Perry v. Hanover Ins. Grp.

621 F.Supp.3d 113

Travis PERRY, Plaintiff, v. The HANOVER INSURANCE GROUP, INC., a/k/a Hanover Insurance Company, Defendant.

No. 1:20-cv-00301-LEW

United States District Court, D. Maine

Signed August 9, 2022

Donald F. Brown, Law Offices of Donald F. Brown, Brewer, ME, William H. Welte, Welte & Welte, P.A., Camden, ME, for Plaintiff.

John S. Whitman, Richardson, Whitman, Large & Badger, Portland, ME, for Defendant.

DECISION AND ORDER

Lance E. Walker, UNITED STATES DISTRICT JUDGE

On August 22, 2019, fire destroyed the engine room, v-berth, deck and wheel house of the fishing vessel ISLA & GRAYSON as it stood on jackstands during a short haul for maintenance and repairs. Travis Perry, owner of the vessel, filed a claim with the Hanover Insurance Group, Inc. ("Hanover"), insurer of the vessel, seeking coverage for his loss. Following an investigation, Hanover denied the claim, contending that Perry intentionally set fire to the ISLA & GRAYSON. In August of 2020, Perry filed suit against Hanover to recover under the policy. The matter comes within this Court's admiralty jurisdiction and therefore proceeded to a bench trial rather than a jury trial, as it might have in an action arising under Maine law.¹

After carefully considering the testimony, exhibits, stipulations, and arguments presented by the parties, I announce in this Decision and Order my findings of fact and conclusions of law. Based on the findings of fact and conclusions of law, judgment will enter in favor of Plaintiff on Plaintiff's core claim for breach of contract and declaratory judgment to that effect, but in favor of Defendant on Plaintiff's contention that Defendant failed to act in good faith during the claim-handling process. Additionally, Plaintiff's Motion to Exclude Certain Opinion Testimony of J.P. Williamson (ECF No. 51) is denied as moot.

FINDINGS OF FACT

Travis Perry is a lobster fisherman and 25-year resident of Columbia Falls, where he lives with his domestic partner, Dara Knapp, and their children. Roughly since graduating high school Perry has captained his own fishing vessels, sailing from his father's wharf in Harrington. Over his fishing career Perry has owned a number of lobster boats, most notably the RATTLESNAKE, the ISLA & GRAYSON (named for his children), and the ISLA & GRAYSON II. This litigation concerns the ISLA & GRAYSON.

Perry commissioned construction of the ISLA & GRAYSON in 2017, financing the purchase with a combination of a $500,000 business loan and roughly $475,000 of his own funds. Although the ISLA & GRAYSON's hull was not uncommon, designed and supplied by H&H Marine of Steuben, Perry had his builder, Mike Light, install a recent vintage, 12-valve Baudouin diesel engine that Perry purchased through Kennedy Marine Engineering of Steuben. On Perry's request, Light installed an additional lobster tank on the boat, which caused the engine to be moved forward from where it might otherwise have gone in the boat. Light also installed the vessel's hydraulics system.

Hanover Insurance Company issued to Perry, as the named insured, a marine insurance policy, in effect from September 5, 2018, to September 5, 2019, and identifying the F/V ISLA & GRAYSON as the insured vessel ("the Policy"). Joint Stipulations of Fact for Trial in this Matter ¶ 3 (ECF No. 87). The Policy covered losses stemming from "the adventures and perils . . . of the waters named herein, fire, lightning, earthquake, assailing thieves, jettisons, barratry of the master and mariners and all other like perils that shall come to the hurt, detriment or damage of the vessel named herein." Id. ¶ 4; Ex. 41 at 2; see also Compl. Ex. 1 at 2 (ECF No. 1-1).

Perry's early experiences with the ISLA & GRAYSON were not smooth sailing. On the vessel's maiden voyage, with members of the Perry family aboard, the seal in the vessel's steering pump failed and approximately 30 gallons of hydraulic oil spilled, seeped into the engine, and flooded the engine room floor. After cleaning the mess and hauling the vessel for repair and redesign of the hydraulic system over a course of several weeks, Perry began fishing with the ISLA & GRAYSON in October of 2017.

More difficulties followed. The electrical system's low voltage alarm persistently sounded in the morning as the engine warmed, emitting a loud, high-pitched noise. A mechanic flown up from Motor Services of Florida (on a warranty basis) could not resolve the issue, and ultimately Perry decided to disable the alarm. The engine also emitted enough smoke during operation to foul the air and discolor the ceiling in the engine room. The Motor Services mechanic addressed the smoking issue by adjusting the fuel map, but then the engine could not attain its advertised speed. Shortly thereafter, the mechanic replaced the engine's turbo chargers. The mechanic also changed twelve injectors, two fuel pumps, six check valves, and one fuel rail. Even after this work, the engine still leaked oil and exhaust. The engine's belt-driven trunnion also slipped or threw off its belt on a recurring basis. Kennedy Marine Engineering repaired the trunnion problem, but not without degrading the engine room gel coat with burns from hot, metal grinder filings. Miscellaneous service calls, including warranty calls, continued into 2019.

Eventually, the ISLA & GRAYSON's mechanical problems were resolved, but not before causing Perry significant frustration. Perry had commissioned what he thought would be a showcase fishing vessel. What he wound up with fell short of his expectations and delivered a series of headaches that understandably angered and embarrassed him, as Hanover contends. Perry would at times deride the ISLA & GRAYSON in text messages to a friendly fellow fisherman. In one March 2018 text exchange Perry called the vessel "junk" and joked he would "burn [h]er in the morning." Ex. 39 at 32. In an April 2018 text exchange he suggested he might intentionally ground the vessel "then jump out and throw a match inside." Id. at 34. Asked why, he said he would have to call since there was "too much to explain." Id.

Around the same time as this text exchange, Perry took a cruise on the same friend's vessel, a recent acquisition with a Wesmac hull and a V-12 engine. The vessel's performance impressed Perry so much that he "went and ordered one" to replace the ISLA & GRAYSON. Tr. 103. The new boat, which Perry was set to christen the ISLA & GRAYSON II, was roughly a third cheaper than the original ISLA & GRAYSON.

Perry listed the ISLA & GRAYSON for sale with Athearn Marine. Though Perry received little interest in the boat and found no realistic possibility of a sale, the listing was no fire sale. Perry initially listed the boat for $850,000—$100,000 less than he paid for it—and the listing only went as low as $700,000.

In April of 2018, Perry had another text exchange in which he complained of the ISLA & GRAYSON sailing at only 24 knots. His friend observed that at least "she's still running," and Perry replied, "Yup who knows how fucking long." Id. at 35. In June, Perry's friend suggested he follow the example of a local salt and burn his boat for the insurance money, to which Perry replied that the other man had "a 150k boat not 850." Id. at 36. When advised, "just gotta do it," Perry responded, "go ahead I'm gone for 3 days." Id. at 37.

Throughout this stormy period, Perry remained financially afloat. Perry had sunk a lot of money into the ISLA & GRAYSON, financed in part with a loan, and had taken out an additional loan to secure the ISLA & GRAYSON II, garnering a substantial debt to service. But Perry consistently had sufficient revenue from lobstering to meet his obligations and still have significant net income. Perry also had sufficient funds to plan for the launch of a new bait business in 2019, and even took on an additional (albeit more modest) business loan to finance this new endeavor. Certainly, Perry had taken on a good deal of water, including a backlog of various machines and accoutrements of his trade, but there was no reason to think he was close to swamping, so long as he could keep fishing. Relying primarily on the ISLA & GRAYSON, but also the RATTLESNAKE (his preceding vessel) and boats lent by other fishermen, Perry made it through the 2017-2018 and 2018-2019 fishing season in good shape. For example, Perry's 2018 tax return reports gross profit over $600,000. Even after the deduction of other expenses, Perry realized considerable net income in 2018.²

On August 20, 2019, more than a year after his unfortunate text exchanges about burning his lobster boat, Perry hauled the ISLA & GRAYSON for maintenance. For the next couple of days, the boat remained on jackstands at Perry's father's boat yard on His Cove Lane in Harrington. On August 21, local boatbuilder Moises Ortiz, who was at the time constructing the ISLA & GRAYSON II for Perry, came to the Perry boat yard to perform fiberglass repairs on the ISLA & GRAYSON's shaft tube. A vessel's fiberglass hull and shaft tube must be bonded together, but the ISLA & GRAYSON's bonding work had cracked and come loose where the shaft tube passed through the hull. Ortiz ground down the fiberglass hull, exposing not only the shaft tube but also a questionable wooden wedge or shim used during the vessel's construction, which he removed and replaced with fiberglass material. He then rebonded the hull to the shaft tube with fiberglass. This work took between four and five hours.

Later that day, Ortiz went with Perry into the engine room to take measurements for purposes of planning for the electrical layout of the ISLA & GRAYSON II's engine room. While there, Perry joined him and consulted with him concerning some fiberglass stress cracks in support structures associated with the engine bed on the original ISLA & GRAYSON that warranted repairs. One of the needed repairs was at the junction of a stringer and baffle adjacent to and immediately aft of the forward engine mount on the starboard...