Harbor to arbitrate its disputes with Global.
For the foregoing reasons, the motion will be granted, the complaint
dismissed and arbitration compelled.
___________Indian Harbor is a corporation with its principal place
of business in Connecticut.
Global is a corporation with its principal place of business in Puerto
__________The following facts are taken from Indian Harbor's
complaint and documents referred to therein.
Global first obtained a policy with Indian Harbor in June 1999. The
policy, number MM100030275, provided Hull and Machinery insurance for its
barge, Barge Global I. The policy went into effect September 3, 1999 and
expired on September 3, 2000. It contained a Binding Arbitration Clause
that states: "The Company and all Insurers under this policy agree that
in the event of any difference arising between the Assured and the
Company with reference to this policy, such difference will be referred
to three disinterested arbitrators. . . ."
Global was entitled to make changes and additions to the policy with
Indian Harbor's approval. It did so by asking its broker, Frenkel & Co.
("Frenkel") to contact Indian Harbor's agent Mariner Management
("Mariner"), who has been succeeded by Castlerock Risk Service, LLC
("Castlerock"). If it approved of the change, Indian Harbor then would
issue an endorsement recognizing the change or addition.
On April 16, 2000, Indian Harbor issued an endorsement to the policy to
include "port risk" coverage of another barge, the Hopper Barge MST 17
(which ultimately sank). Previously, Frenkel had contacted Mariner
requesting such coverage.
The policy was renewed effective September 3, 2000 and terminating on
September 3, 2001.
On December 29, 2000, Global sought to amend the policy and obtain a
Navigation Endorsement for the Barge MST 17. Castlerock received the
request, from Frenkel, at 10:30 a.m. It stated: "With effect from
12/26/00 please amend `MST 17' to navigating basis. Vessels going to
Santo Domingo to operate as sand carrying vessel bringing sand from West
Coast to East Coast." Frenkel altered Global's request later that day,
after the Castlerock office was closed for the holiday weekend, to have
the policy effective December 31, 2000. Frenkel did not receive a reply
to its request. Indian Harbor claims that neither Castlerock nor Indian
Harbor had a reasonable opportunity to review Global's request.
On December 31, 2000, the Barge MST 17 departed San Juan Harbor under
the tow of the tug KRUEGER. The barge was in ballast and en route to the
Dominican Republic. The barge did not have a Load Line inspection to
determine seaworthiness, required by the United States Coast Guard for
navigation at sea.
At 10 p.m. on January 1, 2001, the Master of KRUEGER discovered that
the Barge MST 17 was severely listing. A short time later, the Barge MST
17 sank north of Desecho Island.
Global presented a claim to Indian Harbor for the total loss of the
Barge MST 17 claiming that the request on December 29, 2000, constitutes
an amendment to the policy. Indian Harbor has declined coverage. As a
result, Global initiated arbitration on September 10, 2001, in accordance
with the Binding Arbitration Clause.
Indian Harbor filed suit on November 16, 2001, seeking a declaratory
judgment that it is under no obligation to indemnify
Global, a stay of
any arbitration proceedings, and interest, costs and attorney's fees. In
lieu of an answer, Global then filed this motion to dismiss, which was
heard and marked fully submitted on January 23, 2002.
I. Rule 12(b)(6) Motion to Dismiss
In reviewing a motion to dismiss under Rule 12(b)(6), courts must
"accept as true the factual allegations of the complaint, and draw all
inferences in favor of the pleader." Mills v. Polar Molecular Corp.,
12 F.3d 1170, 1174 (2d Cir. 1993) (citing IUE AFL-CIO Pension Fund v.
Herrmann, 9 F.3d 1049, 1052 (2d Cir. 1993)). Review must be limited to
the complaint and documents attached or incorporated by reference
thereto. Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991).
In this context, the Second Circuit has held that a complaint is deemed
to "include . . . documents that the plaintiffs either possessed or knew
about and upon which they relied in bringing the suit." Rothman v.
Gregor, 220 F.3d 81, 88 (2d Cir. 2000). However, "legal conclusions,
deductions, or opinions couched as factual allegations are not given a
presumption of truthfulness." L'Eureopeenne de Banque v. La Republica de
Venezuela, 700 F. Supp. 114, 122 (S.D.N.Y. 1988). "The issue is not
whether a plaintiff will ultimately prevail but whether the claimant is
entitled to offer evidence to support the claims." Villager Pond, Inc.
v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995) (quoting Schener v.
Rhodes, 416 U.S. 232, 236 (1974)). Dismissal is warranted only when "it
appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitled him to relief." Conley v.
Gibson, 355 U.S. 41, 45-46 (1957). See also Bass v. Jackson, 790 F.2d 260,
262 (2d Cir. 1986).
II. Arbitration Is Compelled
Indian Harbor asserts that the question in this case is whether a
contract — and thus an agreement to arbitrate — exists
between it and Global. If so, it is a proper subject for this Court,
rather than an arbitrator. E.g., 9 U.S.C. § 1 et seq.; InterOcean
Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673, 676
(2d Cir. 1972) ("the question of the very existence of the charter party
which embodies the arbitration agreement" should be decided by court).
Global contends, on the other hand, that the issue is whether its
eleventh-hour request successfully modified policy MM100030275 or, if it
failed to do so, whether that policy (inasmuch as it covers MST 17) is
terminated. Such a dispute would be proper for arbitrators. E.g., Abram
Landau Real Estate v. Bevona, 123 F.3d 69, 73 (2d Cir. 1997); Rochdate
Village Inc. v. Public Service Employees Union, 605 F.2d 1290, 1295 (2d
Cir. 1979) (questions of contract termination properly for arbitration)
Arbitration clauses are to be construed broadly, and "any doubts
concerning the scope of arbitrable issues should be resolved in favor of
arbitration." Moses H. Cone Mem'l Hose. v. Mercury Constr. Corp.,
460 U.S. 1, 24-25 (1983). Indeed, doubts as to whether a claim falls
within the scope of an arbitration clause should be resolved in favor of
arbitrability where the existence of an arbitration agreement is
undisputed. Hartford Accident & Indemnity Co. v. Swiss Reinsurance
America Corp., 246 F.3d 219, 226 (2d Cir. 2001). The arbitration clause
at issue here is a broad one, covering "any difference arising between
the Assured and the Company with reference to this policy. . . ." Global
and Indian Harbor disagree as to whether the Dec. 29 facsimiles sent to
Indian Harbor's agent modified the policy or not.
Indian Harbor admits that what Global sought was an endorsement to the
policy, and thus a change to the contract. It is black-letter law that an
endorsement "[w]hen issued in compliance with all requisites, [becomes]
part of the to the same extent as if it were actually embodied therein."
Couch on Insurance, § 18:17 (3rd ed. 1995); see also Massachusetts
Bonding & Ins. Co. v. Rutley Constr. Co., 159 Misc. 392, 395,
287 N.Y.S. 662, 666 (1936) ("The indorsement or rider, as it is commonly
characterized is a part of the policy contract."). The undisputed
endorsements to the policy in this case reveal that they were intended to
be part of the policy. For instance, Endorsement #2, adding hull coverage
for MST 17, is subject to "all of the terms and condition of the
Policy" (emphasis supplied) and "in consideration of additional
Moreover, if, as Indian Harbor claims, the December 29 correspondence
did not modify the policy in the absence of an acceptance, the policy is
terminated by its very language, and terminations are properly submitted
to arbitration. Abram Landau Real Estate v. Bevona, 123 F.3d 69, 73 (2d
Cir. 1997); Aaacon Auto Transport. Inc. v. Harold Dean Barnes Used Cars,
Inc., 603 F. Supp. 1347, 1348 (2d Cir. 1985); McAllister Bros., Inc. v. A
& S Transp. Co., 621 F.2d 519 (2d Cir. 1980); Rochdale Villaae Inc. v.
Public Serv. Employees Union, 605 F.2d 1290, 1295 (2d Cir. 1979) ("If a
court finds that the parties have agreed to submit to arbitration
disputes `of any nature or character,' or simply `any and all disputes,'
all questions, including those regarding termination, will be properly
consigned to the arbitrator. . . ."); Nolde Bros v. Bakery and
Confectionary Workers Union, 430 U.S. 243 (1973) The American Institute
Port Risk Agreement, which is included in the policy containing the
arbitration clause, states in pertinent part:
If the Vessel(s) commences, or proceeds on, a voyage
during the term of this insurance, the Policy shall
thereupon terminate as soon as the Vessel leaves her
moorings to depart from the above named port.
There is no dispute that MST 17 commenced and proceeded on a voyage
during the term of the insurance. The contract thus would be terminated
unless the modification took effect. Again, a panel of arbitrators is the
proper entity to determine whether the correspondence altered the contract
so as to prevent termination.