United States District Court, D. Maine
ORDER ON MOTION FOR ORDER REDUCING PLAINTIFF JOSEPH
SKILKEN & CO.'S AWARD OF DAMAGES
A. WOODCOCK, JR., UNITED STATES DISTRICT JUDGE
reach and apply action, the Court grants in part and denies
in part the Defendant insurer's motion to reduce the
damages the Court previously awarded by default judgment
against the insured entity.
lawsuit follows another.
Joseph Skilken & Co. v. Oxford Aviation, Inc.:
first lawsuit began on August 21, 2013, when Joseph Skilken
& Co. (Skilken) filed a civil action against Oxford
Aviation, Inc. (Oxford) in this Court. Joseph Skilken
& Co. v. Oxford Aviation, Inc., No.
2:13-cv-00322-JAW, Compl. (ECF No. 1). Skilken
served Oxford on August 26, 2013. Summons in a Civil
Action (ECF No. 7). After Oxford failed to file a timely
answer, on September 18, 2013, Skilken filed a motion for
entry of default. Pl's Req. for Entry of Default
(ECF No. 8). On September 18, 2013, the Clerk of Court
entered default against Oxford. Order Granting
Mot. for Entry of Default (ECF No. 8). On October 16,
2013, Skilken moved for default judgment. Pl's Mot.
for Default J. (ECF No. 10).
October 24, 2013, the Court issued an order, requiring
Skilken to comply with Key Bank v. Tablecloth Textile
Co., 74 F.3d 349 (1st Cir. 1996), either by giving
notice to Oxford of the damages hearing or by filing
affidavits establishing that Oxford had not
"appeared" within the meaning of Key Bank.
Order on Mot. for Default J. (ECF No. 18). On November
15, 2013, the Court issued an order on Skilken's motion
for default judgment, raising questions about two areas of
claimed damages. Order on Mot. for Default J. at 5-6
(ECF No. 21). The Court ordered Skilken to file a further
explanation of the bases for these two areas of claimed
in its November 15, 2013 Order, the Court expressed concern
as to the propriety of aspects of the damages Skilken claimed
were associated with replacement travel. Id. at 5-6.
The Court wondered whether Skilken might have calculated the
claimed damages in such a way as to include "expenses
that it actually avoided while the Cessna was idle."
Id. at 6. It also stated that "[o]f course, Mr.
Skilken's personal trips could not be properly claimed as
part of the damages suffered by the business."
Id. Additionally, the Court observed that, by not
crediting against its damages figure for replacement travel
any expense that it would have incurred from using the
aircraft, "Skilken has presented a gross damages figure
but has failed to set forth a net damages figure."
Id. The Court found that "[t]he remaining
damages claims are in order, " not requiring further
same day, Skilken's counsel wrote to the Court, affirming
that Skilken accepted a damages order without the two areas
of damages the Court had questioned. Notice Concerning
Pl's Resp. to Order on Mot. for Default J. (ECF No.
22). On November 28, 2013, the Court issued an order granting
judgment in favor of Skilken and against Oxford in the total
amount of $423, 295.77. Order on Mot. for
Default J. (ECF No. 23). The Court confirmed that it
found that Skilken had proven these elements of damage and
that they were proper. Id. at 2.
Joseph Skilken & Co. v. Berkley Aviation LLC:
1, 2015, Skilken filed a complaint in this Court against
Berkley Aviation LLC (Berkley) claiming its right to reach
and apply the proceeds of an insurance policy Berkley issued
to Oxford in effect at the time of the event giving rise to
the damages. Compl. to Reach and Apply Insurance
Benefits (ECF No. 1). On June 30, 2015, Berkley answered
the complaint. Answer to Compl. (ECF No. 6). On
November 30, 2015, Skilken moved to amend the complaint to
add a third count. Pis.' Mot. to Amend
Compl. (Consent Mot.) (ECF No. 14). On December 1, 2015,
the Court granted the motion to amend the complaint.
Order Granting Without Obj. Mot. to Amend
(ECF No. 16). On December 2, 2015, Skilken filed the First
Amended Complaint. First Am. Compl. (ECF No. 18). On
December 16, 2015, Berkley answered the First Amended
Complaint. Def. 's Answer to Pis. 'Am.
Compl. (ECF No. 19).
17, 2016, Skilken filed a motion to obtain a court order
clarifying the effect of Berkley's June 17, 2016 tender
of a check for $105, 179.09 to Ms. Skilken. Pis.'Mot.
to Determine Effect of Tender (ECF No. 34) (Tender
Mot.). On July 8, 2016, Berkley filed its opposition.
Def. Berkley Aviation's Resp. to Pis.'Mot. to
Determine Effect of Tender (ECF No. 38) (Tender
18, 2016, Skilken filed a motion for summary judgment,
Pis.'Mot. for Summ. J. (ECF No. 39) (Skilken
Mot.), with a statement of facts, Pis.'
Statement of Material Facts (ECF No. 40) (PSMF), and a
set of stipulated facts. Stip. (ECF No. 41). Skilken
requested oral argument. Skilken Mot. at 1. On
August 8, 2016, Berkley filed a response to Skilken's
motion for summary judgment, Def. Berkley Aviation's
Opp'n to Pis.'Mot. for Summ. J. (ECF No. 48)
(Berkley Opp'n), and a response to its statement
of facts. Def. Berkley Aviation's Opposing Statement
of Facts (ECF No. 49) (DRPSMF). On August 15, 2016,
Skilken replied to Berkley's opposition to its motion for
summary judgment. Pis.'Reply to Mem. in Opp'n to
Pis.'Mot. for Summ. J. (ECF No. 50) (Skilken
18, 2016, Berkley filed a cross-motion for summary judgment,
Def. Berkley Aviation's Mot. for Summ. J. (ECF
No. 43) (Berkley Mot.), with a statement of facts.
Def. Berkley Aviation's Statement of Material
Facts (ECF No. 44) (DSMF). On August 6, 2016, Skilken
responded to Berkley's motion, Pis.'Mem. in
Opp'n to Def.'s Mot. for Summ. J. (ECF No. 45)
(Skilken Opp'n), and filed a responsive
statement of facts. Pis.' Opposing Statement of
Material Facts (PRDSMF). On August 17, 2016, Berkley
replied to Skilken's opposition to its motion for summary
judgment. Def. Berkley Aviation's Reply to Pis.'
Opp'n to Def.'s Mot. for Summ. J. (ECF No. 52)
August 16, 2016, the Court granted the motion for oral
argument, Order Granting Mot. for Oral Arg. and
Hr'g (ECF No. 51), and on March 8, 2017, the Court
held oral argument on the pending motions. Min.
Entry (ECF No. 56). On March 15, 2017, the Court issued
an order on the cross-motions. Order on Mot. to Determine
Effect of Tender & Cross-Mots, for Summ. J. (ECF No.
57) (Summ. J. Order). The Court granted
Skilken's motion on Count One of its Complaint only
insofar as the Court determined that the Defendant is liable
to the Plaintiff under 24-A M.R.S. § 2904, Maine's
reach and apply statute. Id. at 40. The Court
granted Berkley's motion on Count Two of the Complaint.
Id. The Court dismissed both motions as to Count
Three of the Complaint, and it denied the remainder of both
motions. Id. at 40-41. At the urging of the parties,
the Court left for later the reasonableness of the damages
awarded in the default judgment against Oxford. Summ. J.
Order at 1, 40.
time arrived soon after the Court issued its order on the
cross-motions for summary judgment. On April 20, 2017,
Berkley filed a motion to reduce the damages the Court
awarded Skilken in the default judgment against Oxford.
Def. Berkley Aviation's Mem. Regarding Pl's
Alleged Damages (ECF No. 63) (Def. 's
Mot.). Berkley filed twelve attachments with its motion.
Def.'s Mot. Attachs. 1-12. Skilken filed its
opposition on May 11, 2017, along with two attachments.
Pl's Obj. to Def.'s Mot. Regarding Pl's
Alleged Damages (ECF No. 66) (Pl's Opp'n);
Id. Attachs. 1-2. On May 25, 2017, Berkley replied and
filed two attachments. Def. Berkley Aviation's Reply
to Pl's Obj. to Def. 's Mem. Regarding Pl's
Alleged Damages (ECF No. 67) (Def. 's Reply);
Def's Reply Attachs. 1-2 (ECF No. 68). On June 2,
2017, Skilken filed a sur-reply. Pl's Sur-Reply to
Def's Reply to Pl's Obj. to Berkley Aviation's
Mot. Regarding Pl's Alleged Damages (ECF No. 72)
(Pl's Sur-Reply). It filed two attachments.
Pl's Sur-Reply Attachs. 1-2.
9, 2017, the Court held a telephone conference with counsel
during which it discussed its concern about the way the
issues in the case had been framed. Min. Entry (ECF
No. 74). The Court observed that Skilken's First Amended
Complaint alleged that the hard landing of May 13, 2013 had
proximately caused damages to Skilken and that Berkley had
denied those allegations. Then, on March 15, 2017, the Court
had issued an order, concluding that Berkley is liable to
Skilken under the reach and apply statute but leaving open
the question of damages. As the Court had understood the
lawsuit, two questions were left for resolution: (1) what
damages were caused by the hard landing; and (2) were the
causally-related damages reasonable. The Court did not
understand that there was a third issue, namely whether
reasonable damages caused by the hard landing were excluded
under the terms of the Berkley policy. Yet, in its filings,
Berkley had raised a "Your Work" policy exclusion
as a defense as regards the so-called "bad paint
job" claim of $62, 175. In response, Skilken questioned
whether Berkley could raise a policy exclusion as a defense.
Court discussed a distinction between causation and
exclusion. The Court informed counsel that it thought Berkley
was entitled to defend the reach and apply action based on
its contention that the bad paint job had nothing to do with
the hard landing because Skilken's civil action is
premised on the allegation that its damages were caused by
the hard landing.
the Court said it had doubts about whether Berkley could
assert that, even though reasonable damages were caused by
the hard landing, those damages were excluded under the terms
of the policy. This is because an insurer is generally
required to place the insured on notice as to the reasons a
claimed loss is not covered under the terms of the policy.
Here, as the Court understood it, Berkley merely informed
Oxford that there was no coverage at all because the policy
had lapsed, not that if the policy were effective, some
elements of the claimed damages would not be covered.
Court was not certain whether it would need to reach the
issue because, if it concluded that the bad paint job was not
caused by the hard landing, it would not need to address
whether the bad paint job was covered or excluded under the
policy. The Court suggested to counsel that they supplement
their briefing to address the Court's concerns.
20, 2017, Skilken filed a brief addressing these issues.
Pl's Additional Br. Concerning Berkley Aviation's
Mot. Regarding Pl's Alleged Damages (ECF No. 77)
(Pl's Addt'l Br.). On June 28, Berkley filed
its response with two attachments. Def. Berkley
Aviation's Resp. Br. to Pl's Additional Br. Regarding
Pl's Alleged Damages (ECF No. 80)
(Def.'s Addt'l Opp'n) Attachs. 1-2.
Skilken replied on July 7, 2017. Pl's Reply to
Berkley Aviation's Resp. to Pl's Additional Br.
Regarding Pl's Alleged Damages (ECF No. 81)
(Pl's Add'l Reply).
THE PARTIES' POSITIONS
motion, Berkley reiterated the categories of damages that
Skilken claimed leading to the Court's November 15, 2013
damages award to Skilken in the amount of $423, 295.77:
(1) Repairs to the Cessna aircraft as a result of emergency
landing, totaling $138, 848.59;
(2) Repair of the defective work performed on the Cessna
aircraft by Oxford in the amount of $62, 175.00;
(3) Expenses from the unexpected stop in Colorado Springs,
Colorado in the amount of $2, 371.31;
(4) Expenses related to flight-testing the Cessna after the
repairs in the amount of $2, 425.79;
(5) Loss of use for the Cessna for three and one-half months
in the amount of $53, 840.00;
(6) Replacement travel during the period the Cessna was
unavailable due to repairs in the amount of $17, 475.08;
(7) Rental of a Net Jets plane for a planned flight in the
amount of $38, 916.47;
(8) Rental vehicles for trips where the Cessna would have
been used in the amount of $1, 933.14; and
(9) Diminished value of the Cessna aircraft from repaired
damage caused during the emergency landing in the amount of
Def.'s Mot. at 1-2 (citing Summ. J.
Order at 4-5). Noting that the Court expressed
compunctions about items five, seven and eight, Berkley
observed that Skilken withdrew those claims, which totaled
$94, 749.61, leading to a net damages award of $423, 295.77.
Id. at 2-3. Berkley affirmed that it does not
challenge the reasonableness of Skilken's claimed damages
as to categories one ($138, 848.59 for repairs due to the
emergency landing); three ($2, 371.31 for expenses due to the
unexpected stop in Colorado Springs); and four ($2, 425.79
for expenses due to flight testing). Id. at 3.
Berkley challenged the reasonableness of categories two ($62,
175.00 to repair defective work Oxford performed on the
Cessna), six ($17, 475.08 for replacement travel during the
time the Cessna was unavailable while being repaired), and
nine ($200, 000.00 for diminished value of the Cessna
aircraft). Id. Thus, with Berkley's concessions,
the area of dispute melted from $423, 295.77 to $279, 650.08.
The Defective Work Claim
motion, Berkley argued that Skilken's claim of $62, 175
for Oxford's "bad paint job" is not the proper
subject of the reach and apply action because it is not a
covered loss under the Berkley policy. Id. at 3-4.
Quoting 24-A M.R.S. § 2093, Berkley emphasized that a
reach and apply action is proper only when a "loss or
damage, for which the insured is responsible, occurs."
Id. at 4. It contended that the Berkley policy
insuring Oxford expressly excludes Oxfords own work from
coverage, the so-called Your Work exclusion. Id. at
4-5 (citing id. Attach. 8 Commercial General
Liability Aviation Insurance Policy Coverage A-Bodily
Injury and Property Damage Liability § 2(j)(6)
(Oxford Policy)). Berkley further maintained that
coverage for the bad paint job would be unavailable under the
Hangarkeeper's Liability section of the policy.
Id. (citing Oxford Policy Coverage
D-Hangarkeepers' Liability § 2(e)). Finally, Berkley
said that the bad paint job would not qualify as a
"Loss" or "Occurrence" under the policy.
Id. at 5 (citing policy definitions).
The Replacement Travel Claim
second category of damages is Skilken's claim for
replacement travel in the amount of $17, 475.08; the amount
Skilken paid for certain persons to fly on commercial
aircraft while Skilken's Cessna was under repair.
Id. at 6. Berkley contended that at least one of
these trips was purely personal, namely, for Steve Skilken,
President of Joseph Skilken & Company, to travel to St.
Louis, Missouri to attend a diving meet for his daughters.
Id. at 6-7. Berkley argued that the cost of this
trip should be excluded because the cost did not represent
damages to Skilken as a business and was not specific enough
to be compensable. Id. at 7. In addition, Berkley
isolated a trip to Dallas, Texas for which it maintains
Skilken provided inadequate documentation. Id.
Finally, Berkley objected to a trip to Milan, Italy on the
ground that this trip is not sufficiently related to
Skilken's business to be compensable under the Oxford
policy. Id. at 7.
The Diminished Value Claim
disputed the $200, 000 loss of value figure for the Cessna
aircraft on three bases: (1) after the May 31, 2013 hard
landing, Skilken agreed to a value of the Cessna equal to
$1.6 milhon; (2) Skilken's valuations expert Wayne
Muhler's methodology for arriving at the $200, 000
diminished value figure was flawed because it did not account
for actual sales figures of comparable aircraft; and (3)
Wayne Muhler's valuation of the diminished value of the
Cessna was flawed because the parties dispute the fair market
value of the aircraft to begin with. Id. at 8-17.
The Reasonableness Standard
Berkley cited Patrons Oxford Insurance Company v.
Harris, 2006 ME 72, 905 A.2d 819 and Planalto v.
Ohio Casualty Insurance Company, No. 2:07-cv-00142-DBH,
2008 U.S. Dist. LEXIS 41036 (D. Me. 2008) for the proposition
that an insurer is not liable for damages awarded in an
uncontested default hearing if the damages are determined to
be unreasonable. Id. at 17. Berkley acknowledged
that Harris and Planalto place the burden
to prove unreasonableness on different parties:
Harris on the insured, and Planalto on the
insurer. Id. But it said that Harris
controls because it is a matter of state substantive law.
Id. In total, Berkley urged the Court to find the
$62, 175.00 for repair of defective work uninsured, the
replacement travel portion of $17, 475.08 unrelated to
Skilken's loss as a business, and the diminished value of
the Cessna to equal $40, 308 based on Berkley's
expert's valuation. Id. at 18. Berkley asked the
Court to reduce the damage award from $423, 295.77 to $143,
645.69. Id. at 19.
Waiver of Exclusions
response, Skilken acknowledged that a Planalto
proceeding "allows an insurer to challenge the
reasonableness of, in this case, damages awarded in a default
judgment." Pl's Opp'n at 2 (quoting
Planalto, 2008 U.S. Dist. LEXIS 41036, at *20-21).
However, Skilken argued that, even though Berkley may contest
the reasonableness of the damages, it may not now assert
coverage defenses because Berkley may not "plead and
prove a policy coverage exception which should have been
brought, if at all, by counterclaim." Id. It
explained that Maine law places a burden on the plaintiff in
a reach and apply action to prove coverage under the
insurer's policy, but it places a burden on the insurer
to prove an exclusion to coverage. Id. (citing
Mut. Firelns. Co. v. Hancock, 634 A.2d 1312, 1312-13
pointed out that in its March 15, 2017 decision on the
cross-motions for summary judgment, the Court concluded that
the Berkley policy was in effect when the hard landing
occurred and that Berkley had sufficient notice of the
Skilken claim to allow the policy to be reached. Id.
at 3. Skilken conceded that when an insurer defends a civil
action under a reservation of rights and the insured enters
into a settlement without its consent, the insurer "is
free to litigate the facts of coverage in a declaratory
judgment action brought after the settlement is
entered." Id. (quoting Harris, 2006 ME
72, ¶ 22, 905 A.2d 819). But Skilken contended that in
order to raise a policy exclusion as a defense, an insurer
must preserve the exclusion by filing a declaratory judgment
action, by asserting a counterclaim in the reach and apply
action, or at a minimum by asserting the coverage exclusion
as an affirmative defense in the reach and apply action.
Id. (citing Harris, 2006 ME 72, ¶ 16,
905 A.2d 819; Fed.R.Civ.P. 13(a)(1)). Here, Skilken observed
that Berkley refused Oxford's demands for a defense and
for indemnification, and it asserts that "by doing so
waived its right ... to assert the policy exclusions it now
argues." Id. at 4. It noted that Berkley did
not file a counterclaim to the reach and apply action and did
not raise coverage exclusions as an affirmative defense to
the reach and apply action. Id.
speculated that Berkley may have "made an early
strategic decision to go 'all or nothing'-to rely
entirely on its dual arguments that the policy terminated
before the hard landing and that even if the policy were in
effect insufficient notice defeated reach and apply-rather
than risk offering an additional argument which, while
preserving policy exclusion defenses, might tacitly concede
that the policy was in effect and notice sufficient."
Id. In any event, Skilken claimed, Berkley is
"bound by its choices." Id.
Burden of Proof on Insurer
disputed Berkley's contention that the burden to prove
the reasonableness of the damages rests with Skilken.
Id. at 4-6. It distinguished Harris, where
the Maine Supreme Judicial Court was confronted with the
appearance of collusion between the plaintiff and defendant
in the underlying action and held that it was the plaintiffs
burden to demonstrate that the settlement was
"reasonable" and "nonfraudulent."
Id. (quoting Harris, 2006 ME 72, ¶ 21,
905 A.2d 819). Here, by contrast, Skilken pointed out, the
underlying judgment was judicially-awarded after the entry of
default and a damages hearing. Id. at 4-5. Skilken
also noted that if Berkley had provided a defense as it was
required to do under the Oxford policy, it would have been
represented through insurance defense counsel at the damages
hearing. Id. at 5. Skilken stated that the Court
issued the underlying judgment only after receiving
declarations and other proof and only after challenging
certain elements of the damages claim, which Skilken
withdrew. Id. Skilken argued that Planalto
stated the proper rule for this case, namely that the insurer
bears the burden to demonstrate the awarded damages are
unreasonable. Id. at 5-6.
Judicial Determination of Berkley's Liability
quoted the Court's March 15, 2017 order, "[t]he
Policy, if it was in effect at the time of the hard landing,
would also have required [Berkley subsidiary] StarNet to
indemnify Oxford for the claims set forth in the case of
Joseph Skilken & Co. v. Oxford Aviation, Inc.,
2:13-cv-00322-JAW." Id. at 6 (quoting Summ.
J. Order at 8). Skilken stated that the Court's
order did not "distinguish between losses which might
have been covered under the policy and losses which the
policy might have excluded from coverage." Id.