The opinion of the court was delivered by: POLLACK
In November 1972, Gene DeMatteo, through the corporation he controls, purchased a brand new pleasure yacht from Chris Craft. He bought the yacht in order to entertain business clients and his family during local excursions and longer voyages between Connecticut and Florida, and do so with the style, grace and comfort one would expect from such a yacht. And, just as one would do with a new house or automobile, DeMatteo took out all risk insurance to cover the new yacht for any harm that might befall it.
Unfortunately, the style and comfort Mr. DeMatteo thought he had bought and paid for were never realized during his time with the yacht. Although the yacht made numerous trips along the East Coast and one to the Bahamas, it and its owner were afflicted with numerous and persistent problems, such as peeling paint, leaky windows, and malfunctioning toilets, which detracted from the yacht's appearance and the ease and convenience of its use. In addition, the boat required a regular maintenance and adjustment of its mechanical systems at a frequency which, although foreseeable in such a complex piece of machinery, was a disappointment to the plaintiff. Indeed, the yacht owner was ultimately driven to commence a lawsuit, still pending in this Court, against the manufacturers, charging breach of warranty and demanding rescission of the contract of sale.
Plaintiff's troubles did not end, however, with the maintenance and cosmetic maladies just described, for on July 3, 1976, the yacht inexplicably caught fire, burned and sank off the New Jersey coast. And although there had never been another instance of fire on the yacht and it had been fully checked out and tested by a reputable boatyard the day before, the insurer of the yacht, on advice of counsel, reversed its initial decision and assurance to plaintiff that it would pay the claim, and mounted legal defenses to plaintiff's claim which have been tried herein.
This diversity case was heard at a Bench trial on January 9, 10, and 12, 1979. The Court has made an exhaustive review of the record, has studied the legal memoranda submitted by the parties, and after due consideration thereof, finds and so decides that plaintiff is entitled to recover the amount of the insurance from the defendant, for the reasons shown hereafter.
SPECIFIC FINDINGS OF FACT
In November 1972, the plaintiff, a Connecticut corporation, purchased a new "Roamer 68" yacht from the manufacturer, Chris Craft Corporation, through Rex Marine Center of South Norwalk, Connecticut. The cost of the yacht, named the Counterpoint, was $ 342,270.00, which was paid in cash and the trade-in of another yacht.
By application dated November 16, 1972,
plaintiff applied for "All Risks" yacht insurance with INA, the defendant. The defendant was well aware of the high quality and calibre of the builder of yachts such as the plaintiff's and accepted all risks thereunder without hesitation as a matter of course. Plaintiff applied to INA for such insurance through an insurance broker, Joseph J. O'Connell, and an INA agent, Boccaccio & Susanin, Inc., of Hartford, Connecticut. INA issued yacht policy No. YK 91490 covering the Counterpoint for one year from November 10, 1972. That policy was renewed for successive one year periods on November 10, 1973, and on November 10, 1974. The premium for each of these coverage periods was paid in timely fashion.
During the course of its ownership of the Counterpoint plaintiff encountered various maintenance problems with the yacht. The vast majority of these problems were of a cosmetic nature, for example, peeling paint, or of a nature that impaired the vessel's function as a luxury cruiser but not its fundamental mechanical soundness, such as leaky windows and malfunctioning toilets.
Some of the problems, in addition, centered around the engines. The Counterpoint was equipped with two twelve-cylinder, turbocharged engines manufactured by the Detroit Diesel division of General Motors Corporation. The engines experienced problems with oil pressure and leaks, and the valves in the starboard engine were replaced seven or eight times. Whenever malfunctions occurred, repairs were always made promptly.
The problems with the yacht led the plaintiff to be quite disappointed in it as a luxury item and in the manufacturers' handling of the claims made under warranty. Plaintiff's displeasure focused on the cosmetic blemishes and inconveniences, because it had expected that the yacht would meet a high standard of luxury and comfort, sometimes described as "yacht condition."
Plaintiff disclosed the nature and substance of its difficulties with the yacht to defendant's agent, Ernest Susanin of Boccaccio & Susanin, Inc. Susanin knew of plaintiff's troubles, including engine malfunctions and disagreements with the manufacturer over coverage under the warranty, for some time before November 1975.
On September 30, 1975, Boccaccio & Susanin, the INA agent, requested the issuance of another renewal of the insurance from the home office. This request was handled by Ms. Frances M. McClean, an underwriter in the INA Marine Department in Hartford. On October 7, 1975, McClean requested of Michelle A. Corriveau of Boccaccio & Susanin information concerning the availability of the Counterpoint for survey by INA. On October 13, 1975, after checking with plaintiff, Corriveau wrote to McClean, stating that the yacht was either about to depart or already in transit and would be available for survey at the Brazilian Dock in Palm Beach, Florida, after November 14, 1975.
On November 5, Corriveau telephoned McClean to check on the issuance of the renewal certificate. On November 7, after receiving advice from the New York office of INA, McClean responded that the deductible had to be raised from $ 1,000 to $ 2,500 or $ 3,000, and offered to increase the insured value of the yacht from $ 300,000 to $ 325,000 at the option of the insured. By memorandum dated November 11, 1975, Corriveau requested that the policy be renewed at $ 300,000 with a $ 2,500 deductible.
McClean believed that she bound the defendant to agree to renew the insurance on the Counterpoint at the value of $ 300,000 or $ 325,000, at the option of the assured, on November 7. She did not, although she could have, offer rates or bind the company "subject to survey," which would have allowed INA to survey the boat at its convenience. However, she stated that she requested the information about the yacht's availability for survey so that a survey could be done if the higher valuation were chosen by the assured. Nonetheless, she quoted a rate for a value of $ 325,000 without reserving the right to survey. McClean never told Boccaccio & Susanin or the plaintiff that whether or not INA would cause a survey to be done depended on the choice of the face value of the policy. She said that she decided not to order a survey of the Counterpoint when plaintiff decided not to insure it at the greater value. She said there was No other reason for a survey except for the need to confirm an increased valuation of the yacht because it was not INA's normal practice to survey Chris Craft boats of the age of the Counterpoint.
On November 13, 1975, a new policy on the Counterpoint, No. YK 128902, was prepared by INA, with an effective date of November 10, 1975, because the office copy of the original 1972 policy was becoming "tattered." There were no substantive changes in the coverage or conditions of the new policy. The new policy was mailed to Boccaccio & Susanin on November 13, 14, or 17, 1975 for delivery to the assured's broker. On November 21st, Boccaccio & Susanin sent the policy with an invoice for the premium to O'Connell who sent the policy to Gene ...