Opinion ID: 617714
Heading Depth: 2
Heading Rank: 1

Heading: EMC and SWS Claims on Appeal

Text: EMC and SWS challenge the district court’s damages award for their breach of contract claim. They argue that the district court should have ordered their full reimbursement for their claimed costs, not merely for 80% as paid by GAIC. They also contend that the district court improperly truncated their right to collect on their policy on August 31, 2005. EMC and SWS further maintain that the district court erred in ruling against them on their claim for breach of good faith and fair dealing. They assert they successfully raised and proved their claim under New York law. 22 Nos. 11-1266 & 11-1346
and SWS Were Not Entitled to Full Payment of Their Claimed Costs Was Not Clear Error EMC and SWS claim that GAIC agreed to pay them 80% of their standard rates and that the reduced rate would constitute charging at cost. GAIC counters that they agreed to the 20% reduction subject to review and approval. Accordingly, they did not have to pay any invoice that did not substantiate that the 20% reduction reflected EMC and SWS’s true costs sans profit. The district court considered the evidence presented by the plaintiffs, namely testimony by Dennis Egan and Robin Chanda, but it found their testimony “unpersuasive.” It held that EMC and SWS proved neither that GAIC agreed to treat the 20% reduction as cost nor that their charged rates were, in fact, their costs. See discussion supra at I.B.3. Indeed, both GAIC in 2005 and the court invited EMC and SWS to reconstruct their costs as best they could and provide numerical justification for their invoices. They refused both invitations, asserting that their agreement with GAIC precluded them from tracking the necessary billing details during the cleanup operations and that there was no feasible way to meaningfully capture those specifics ex post. The district court recognized the difficulty posed by EMC and SWS’s task, but found “no indication that evidence that would have permitted [them] to prove their costs was unavailable to them.” As the court elaborated: Nos. 11-1266 & 11-1346 23 [P]laintiffs could have provided estimates of their unrecorded time for equipment usage and the work of Egan as salvage master . . . . Alternatively, plaintiffs could have offered in this litigation (just as they could have done in 2005) an accounting analysis or other evidence to show that they had charged at rates that amounted to their costs relating to the salvage and recovery project. Or they could have tried to document Egan and Chanda’s claim that they were charging at rates that actually were the same rates that resulted in zero profit or a loss in 2004. . . . But [they] did not take any of these routes. Rather, they chose to rely on a theory that [GAIC] agreed up-front to the particular rates [they] quoted and on the proposition that GAIC admitted the ac- curacy of those rates after the fact. That theory and proposition were insufficiently supported . . . . Based on the evidence submitted by EMC and SWS, we conclude that the district court’s analysis contains no clear error. EMC and SWS did not provide sufficient support either that GAIC agreed to the 20% rate reduction whole-cloth or that the amounts they claimed reflected their true costs. They are not entitled to any additional payments under this theory.
August 31, 2005 EMC and SWS contend that the EMC 423 was not completely cleaned on August 31, 2005 and, accordingly, 24 Nos. 11-1266 & 11-1346 GAIC was required to continue indemnification under the policy. GAIC cross-appeals that its indemnification responsibilities ended on June 7, 2005, after the Coast Guard deemed oil recovery efforts terminated. The district court reasoned that, under the terms of the policy, GAIC owed EMC and SWS coverage on salvage operations, offloading, and disposal of cargo “to the extent that such actions contribute[d] to stopping a discharge or release, or prevent[ed] a substantial threat of a discharge or release under OPA90, CERCLA, or the FWPCA.” See discussion supra at I.A.1. The policy also demanded coverage for expenses to mitigate liability under OPA90 and CERCLA. Id. The district court found that coverage ended on August 31, 2005 because, in its September 2005 lawsuit against EMC and SWS, the IEPA “referenced only the actual spills and not any ongoing threat of further contamination.” This, it concluded, “support[ed] an inference that the plaintiffs were no longer exposed to OPA90 or state-equivalent liability a[t] the end of August 2005[,] [and] [p]laintiffs, who bore the burden of proof, . . . failed to prove otherwise.” See discussion supra at I.B.3. On the evidence before us, we find no error in the district court’s ruling. EMC and SWS, enjoyed and continue to enjoy the burden of proof on this issue, and nothing they have provided the district court or this Court convinces us that they were entitled to further payments after August 31, 2005. The district court did not err by tailoring its damage award. Nos. 11-1266 & 11-1346 25
EMC and SWS’s Breach of Good Faith and Fair Dealing Claim The district court rejected EMC and SWS’s claim that the GAIC breached its duty of good faith and fair dealing because admiralty law did not support such a claim and New York law, to the extent that it did, precluded claims where the conduct underlying the breach of good faith and fair dealing claim was the same conduct generating a breach of contract claim. In reaching this conclusion, the district court relied on Cary Oil Co. v. MG Refining and Marketing, Inc., 90 F. Supp. 2d 401, 419 (S.D.N.Y. 2000) (“Under New York law, a claim for breach of the implied covenant will be dismissed as duplicative if the conduct allegedly violating the implied covenant is also the predicate for breach of the underlying contract.”). EMC and SWS find Cary inapposite. They argue, first, that Cary is not an insurance case and, thus, not controlling. Second, they assert that Cary fails to govern after 2008, when the New York Supreme Court, Appellate Division, in Panasia Estates, Inc. v. Hudson Ins. Co., clarified that a plaintiff could recover “consequential damages resulting from a breach of the covenant of good faith and fair dealing . . . in an insurance contract context, so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.” 10 N.Y.3d 200, 203 (N.Y. App. Div. 2008) (quoting Bi-Economy Mkt., Inc. v. 26 Nos. 11-1266 & 11-1346 Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 192 (N.Y. App. Div 2008)) (internal quotation marks omitted). GAIC rightly points out, however, that New York courts—subsequent to Panasia and Bi-Economy—view claims for breach of good faith and fair dealing as “duplicative of a claim sounding in breach of contract.” See, e.g., Goldmark, Inc. v. Catlin Syndicate Ltd., No. 09-CV-3876, 2011 WL 743568, at  (E.D.N.Y. Feb. 11, 2011). A breach of the duty of good faith may justify the recovery of consequential damages in addition to the loss insured by the policy at issue, but that breach is another means of recovery under the contract and not a separate cause of action in and of itself. Id. To this end, EMC and SWS may not recover on an independent breach of good faith claim. EMC and SWS also do not recover consequential dam- ages for bad faith under their breach of contract claim. The district court held that GAIC’s breaches “were made in good faith and without malice.” EMC objects to this characterization, arguing that GAIC’s misrepresentations that the policy was exhausted when it was not constitutes bad faith dealings that merit damages: GAIC “consistently refused to communicate with the insured, never once reserved its rights, has repeatedly ignored its duty to independently evaluate the coverage under the policy (including for cargo removal), and has misrepresented the coverage under the policy . . . , including the claim that the policy was exhausted.” With these facts before it, the district court did not find bad faith, and the plaintiffs present no new evidence Nos. 11-1266 & 11-1346 27 to suggest that its decision was clearly erroneous. Cf. Am. Nat’l Fire Ins. Co. v. Kenealy, 72 F.3d 264, 270 (2d Cir. 1995) (“The district court did not find bad faith and we discern no facts here that would justify reversing that finding. . . . [I]t is not bad faith for an insurer to fight liability when policy coverage is unclear.”).