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INSTITUTE FOR SHIPBOARD EDUC. v. CIGNA WORLDWIDE I

May 4, 1993

INSTITUTE FOR SHIPBOARD EDUCATION, Plaintiff,
v.
CIGNA WORLDWIDE INSURANCE, Defendant.



The opinion of the court was delivered by: ROBERT J. WARD

 WARD, District Judge.

 BACKGROUND

 This action arises from a dispute between two insurers concerning the extent to which each had a contractual duty to indemnify and defend in connection with an underlying negligence action which has now been settled.

 The Underlying Lawsuit

 The underlying lawsuit involved a wrongful death claim by the parents and estate of Michael Keith Burgbacher ("Burgbacher"), who died of an allergic reaction to medication that he was required to take as a condition of his employment aboard the S.S. Universe ("the vessel"). That suit was brought against, inter alios, ISE, Seawise Foundation ("Seawise"), and Ernest Ainslee, M.D. ("Ainslee"). ISE administered an educational program known as the Semester at Sea. Seawise, owner of the vessel, entered into a written agreement with ISE to provide the vessel to ISE during the spring 1984 Semester at Sea program.

 At all relevant times, ISE and Seawise concurrently employed Ainslee, under separate written contracts, to provide medical services aboard the vessel. ISE had also entered into a written agreement with Burgbacher, dated November 16, 1983, stipulating that he was to fill the position of Resident Director on the vessel from January 10, 1984 through April 23, 1984, in exchange for room and board and a "transportation allowance" of $ 500. The itinerary planned by ISE during this time period included countries known to present malaria risks. Accordingly, ISE required all students and staff to take the anti-malarial drugs chloroquine and Fansidar. Burgbacher became ill during the voyage as a result of an allergic reaction to Fansidar, which the medical staff of the vessel failed to diagnose and properly treat. On March 14, 1984, Burgbacher died of Stevens-Johnson syndrome in Colombo, Sri Lanka.

 Burgbacher's parents and his estate filed a complaint in the United States District Court for the Western District of Pennsylvania, in which they alleged that the negligence of ISE, Seawise and Ainslee was the proximate cause of Burgbacher's death.

 The complaint contained both common-law claims and federal claims under the Jones Act, 46 U.S.C. § 686 et. seq., the Death on High Seas Act, 46 U.S.C. § 761 et. seq., and general maritime law. In particular, Burgbacher's parents and his estate claimed that these defendants were negligent in employing an incompetent physician, providing the decedent with medicine which caused illness, failing to warn of the risks of the medication, failing to monitor the medication, failing to diagnose the illness and failing to provide the decedent with a safe place to work. ISE, Seawise and Ainslee moved for summary judgment on the grounds that: (1) plaintiffs' exclusive remedy lay under the workers' compensation laws of California; (2) Burgbacher was not a seaman and thus the Jones Act was inapplicable; (3) a survival action, if applicable, would need to be brought under general maritime law and not the law of Pennsylvania; and (4) Burgbacher's father was a non-dependent parent and should be dismissed as a plaintiff.

 On April 18, 1988, Judge Ziegler granted summary judgment for ISE, Seawise and Ainslee on the Jones Act claims. Insofar as the only claims against Seawise arose under the Jones Act, Seawise was dismissed from the action. ISE, Ainslee, and Burgbacher's parents and the estate thereupon entered into settlement negotiations and, on May 17, 1989, Burgbacher's parents and the estate signed a receipt and release in exchange for a $ 1.2 million payment ("the Burgbacher settlement").

 The Relevant Insurance Coverage and the Instant Action

 Both ISE and Seawise had policies of insurance covering the Semester at Sea voyage and its participants. Seawise maintained protection and indemnity insurance with Steamship Mutual Underwriting Association (Bermuda) Limited ("the P&I Club"), *fn1" which also covered ISE as an additional insured by endorsement. ISE obtained separate insurance policies through the American Foreign Insurance Agency ("AFIA") *fn2" for (i) general liability coverage, (ii) workers' compensation and employers' liability insurance, and (iii) umbrella liability. ISE seeks to recover from Cigna for the Burgbacher settlement under the workers' compensation and employers' liability policy.

 Rule 24 of the protection and indemnity insurance policy maintained by Seawise and ISE through the P&I Club ("the P&I Club policy") covered, inter alia,

 
damages or compensation for loss of life of or personal injury to or illness of
 
i. any person . . . including hospital, medical or funeral expenses for which the Member may in consequence be liable, arising out of the negligent navigation . . . or other negligent act or omission on board of or in relation to the entered ship . . . .

 Exhibits to Parties' Cross-Motions for Summary Judgment (hereinafter "Exhibits to Cross-Motions"), Ex. 14 at 26. The relevant ISE policy with Cigna, Standard Workmen's Compensation and Employers' Liability Policy WC003991 ("the Cigna policy"), contained two types of coverage. Under Coverage A, Cigna agreed

 
to pay voluntarily on behalf of the insured, to the employees defined in section 1 of this endorsement, the compensation, medical and other benefits specified in the workmen's compensation law and occupational disease law of the state designated in item 3 of the declarations in the same manner as if such employees were covered under the provisions of said law or laws.

 Id., Ex. 19 at Endorsement No.1, § 2.A. In "COVERAGE B - EMPLOYER'S LIABILITY" of the endorsement ("Coverage B"), Cigna agreed

 
to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury caused by accident or disease, including death at any time resulting therefrom, sustained by an employee as defined in section 1 of this endorsement and arising out of and in the course of his employment in operations connected with his assignment to a country or countries stated in item 1 of the declarations.

 Id., Ex. 19 at Endorsement No.1, § 3.A.

 Each relevant policy covering ISE included a provision setting forth the order and amount that would be paid if other insurance covered the claim. Rule 20 of the P&I Club policy stated that:

 
if a Member is, apart from the protection or indemnity of the Club, insured, protected or indemnified in any manner whatsoever against any of the liabilities, costs or expenses enumerated in Rules 24 or 25, no contribution shall be made by the Club to such liability, costs or expenses, on the basis of double insurance or otherwise, to the extent to which he is so insured or protected or indemnified. Nevertheless, with the approval of the Directors, a Member may be protected or indemnified by special agreement with the Club made either directly with himself or with other Insurers upon the terms that certain liabilities, costs or expenses shall be borne by the Club notwithstanding such other insurance, protection or indemnity.

 Id., Ex. 14 at 25.

 The Cigna policy also limited coverage in its "other insurance" clause:

 
if the insured has other insurance against a loss covered by this policy, the company shall not be liable to the insured hereunder for a greater proportion of such loss than the amount which would have been payable under this policy, had no other such insurance existed, bears to the sum of said amount and the amounts which would have been payable under each other policy applicable to such loss, had each such policy been the only policy so applicable.

 Id., Ex. 19 at 3, P 11.

 Both insurers involved in the instant litigation were notified of the underlying Burgbacher action upon its commencement. Cigna had paid Burgbacher's father, prior to initiation of the underlying litigation, $ 1500 for Burgbacher's funeral expenses and $ 5000 for shipment of his body back to the United States, pursuant to Coverage A of the Cigna policy. Cigna did not participate in the underlying trial or settlement negotiations, even though it had been invited to do so on two occasions by ISE's counsel, Hill, Betts & Nash. In addition, Cigna, while never formally declining to participate in the defense or settlement of the claim, did not contribute to the defense or settlement costs. The P&I Club assumed the defense on behalf of all defendants in the underlying action and advanced $ 1.2 million for the settlement and $ 172,741.38 for defense costs.

 ISE commenced this action on May 30, 1990 on behalf of the P&I Club for contribution by Cigna to the settlement and defense costs.

 DISCUSSION

 A. Standards for Granting Summary Judgment

 Summary judgment may be granted when the moving party establishes "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Rosen v. Thornburgh, 928 F.2d 528, 532 (2d Cir. 1991). If no rational fact-finder could find in the nonmovant's favor, there is no genuine issue of material fact, and summary judgment is appropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In making this determination, the court should not resolve disputed issues of fact, but rather, while resolving ambiguities and drawing reasonable inferences against the moving party, must assess whether material factual issues remain for the trier of fact. Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (quoting Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932 (1987)).

 When a summary judgment motion, such as those presently before this Court, involves the construction of contractual language, the parties' "intent is all [and] the language used must be examined first to see if it is ambiguous." Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990). A court may grant the motion "only where the language and the inferences to be drawn from it are unambiguous." Id. (emphasis in original). Thus, a motion for summary ...


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