster, Barge ING 4727, which was one of hundreds of barges and vessels to break away

24 from their moorings during the storm, came to rest against a house on the land side of the levee. 

25 On September 9, 2005, the Wall Street Journal published an article entitled “Still

26 Unknown: Did a Barge Breach the Levee?” In that article, the Army Corps of Engineers was
4

1 quoted as stating “that one possible cause of this breach is that [Barge ING 4727] smashed

2 through [the levee].” The article identified Ingram Barge Company (“Ingram”) as Barge ING

3 4727’s owner, and Lafarge as the operator responsible for the terminal to which Barge ING 4727

4 was moored when the hurricane struck. Ingram was quoted as stating that “it would have been

5 the terminal’s responsibility to secure [Barge ING 4727] in advance of the storm.” Lafarge,

6 which was contacted the day before by the reporter preparing the article, stated only that it was

7 “not yet able to provide additional information regarding the terminal or its related transportation

8 operations.” It thus was brought to public attention that Barge ING 4727 may not have been

9 merely a casualty of Hurricane Katrina but in fact may have caused the flooding of the Lower

10 Ninth Ward. Further, the article implied that Lafarge may have failed to properly moor Barge

11 ING 4727 during the storm and that Lafarge was therefore responsible for the devastation to the

12 Lower Ninth Ward. 

13 Lafarge, one of the largest suppliers of construction materials in the United States and

14 Canada, was well aware that the exposure to potential liability created by Barge ING 4727

15 threatened the existence of the company. Thus, upon receiving the initial inquiry from the Wall

16 Street Journal reporter on September 8, 2005, and thereby first becoming aware of a potential

17 causal connection between Barge ING 4727 and the breached levee, Lafarge retained Goodwin

18 Procter LLP (“Goodwin Procter”), which Lafarge described as “a top law firm with a national

19 reputation [that] had represented [Lafarge] in class action/mass tort and other complex litigation

20 [in the past].” Lafarge also retained Holland & Knight LLP (“H&K”), which, according to

21 Lafarge, had a “prominent maritime investigation and litigation practice.” The next day, on

22 September 9, 2005, after being advised by Goodwin Procter about the need for local counsel,

23 Lafarge retained the New Orleans law firm Chaffe McCall LLP (“Chaffe”), which also had a

24 sizable maritime practice. The law firms immediately began their work: “Goodwin [Procter] had

25 primary responsibility for oversight, communication, and all legal issues dealing with potential

26 mass tort liability; H&K had the lead on maritime issues and investigation[;] and Chaffe provided
 The communication was made between Lafarge’s insurance broker, Willis of New York, 1

Inc., and NYMAGIC’s managers in the Mutual Marine Office, Inc. For ease of reference, this

opinion will refer to these and similar communications as between Lafarge and NYMAGIC. 

5

1 necessary local support.” Although Goodwin Procter and Chaffe would continue to remain on

2 the case, H&K was discharged in early 2006 after the firm completed its reports on the initial

3 investigation “into the circumstances of the breakaway [B]arge ING 4727 and the failure of the

4 . . . levee structures.” 

5 Meanwhile, on September 9, 2005, Lafarge had notified its primary insurer, NYMAGIC,

6 about Barge ING 4727 and the possibility of claims against Lafarge. At that time, Lafarge 1

7 advised NYMAGIC only that it had retained H&K. In a facsimile transmission dated September

8 13, 2005, NYMAGIC responded that it had “set up a file and [would] await further details or

9 other developments.” NYMAGIC also noted in the transmission that “we have good counsel in

10 New Orleans, Messrs. Sutterfield and Webb [(“Sutterfield”)], who we would like to involve

11 should there be any significant claim against [Lafarge] in this matter.” It was not until September

12 20, 2005, that Lafarge notified NYMAGIC that it had retained Goodwin Procter and Chaffe, in

13 addition to H&K. Lafarge never obtained NYMAGIC’s prior consent to the appointment of any

14 of these law firms. In a response dated September 22, 2005, NYMAGIC advised Lafarge that

15 “we cannot commit to paying for public relations or lobbying efforts” and that “[f]or defense, we

16 wish to assign one of the Louisiana firms on our ‘Panel Counsel’ list.” The response included the

17 names of six New Orleans law firms, including Sutterfield, specializing in maritime litigation. 

18 Lafarge, however, did not respond to NYMAGIC’s offered list of counsel, and it became

19 clear that Lafarge “would not consent to any of the six law firms proposed by NYMAGIC and . . .

20 that they intended to continue to employ Goodwin Proct[e]r, Chaffe . . . and [H&K].” In an e21 mail dated September 28, 2005, NYMAGIC advised Lafarge that “[we] can agree to the costs of

22 the experts and surveyors but [we] cannot agree to pay for the three sets of attorneys on the case,

23 none approved by us.” In a separate e-mail dated the same day, NYMAGIC also informed

24 Lafarge that “[w]e have decided to appoint Sutterfield & Webb as defense counsel in Louisiana.” 
6

1 Lafarge then instructed Goodwin Procter to “cooperate with Sutterfield and to bring Dan Webb,

2 of that firm, up to speed.” 

3 On November 3, 2005, the first action against Lafarge was filed in the United States

4 District Court for the Eastern District of Louisiana. See In re Katrina Canal Breaches Consol.

5 Litig., No. 05-4182, 2008 WL 4401970, at *8 (E.D. La. 2008). The action then was predictably

6 enlarged and rapidly mutated into litigation of substantial magnitude and complexity: 

7 No fewer than four separate class action complaints have been filed against

8 Lafarge, some with putative classes as large as 40,000 members, seeking damages

9 as high as $100 billion. No fewer than 900 docket entries were made in the

10 Katrina Barge Litigation when it was pending before Chief Judge Berrigan, and no

11 fewer than 16,000 docket entries have been made in the consolidated Katrina

12 Litigation pending before Judge Duval. At least 28 other parties, including

13 insurers as direct action defendants, are or have been co-defendants of Lafarge in

14 the Katrina Barge Litigation. 

15 

16 N.Y. Marine and Gen. Ins. Co. v. Lafarge N. Am., Inc., 598 F. Supp. 2d 473, 495 (S.D.N.Y.

17 2009) (internal quotation marks and alteration omitted). Although the merits of Lafarge’s liability

18 (the “barge litigation”) will be adjudicated in the Louisiana District Court, Lafarge’s insurers

19 commenced three separate actions giving rise to this appeal in the United States District Court for

20 the Southern District of New York. Id. at 476–78. In those actions, the insurers sought

21 declaratory judgments with respect to issues of coverage under the primary and excess policies. 

22 Id. 

23 B. Lafarge’s Insurers

24 Pursuant to NYMAGIC’s primary policy, NYMAGIC paid “the approved legal fees and

25 expenses of Sutterfield & Webb and Lafarge’s expert fees and costs.” These expenses exhausted

26 the primary policy’s limit of $5 million. Under the excess policy issued by the three excess

27 insurers — NYMAGIC, AHAC, and NACA — NYMAGIC paid and continues to pay 40% of the

28 legal fees and expenses billed by Sutterfield and the expenses billed by Lafarge’s experts in

29 connection with the barge litigation. The remaining 60% of the fees and expenses are said to be

30 covered under the excess policy by AHAC and NACA, but these two insurers have refused to pay

31 so far. Id. at 490 & n.12. The excess policy issued jointly by the three excess insurers covers
7

1 Lafarge for liability and expenses up to $45 million and under certain circumstances, $50 million. 

2 Neither NYMAGIC, AHAC, nor NACA has approved or paid any of the legal fees and expenses

3 of Goodwin Procter, H&K, and Chaffe. The total legal fees and expenses of these three firms

4 amount to over $10 million as of November 11, 2008. Id. at 490. 

5 In addition to being insured under NYMAGIC’s primary policy and the excess policy

6 issued by the three excess insurers, Lafarge also is a member of the American Club, a non-profit

7 mutual insurance association, which provides a “protection and indemnity” policy (the “American

8 Club Policy”) for its members. The American Club Policy “cover[s] shipowners and charterers

9 against third-party liabilities arising from the ownership or operation of insured vessels.” Thus, in

10 accordance with this general purpose, a list of specific vessels to be insured is identified by

11 Lafarge and incorporated into its Certificate of Entry, a document proving Lafarge’s membership

12 with the American Club. 

13 Although Ingram owned Barge ING 4727 — and therefore the barge was not listed as an

14 insured vessel under Lafarge’s Certificate of Entry — Lafarge’s membership in the American Club

15 included the following special term and condition: “If Lafarge . . . acquires an insurable interest in

16 any vessel . . . through purchase, charter, lease or otherwise, [the American Club Policy will]

17 automatically cover such . . . vessel effective from the date and time [Lafarge] acquires an

18 insurable interest in such . . . vessel.” (emphasis added). As explained in more detail below, one

19 of the principal issues at contention in this appeal is whether the term “otherwise” in the American

20 Club Policy includes Barge ING 4727, which Lafarge acquired some interest in pursuant to a

21 Transportation Agreement between Lafarge and the barge’s owner, Ingram. 

22 The three separate actions filed in the United States District Court for the Southern

23 District of New York were as follows: First, NYMAGIC sought judgments against Lafarge

24 declaring that (1) NYMAGIC’s primary policy did not cover the legal fees earned by Lafarge’s

25 counsel, i.e., Goodwin Procter, H&K, and Chaffe, which firms were retained without

26 NYMAGIC’s knowledge and consent; (2) NYMAGIC — which asserts that it retained the right
 In the alternative, AHAC and NACA sought a declaration that they were not obligated 2

to pay until NYMAGIC’s primary policy was exhausted and Lafarge, as a self-insurer, paid the

full amount of what should have been paid under the American Club Policy. 

8

1 under its primary policy to direct the defense of any action against Lafarge — had fulfilled its

2 obligations under the policy; and (3) NYMAGIC is obligated to pay only reasonable fees and

3 expenses relating directly to the defense of the claims against Lafarge. Second, the American

4 Club sought a judgment against Lafarge declaring that the American Club Policy did not cover

5 Barge ING 4727 and that, therefore, the American Club was not obligated to cover any of

6 Lafarge’s expenses or liabilities arising from the barge litigation. And third, AHAC and NACA

7 sought judgments against Lafarge and the American Club declaring that (1) the American Club

8 Policy covered Barge ING 4727; (2) AHAC and NACA, as excess insurers, were not obligated to

9 pay until NYMAGIC’s primary policy and the American Club Policy were first exhausted; and 2

10 (3) because NYMAGIC’s primary policy did not cover Lafarge’s legal fees earned by Goodwin

11 Procter, H&K, and Chaffe, AHAC and NACA also were not liable to reimburse Lafarge for

12 payments to those law firms. Id. at 476–77. 

13 Lafarge moved to transfer the American Club action to the Louisiana District Court;

14 however, that motion was denied on January 29, 2007. See Am. Steamship Owners Mut. Prot.

15 and Indem. Ass’n, Inc. v. Lafarge N. Am., Inc., 474 F. Supp. 2d 474, 482–91 (S.D.N.Y. 2007). 

16 Subsequently, NYMAGIC, in its capacity as an excess insurer, was granted leave to intervene as a

17 party plaintiff so that it could assert claims mirroring those in AHAC and NACA’s action for

18 declaratory judgment against the American Club and Lafarge. As the District Court observed,

19 “[this] is not surprising, since all three insurers, having subscribed to the Excess Policy, are in the

20 same boat and intent upon bailing it out.” Lafarge N. Am., Inc., 598 F. Supp. 2d at 478. Each

21 party then filed motions and cross-motions for summary judgment and, alternatively, in the case of

22 the American Club, a motion to dismiss all claims asserted against it. 

23 C. The District Court’s Decisions on Summary Judgment 

24 On October 27, 2008, the District Court granted the American Club’s motion for
9

1 summary judgment against Lafarge, declaring that the American Club has no obligation to provide

2 coverage for the claims asserted against Lafarge in connection with the barge litigation. 

3 Reviewing the terms of the Transportation Agreement, which established the conditions of

4 Lafarge’s use of Ingram’s barges, the District Court concluded that the American Club Policy’s

5 provision providing for automatic coverage of insurable interests in any vessel acquired by

6 Lafarge “through purchase, charter, lease or otherwise” did not apply to Ingram’s Barge ING

7 4727. See Am. Steamship Owners Mut. Prot. and Indem. Ass’n, Inc. v. Lafarge N. Am., Inc.,

8 No. 06 Civ. 3123, 2008 WL 4449353, at *8–*9 (S.D.N.Y. Sept. 29, 2008). According to the

9 District Court: 

10 Lafarge tells Ingram it needs a cement cargo to be transported from Joppa to New

11 Orleans on a particular date. Ingram selects from its fleet of barges one to perform

12 the work: it could be the ING4727, or 4726, or 4728, or any other Ingram barge. 

13 Lafarge neither knows [n]or cares. All it knows is that if all goes well, an Ingram

14 barge will arrive at Lafarge’s New Orleans facility to discharge a cement cargo.

15 Id. at *9. The court concluded that this arrangement between Lafarge and Ingram did not

16 constitute an acquisition by Lafarge — “through purchase, charter, lease or otherwise” — of an

17 insurable interest in Barge ING 4727. 

18 On February 19, 2009, the District Court (1) granted the American Club’s motion for

19 summary judgment and dismissed AHAC, NACA, and NYMAGIC’s claims against the American

20 Club, the court having concluded that the American Club Policy, as explained in its October 27,

21 2008 summary judgment, did not cover Barge ING 4727; (2) granted Lafarge’s motion for

22 summary judgment against the excess insurers and declared that they were obligated to cover

23 Lafarge, the court having concluded that the excess insurance policy was triggered because

24 Lafarge properly maintained the American Club Policy and because Lafarge was not a self25 insurer; and (3) granted, in part, Lafarge’s motion for summary judgment against both the primary

26 and excess insurers and declared that they were obligated to cover the legal fees earned by

27 Goodwin Procter and H&K but not Chaffe. See generally Lafarge N. Am., Inc., 598 F. Supp. 2d

28 at 481–97. The court also denied all claims for attorneys’ fees in connection with the motions and
 Lafarge also demanded a jury trial in the action brought by the American Club, but that 3

demand was stricken by the court in a decision dated August 1, 2008. See Am. Steamship

Owners Mut. Prot. and Indem. Ass’n, Inc. v. Lafarge N. Am., Inc., No. 06 Civ. 3123, 2008 WL

2980919, at *1–*2 (S.D.N.Y. Aug. 1, 2008) (concluding that Lafarge did not have a right to a

jury in a case brought pursuant to the court’s admiralty jurisdiction). Because we affirm the

District Court’s determination that the American Club Policy does not cover Barge ING 4727, we

need not decide whether the District Court erred in striking Lafarge’s jury demand. 

10

1 cross-motions for summary judgment. Id. at 497. The court directed entry of final judgment

2 pursuant to Federal Rule of Civil Procedure 54(b), see id. at 497–98, and this timely appeal

3 followed. 

4 D. Arguments on Appeal

5 On appeal, Lafarge, NYMAGIC, AHAC, and NACA argue that the American Club Policy

6 covers Barge ING 4727. Lafarge also challenges the District Court’s denial of its motion to

7 transfer venue; the court’s determination that the primary and excess policies did not cover the

8 legal fees earned by Chaffe; and the court’s refusal to award attorneys’ fees in connection with the

9 motions and cross-motions for summary judgment. NYMAGIC, AHAC, and NACA further 3

10 challenge the District Court’s decisions on summary judgment, contending that the court erred in

11 concluding that the excess policy was triggered and that both the primary and excess policies

12 covered the legal fees earned by Goodwin Procter and H&K. 

13 II. DISCUSSION

14 A. Motion to Transfer to Louisiana District Court 

15 We review a district court’s denial of a motion to transfer venue for abuse of discretion. 

16 D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 105 (2d Cir. 2006). A district court may

17 exercise its discretion to transfer venue “for the convenience of parties and witnesses, in the

18 interest of justice.” 28 U.S.C. § 1404(a). Among the factors to be considered in determining

19 whether to grant a motion to transfer venue “are, inter alia: (1) the plaintiff’s choice of forum, (2)

20 the convenience of witnesses, (3) the location of relevant documents and relative ease of access to

21 sources of proof, (4) the convenience of parties, (5) the locus of operative facts, (6) the

22 availability of process to compel the attendance of unwilling witnesses, and (7) the relative means
11

1 of the parties.” Gottdiener, 462 F.3d at 106–07 (internal quotation marks and alteration omitted). 

2 Here, Lafarge does not contest that the above factors either are neutral or favor the

3 American Club against transferring the case to the Louisiana District Court. Instead, Lafarge

4 argues that the so-called first-filed rule “overshadows all other considerations.” Lafarge Reply

5 Br. at 24. Relying much on the rationale of avoiding duplicative litigation that underlies the first6 filed rule, Lafarge argues that the District Court abused its discretion because the issue of

7 coverage will not be binding on the Louisiana District Court and will need to be re-litigated in the

8 Louisiana District Court, where the barge litigation is currently underway. 

9 The first-filed rule states that, in determining the proper venue, “[w]here there are two

10 competing lawsuits, the first suit should have priority.” Gottdiener, 462 F.3d at 106. The rule is

11 inapplicable when there are “special circumstances.” Employers Ins. of Wausau v. Fox Entm’t

12 Group, Inc., 522 F.3d 271, 276 (2d Cir. 2008). Special circumstances include manipulative or

13 deceptive behavior on the part of the first-filing plaintiff. Id. In addition to “special

14 circumstances,” transfer to the first-filed jurisdiction is also inappropriate when “the balance of

15 convenience favors the second-filed action.” Id. at 275 (internal quotation marks omitted). The

16 “balance of convenience” is determined by considering the same factors “considered in connection

17 with motions to transfer venue.” Id. 

18 Here, the “special circumstances” exception to the first-filed rule is inapplicable. There is

19 no allegation of deceptive or manipulative behavior by the first-filed plaintiffs in Louisiana. Thus,

20 because “[w]here special circumstances are not present, a balancing of the conveniences is

21 necessary,” id. at 276, Lafarge’s claim that the first-filed rule “overshadows all other

22 considerations” in this case is incorrect, see id. at 275 (“[T]he first-filed rule is only a presumption

23 that may be rebutted by proof of the desirability of proceeding in the forum of the second-filed

24 action.” (internal quotation marks omitted)); see also id. (stating that the convenience factors

25 compose the “centrality” of adjudicating transfer motions). Further, so far as the District Court
 We add that the Louisiana District Court has subsequently stated that it intends to 4

follow the rulings of this Circuit with respect to issues involving coverage: 

[I]t is clear that this entire coverage matter has been and will be adjudicated in

New York and in the Second Circuit Court of Appeals in a timely fashion. For

reasons of comity and judicial economy, this Court will not undertake a second

look at the precise same issues. Such a course of action could potentially wreak

havoc and create unnecessary conflicts. [The New York District Court]

determined that the first to file rule was not applicable to these disputes and as

such, the Court will not take any action to create any potential conflict. Simply

put, two federal courts should not be adjudicating the same issues.

In re Katrina Canal Breaches Consol. Litig., No. 05-4182, Section K(2), Order and Reasons (E.D.

La. Oct. 9, 2008) (reprinted in the Appendix to the American Club Answering Br.). Lafarge’s

fear of duplicative litigation, therefore, has less force now as a practical matter.

12

1 considered the first-filed rule and balanced the convenience factors, we see no abuse of discretion

2 in the District Court’s analysis. 

3 As the District Court noted, among its other observations, the American Club Policy was

4 negotiated and executed in New York, issued by a New York insurer, stipulated to apply New

5 York law, and agreed upon to be litigated in the United States District Court for the Southern

6 District of New York in the event Lafarge brought a claim against the American Club. See Am.

7 S.S. Owners Mut. Prot. & Indem. Ass’n, Inc. v. Lafarge N. Am., Inc., 474 F. Supp. 2d 474,

8 482–90 (S.D.N.Y. 2007). Thus, the locus of operative facts as well as the interests of efficiency

9 and fairness favor a New York forum. With respect to Lafarge’s claim of duplicative litigation,

10 the District Court reasonably determined that the liability and coverage issues in the Louisiana and

11 New York actions, respectively, are not coextensive because resolution as to the liability issues

12 would not necessarily resolve Lafarge’s claims against the American Club for defense costs. Id. at

13 476–77, 486. Moreover, the District Court reasonably relied on Fifth Circuit precedent to

14 conclude that it was unlikely that two inconsistent judgments on the merits would result from the

15 court’s denial of Lafarge’s transfer motion. See Acosta v. Master Maint. & Constr. Inc., 452 4

16 F.3d 373, 377 n.7 (5th Cir. 2006) (stating that an arbitration award may be “persuasive, if not
13

1 binding,” on direct-action plaintiffs who are not parties to the arbitration between defendant2 insured and defendant-insurer (emphasis added)). Weighing Lafarge’s asserted claims of

3 duplicative litigation, the unlikely event of inconsistent judgments, the various convenience

4 factors, and the interests of justice, the District Court reasonably concluded that transfer was not

5 warranted in light of the totality of the circumstances. Id. at 490. 

6 Lafarge also argues that the District Court applied the wrong standard in evaluating the

7 motion to transfer, namely, that the court erroneously applied the “clear and convincing evidence”

8 standard. Although we have never explicitly approved a district court’s use of the “clear and

9 convincing evidence” standard in ruling on a motion to transfer venue, the propriety of that

10 standard to transfer-motions is evident. We have stated that the party requesting transfer carries

11 the “burden of making out a strong case for transfer.” Filmline (Cross-Country) Prods., Inc. v.

12 United Artists Corp., 865 F.2d 513, 521 (2d Cir. 1989) (internal quotation marks omitted). It is

13 therefore appropriate that the district courts in our Circuit have consistently applied the clear and

14 convincing evidence standard in determining whether to exercise discretion to grant a transfer

15 motion. See, e.g., Hershman v. UnumProvident Corp., 658 F. Supp. 2d 598, 600 (S.D.N.Y.

16 2009); MAK Mktg. Inc. v. Kalapos, 620 F. Supp. 2d 295, 298 (D. Conn. 2009); Wagner v. N.Y.

17 Marriott Marquis, 502 F. Supp. 2d 312, 315 (N.D.N.Y. 2007); Neil Bros. Ltd. v. World Wide

18 Lines, Inc., 425 F. Supp. 2d 325, 327 (E.D.N.Y. 2006); Tom & Sally’s Handmade Chocolates,

19 Inc. v. Gasworks, Inc., 977 F. Supp. 297, 302 (D. Vt. 1997); United States v. Gen. Motors

20 Corp., 183 F. Supp. 858, 861 (S.D.N.Y. 1960); see also Christina Canada, Inc. v. Wior Corp.,

21 702 F. Supp. 461, 463 (S.D.N.Y. 1988) (“[A]bsent a clear and convincing showing that the

22 balance of convenience favors the ultimate forum, discretionary transfers are not favored.”

23 (internal quotation marks omitted)); accord Headrick v. Atchison, T. & S.F. Ry. Co., 182 F.2d

24 305, 310 (10th Cir. 1950) (holding that under 28 U.S.C. § 1404(a), “the plaintiff’s choice of

25 forum [should not be] disturbed[] unless the balance in the defendant’s favor is shown by clear

26 and convincing evidence”); cf. In re Horseshoe Entm’t, 337 F.3d 429, 434 (5th Cir. 2003).
14

1 Accordingly, we see no error from which to conclude that the District Court abused its

2 discretion in denying Lafarge’s motion to transfer to the Louisiana District Court. 

3 B. Standard of Review

4 “We review a grant of summary judgment de novo, construing the evidence in the light

5 most favorable to the non-moving party and drawing all reasonable inferences in its favor.” 

6 Palmieri v. Allstate Ins. Co., 445 F.3d 179, 187 (2d Cir. 2006). Summary judgment is appropriate

7 “when no genuine issue of material fact exists and the moving party is entitled to judgment as a

8 matter of law.” Id.; see also Fed. R. Civ. P. 56(c). In the context of an action predicated on a

9 contract dispute, summary judgment is generally inappropriate where the contested contractual

10 language is ambiguous. Palmieri, 445 F.3d at 187. The district court’s determination of whether

11 a contractual provision is ambiguous is a question of law that we review de novo. Id.; see also

12 ReliaStar Life Ins. Co. of N.Y. v. Home Depot U.S.A., Inc., 570 F.3d 513, 517 (2d Cir. 2009)

13 (per curiam). See generally Palmieri, 445 F.3d at 187 (“Ambiguity resides in a writing when —

14 after it is viewed objectively — more than one meaning may reasonably be ascribed to the

15 language used.” (quoting Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir. 1990))). 

16 It is undisputed that New York law applies in our examination of the various insurance

17 policies at issue in this case. And “[u]nder New York law, the question of ambiguity . . . must be

18 determined from the face of the agreement, without reference to extrinsic evidence.” Collins v.

19 Harrison-Bode, 303 F.3d 429, 433 (2d Cir. 2002) (footnote omitted). “Once a court concludes

20 that an insurance provision is ambiguous, the court may accept any available extrinsic evidence to

21 ascertain the meaning intended by the parties during the formation of the contract.” Parks Real

22 Estate Purchasing Group v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 43 (2d Cir. 2006)

23 (internal quotation marks omitted). 

24 Although a determination that a contract is ambiguous ordinarily requires denial of

25 summary judgment, the court may nonetheless grant summary judgment where the extrinsic

26 evidence illuminating the parties’ intended meaning of the contract is “so one-sided that no
 NYMAGIC, AHAC, and NACA also take the position that the American Club Policy 5

covers Barge ING 4727. Although we refer only to Lafarge in the text of the opinion for ease of

reference, in doing so we address all arguments for coverage made by Lafarge, NYMAGIC,

AHAC, and NACA.

15

1 reasonable person could decide to the contrary.” Compagnie Financiere De Cic Et De L’Union

2 Europeenne v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153, 158 (2d Cir. 2000)

3 (Sotomayor, J.) (internal quotation marks omitted). Similarly, summary judgment may be granted

4 despite any ambiguities in the contract “where there is no extrinsic evidence that would support a

5 resolution of [the] ambiguities in favor of the nonmoving party’s case.” Topps Co. v. Cadbury

6 Stani S.A.I.C., 526 F.3d 63, 68 (2d Cir. 2008). These apparent exceptions merely reinforce the

7 principle that the lynchpin of a summary judgment determination is, in most cases, the existence

8 vel non of genuine issues of material facts. See, e.g., AD/SAT, Div. of Skylight, Inc. v.

9 Associated Press, 181 F.3d 216, 226 (2d Cir. 1999). 

10 C. The American Club Policy

11 Barge ING 4727 appears nowhere on Lafarge’s list setting forth the vessels to be covered

12 by the American Club Policy. Nonetheless, it is argued that Barge ING 4727 is automatically

13 covered pursuant to the following provision of the American Club Policy (the “Chartered Barges

14 Clause”): 

15 If Lafarge . . . acquires an insurable interest in any vessel in addition to or in

16 substitution for those set forth herein, through purchase, charter, lease or

17 otherwise, such insurance as is afforded hereunder to any similar vessel shall

18 automatically cover such additional vessel effective from the date and time

19 [Lafarge] acquires an insurable interest in such additional vessel. With respect to a

20 chartered, leased or similarly acquired vessel, the insurance hereunder

21 automatically includes the owner as an additional Assured with waiver of

22 subrogation against the owner, if required, effective from the date and time such

23 vessel is insured hereunder. (emphasis added). 

24 Lafarge argues that it acquired an insurable interest in Barge ING 4727 “through

25 purchase, charter, lease or otherwise” and, therefore, that Barge ING 4727 is covered under the

26 American Club Policy. Specifically, Lafarge argues that it acquired an insurable interest in Barge 5

27 ING 4727 by means “otherwise” via the Transportation Agreement with Ingram, which
16

1 purportedly conferred upon Lafarge the status of bailee of Ingram’s Barge ING 4727. Lafarge

2 insists that the term “otherwise” must be given its dictionary meaning, i.e., “in any other manner.” 

3 According to Lafarge, any insurable interest in a vessel — be it acquired by Lafarge through

4 purchase, charter, lease, or, in the alternative, “regardless of how acquired,” Lafarge Reply Br. at

5 4 (emphasis added) — is automatically covered under the plain terms of the Chartered Barges

6 Clause. 

7 As Lafarge notes, we have in other contexts read “otherwise” literally and construed

8 provisions containing that term to mean an assurance of comprehensiveness. See, e.g., Greene v.

9 United States, 79 F.3d 1348, 1355 (2d Cir. 1996) (“When § 1256 lists several types of

10 terminations and follows those with the words ‘or otherwise,’ the statute necessarily brings

11 transfers of all kinds within its compass. The statute does not say ‘or other similar terminations,’

12 nor does it limit in any way the words ‘or otherwise.’”); Dunham v. Omaha & Council Bluffs St.

13 Ry. Co., 106 F.2d 1, 3 (2d Cir. 1939) (“The words ‘or otherwise’ following ‘any suit or

14 proceedings in equity’ can only enlarge the reference to the form of action to include any other

15 suit or proceedings . . . . ‘Otherwise’ means, ‘In a different manner; in another way, or in other

16 ways.’”). In contrast to Green and Dunham, however, here, the structure of the Chartered Barges

17 Clause and the provisions of the American Club Policy counsel against applying a literal

18 interpretation of the term “otherwise.” See JA Apparel Corp. v. Abboud, 568 F.3d 390, 405 (2d

19 Cir. 2009) (stating that in examining a contract, the court considers “the context of the entire

20 integrated agreement,” as well as “the customs, practices, usages and terminology as generally

21 understood in the particular trade or business” (internal quotation marks omitted)). 

22 The American Club is a “Steamship Owners Mutual Protection and Indemnity

23 Association,” and in accordance with that general purpose, the American Club Policy requires

24 members to provide a list of their vessels to be entered with the Club. As a special condition, the

25 Chartered Barges Clause permits automatic coverage under the American Club Policy to Lafarge

26 in the event it “acquires an insurable interest in any vessel in addition to or in substitution for
17

1 those set forth herein, through purchase, charter, lease or otherwise.” In considering the

2 Chartered Barges Clause, we find it significant that it automatically covers vessels that are “in

3 addition to or in substitution for those set forth herein,” i.e., vessels owned by Lafarge and that

4 are part of the “Lafarge fleet.” See Lafarge N. Am., Inc., 2008 WL 4449353, at *2. This

5 provides the appropriate context for interpreting the phrase that immediately follows, “through

6 purchase, charter, lease or otherwise,” which essentially describes the way in which a substantial

7 interest akin to the interest in the vessels “set forth herein” may be acquired. The phrase “through

8 purchase, charter, lease or otherwise,” therefore, reasonably signifies a limiting precept rather than

9 an assurance of comprehensiveness. 

10 Indeed, interpreting “otherwise” literally would result in a substantial modification of the

11 Chartered Barges Clause. If “otherwise” were to be interpreted as literally as Lafarge contends,

12 then the Chartered Barges Clause need not have required that an insurable interest in a vessel be

13 acquired “through” any particular type of transaction in the first place. In fact, the Chartered

14 Barges Clause need not even have referred to the acquisition being “in addition to or in

15 substitution for” the vessels that make up the Lafarge fleet. Rather, the Chartered Barges Clause

16 need only have stated that coverage is warranted for any vessel in which Lafarge has an insurable

17 interest. Thus, by literally construing the term “otherwise,” Lafarge effectively guts two entire

18 phrases from the Chartered Barges Clause. Lafarge’s approach to interpreting the term

19 “otherwise” therefore violates the fundamental rule of contract interpretation that “a court must

20 strive to give meaning to every sentence, clause, and word.” See Zurich Am. Ins. Co. v. ABM

21 Indus., Inc., 397 F.3d 158, 165 (2d Cir. 2005) (internal quotation marks omitted) (quoting

22 Travelers Cas. & Sur. Co. v. Certain Underwriters at Lloyd’s of London, 96 N.Y.2d 583, 594

23 (2001)). 

24 Lafarge refers to a different sentence in the Chartered Barges Clause providing for

25 coverage of third-party owners “[w]ith respect to a chartered, leased or similarly acquired vessel.” 

26 Lafarge contends that the Chartered Barges Clause would have used the same language, i.e., “or
18

1 similarly acquired vessel,” had the parties intended “otherwise” to be limited to transactions akin

2 to charters, leases, or purchases. Lafarge asserts that “otherwise” therefore “should be

3 interpreted here to broaden the scope of coverage available under the Chartered Barges [C]lause

4 to the same extent as though all possible methods of acquiring an insurable interest in a vessel had

5 been included by name.” AHAC & NACA Opening Br. at 31. This logic, however, does not

6 explain or address the modification of the Chartered Barges Clause that would result from the

7 elimination of the limiting phrase altogether, were we to adopt Lafarge’s literal definition of

8 “otherwise.” See Cent. Hanover Bank & Trust Co. v. Comm’r of Internal Revenue, 159 F.2d

9 167, 169 (2d Cir. 1947) (Learned Hand, J.) (“There is no more likely way to misapprehend the

10 meaning of language — be it in a constitution, a statute, a will or a contract — than to read the

11 words literally, forgetting the object which the document as a whole is meant to secure.”). See

12 generally Robert T. Lemon II, Allocation of Marine Risks: An Overview of the Marine Insurance

13 Package, 81 Tul. L. Rev. 1467, 1480–81 (2007) (“The P&I [Protection and Indemnity] policy is

14 not a comprehensive general liability policy, for it does not purport to cover all types of an

15 insured’s liability . . . .”). 

16 Lafarge also refers to Rule 2 of the American Club Policy, which provides that a member

17 of the American Club “shall be indemnified in connection with each vessel . . . against any loss,

18 damage or expense which the Member shall become liable to pay and shall pay by reason of the

19 fact that the Member is the owner (or operator, manager, charterer, mortgagee, trustee, receiver

20 or agent, as the case may be) of the insured vessel.” (emphasis added). Lafarge contends that

21 “because the Club’s Rules included all sorts of methods for acquiring an insurable interest other

22 than — and different from — a purchase, charter, or lease, the phrase ‘or otherwise’ in the

23 Certificate of Entry must likewise be construed in that broad manner.” Lafarge Opening Br. at

24 42. But Rule 2 is a finite list of relationships and does not support Lafarge’s claim that, under the

25 Chartered Barges Clause, an insurable interest in a vessel can be acquired by any means. 

26 Furthermore, Lafarge argues that the term “otherwise” must be read literally to encompass
 Moreover, while not advanced by the American Club, we note the possibility that a 6

vessel may be bequeathed to Lafarge pursuant to a will, donated to Lafarge pursuant to a trust, or

adopted by Lafarge pursuant to an equal merger with another company. None of these

circumstances appear to constitute a “purchase, charter, [or] lease,” but these examples provide

meaning to “otherwise” that survive Lafarge’s test of synonyms. 

 Because we affirm the District Court’s decision on other grounds, we need not address 7

the propriety of its use of ejusdem generis to make a plain meaning determination of the Chartered

Barges Clause. But cf. United States v. Turkette, 452 U.S. 576, 581 (1981) (“The rule of

ejusdem generis is no more than an aid to construction and comes into play only when there is

some uncertainty as to the meaning of a particular clause in a statute.”). Moreover, rules of

contract interpretation need not be applied unless “the extrinsic evidence does not yield a

conclusive answer as to the parties’ intent.” Parks Real Estate Purchasing Group v. St. Paul Fire

19

1 any and all transactions because there are “no means of acquiring an interest in a vessel that are

2 similar to a purchase, charter, or lease but not already encompassed within the words ‘purchase,’

3 ‘charter,’ or ‘lease.’” Lafarge Opening Br. at 45. To the extent a vessel may be “hired” or

4 “rented,” Lafarge argues that those terms are synonyms of “charter” and “lease” and that

5 interpreting “otherwise” to mean all synonyms for “purchase, charter, [or] lease” would render

6 “otherwise” superfluous. According to Lafarge, therefore, reading “otherwise” as akin to

7 purchase, charter, or lease would read out “otherwise” entirely. While Lafarge does make a

8 reasonable argument in this regard, we note that the authorities cited by Lafarge to support the

9 proposition that “arguably . . . synonymous . . . terms should be treated as mutually exclusive,

10 rather than as synonyms,” see, e.g., S. Axelrod Co. v. Mel Dixon Studio, Inc., 471 N.Y.S.2d 945,

11 951 (Civ. Ct. 1983), do not involve situations where a reasonably discernable intent of the

12 contract would be rendered a nullity if we were to follow the rule to the letter. 

6

13 We are therefore unpersuaded that “otherwise” cannot reasonably be construed to mean a

14 narrow category of commercial conducts akin to a purchase, charter, or lease. Nonetheless, be

15 that as it may, we are unable to conclusively determine from the face of the American Club Policy

16 a single plain meaning of the Chartered Barges Clause. And in this regard, we find error in the

17 District Court’s determination to the contrary. This error was inconsequential, however, because

18 there are no genuine issues of material facts in this case that would support the application of a

19 literal reading of the term “otherwise” in the Chartered Barges Clause. See generally In re 7
& Marine Ins. Co., 472 F.3d 33, 43 (2d Cir. 2006) (internal quotation marks omitted). 

20

1 Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112, 134 (2d Cir. 2007) (“[A]n

2 appellate court is free to affirm a district court decision on any grounds for which there is a record

3 sufficient to permit conclusions of law, even grounds not relied upon by the district court.”

4 (internal quotation marks omitted)). 

5 Although the record does not clearly inform us of the precise limits of the term

6 “otherwise,” it is absolutely clear what “otherwise” is not: “otherwise” does not include the kind

7 of relationship associated with a shipowner’s bailment to a terminal operator — the relationship

8 Ingram had with Lafarge for Barge ING 4727. See generally Dow Chem. Co. v. Barge UM-23B,

9 424 F.2d 307, 311 (5th Cir. 1970) (A terminal operator, or “wharfinger,” is a “bailee for hire [that

10 is] required to see to it that the barges were adequately moored at all times.”); Am. River Transp.

11 Co. v. Paragon Marine Servs., Inc., 213 F. Supp. 2d 1035, 1059 (E.D. Mo 2002) (“The operator

12 of a fleeting facility as bailee has the responsibility of caring for a barge after it is committed to its

13 custody.”); accord Burns Bros v. Long Island R.R. Co., 176 F.2d 406, 409 (2d Cir. 1949). 

14 Lafarge’s insurance broker, Joanne Fedchin, stated at her deposition that the Chartered

15 Barges Clause was not intended “to insure a third-party’s barge that was simply delivering cargo

16 to a [Lafarge] facility.” Rather, the Chartered Barges Clause was added at the insistence of

17 Lafarge “for ease of business” by permitting automatic coverage of barges that Lafarge was

18 chartering “for very short periods of time and . . . on a fairly regular basis.” Indeed, in a facsimile

19 transmission dated April 14, 1999, Ms. Fedchin wrote to the American Club that Lafarge

20 “charters barges in from time to time — sometimes for a 2 week period, sometimes for a few

21 days”; confirmed that these charters were automatically covered under the American Club Policy;

22 and enclosed a proposed clause, which would ultimately be incorporated into the American Club

23 Policy as the Chartered Barges Clause, consistent with Lafarge’s aims. Ms. Fedchin further

24 testified as to the logic behind her understanding of the Chartered Barges Clause as not covering

25 liabilities incurred by Lafarge as a terminal operator: “There is a separate policy that was placed
 Indeed, in an assertion by the American Club that is not refuted by Lafarge, Lafarge 8

initially attempted to tender the premium for only Barge ING 4727 in the amount of $852 after

the commencement of the barge litigation. It was not until two years later that Lafarge attempted

to tender the premiums for the over 3,000 other similar barges to bring its conduct in line with its

legal claims. American Club Answering Br. at 52–53. 

21

1 for La[f]arge to cover their miscellaneous marine liabilities, including this exposure which goes by

2 a variety of names for the purposes here. I’ll just use one. Wharfingers liability.” 

3 In accord with Ms. Fedchin’s testimony is Lafarge’s conduct, which evinces an

4 understanding that third-party barges such as Barge ING 4727 are not covered under the

5 Chartered Barges Clause. “Conduct of the parties provides another important source for deriving

6 their intent as to the meaning of the insurance contracts at issue. . . . ‘[T]here is no surer way to

7 find out [the intent of the parties to a contract] . . . than to see what they have done.’” Am. Home

8 Prods. Corp. v. Liberty Mut. Ins. Co., 565 F. Supp. 1485, 1503 (S.D.N.Y. 1983) (quoting

9 Brooklyn Life Ins. Co. v. Dutcher, 95 U.S. 269, 273 (1877)); see also City of N.Y. v. N.Y. City

10 Ry. Co., 193 N.Y. 543, 548 (1908) (“When the parties to a contract of doubtful meaning, guided

11 by self-interest, enforce it for a long time by a consistent and uniform course of conduct, so as to

12 give it a practical meaning, the courts will treat it as having that meaning . . . .”). 

13 Here, pursuant to the Chartered Barges Clause, any declarations and premiums for

14 unlisted vessels would have been due annually. Lafarge never declared or tendered any premiums

15 for the over 3,000 third-party owned barges that had passed through its terminals for nearly seven

16 years since Lafarge had become a member of the American Club. Nor is there evidence that the

17 American Club ever demanded premiums for these third-party barges. It was only after the

18 commencement of the barge litigation that Lafarge attempted to satisfy at once its declarations

19 and premiums for the thousands of third-party barges that passed through its terminals for the past

20 seven years. Lafarge’s inaction is strong evidence that third-party barges were never intended to

21 be covered by the Chartered Barges Clause, and that inaction is not ameliorated by Lafarge’s

22 subsequent assertion of coverage that was, as the District Court aptly observed, “transparently

23 tactical.” Lafarge N. Am., Inc., 2008 WL 4449353, at *10. 

8
 Although one of Lafarge’s risk managers testified at his deposition that the Chartered 9

Barges Clause is read broadly to cover Lafarge’s acquisition of any insurable interest in a vessel,

the manager testified as to his understanding of the text of the Chartered Barges Clause and not

the intent of the Chartered Barges Clause. Indeed, it appears from the record that the manager

did not recall the Chartered Barges Clause at all; rather, at his deposition, he interpreted the text

of the clause de novo. Similarly, according to the citation provided by Lafarge, Lafarge’s other

risk manager merely testified that he had directed his brokers to “always obtain the broadest

coverage possible” and did not state that the intent of the Chartered Barges Clause was to cover

any and all insurable interests acquired by Lafarge. These testimonies are insufficient to raise

genuine issues of material fact. See Nora Beverages, Inc. v. Perrier Group of Am., Inc., 269 F.3d

114, 124 (2d Cir. 2001) (noting, in the context of an infringement action, that summary judgment

was appropriate because “de minimis evidence [is] insufficient to raise triable issues”). 

 Lafarge argues that its oversight is “not at all uncommon” because insureds ordinarily 10

forget to pay premiums until losses are incurred and because insurers should “be happy to have

the premium.” Even if that were true, Lafarge’s failure to pay premiums for the thousands of

third-party barges, which had passed through its terminals for seven years, demonstrates that

Lafarge’s failure to pay was not a simple oversight but, rather, strong evidence that Lafarge never

expected third-party barges to be covered under the Chartered Barges Clause. See supra note 8.

22

1 Lafarge only challenges the credibility of Ms. Fedchin’s testimony and does not bring forth

2 other evidence that would genuinely place into question her understanding of the intent of the

3 Chartered Barges Clause. Nor does Lafarge offer an explanation, other than that it was an 9

4 “oversight,” for its decision not to declare or pay any premiums for third-party vessels until it

5 became tactically desirable to do so after Hurricane Katrina. Cf. Topps Co., 526 F.3d at 68 10

6 (Summary judgment is appropriate “where there is no extrinsic evidence that would support a

7 resolution of [the] ambiguities in favor of the nonmoving party’s case.”). Instead, Lafarge argues

8 that it was the “operator” of Barge ING 4727 and not simply a wharfinger acting as the bailee of

9 the barge. Lafarge contends that the strength of the evidence showing that it had operational

10 control over Barge ING 4727 warrants summary judgment in Lafarge’s favor or, at a minimum,

11 raises sufficient issues of fact such that summary judgment is inappropriate. 

12 Although the Transportation Agreement between Lafarge and Ingram contemplates some

13 control by Lafarge over Ingram’s barges for purposes of unloading cargo or shifting barges within

14 its terminal, the agreement states that “[n]othing contained in this Contract shall be construed as a

15 contract by [Lafarge] for the chartering, hiring or leasing of any barge[, and] . . . [Lafarge] shall

16 exercise no control over the operation of any barge.” (emphases added). This language
23

1 articulates the opposite condition of the Chartered Barges Clause, which requires that a qualifying

2 vessel be acquired “through purchase, charter, lease or otherwise” to establish automatic

3 coverage. Lafarge’s “acquisition” of Barge ING 4727, therefore, falls outside the provisions of

4 the Chartered Barges Clause. 

5 Moreover, it is undisputed that Lafarge first contacted Ingram’s subcontractor to move

6 Barge ING 4727; having received no reply, Lafarge called a towing company to move Barge ING

7 4727 in preparation for the landing of Hurricane Katrina. See In re Ingram Barge Co., No. 05-

8 4419, 2008 WL 906303, at *1–*2 (E.D. La. Mar. 31, 2008). Whatever insurable interest Lafarge

9 acquired in Barge ING 4727 through its control of the vessel under these extenuating

10 circumstances, it was not — nor was it akin to — an acquisition of the vessel through purchase,

11 charter, or lease. It also cannot be broadly said that Barge ING 4727 was acquired “in addition to

12 or in substitution for” a vessel in Lafarge’s fleet. As the District Court summarized the

13 relationship between Lafarge and Ingram: “Lafarge tells Ingram it needs a cement cargo to be

14 transported[,] . . . . Ingram selects from its fleet of barges one to perform the work[, and] . . . .

15 Lafarge neither knows [n]or cares [which one of Ingram’s barges] . . . arrive at Lafarge’s New

16 Orleans facility to discharge [the] cement cargo.” Lafarge N. Am., Inc., 2008 WL 4449353, at

17 *9. The District Court’s observation confirms the relationship between Lafarge and Ingram that,

18 in practice as well as in agreement, Barge ING 4727 was never imagined to be “in addition to or

19 in substitution for” a vessel in Lafarge’s fleet or otherwise contemplated by the Chartered Barges

20 Clause as a covered vessel. 

21 In view of the foregoing, although the Chartered Barges Clause is ambiguous, we hold

22 that summary judgment in favor of the American Club is warranted given (1) the strength of the

23 extrinsic evidence that the Chartered Barges Clause was never intended to cover third-party

24 barges such as Barge ING 4727; (2) the lack of any evidence as to a contrary intent that raises

25 genuine issues of material fact; and (3) the Transportation Agreement’s express articulation of the

26 relationship between Ingram’s barges and Lafarge as outside the conditions of the Chartered
24

1 Barges Clause. See Merrill Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d at 158; Topps Co.,

2 526 F.3d at 68. 

3 D. Legal Fees Covered by the Primary Policy 

4 The resolution of whether NYMAGIC’s primary policy covers the legal expenses earned

5 by Goodwin Procter, H&K, and Chaffe — the three firms retained by Lafarge without notice to,

6 or consent from, NYMAGIC — lies in applying two provisions of the primary policy. The first

7 provision states that NYMAGIC has the option to name mutually acceptable attorneys who will

8 represent Lafarge in any policy-related litigation between Lafarge and third parties (the “Naming

9 Clause”): 

10 [NYMAGIC], in consideration, in consultation with [Lafarge], shall have the

11 option of naming any mutually acceptable attorneys who shall represent [Lafarge]

12 in the prosecution or defense of any litigation or negotiations between [Lafarge]

13 and third parties concerning any claim based on a liability or an alleged liability

14 covered by [the primary] policy, and shall have the direction of such litigation’s

15 [sic] or negotiations. 

16 The second provision states that Lafarge is obligated to take steps to protect its own and

17 NYMAGIC’s interests in respect to any occurrence that is likely to give rise to a claim under the

18 primary policy (the “Protection Clause”): 

19 [I]n respect of any occurrence likely to give rise to a claim under this policy,

20 [Lafarge] is obligated to and shall take such steps to protect [its] and/or

21 [NYMAGIC’s] interests as would reasonably be taken in the absence of this or

22 similar insurance. 

23 On the one hand, NYMAGIC contends that, pursuant to the Naming Clause, it has the

24 right to name mutually acceptable attorneys for Lafarge’s defense in the barge litigation; that in

25 exercising its right to specify counsel, NYMAGIC reasonably offered Lafarge to choose from a

26 panel of six qualified law firms; that Lafarge breached its duty of good faith by ignoring

27 NYMAGIC’s offered list of counsel; that Goodwin Procter, H&K, and Chaffe were retained by

28 Lafarge without NYMAGIC’s knowledge or consent; and that NYMAGIC, which has fulfilled its

29 obligation under the Naming Clause by appointing Sutterfield for Lafarge’s defense, is not

30 obligated to pay for the legal fees earned by the three unauthorized law firms. 
25

1 Lafarge, on the other hand, contends that it took reasonable steps pursuant to its

2 obligations under the Protection Clause. Lafarge asserts that it immediately retained qualified

3 counsel to preserve evidence, investigate the cause of the breached levee, and minimize exposure

4 to liability; that the three firms worked in different capacities and did not duplicate each others’

5 work; and that the Protection Clause, in light of the exceptional circumstances of Hurricane

6 Katrina, trumped the provisions of the Naming Clause. Furthermore, Lafarge asserts that even if

7 the Naming Clause applied, NYMAGIC acted in bad faith by failing to investigate the case,

8 refusing to explain its rejection of Lafarge’s choice of counsel, and offering an inadequate list of

9 firms to represent Lafarge in the barge litigation. Lafarge also asserts that NYMAGIC is

10 precluded from exercising its rights under the Naming Clause because the interests in the litigation

11 between Lafarge and NYMAGIC are in conflict. 

12 Thus, according to Lafarge, the District Court erred because the primary policy covered

13 not only Goodwin Procter and H&K, but also Chaffe, as the retainer of all three law firms was

14 reasonable and required under the Protection Clause. According to NYMAGIC, the District

15 Court erred because the primary policy covers neither Goodwin Procter, H&K, nor Chaffe, as all

16 three firms were retained without NYMAGIC’s knowledge or consent and in violation of the

17 Naming Clause. Each party emphasizes one clause and minimizes the importance of the other. 

18 We think it plain that both provisions must be given full effect. See Chapman v. N.Y. State Div.

19 for Youth, 546 F.3d 230, 236 (2d Cir. 2008) (“A contract should be construed so as to give full

20 meaning and effect to all of its provisions.” (internal quotation marks omitted) (quoting Am.

21 Express Bank Ltd. v. Uniroyal, Inc., 562 N.Y.S.2d 613, 614 (App. Div. 1990))). 

22 Lafarge is correct that in light of the exceptional circumstances of Hurricane Katrina, it

23 was reasonable to act quickly to retain Goodwin Procter, H&K, and Chaffe to preserve evidence,

24 investigate the cause of the breached levee, and minimize exposure to the damages that would be

25 at stake in the foreseeable and inevitable lawsuits. Considering the level of complexity of the case

26 in both procedural and substantive respects, as well as the possibility of being cast in damages that
26

1 could exceed the value of Lafarge several times over, we agree with the District Court that “it

2 was reasonable for Lafarge to retain at once a large firm such as Goodwin, with complex case and

3 mass tort experience, to take immediate control of Lafarge’s defense against the anticipated

4 litigation flood (which in fact materialized). It was also reasonable for Lafarge to retain an

5 admiralty firm such as H&K, with experience in the ‘rapid response’ investigation and evaluation

6 of major marine casualties.” Lafarge N. Am., Inc., 598 F. Supp. 2d at 493. 

7 In particular, with respect to H&K and Goodwin Procter’s early engagement of a

8 recognized maritime expert to “quickly assemble[] a team of experts in disciplines such as

9 hydrology and soil science, and travel . . . with his team to New Orleans” in order to “investigate

10 the barge breakaway and the allegations that the barge had caused the failure of the . . . levee,”

11 id., the selection and engagement of the expert was also reasonable. “[T]rial lawyers and claims

12 adjusters know that the prompt identification and preservation of evidence — physical,

13 documentary, and testamentary — after a major casualty is vital. . . . [E]vidence . . . could be lost

14 or compromised if not garnered quickly and preserved carefully.” Id. at 494. With respect to

15 Chaffe, “[t]here is no dispute that Lafarge requires local representation by a Louisiana firm well

16 versed in admiralty law,” and thus, it was reasonable to retain local counsel, Chaffe, in addition to

17 Goodwin Procter and H&K. Id. at 495. 

18 The primary policy’s provision requiring NYMAGIC to pay expenses related to

19 “defending and/or investigating” in connection with claims arising under the primary policy (the

20 “Expense Clause”) also informs the policy’s coverage of Goodwin Procter, Chaffe, and, in

21 particular, H&K’s investigative services. The Expense Clause requires 

22 [NYMAGIC] to pay survey and related expenses reasonably incurred by [Lafarge]

23 and the legal cost and expense of defending and/or investigating and/or conducting

24 proceedings to limit liability on any suit or claim against [Lafarge] based on a

25 liability or an alleged liability coming within the scope of [the primary policy] . . .

26 but [NYMAGIC] shall not be liable for the cost or expense of defending any suit

27 or claim unless said cost or expense shall have been incurred with the written

28 consent of [NYMAGIC]. [NYMAGIC], however, reserves the right to conduct

29 the defense of any actions or suits at its own expense. 

30 (emphasis added). Here, H&K was retained for investigative purposes — and not as defense
27

1 counsel — and was discharged following the conclusion of its investigation on the cause of the

2 breached levee. And although the Expense Clause conditions payment on NYMAGIC’s written

3 consent, Lafarge had apprised NYMAGIC of its retention of H&K in Lafarge’s first notification

4 to NYMAGIC about the possibility of claims arising from Barge ING 4727, and NYMAGIC did

5 not object to H&K’s retention. Moreover, NYMAGIC never initiated its own investigation of

6 Barge ING 4727, yet clearly draws much benefit from H&K’s earlier investigations. Cf.

7 Transcare N.Y., Inc. v. Finkelstein, Levine & Gittlesohn & Partners, 804 N.Y.S.2d 63, 64 (App.

8 Div. 2005) (noting the failure of the insurer to “investigate the merits of the underlying claim” and

9 stating that “the insurer does not satisfy its duty to defend merely by designating independent

10 counsel to defend the litigation” (internal quotation marks omitted)). In fact, the remaining excess

11 insurers implicitly acknowledge that H&K’s investigative services were covered by the primary

12 policy. See AHAC & NACA Reply Br. at 16 (stating that “[Lafarge] violated [the Naming

13 Clause] by unilaterally retaining Goodwin,” without mentioning H&K, which they described as

14 “investigative counsel”). We therefore conclude that the fees earned by Goodwin Procter, H&K,

15 and Chaffe, which fees were of the type specifically contemplated under the Expense Clause, are

16 covered under the Protection Clause in light of the circumstances in this case. 

17 That said, the Naming Clause would be rendered a nullity by the Protection Clause if

18 Lafarge’s duty to minimize liability permitted it to hire expensive attorneys and establish

19 NYMAGIC’s obligation to pay for those attorneys until the end of litigation. While Goodwin

20 Procter, H&K, and Chaffe were reasonably retained to minimize potential liability arising from the

21 extraordinary circumstances here, the Protection Clause does not qualify NYMAGIC’s option to

22 name mutually acceptable counsel pursuant to the Naming Clause. The primary policy does not

23 hint of any circumstances where the Protection Clause would trump the Naming Clause, and

24 Lafarge does not point to any language to bring the two provisions into doubt as to their plain

25 meaning in this regard. Thus, once NYMAGIC clearly expressed its intention to fulfill its

26 obligations and offered Lafarge a choice of six qualified law firms, it was incumbent upon Lafarge
28

1 to act in good faith to consider agreeing to retain a firm from NYMAGIC’s list. 

2 Lafarge now asserts various reasons for rejecting NYMAGIC’s offered list of firms;

3 however, none of these arguments has merit. Lafarge claims that the firms offered by NYMAGIC

4 were unqualified to defend its interests in the barge litigation because Sutterfield is “only a five5 person firm.” But NYMAGIC not only offered Sutterfield, but also a list of several law firms

6 composed of between 40 and 160 attorneys specializing in maritime law and experienced in class

7 actions. It was only after Lafarge refused to consider any of these larger firms that NYMAGIC

8 retained Sutterfield to defend Lafarge, which was then already being represented by three large

9 law firms. Moreover, Lafarge’s argument is predicated on the unwarranted assumption that a

10 “five-person firm” is less competent than a larger firm or that the “five-person firm” would

11 knowingly fail in its duties to adequately prepare for Lafarge’s defense. See La. Rules of

12 Professional Conduct R. 1.1(a) (“A lawyer shall provide competent representation to a client.”). 

13 There is nothing to suggest that Sutterfield lacks expertise in complex maritime defense or that it

14 would not associate itself with another firm in the absence of Goodwin Procter and Chaffe. Cf.

15 N.Y. Rules of Professional Conduct R. 1.1(b) (“A lawyer shall not handle a legal matter that the

16 lawyer knows or should know that the lawyer is not competent to handle, without associating

17 with a lawyer who is competent to handle it.”). 

18 Lafarge also argues that NYMAGIC failed to provide an explanation for rejecting

19 Lafarge’s three unauthorized law firms, whose replacement several weeks after their retention

20 would be “nonsensical” and “unreasonable.” But this argument is backwards. After being

21 informed of Lafarge’s unauthorized retention of three law firms, NYMAGIC offered its own list

22 of firms. Lafarge made no response to the offer and submitted no reasons for rejecting it. 

23 NYMAGIC acted consistently with the Naming Clause, while Lafarge breached its duty to

24 consider NYMAGIC’s offered list of law firms in good faith. See Nuvest, S.A. v. Gulf & W.

25 Indus., Inc., 649 F.2d 943, 947 (2d Cir. 1981) (“Under both contract law and agency principles,

26 the parties owe each other a duty of good faith.”). Indeed, because Lafarge lodged no response
29

1 to NYMAGIC’s offered list of law firms, it seems inappropriate for Lafarge to now complain that

2 NYMAGIC failed to consider the high cost of replacing law firms that had already begun working

3 on Lafarge’s defense — an argument that could have been made had Lafarge “consult[ed]” with

4 NYMAGIC regarding “mutually acceptable attorneys” pursuant to the Naming Clause. 

5 Moreover, Goodwin Procter and Chaffe would not have been as entrenched and costly to replace

6 had Lafarge informed NYMAGIC of their retention at an earlier time. 

7 Finally, Lafarge argues that NYMAGIC is precluded from exercising its rights under the

8 Naming Clause because a conflict of interest is inherent in Lafarge’s relationship with

9 NYMAGIC. Lafarge asserts that because the potential liability at stake in the barge litigation

10 (billions of dollars) is substantially greater than the amount covered by NYMAGIC

11 (approximately $30 million, which includes obligations under both the primary and excess

12 policies), Lafarge was permitted under New York law to retain its own counsel and bill

13 NYMAGIC for that expense under the primary policy. This argument, however, must be

14 rejected, as Lafarge’s alleged “conflict” with NYMAGIC is not of the type recognized to confer

15 an independent right on the insured to retain counsel at the insurer’s expense. 

16 The New York Court of Appeals has held that “[i]ndependent counsel is only necessary in

17 cases where the defense attorney’s duty to the insured would require that he defeat liability on any

18 ground and his duty to the insurer would require that he defeat liability only upon grounds which

19 would render the insurer liable.” Pub. Serv. Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392, 401 n.*

20 (1981); see also Cunniff v. Westfield, Inc., 829 F. Supp. 55, 57 (E.D.N.Y. 1993); Emons Indus.,

21 Inc. v. Liberty Mut. Ins. Co., 749 F. Supp. 1289, 1297 (S.D.N.Y. 1990). Here, both NYMAGIC

22 and Lafarge share a common interest in defeating Lafarge’s liability in the barge litigation. Rather

23 than allege a conflict of interest based on different theories of defense affecting the distribution of

24 liability between Lafarge and NYMAGIC, Lafarge asserts its purported conflict on the substantial

25 difference in the amounts at stake in the barge litigation and the amounts that are covered under

26 the primary policy. Lafarge’s purported conflict is not a recognized basis for permitting Lafarge
 To the extent NYMAGIC suggested that Lafarge retain additional attorneys (at 11

Lafarge’s own expense) in light of the potential for exposure above the limits of the relevant

policies, such a suggestion does not necessarily mean NYMAGIC has a conflict of interest with

Lafarge. Indeed, it is encouraged in situations where the potential claims exceed the policy limits

to advise the insured of retaining separate counsel. See Nat’l Conference of Lawyers and Liab.

Insurers, Am. Bar Ass’n, Guiding Principles II (reprinted in Douglas R. Richmond, Walking a

Tightrope: The Tripartite Relationship Between Insurer, Insured, and Insurance Defense Counsel,

73 Neb. L. Rev. 265, 286–91 (1994)); id. at 287 (“[T]he [insurer] retains the exclusive right to

control and conduct the defense of the case, in good faith, subject to the right of the insured or

such additional attorney to participate.”). 

30

1 to retain independent counsel at the expense of NYMAGIC’s primary policy. As the New York

2 Court of Appeals observed: 

3 [W]here multiple claims present no conflict — for example, where the insurance

4 contract provides liability coverage only for personal injuries and the claim against

5 the insured seeks recovery for property damage as well as for personal injuries —

6 no threat of divided loyalty is present and there is no need for the retention of

7 separate counsel. This is so because in such a situation the question of insurance

8 coverage is not intertwined with the question of the insured’s liability.

9 Goldfarb, 53 N.Y.2d at 401 n.* (emphasis added). Of course, we observe that settlement

10 negotiations may raise a conflict of interest even between an insured and an insurer sharing a

11 common goal of defending against liability, but such a potential or actual conflict is not apparent

12 in this case. Lafarge therefore did not have a right to pursue independent counsel whose legal 11

13 fees would be covered by the primary policy. 

14 Accordingly, to give full effect to the provisions in the primary policy, we hold that

15 Goodwin Procter’s and Chaffe’s legal fees are covered under the Protection Clause for amounts

16 incurred by Lafarge prior to, but not including, September 28, 2005, when it became clear that

17 Lafarge was not acting in good faith in considering the list of six qualifying law firms proposed on

18 September 22 by NYMAGIC, and when NYMAGIC advised Lafarge by e-mail that it would not

19 “agree to pay for the three sets of attorneys on the case, none approved by [NYMAGIC].” With

20 respect to H&K, because it was retained on a temporary basis for an investigative mission rather

21 than as defense counsel, and because NYMAGIC “did not commission any investigation of its

22 own into the incident and received full disclosure of the fruits of Lafarge’s,” Lafarge N. Am., Inc.,

23 598 F. Supp. 2d at 494, the fees earned by H&K are covered in toto under the Protection Clause. 
31

1 E. Coverage Under the Excess Policy

2 1. Coverage Generally

3 The excess insurers concede that a finding of “simple non-coverage” of Barge ING 4727

4 under the American Club Policy negates any argument they may have that Lafarge breached its

5 obligation under the excess policy to maintain and keep in full effect the American Club Policy. 

6 Because we hold today that summary judgment in favor of the American Club is warranted based

7 on the simple non-coverage of Barge ING 4727 under the American Club Policy, and because

8 there is no dispute that NYMAGIC’s primary policy has been exhausted, the excess policy now

9 applies to cover expenses in excess of the primary policy’s limits. 

10 2. Coverage of Lafarge’s Unauthorized Legal Expenses

11 The District Court determined that the excess policy here is a “bumbershoot” policy,

12 which is a type of insurance “intended to fill any coverage gap which might occur when an

13 assured’s underlying or primary insurance limits are exceeded, or when underlying insurance

14 covering the risk involved does not exist.” Lafarge N. Am., Inc., 598 F. Supp. 2d at 486 (internal

15 quotation marks omitted; emphases added). This determination is supported by the excess policy,

16 which states that it covers “[a]ll Protection and Indemnity risks of whatsoever nature including,

17 but not limited to, those covered by the Underlying Protection and Indemnity insurances”;

18 “General Average, Collision Liabilities, Tower’s Liabilities, Salvage, Salvage Charges, and Sue

19 and Labor arising from any cause whatsoever”; and “[a]ll other sums which [Lafarge] shall

20 become legally liable to pay . . . for damages of whatsoever nature” for “[p]ersonal injuries” and

21 “[p]roperty [d]amage.” See St. Paul Fire & Marine Ins. Co. v. Bd. of Comm’rs of Port of New

22 Orleans, 646 F. Supp. 2d 813, 818–19 (E.D. La. 2009) (describing the foregoing coverage, in the

23 exact terms, as “considered standard in marine bumbershoot policies”). The excess policy also

24 broadly covers “such expenses as are set out in the definition of ‘ULTIMATE NET LOSS’” (the

25 “Loss Clause”), which, in turn, includes “expenses for doctors, lawyers, nurses and investigators

26 and other persons, and for litigation, settlement, adjustment and investigation of claims and suits
 The excess policy provides, in part, that “[i]f other valid and collectible insurance with 12

any other Insurer is available to [Lafarge] covering a loss also covered by this Policy, . . . the

insurance afforded by this Policy shall be in excess of and shall not contribute with such other

insurance.” 

32

1 which are paid as a consequence of any occurrence covered hereunder.” And although there is a

2 clause that conditions the excess policy on the proper maintenance of specified primary insurance

3 policies, that clause does not speak to the circumstance where the underlying primary policies are

4 properly maintained but nonetheless do not cover an expense that is otherwise covered by, for

5 example, the Loss Clause. The excess policy is, therefore, a “bumbershoot.” 

6 Because the primary policy covers a portion of the legal fees earned by Lafarge’s

7 unauthorized law firms, any amount exceeding the primary policy’s limit with respect to those

8 expenses is covered by the excess policy. But because the excess policy is also a 12

9 “bumbershoot,” coverage of the portions of the legal expenses not covered under the primary

10 policy is still possible. 

11 Although the excess policy does not include a provision similar to that in the primary

12 policy reserving the insurers the right to name Lafarge’s defense counsel, the excess policy does

13 grant the insurers the right to associate with NYMAGIC to defend Lafarge in the barge litigation. 

14 Specifically, the provision (the “Assistance Clause”) allowing for association provides: 

15 [The excess insurers] shall have the right and shall be given the opportunity to

16 associate with [Lafarge] or [Lafarge’s] Underlying Insurers, or both, in the defense

17 and control of any claim, suit or proceeding relative to an occurrence where the

18 claim or suit involves or appears reasonably likely to involve [the excess insurers]

19 in which event [Lafarge], the Underlying Insurers and [the excess insurers] shall

20 cooperate in all things in the defense of such claim, suit or proceeding. 

21 Relying upon this provision, the excess insurers argue that the excess policy’s coverage of

22 legal fees is limited to those covered by the primary policy. But we do not see what the excess

23 insurers imagine is contained in the Assistance Clause that plainly supports their argument. The

24 Assistance Clause does not incorporate the primary policy’s Naming Clause. Nor does it adopt

25 the Naming Clause as a limitation on the excess insurers’ obligation to pay legal fees. The

26 Assistance Clause simply allows for the excess insurers to associate with either NYMAGIC or
33

1 Lafarge, or both, in the defense of qualifying claims, and otherwise requires cooperation among

2 all parties in the common goal of defense. Indeed, this reservation of rights is strong evidence

3 that coverage for fees earned by both counsel, either as excess to NYMAGIC’s primary policy or

4 as initial coverage for Lafarge’s independent counsel, was intended pursuant to the umbrella

5 coverage provided by the excess policy. That the excess insurers may associate with one counsel

6 does not end their broad obligation to indemnify expenses for other counsel who, at the option of

7 the excess insurers, would have also been associated with the excess insurers’ counsel. 

8 Because we conclude that the excess policy is a “bumbershoot” and may cover legal

9 expenses that are not covered by the primary policy, the only limitation to the excess policy’s

10 coverage of legal expenses is the general rule that coverage be for reasonable legal expenses — a

11 point of law not in dispute by the parties. See Lafarge N. Am., Inc., 598 F. Supp. 2d at 497 (“All

12 parties agree that the Insurers are responsible to pay only the ‘reasonable’ fees and costs of

13 attorneys.”). In this regard, although we reject the excess insurer’s construction of the Assistance

14 Clause, we agree that Lafarge’s retention of Goodwin Procter and Chaffe in open defiance of the

15 plain terms of the Naming Clause of the primary policy was unreasonable. The excess policy

16 specifically requires the primary policy to be maintained in full effect; the excess insurers therefore

17 reasonably expected Lafarge’s defense counsel to be selected pursuant to the plain terms of the

18 primary policy. Moreover, while it may have been reasonable for Lafarge to retain its own

19 attorneys to protect against any remote potential conflicts of interest between the insurers and

20 Lafarge, the continued retention of Goodwin Procter and Chaffe goes well beyond the necessity

21 of filling that modest role. Accordingly, we conclude that the excess policy does not cover the

22 fees and expenses claimed by Goodwin Procter and Chaffe on or after September 28, 2005. 

23 F. Legal Fees in Connection with Motions Before the District Court

24 Attorneys’ fees awards in admiralty suits are discretionary and ordinarily require a finding

25 of bad faith. See Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 309 (2d Cir. 1987). 

26 In denying a motion for attorneys’ fees, the District Court may also consider, inter alia, the
34

1 relevant state rule, here, New York, and, as well, the status of the party moving for fees, i.e.,

2 whether the movant is a prevailing party. See N.Y. Marine & Gen. Ins. Co. v. Tradeline (LLC),

3 266 F.3d 112, 130 (2d Cir. 2001). The District Court in this case denied Lafarge’s motion for

4 attorneys’ fees because: (1) under New York law, Lafarge would not be entitled to attorneys’

5 fees, and (2) Lafarge only partially prevailed in defending against the insurers’ summary judgment

6 motions. In light of our holdings today, Lafarge cannot claim error with respect to the District

7 Court’s latter conclusion. 

8 “Under New York law, it is well settled that an insured cannot recover his legal expenses

9 in a controversy with a carrier over coverage, even though the carrier loses the controversy and is

10 held responsible for the risk.” Employers Mut. Cas. Co. v. Key Pharms., 75 F.3d 815, 824 (2d

11 Cir. 1996) (internal quotation marks omitted). A “narrow exception” to this rule applies, Liberty

12 Surplus Ins. Corp. v. Segal Co., 420 F.3d 65, 67 (2d Cir. 2005) (per curiam) (internal quotation

13 marks omitted), when an insured is “cast in a defensive posture by the legal steps an insurer takes

14 in an effort to free itself from its policy obligations, and who prevails on the merits,” U.S.

15 Underwriters Ins. Co. v. City Club Hotel, LLC, 3 N.Y.3d 592, 597 (2004) (internal quotation

16 marks omitted). Although the exception appears broadly applicable to insurers attempting to

17 escape any policy obligation, we have held that the insured is entitled to attorneys’ fees only if the

18 insured prevails in a dispute over the insurer’s attempt “to free itself” from its “duty to defend.” 

19 Liberty Surplus Ins. Corp., 420 F.3d at 67–68. 

20 Here, NYMAGIC does not contest its duty to defend Lafarge in the barge litigation. 

21 Indeed, NYMAGIC concedes that it has such a duty, and has accordingly offered a list of

22 attorneys for Lafarge’s defense, assigned Sutterfield to Lafarge’s defense after Lafarge

23 unreasonably rejected NYMAGIC’s offered list of attorneys, and continues to pay for Sutterfield

24 and other related expenses. Similarly, although AHAC and NACA quibble with the order in

25 which they should pay for Lafarge’s defense, neither insurer denies that it has a duty to pay for

26 Lafarge’s legal expenses insofar as those expenses exceed the primary policy. More importantly,
35

1 AHAC and NACA adopt NYMAGIC’s position with respect to coverage under the primary

2 policy and do not contest NYMAGIC’s duty to defend Lafarge in the barge litigation. In essence,

3 the insurers here only challenge their obligation to pay for Lafarge’s firms, which were retained

4 without NYMAGIC’s knowledge or consent and in contravention to the Naming Clause of the

5 primary policy. NYMAGIC is asserting its right under the Naming Clause to defend Lafarge. 

6 Accordingly, because the insurers do not attempt to avoid their duty to defend Lafarge, the

7 District Court’s conclusions regarding New York law were not in error. 

8 We therefore conclude that the District Court did not abuse its discretion. The District

9 Court’s underlying reasons for denying Lafarge’s motion for attorneys’ fees were sufficient and

10 without error. 

11 III. CONCLUSION

12 We have considered the remaining arguments made by the parties and find them to be

13 either without merit or unnecessary to address in light of our holdings in this opinion. For the

14 foregoing reasons, the judgment of the District Court is AFFIRMED in part, VACATED in part,

15 and REMANDED for further proceedings not inconsistent with this opinion.