Court Opinion

ID: 818011
Source: CourtListenerOpinion
Date Created: 2013-02-01 15:35:32.81176+00
Date Added: 2024-06-11T09:00:51.401764
License: Public Domain

11-3774-cv
Weeks Marine, Inc. v. Am. S.S. Owners Mut. Prot. & Indem. Ass’n, Inc., et al.

                                  UNITED STATES COURT OF APPEALS
                                     FOR THE SECOND CIRCUIT

                                          SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or
after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and
this Court’s Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a
party must cite either the Federal Appendix or an electronic database (with the notation “summary
order”). A party citing a summary order must serve a copy of it on any party not represented by
counsel.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 1st
day of February, two thousand thirteen.

PRESENT:

                    JOSÉ A. CABRANES,
                    RICHARD C. WESLEY,
                    DEBRA ANN LIVINGSTON,

                                        Circuit Judges.

_____________________________________

WEEKS MARINE, INC.,

                              Plaintiff-Appellant,

                    v.                                                                No. 11-3774-cv

AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION
AND INDEMNITY ASSOCIATION, INC., SHIPOWNERS
CLAIMS BUREAU, INC.,

                              Defendants-Appellees,

_____________________________________

FOR PLAINTIFF-APPELLANT:                                              JOHN A.V. NICOLETTI (Noshin Namazi,
                                                                      William M. Fennel, on the brief) Nicoletti
                                                                      Hornig & Sweeney, New York, NY.

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FOR DEFENDANTS-APPELLEES:                              JOHN WOODS (George G. Cornell, John
                                                       Russell Stevenson, on the brief) Clyde & Co, US
                                                       LLP, New York, NY.

       Appeal from an August 26, 2011 judgment of the United States District Court for the

Southern District of New York (Naomi Reice Buchwald, Judge).

       UPON DUE CONSIDERATION IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

       Plaintiff-appellant Weeks Marine, Inc. (“Weeks”) brought this suit against American

Steamship Owners Mutual Protection and Indemnity Association, Inc. (“American Club”) and

Shipowners Claims Bureau, Inc. (“SCB”) (jointly, “defendants”) seeking damages and declaratory

relief following an alleged breach of an insurance contract. We assume the parties’ familiarity with

the underlying facts, the procedural history of the case, and the issues on appeal. The following

facts are undisputed.

       American Club is non-profit mutual insurance association managed by SCB; Weeks is a

member of American Club. As relevant here, Weeks was issued a “Certificate of Entry”

(“Certificate”) by American Club as part of its annual membership for a one-year period,

commencing February 20, 2005. The Certificate provided, inter alia, a division of liability between

Weeks and American Club for all claims by crew or employees in which Weeks would bear liability

up to $1 million and American Club would bear liability for claims in excess of $1 million, up to a

maximum of $2 million in liability—effectively leaving Weeks also liable for any amount in excess of

$3 million. In addition, the Certificate provided that Weeks would be responsible for “the

investigation, settlement, defense or appeal” of any crew claim and would give American Club

“prompt notice,” in the event it learned of any one of five conditions:

               (a) any claim, suit or proceeding that appears to involve indemnity by
               the American Club; (b) any occurrence, claim, award or proceeding
               judgment which exceeds 50% of the Insured’s retention under this
               policy, (c) any occurrence which causes serious injury (disability for a

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                  period of nine months or more) to two or more employees; (d) any
                  case involving: 1. Amputation of a major extremity, 2. Brain or spinal
                  cord injury, 3. Death, 4. Any second or third degree burn of 50% of
                  the body or more; (e) the reopening of any case in which further
                  award might involve liability to the American Club.

         Weeks Marine, Inc. v. Am. S.S. Owners Mut. Prot. & Indem. Ass’n, No. 08-CV-9878, 2011 WL

3796331, at *1-2 (S.D.N.Y. Aug. 25, 2011). As a member of American Club, Weeks was also subject

to the association’s by-laws. These by-laws, in part, govern the handling of claims by members, such

as Weeks, against American Club.

         The instant dispute between the parties arises from a claim filed by Maximino Garza

(“Garza”), a Weeks crew member, following a February 15, 2006 accident which resulted in a

concussion and cervical sprain. Following the rejection of an $850,000 settlement demand Garza

proceeded to trial against Weeks on February 5, 2008 and obtained a judgment in his favor in the

amount of $3,715,620.36.1 The defendants received notice of the Garza claim from Weeks two days

later. After the defendants refused to indemnify Weeks, citing a failure to provide prompt notice of

the Garza claim, Weeks instituted the current suit.

         In the proceedings below, the defendants moved for summary judgment, which Weeks

opposed principally on the grounds that the notification provision in the Certificate was not a

condition precedent to insurance coverage and that, in any event, the defendants were required to

show that they were prejudiced by the lack of notification in order to deny coverage. After a

through analysis of relevant precedents under New York law, the District Court found that New

York’s traditional “no prejudice” rule applied and that the defendants were not required to show

prejudice to disclaim coverage after being notified of a claim post-judgment. The District Court also

         1
            Weeks Marine appealed the verdict and the Texas Court of Appeals affirmed. Weeks Marine, Inc. v. Garza, 370
S.W.3d 390 (Tex. App. 2010). After briefing was concluded in the case presently before us, the Supreme Court of Texas
issued a decision affirming in part and reversing in part, reducing Garza’s award by $2.5 million. Weeks Marine, Inc. v.
Garza, 371 S.W.3d 157 (Tex. 2012).

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considered, and rejected, several arguments by Weeks claiming that it was not contractually obligated

to report the Garza claim. Based on these conclusions, the District Court granted summary

judgment in favor of the defendants. This appeal followed.

                                                 DISCUSSION

        We review an order granting summary judgment de novo and “resolv[e] all ambiguities and

draw[ ] all permissible factual inferences in favor of the party against whom summary judgment is

sought.” Burg v. Gosselin, 591 F.3d 95, 97 (2d Cir. 2010) (quoting Wright v. Goord, 554 F.3d 255, 266

(2d Cir. 2009)). On appeal, Weeks raises a number of arguments, nearly all of which were

considered, and dismissed, by the District Court. First, Weeks argues that the District Court erred in

applying New York’s “no prejudice” rule rather than the established common law rules. See Unigard

Sec. Ins. Co. v. N. River Ins. Co., 79 N.Y.2d 576, 581 (1992) (recognizing New York’s “no prejudice”

rule as a limited exception to established rules of contract law). We disagree. “It is settled New

York law that the notice provision for a primary insurer operates as a condition precedent and that

the insurer need not show prejudice to rely on the defense of late notice.” Id. The exceptions to

this rule to which Weeks cites—Unigard, for reinsurance contracts, and Rekemeyer v. State Farm Mut.

Auto. Ins. Co., 4 N.Y.3d 468 (2005), for supplemental underinsured motorist (“SUM”) benefits—are

inapplicable to the current facts. Rekemeyer is facially distinguishable from the instant case as one

where the New York Court of Appeals was persuaded to “relax its application of the no-prejudice

rule in SUM cases where the carrier [had] been timely put on notice of the accident.” Rekemeyer, 4

N.Y.3d at 474. Likewise, the District Court correctly determined that “there can be no dispute that

the American Club is not a reinsurer and the Certificate of Entry between Weeks Marine and the

American Club is not a reinsurance contract,” Weeks Marine, 2011 WL 3796331, at *7, rendering the

current case, at best, only “analogous,” id., to the reinsurance contract at issue in Unigard.

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        Weeks on appeal invites us to extend the Unigard rule beyond reinsurance contracts to the

facts of this case. We decline to do so, substantially for the reasons given by the District Court in its

Opinion of August 25, 2011. See Weeks Marine, 2011 WL 3796331, at *7-8. Accordingly, we find no

reason to deviate from New York’s “no prejudice” rule and dismiss Weeks’s claim.

        On appeal, Weeks also argues, curiously, that the Certificate which contained a notification

provision for “[b]rain or spinal cord injur[ies]” did not require reporting Garza’s concussion because

Weeks had the discretion to determine that a concussion is not a brain injury. We agree with the

District Court that “[w]hatever the symptoms of a concussion are, it is beyond dispute that they are

caused by trauma, and that the trauma is to the brain.” Weeks Marine, 2011 WL 3796331, at *12

(citing cases and medical authorities). Accordingly, we find no merit to Weeks’s arguments that it

was not required to report the Garza claim.

        Finally, Weeks argues on appeal that American Club’s coverage of two prior claims,

involving sums of $2.35 million and $1.8 million, paid to crew members who had sustained back

injuries, despite untimely notice, creates an issue of fact as to whether American Club should be

estopped from denying coverage here. We find no merit to this argument, substantially for the

reasons given by the District Court in its Opinion of August 25, 2011. See Weeks Marine, 2011 WL

3796331, at *12-13.
                                               CONCLUSION

        We have considered all of Weeks’s arguments on appeal and find them to be without merit.

Accordingly, we AFFIRM the August 26, 2011 judgment of the District Court in all respects.

                                                        FOR THE COURT:
                                                        Catherine O'Hagan Wolfe, Clerk

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