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Chrisnav Yachting, Ltd. v. Lloyd's Underwriters

November 20, 2006

CHRISNAV YACHTING, LTD., PLAINTIFF,
v.
LLOYD'S UNDERWRITERS, SYNDICATE NO. 1861 : (BRM), SYNDICATE NO. 1084 (HAY), AND SYNDICATE NO. 2488 (AGM), AND GE FRANKONA REINSURANCE, LTD. DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge

OPINION & ORDER

Plaintiff Chrisnav Yachting, Ltd. ("Plaintiff" or "Chrisnav"), a Greek corporation whose managing director is Nicholas Christodoulopoulos, has brought the instant case against their insurers, certain Lloyd's of London underwriters and GE Frankona Reinsurance, Ltd. ("Defendants" or "Underwriters"), for recovery on a marine hull and machinery policy purportedly covering damage to Plaintiff's yacht M.V. ELIKI.

Defendants now move for summary judgment to, inter alia, 1) dismiss Plaintiff's complaint entirely, or otherwise seek a declaratory judgment that the insurance contract is null and void; 2) dismiss Plaintiff's claims for bad faith and exemplary damages; and 3) seek a declaratory judgment absolving Defendants of liability under the insurance contract for certain indirect costs claimed by Plaintiffs. For the reasons articulated below, Defendants' motion is granted in part and denied in part.

I.BACKGROUND

Plaintiff Chrisnav has owned the M.V. ELIKI yacht since 1990. Nicholas Christodoulopoulos Declaration, ¶ 3 ("Christo. Decl."). Nicholas Christodoulopoulos has served as the managing director of Chrisnav since 1999. Id.at ¶ 4.*fn1 He is a former Greek maritime lawyer and currently the president of a London financial company that loans money to businesses to purchase yachts. Defendants' Statement of Material Facts ¶ 22-23 ("Def. Facts").

a.2003 Policy Negotiations

In January 2003, Nicholas Christodoulopoulos negotiated the renewal of the marine hull and machinery policy for the M.V. ELIKI through Chrisnav's London insurance broker, Heath Lambert Group ("HLG"). Christo. Decl. ¶ 76. The underwriters sought to raise the premium by 20 percent. Christo. Decl. ¶ 76, 78, 79. During the negotiations, Christodoulopoulos faxed a letter to his brokers stating that "our zero loss records for 25 years demonstrate our continuity, loyalty, and prudent/safe management." Id.; see also Christo. Decl., Ex. QQ. Eventually, the underwriters agreed to a 10 percent rise in premium with a shorter coverage period and increased deductible. Christo. Decl. ¶ 78.

Previously, the "N&P Partnership," a partnership composed of Nicholas Christodoulopoulos and his brother Panayiotis, owned another ship, the M.V. KASSANDRA, from 1988 to February 7, 1994. Plaintiff's Statement of Material Facts ¶ 5 ("Pl. Facts"). On February 7, 1994, the N&P Partnership sold the KASSANDRA to new owners (the "Kassandra Yachting Company," or "KYL") for $3.5 million. Id. Pursuant to the terms of the sale, the N&P Partnership provided a loan of $3 million to the new owners. In return, the new owners provided the N&P Partnership with, inter alia, a mortgage on the KASSANDRA and Loss Payee status on KASSANDRA's marine hull policy, and assigned the marine hull policy to N&P to the extent of the loan. Id. Nicholas Christodoulopoulos separately purchased Mortgagee's Interest Insurance for his interest in the loan. Id.

On June 30, 1994, the KASSANDRA was destroyed by fire. Pl. Facts ¶ 5. The new owners defaulted on the loan from the N&P Partnership. Id. The N&P Partnership subsequently brought suit in the Southern District of New York against the marine hull underwriters as an assignee of the marine hull policy. Id. The N&P Partnership settled the marine hull claim for $1.375 million. Nicholas Christodoulopoulos subsequently settled the Mortgagee's Interest Insurance claim for $490,000. Id.

b.Move to Psychalis Shipyard

On December 8, 2003, Nicholas Christodoulopoulos informed his brokers by letter that the ELIKI was scheduled to move to the Psychalis shipyard "in order to undergo certain repairs and maintenance for a period of about two week[s]," and asked the brokers to "please advise Underwriters accordingly." Def. Facts ¶ 37. Christodoulopoulos stated that "the Owners have decided to modernize, refit and upgrade the yacht at substantial cost." Id.

The Underwriters, relaying their message through the brokers, then asked Christodoulopoulos on December 9 how long the work would take; at what cost; whether the value of the vessel would increase; whether "hot work" was required; and the experience and records of the shipyard. Def. Facts ¶ 39. The brokers' letter to Christodoulopoulos relaying the Underwriters' message stated "Warranted laid up alongside at approved berth in yard," and "Additional premium to be agreed depending on above information." Id. Christodoulopoulos responded on December 10 that the value of the ship would not increase; that "minor" work would take about three weeks and cost less than 10,000 Euros; and additionally, "hot work" would be required only to weld certain pieces on the exterior of the hull such as placing protective cover. Id. at ¶ 42. Christodoulopoulos also stated that "[t]he vessel will be laid up along side at the yard's berth." Defendant's Ex. G, Ex. 23. The Underwriters then agreed on December 11 to insure the ship without an extra premium. Def. Facts at ¶ 44.

On December 10, the ELIKI arrived at Psychalis shipyard. Def. Facts ¶ 46. According to Defendants, the ship was moored to an "old laid-up open type navy car carrier." Def. Facts ¶ 47. According to Plaintiffs, the ship was "moored alongside the barge, or landing craft, that was converted for use as an extension of the pier" at Psychalis. Pl. Facts ¶ 47. Plaintiffs called this arrangement "stable and secure." Id. Defendants alleged that the ELIKI "was moored in the vicinity of several laid-up merchant ships" and "some of the ELIKI's mooring lines were attached to several of these merchant vessels." Def. Facts ¶ 48. Plaintiffs respond that "this is a normal practice. when several ships are moored in shipyards one next to the other or when they are laid-up." Pl. Facts ¶ 48.

c.Damage to ELIKI and Repairs

On December 23, 2003, the ELIKI was damaged as the result of a severe storm. A large ship broke free of her moorings, and collided with another passenger vessel, pushing that vessel into ELIKI and ELIKI in turn into another ship. Def. Facts ¶ 50.

On January 2, 2004, Nicholas Christodoulopoulos began "debris removal." Pl. Facts ¶ 56. (Defendants term this work "steel reparations." Def. Facts ¶ 56.) Over two weeks after the incident, on January 7, 2004, Nicholas Christodoulopoulos notified the Underwriters (through his brokers) of the loss.*fn2 The Underwriters appointed their surveyors, Stewart & Hazell, to survey the damages, and Chrisnav appointed its own consultant, Stelios Dassiras, as well. Def. Facts ¶ 54, 57. The parties agreed that steel repairs would be done at Psychalis and other repairs at smaller shipyards. Def. Facts ¶ 60. On January 14, the Underwriters' surveyors emailed a preliminary report to Chrisnav's brokers, which the brokers subsequently faxed to Christodoulopoulos, stating that "[w]e are of the opinion that the original mooring arrangements of ELIKI, as reported, were sufficient." Christo Decl., Ex. L at 7.

Repairs proceeded at Psychalis through March 2004 with periodic inspections by the parties. Def. Facts at ¶ 62. On April 2, 2004, ELIKI sailed to the Vertopolous drydock for further repairs. There, Defendants allege, Plaintiffs performed "owner's work" (i.e. installing a bow thruster) in addition to repairing the storm damages. Def. Facts ¶ 65.

d.Claim Adjustment

On April 15, 2004, Chrisnav presented the Underwriters' surveyors with invoices for repairs to date totaling 89,254 Euros. Def. Facts ¶ 68. The Underwriters' surveyors, in a writing marked "without prejudice," approved an initial payment of $46,267.43, which less the $24,000 deductible, resulted in an authorized payment of $22,267.43. Def. Facts ¶ 69. On June 1, 2004, the Underwriters sent a payment of $20,000 pursuant to this authorization. Def. Facts ¶ 74. Repairs completed on July 30, 2004. Id. at ¶ 75.

On September 8, 2004, Chrisnav presented the Underwriters' surveyors with a second set of invoices totaling 345,930.77 Euros (including the amounts claimed in ...


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