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November 14, 1997


The opinion of the court was delivered by: RAKOFF


 Discovery was closed and cross motions for summary judgment were pending when the case was transferred to this Judge on February 26, 1997. On March 24, 1997, after hearing oral argument, the Court denied all summary judgment motions but made certain findings pursuant to Rule 56(d) of the Federal Rules of Civil Procedure. See March 24, 1997 Transcript. There followed a four day bench trial, June 10 through June 13, 1997, and submission of post-trial memoranda.

 Upon a consideration of the evidence submitted at trial, the post-trial memoranda, and all other prior papers and proceedings herein, the Court now denies Commercial Union's claims for declaratory judgment, grants Flagship's claims for breach of contract and breach of the duty to defend, and denies Flagship's remaining claims. The findings of fact and conclusions of law supporting these rulings herewith follow.

 Factual Findings

 Flagship is one of about seventy affiliated companies licensed by Sea Tow International to operate under the "Sea Tow" trademark. Trial Transcript ("Tr.") at 745. In exchange for an annual fee, Sea Tow subscribers receive emergency marine assistance, such as towing, refueling, recharging batteries, and ungrounding grounded vessels. Tr. 234, 744-46. Only operators of non-commercial pleasure craft qualify for regular membership, but Sea Tow licensees sometimes provide ad hoc emergency services to non-members, such as operators of commercial vessels, for fees set by the particular circumstances. Tr. 234, 746-47. Separate from these emergency services, most Sea Tow licensees, including Flagship, are also in the business of providing non-emergency services to commercial vessels, including towing, oil spill clean-up, salvage work, and commercial diving. Tr. 176, 237, 327; see also infra.

 Prior to 1994, the Sea Tow companies were insured under a master insurance policy from the New Hampshire Insurance Group, which named Sea Tow International as the primary insured and each Sea Tow licensee as a named insured. Tr. 160-61. The policy had been placed by Daniel Brisotti, the president of an insurance brokerage company named Brisotti & Silkworth ("B&S"). Id. In or about June 1994, New Hampshire Insurance Group informed Brisotti that it would not renew the master policy, whereupon Brisotti began to seek alternative coverage for Sea Tow International and its licensees. Tr. 162, 204, 226, 228. Among the insurers he contacted was Commercial Union, with which B&S had (and continues to have) a written "Marine Agency Agreement" drafted by Commercial Union. Among other things, the Agreement authorizes B&S, as Commercial Union's agent for these purposes, to place commercial and yacht business with Commercial Union's marine department and, with prior approval from Commercial Union, to sign the "binder" on the policies and execute certificates of insurance on behalf of Commercial Union. Tr. 164-65, 203, 221, 224-25, 231, 632, 654; Trial Exhibit ("Ex.") 23. The Agreement does not, however, give B&S any authority to cancel or amend the terms and conditions of any such policy, waive any exclusion, or set any premium. Tr. 163-64, 229, 632-33; Ex. 23.

 Most of Brisotti's discussions with Commercial Union regarding the Sea Tow policies were with Michael Schliwka, a Commercial Union marine underwriter. Instead of offering Brisotti a master policy, Schliwka proposed that each Sea Tow licensee be insured separately. Tr. 166-168, 256, 432, 435, 488. Accordingly, Schliwka asked Brisotti to submit separate applications for each Sea Tow licensee on two-page forms entitled "Application for Quotation" drafted by Commercial Union. Id. Brisotti, in turn, filled out these forms for each of the various Sea Tow companies, including Flagship. Tr. 180, 438; Exs. C, D and 25.

 Within a section entitled "General Description of Operation," the form provided a single line for "the type of work employed in." On Flagship's form (as on others) Brisotti filled in this line with the words "Tow Boat - Pleasure Craft." Ex. D. Brisotti, however, never sent the filled-in form to Flagship for review, allegedly because he was under "time constraints" to obtain the replacement insurance before the New Hampshire Insurance Group coverage expired on September 15, 1994. Tr. 182-83, 268-71. Flagship, therefore, never signed the line provided under the statement that "... it is agreed that this form shall be the basis of the contract should a policy issue." Ex. D. Nevertheless, Commercial Union accepted the unsigned application.

 The application form was not the only information concerning the operations of Flagship and other Sea Tow licensees that Schliwka received from Brisotti in the course of the application process. To begin with, Brisotti provided Commercial Union with a copy of the expiring insurance policy and rate information relating thereto, and, for each of the Sea Tow licensees (including Flagship), a full list of vessels, a complete loss listing from April 1992 through June 1994 and a summary of general loss listing, resumes of the captains, a list of vessel minimum requirements, certificates for certain captains indicating that they were accredited for commercial assistance and professional towing, and detailed vessel surveys. Tr. 248-50, 279-80, 440; see, e.g., Exs. 47, 75 and A. In addition, the policies subsequently issued were expressly conditioned upon receipt of substantial additional documentation, which was timely provided. Tr. 265, 277, 440, 442, 495-97.

 Upon careful inspection, the Court finds that documents provided to Commercial Union in the application process fully disclosed the involvement of Flagship and other Sea Tow licensees in oil spill and other pollution clean-up work, emergency salvage operations, search and rescue operations, commercial diving operations, towing of large commercial vessels, and numerous other aspects of Flagship's business that defendant alleges were undisclosed. See, e.g., Exs. A, B, 15A, 28, 47, 70; Tr. 258, 437, 466, 472, 489-90, 534, 567. In addition, although the Court discredits Brisotti's self-serving testimony that Schliwka rebuffed Brisotti's oral efforts to apprise Schliwka of the full scope of the Sea Tow business, see Tr. 266, 449-50, 490, the Court nonetheless finds that Schliwka was personally familiar with the broad scope of Sea Tow's business as a result of his past prior involvement with the company. Tr. 226, 449 ff., 490.

 The policies that Commercial Union issued to each of the various Sea Tow licensees were substantially identical. Tr. 158, 277-79. On September 8, 1994, Commercial Union issued policy number CJH421082 (the "Policy") to Flagship, Tr. 188, 277; Ex. G. Coverage, for a period of one year, became effective on September 15, 1994. Joint Pretrial Order, Stipulated Facts Nos. 1 and 2; Ex. I. The complete policy was mailed to Flagship on November 9, 1994. Tr. 357, 359; Exs. 36A and 151.

 On November 13, 1994, Gary MacLean, captain of one of Flagship's insured vessels, SEATOW No. 6, was injured in the course of towing the LANTERN QUEEN, a 61-foot long commercial dinner cruise vessel. Stipulated Facts Nos. 6 and 7. Specifically, MacLean was injured when a towline connecting SEATOW No. 6 to the LANTERN QUEEN became ...

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