In Crowley Maritime Corp. v. National Union Fire Insurance Co. of Pittsburgh, 2019 WL 3294003 (11th Cir. July 23, 2019), the Eleventh Circuit affirmed a denial of insurance coverage under an executive and organization liability insurance policy. Crowley Maritime Corporation (“Crowley”) carries freight between the United States and Puerto Rico, and purchased liability insurance from National Union that provided coverage for an initial policy period running from November 1, 2007 through November 1, 2008 and an extended discovery period running through November 1, 2013. The policy provided coverage on a “claims made” basis, meaning that National Union insured Crowley “solely with respect to Claims first made against an Insured during the Policy Period or the Discovery Period (if applicable) and reported to [National Union] pursuant to the terms of the Policy.” The policy covered defense costs resulting from the investigation, adjustment, and defense of a claim against an insured.
During the initial policy period, Crowley and its then-Vice President, Thomas Farmer, attracted the attention of federal law enforcement officers. On April 16, 2008, an FBI special agent submitted an affidavit supporting a search warrant to a federal magistrate judge in the Middle District of Florida. The affidavit described, in great detail, an ongoing FBI/DOJ antitrust investigation involving several freight carriers, asserting that Farmer and others had been involved in price coordination in violation of the Sherman Act. The affidavit was sealed by court order the day it was presented to the magistrate judge. On April 17, 2008, a search warrant was executed at Crowley’s headquarters.
A little over a week later, on April 25, 2008, Crowley’s insurance broker sent National Union a notice providing initial details of a DOJ/FBI investigation, including a statement that “the charges that may have led to the subpoena and search warrant are sealed at this point in time and no indictments have been filed.” National Union responded acknowledging the notice, and denying coverage because, in part, no one had been identified in writing as a target of the investigation as required by the policy.
Crowley and National Union then continued to correspond over the next four years. Crowley maintained that a claim existed and had been reported to National Union in April 2008. National Union acknowledged the existence of circumstances that might eventually result in a claim against an insured person, but persisted in its denial of coverage.
Crowley initiated arbitration, and, in a December 2012 arbitration order, the arbitrators concluded that the April 25, 2008 notice did not constitute a notice of claim under the policy. The arbitration order noted that the evidence of a claim presented to National Union at that time included only: the search warrant, the Farmer and Crowley subpoenas, several documents relating to a plea agreement entered into by Crowley, and the investigation relating to those documents. The arbitration order further observed that “the triggering event for a Claim . . . is when the DOJ identifies in writing an Insured Person as one against whom a criminal proceeding may be commenced.”
After the arbitration order was entered, on February 11, 2013, the government offered to enter into a plea agreement with Farmer. Crowley notified National Union of the plea offer on February 15, 2013. National Union agreed to treat the FBI/DOJ investigation as a claim as of February 18, 2013 (the date it received the notice). In making this coverage determination, National Union acknowledged that Crowley submitted the February 2013 notice within the six-year discovery period, and that notice appeared to relate to prior correspondence which constituted a notice of circumstances under the policy. National Union agreed to cover future defense costs, but not past defense costs.
Farmer rejected the plea offer, went to trial, and the affidavit was unsealed. A federal jury found Farmer not guilty. Crowley sent a notice to National Union on July 22, 2015, notifying National Union of the verdict, and argued that the unsealed affidavit made “clear” that a claim had been asserted as of the date of the filing of the search warrant in April 2008. Crowley demanded reimbursement of $2,541,346.34 in legal fees between the date of the April 2008 notice and the February 2013 notice. National Union refused, and Crowley brought a diversity action for breach of contract against National Union in the United States District Court for the Middle District of Florida. National Union moved to dismiss on grounds of res judicata and statute of limitations, and that the claim was untimely because it was not reported until July 22, 2015, well after the six-year discovery period.
The district court granted National Union’s motion for summary judgment (the court had converted National Union’s motion to dismiss to a motion for summary judgment), finding that Crowley did not notify National Union of the existence of the unsealed affidavit until 2015. As a result, the 2012 arbitration proceeding was not res judicata to Crowley’s claim for coverage based on the affidavit. But the unsealed affidavit was still found to be untimely under the policy’s discovery period. The district court held, in the alternative, that if the claim were deemed to have been submitted in 2008, then the 2012 arbitration would have been res judicata.
Senior Judge Lanier Anderson’s opinion for the court affirmed the district court, on somewhat different grounds. The court identified the sole issue as whether Crowley established that the claim based on the affidavit not only existed as of its April 2008 notice to National Union but also was reported to National Union as required by the policy terms.
The court applied Florida law to determine that the policy expressly limits coverage to claims that are “first made against an Insured” during the policy period or the discovery period and that are “reported to the Insurer” pursuant to the terms of the policy. The court held that the affidavit constituted a claim against Farmer, but that Crowley did not timely report the claim to National Union in a manner required by the policy. The court reasoned that Crowley was bound by the arbitration order with respect to the reporting period beginning April 16, 2008 and running through December 2012. With respect to the reporting period beginning immediately following the arbitration through the end of the discovery period on November 1, 2013, the court held that Crowley failed to report a claim based on the affidavit because it did not report any new information about the affidavit until after the discovery period had expired.