United States Court of Appeals
For the First Circuit
No. 06-1048
NEW HAMPSHIRE INSURANCE COMPANY,
Plaintiff, Appellee,
v.
NICHOLAS DAGNONE,
Defendant-Counterclaimant, Appellant.
v.
HINCKLEY YACHT SERVICES,
THE TALARIA COMPANY LLC,
Third-Party Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Mary M. Lisi, U.S. District Judge]
Before
Torruella, Circuit Judge,
Cyr, Senior Circuit Judge,
and Howard, Circuit Judge.
John D. Deacon, Jr., for appellant.
James E. Mercante, with whom Rubin, Fiorella & Friedman, LLP,
was on brief, for appellee.
February 2, 2007
TORRUELLA, Circuit Judge. Nicholas Dagnone ("Dagnone")
renewed his marine insurance policy (the "policy") from New
Hampshire Insurance Company ("NHIC") on July 31, 2003. On
December 6, 2003, Dagnone's boat was damaged during a storm, and
Dagnone filed a claim with NHIC. NHIC denied the claim, and filed
the present action seeking a declaratory judgment that the policy
does not cover Dagnone's claim. The district court granted summary
judgment in favor of NHIC. After careful consideration, we affirm
the judgment of the district court.
I. Background
Dagnone owns a forty-nine foot 1993 bluewater yacht (the
"yacht"). In 1997, Dagnone purchased marine insurance on his yacht
from NHIC, and renewed the policy every year from 1997 through
2003. In 2003, Dagnone renewed the policy once more, so that the
yacht would be covered from September 18, 2003 until September 18,
2004. In the section entitled "General Conditions and Exclusions,"
the renewed policy stated:
1. RESTRICTIONS ON THE USE OF YOUR YACHT:
There are certain restrictions on the use of
your yacht under this policy. We shall not
cover losses that occur while your yacht is
being used in any way that is prohibited by
this policy.
. . .
(d) Your yacht must be laid-up and out of
commission during the period shown on the
declarations.
The "declarations" to which the policy refers state:
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Lay-up Warranty: Waranteed [sic] that the
described yacht shall be laid up and out of
commission and not used by the insured for any
purpose during the period from 10/31 (at 12:01
am) to 4/15 (12:01 am).
Dagnone's yacht was docked at the Goat Island Marina in
Newport, Rhode Island ("Goat Island") during the spring and summer
of 2003. For the winter, Dagnone decided to place the yacht in dry
storage at Hinckley Yacht Services ("Hinckley"), located in
Portsmouth, Rhode Island. Dagnone contracted with a local captain,
Ted Beaumont ("Beaumont"), to winterize his yacht and take it from
Goat Island to Hinckley. On November 22, 2003, Beaumont motored
Dagnone's yacht to Hinckley, docked the yacht there, and left the
keys in the yacht, per Hinckley's instructions. At this point,
Beaumont had performed all of the procedures for winterizing the
yacht except for anti-freezing the engines. Hinckley informed
Dagnone that there were other boats waiting to be hauled out for
dry storage and that the boats would be hauled in the order in
which they arrived. Beaumont stated that he would finish
winterizing the yacht once it was hauled out. Dagnone's yacht
remained docked at Hinckley from November 22 until December 6,
2003, when a storm struck the marina. During the storm, Dagnone's
yacht broke loose from the dock and suffered $38,327 of damage
according to Dagnone's estimate. After the storm, Hinckley hauled
out the yacht, and Beaumont completed the winterization procedures.
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Dagnone promptly filed a claim with NHIC for the damage
to his yacht. On April 7, 2004, NHIC denied the claim, asserting
that Dagnone had failed to comply with the provisions in the policy
requiring that the yacht be "laid up and out of commission" between
October 31 and April 15.
On April 9, 2004, NHIC filed a complaint against Dagnone,
seeking a declaratory judgment that Dagnone's claim was not covered
by the policy. Dagnone filed a counterclaim against NHIC seeking
coverage under the policy.1 NHIC and Dagnone both moved for
summary judgment in their favor. The district court denied
Dagnone's motion for summary judgment and granted summary judgment
in favor of NHIC.
II. Discussion
A. Standard of Review and Governing Law
We review a district court's grant of summary judgment de
novo, examining all the facts and making all reasonable inferences
in favor of the non-moving party. Napier v. F/V Deesie, Inc., 454
F.3d 61, 65-66 (1st Cir. 2006). Summary judgment is appropriate
when there are no genuinely disputed material facts and the moving
party is entitled to judgment as matter of law. Fed. R. Civ. P.
56(c).
1
Dagnone also asserted a Rhode Island law claim against NHIC and
filed a third-party complaint against Hinckley, neither of which is
the subject of this appeal.
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A dispute over the interpretation of a marine insurance
contract falls within our admiralty jurisdiction, and as such, we
will apply state law unless an established federal admiralty rule
governs. Commercial Union Ins. Co. v. Pesante, 459 F.3d 34, 37
(1st Cir. 2006). Because there is no established federal admiralty
rule governing the interpretation of marine insurance contracts, we
look to state law to interpret the policy. Littlefield v. Acadia
Ins. Co., 392 F.3d 1, 6 (1st Cir. 2004).
Both parties suggest that we look to New York law to aid
in the interpretation of the contract because the contract was
concluded in New York and both parties are New York residents. New
York law generally construes insurance contracts liberally in favor
of the insured, but "where the provisions of the policy are clear
and unambiguous, they must be given their plain and ordinary
meaning." Government Employees Ins. Co. v. Kligler, 42 N.Y.2d 863,
864 (1977). Thus, if the policy clearly and unambiguously excludes
coverage for the damage to the yacht, NHIC is entitled to summary
judgment.
B. "Being used in any way that is prohibited by this policy"
Dagnone's first argument is that the exclusion in the
policy for yachts that are not "laid up and out of commission" does
not apply here because the exclusion only applies if the damage
occurs while a yacht is "being used." Dagnone argues that his
yacht was not "being used" on the night it was damaged and as such,
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the policy exclusion cannot apply. Dagnone argues that
interpreting the contract any other way would render the words
"being used" surplusage, which New York courts disfavor. See,
e.g., Lawyers' Fund for Client Protection v. Bank Leumi Trust Co.,
94 N.Y.2d 398, 404 (2000) ("Bank Leumi's interpretation would
render the second paragraph superfluous, a view unsupportable
under standard principles of contract interpretation.").
Dagnone's interpretation of the contract would require us
to "superimpose" the kind of "unnatural or unreasonable
construction" that New York courts have cautioned against. Maurice
Goldman & Sons v. Hanover Ins. Co., 80 N.Y.2d 986, 987 (1992). The
insurance contract is clear: the policy does not cover damage to
the yacht if it was "being used in any way that is prohibited by
th[e] policy." It is true that Dagnone was not taking the yacht
out for a brisk December cruise on the night it was damaged,
however, the vessel was still fully operable. The yacht was still
"being used" in the sense that it was in the water, having just
been motored to Hinckley, and awaiting hauling out, rather than
being "laid up and out of commission," as required, i.e., being
"inoperable." To require some higher degree of use for the
exclusion to apply would be contrary to the unambiguous meaning of
the provision and would also defeat its clear intent: to encourage
owners not just to stop using their boats during the winter, but to
take affirmative steps to winterize their boats so that they are
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"laid up and out of commission." Thus, we find that the policy's
exclusions clause is susceptible of only one reasonable
interpretation: the policy will not cover losses during the
specified months if the boat is not "laid up and out of
commission."2
C. "Laid up and out of commission"
Dagnone's second argument is that, contrary to the
conclusion of the district court, the yacht was in fact "laid up
and out of commission" the night it was damaged. As such, Dagnone
argues, the exclusion claimed by NHIC cannot apply. Dagnone
directs us to Providence Washington Ins. Co. v. Lovett, 119 F.
Supp. 371, 374 (D.R.I. 1953), in which a district court looked to
local practice at Rhode Island marinas to determine whether a boat
had been laid up and out of commission. Dagnone points out that in
Lovett, the court found that a boat which had been left in wet
storage in accordance with the local practices had been laid up and
out of commission, as required by a marine insurance policy. Id.
at 375.
As an initial matter, we note that Lovett is of low
persuasive value. It was decided in 1953, and we can imagine that
the practices for laying up a boat and putting it out of commission
2
Because we find that the policy by its terms would be breached
if the yacht was not laid up and out of commission during the
winter months, we see no need to address NHIC's argument that
failure to strictly comply with a warranty in a marine insurance
contract precludes recovery under the policy.
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may have changed in the past fifty years. Furthermore, the
decision in Lovett was based on the local custom and practice at a
specific marina, Port Edgewood, whereas Dagnone's yacht was located
at Hinckley Marina on the night of the storm.
The fatal flaw in Dagnone's reasoning, however, is that
his dispute with NHIC is not whether the yacht had been hauled out
of the water, but whether it had been fully winterized (and thus
placed out of commission). Both parties appear to agree that full
winterization was required to render the yacht laid up and out of
commission. Even Lovett states that if it was not possible to
immediately haul a boat out of the water, it was local practice to
lay the boat up by "plac[ing] such boats, completely winterized, in
slips on either side of the piers in wet storage for a reasonable
length of time pending hauling ashore." Id. at 374 (emphasis
added). Beaumont and the manager of Hinckley both stated that in
local practice, the final step in winterizing a boat was to anti-
freeze the engines, and Dagnone admitted that he had anti-freezed
his engines as part of the winterization process in years past.
All parties agree that when the yacht was damaged on December 6,
2003, its engines had not yet been anti-freezed. Thus, the
district court correctly concluded that the yacht had not been
fully winterized, and thus was not laid up and out of commission on
the night it was damaged. Because the policy excludes claims for
damage that occurs when a boat is being used during December if the
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boat is not laid up and out of commission, NHIC is not responsible
for covering the damage to the boat.
III. Conclusion
For the foregoing reasons, we affirm the judgment of the
district court.
Affirmed.
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