Tropigas de Puerto Rico v. Certain Underwriters at Lloyd's of London, No. 10-1122 (Mar. 11, 2011)
 
Don't you love the word "stevedore?" In a case decided March 11, 2011, the First Circuit analyzed the issue of alleged stevedore-caused damage and came away with a good guide to how not to use the statement of supplemental facts when responding to a motion for summary judgment and reaffirms the burden insureds face when arguing for coverage.
 
Tropigas is a propane gas distributor based in Puerto Rico. It purchased 14 large underground storage tanks from a manufacturer in Dallas, Texas. After a short trip to Houston, the tanks were loaded onto a barge for transport to Puerto Rico. Lloyd's issued an insurance policy covering the tanks against "all risks of physical loss or damage from external cause." The coverage, however, extended from the start of the loading process in Houston, through transit, and ended "upon berthing of the barge at the destination port." There was no coverage, under this policy, for unloading operations.
 
The tanks were loaded onto the barge on January 28, 2004 under the monitoring of a marine surveyor, who had also inspected the tanks prior to loading. The surveyor noted in his report that the tanks exhibited minor cosmetic damage, which was repaired prior to delivery, and that the loading process went off without a hitch. There was no inspection of the cargo when the ship docked in Puerto Rico. There was some videotaping of the off-loading of the tanks. An inspection of the tanks conducted post-installation revealed extensive warping and deformation.
 
Tropigas sent their claim letter in December, positing that the warping and deformation of the tanks occurred either during the loading operations in Houston or during transit (they later dropped the speculation about transit, leaving only the stevedores as the potential culprits). Lloyd's refused payment and a lawsuit was commenced.
 
Lloyd's moved for summary judgment and submitted a statement of uncontested facts. In that statement, it emphasized the surveyor's report that no damage had occurred to the tanks during loading. It also proffered a report from its expert, concluding that the loading did not cause the damage. Tropigas opposed the motion and, in doing so, attached 31 "supplemental facts." These included: that there was no mention in the survey about how the rollers used during loading were leveled; that Lloyd's had failed to exclude a difference in height of the rollers as a possible cause of the damage; that there was photographic evidence that the tanks were improperly hoisted; and, that their video of the unloading showed nothing unusual had occurred during unloading. The district court granted the motion for summary judgment.
 
Tropigas' first argument on appeal was that their "supplemental facts" had not been properly admitted or denied and, therefore, should have been deemed admitted and this alone would have precluded the entry of summary judgment. The court, however, found that the supplemental facts could be fit into two groups - the immaterial and the non-factual. It is a fact, for example, that there was no evidence of how the rollers had been leveled, but without more, that is immaterial. By contrast, Lloyd's failure to exclude the height of the rollers as a cause of the damage is not a fact, it is pure argument. "Neither half of this taxonomy profits the plaintiff. To the extent that the items are factual, deeming them admitted does not change the outcome of the case. To the extent that they are non-facts, they are equally impuissant. Either way, the plaintiff's claim of error fails."
 
The appeals court then reaffirmed that the insured bears the burden of establishing that the policy was in force and effect at the relevant time and that the loss was covered. Since the coverage started with loading in Houston and ended when the ship entered port in Puerto Rico, the insured had a burden to prove, at a minimum, that the damage occurred during that period. To meet that standard, the insured must present "definite, competent evidence."
 
Tropigas argued that the tanks may have been damaged by the rollers used to maneuver them into place. It noted that the surveyor did not provide any information on the height or level of the rollers. Second, it suggested, based on a photograph of one tank being hoisted that the straps were too close to each other. With this "fact" (no expert opinion confirmed the conclusion that the photograph showed straps that were too close together), Tropigas cites Lloyd's deposition testimony that it was possible that improper strap placement could cause damage to an object being hoisted.
 
The court found that both of these arguments were about what was possible, not what was probable. "Merely raising possibilities does not bridge the gap between fact and theory." It may be true that off-level rollers could cause damage, but there being no evidence of off-level rollers, that is immaterial. Similarly, while the photograph of the tank may, indeed, show it being hoisted in a sub-optimal way, it does not, without more, create a genuine issue of material fact. The expert's statement that he could not definitely rule out improper placement of the slings as a cause of the damage does not cure that infirmity. The court states, "[t]hat statement merely fuels the speculation..." 
 
In what the court describes as a "last-ditch measure," Tropigas attempts to prove that the damage must have occurred during loading because it did not occur during the voyage, off-loading, ground-transportation, or installation of the tanks. Tropigas points to its videotape of the off-loading, and to a letter, written two years after the fact, by an engineer. The videotape is described as incomplete and unexplained and, therefore, of "very slight" probative value. The letter is, in the court's words, "thin gruel." The engineer observed the off-loading or the transport, or both, but it is not clear which and "the record is tenebrous as to what, if any, role he may have played in that work." There are few details given but the writer summarily concludes there was no damage. "These gauzy generalities are not significantly probative and, therefore, carry no weight in the summary judgment calculus."
 
In short, the court gives two succinct lessons. First, that the statement of material facts must be as the name implies, material and facts. Second, evidence that is merely colorable "cannot impede an otherwise deserved summary disposition."

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Some Notes About Insurance in Japan

Posted on March 17, 2011 10:35 by Gregory Gentry

Did you know that AFLAC generates 75% of its revenue from Japan? Gilbert Gottfried must know that now. The voice of the AFLAC duck in its U.S. commercials was fired this week after insensitive comments he made about Japan's tragedy on Twitter. This article in the DRI Voice discusses some of the pitfalls of social media like Twitter.
 
The total cost of the earthquake damage could be between $100 billion and $190 billion (estimates from Eqecat, the catastrophe modeling firm and Barclay's Capital respectively). However, because most earthquake risk in Japan is covered by the government, insurance losses are likely to be in the range of $12-25 billion. For comparison, Hurricane Katrina caused total losses of $125 billion, of which $62.2 billion was insured. The 1995 earthquake in Kobe caused economic losses of more than $100 billion, but only $3 billion was insured loss. That area was not considered earthquake-prone, so earthquake coverage was less prevalent than in other areas. But that catastrophe did increase the rate of coverage.
 
The Wall Street Journal reports that insurance claims related to the disaster in Japan will be generated far from the island-nation. They quote Rod Fox of reinsurance broker TigerRisk that the disaster will "have far-reaching effects, and the business interruption claims can mount very quickly." Already ON Semiconductor has reported that they are "working with [their] insurance carriers to assess and recover incurred losses from business interruption, supply chain disruption and property damage..."
 
Our hearts go out to everyone affected by this catastrophe in Japan and we'll be seeing these issues for some time to come.

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