Citations
- 423 F. Supp. 2d 193
Full opinion text
FINDINGS OF FACT and CONCLUSIONS OF LAW
KEENAN, District Judge.
INTRODUCTION
This is a maritime insurance action arising out of the grounding of the bulk carrier SATURN II off the western coast of India on June 25, 2002. Plaintiffs are a group of insurers that underwrote hull and machinery (H & M) insurance on the SATURN II. Defendants are the owners and managers of the vessel, respectively. Plaintiffs seek a declaratory judgment that the insurance policies are voidable ab ini-tio because of defendants’ alleged breaches of the duty of utmost good faith, or, alternatively, that they may deny coverage because defendants cannot show a valid claim and because the vessel was unseaworthy.
Defendants have counterclaimed. They allege that the SATURN II was a constructive total loss and that plaintiffs are liable on the policies for $6,000,000. Defendants further allege that plaintiffs failed to satisfy sue and labor and general average obligations under the policies; that plaintiffs themselves breached fiduciary duties during their investigation of the claim; and that plaintiffs’ actions with respect to the discharge of cargo and salvage caused additional damage in an undetermined amount. Defendants also contend that plaintiffs should be estopped from denying coverage. Both sides demand attorneys’ fees and costs.
This matter was tried to the Bench over seventeen days in February and March 2005. The Court heard oral argument on May 31, 2005. This order constitutes the Court’s findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure.
FINDINGS OF FACT
1. BACKGROUND
A. The Parties
At all relevant times, plaintiffs American Home Assurance Company (“American Home”) and New York Marine & General Insurance Co. (“New York Marine”) were insurance companies that underwrote H & M insurance on blue water vessels. (S.F. ## 1-2.) American Home’s underwriting agent was American International Marine Agency of New York, Inc. (“AIMA”). (S.F. # 1.) New York Marine’s underwriting agent was Mutual Marine Office, Inc. (“MMO”), located in New York, New York. (S.F. # 2.) Plaintiffs Bluewater Insurance ASA (“Bluewater”) of Oslo, Generali France Assurances (“Generali France”) of Paris, and “The Ethniki” Hellenic General Insurance Company S.A. (“Ethniki”) of Athens, underwrote H & M insurance on blue water vessels. (S.F. 6.) Plaintiffs Hamburger Versicherung WAG VERS A (CONVERIUM) (“Hamburger A”), Hamburger Versicherung WAG VERS B(R+V) (“Hamburger B”), Gothaer VAG (“Gothaer”) and ING Insurance (“ING”) underwrote H & M insurance on blue water vessels through their managing general agent Belgian Marine Insurers S.A. (“Belmarine”), located in Liege, Belgium. (S.F. #5.)
Defendant Endeavour Navigation S.A. (“Endeavour”) was a Liberian Corporation and the registered owner of the SATURN II. (S.F. ## 7, 8, 37.) Defendant Masters’ Ships Management S.A. (“MSM”), a Liberian corporation with its principal place of business in Athens, managed the SATURN II under a management agreement dated December 22, 1999. (S.F. # 12; - Tr. 1242-43; Ex. X-3.) Former Defendant Royal Bank of Scotland PLC, the first mortgagee on the SATURN II, assigned back to defendants its interest in any insurance proceeds paid by the plaintiffs because of the grounding. (S.F. # 52.)
B. The Witnesses
1. The Crew of the SATURN II
For the present purposes, the two most important crew members of the SATURN II were the master, Captain Manuel Pa-dayhag, and the chief engineer, Rogelio Santos. Both testified by way of deposition.
2. The Plaintiff Insurers
Each underwriter or its authorized agent was represented at trial. The witnesses and their respective affiliations were as follows: Joseph O’Doherty (AIMA), Tim McAndrew (MMO), Erik Lund (Bluewater), Frangois Azou (Genera-li France), Pierre Cobus (Belmarine) and George Dalianis (Ethniki). All testified during the plaintiffs’ case-in-chief.
3. Salvage Operations
Plaintiffs retained the Salvage Association, an H & M surveying firm, to assess the damage to the SATURN II. William Johnstone, a Salvage Association surveyor who visited the vessel, testified for plaintiffs. Defendant Endeavour, with the insurers’ approval, retained the British law firm Clyde & Co. to protect its interests on issues of salvage. Martin C. Hall from Clyde & Co. testified during plaintiffs’ direct case.
4. The Post-Grounding Investigation
Plaintiffs retained Evdemon & Partners (“Evdemon”) to inspect the SATURN II after the grounding. Stavros Trimis, a senior surveyor at Evdemon, testified for plaintiffs. AI Marine Adjusters (“AI Marine”) handled the investigation of the SATURN II insurance claim on behalf of the underwriters. Vincent Corteselli, the manager of H & M liabilities at AI Marine, testified during the plaintiffs’ direct case. Mr. Corteselli contacted Aquila Maritime Business, Inc. (“Aquila”) in Manila for assistance in setting up interviews with former crew members of the SATURN II. Andrew J. Malpass, the executive vice president of Aquila at the time, testified for plaintiffs.
5. Plaintiffs’ Expert Witness
Harry S. Keefe, who retired in 1998 after a 40-year career in the marine insurance business, offered expert testimony on H & M insurance for plaintiffs. In his last position, Mr. Keefe was vice president and manager of the blue water hull underwriting department at GRE Insurance Group. (Tr. 21; Ex. 141.)
6. Defendants Endeavour and MSM
Nikos Christodoulatos testified at trial on behalf of MSM. Nikos was the managing director at MSM — in his words “the top man in the company” — in 2002. (Tr. 1241.) Nikos’s father, Gerassimos Chris-todoulatos, testified by deposition. Ger-assimos was a member of the board of administration at Endeavour during the relevant time period. Nikos testified that Gerassimos was not employed by MSM in 2002 and had no involvement with the SATURN II. (Tr. 1244.) This was one of many lies from that witness. As will be discussed in greater detail below, there is ample evidence that Gerassimos was actively involved with MSM, the SATURN II account and the aftermath of the grounding.
MSM’s crew manager, Georgios Petsin-is, and superintendent engineer, Petros Moundreas, also testified for defendants— with much the same lack of forthrightness as Nikos Christodoulatos.
7. Defendants’ Insurance Broker
The insurance broker for Endeavour and MSM with respect to the placement of the H & M insurance was HBI International Ltd. (“HBI”). HBI had an office in New York. Both sides designated Anthony Piazza, the president of HBI during the relevant time period, as an intended witness. He testified during plaintiffs’ casein-chief. There was no need to call him back to testify during defendants’ case.
8. Defendants’ Expert Witness
Captain John Bergin offered expert testimony for defendants on navigation. Captain Bergin retired in 2001 after over 30 years as a seagoing master. He now teaches advanced ship handling courses at the Maritime Institute of Technology. (Tr.1952,1957.)
C. The Vessels on Defendants’ Account
The SATURN II was a 64,535 metric-ton deadweight bulk carrier built in 1981. It was 224.50 meters (736.55 feet) in length, 32.20 meters (105.64 feet) in breadth and 17.70 meters (58.07 feet) in depth. A Sulzer 6 RND 76M type main engine powered the vessel. (S.F.# 9.) The agreed value of the vessel for the purposes of H & M insurance was $7,500,000. (S.F.#27.) The vessel’s sound market value at the time of the June 25, 2002 grounding was between $4,000,000 and $4,500,000. (Tr. 455-56, 465, 493-94.)
The size of the MSM fleet fluctuated prior to 2002. On June 22, 2000, there were four ships on the account: the SATURN II, MADONA, AFRICANA and SILVER TOY. (Tr. 187-88, 401-02.) Ni-kos Christodoulatos testified that in 2000, when American Home wrote H & M insurance as the lead underwriter on the MSM account, the SILVER TOY was insured as a single vessel. He said that the MADO-NA, AFRICANA and SATURN II were added later. (Tr. 1255-56.) The Court discounts this testimony and just about everything else Mr. Christodoulatos said on the stand. He was one of the least credible witnesses the Court has seen in over 22 years. Both Mr. O’Doherty and Mr. Piazza testified credibly that there were four ships on the account in 2000, one of which was the SILVER TOY. (Tr. 232, 401.) The MADONA was lost at sea, bringing the fleet size down to three. (Tr. 232.) The AFRICANA was sold sometime prior to May 22, 2002. (Tr. 402-03.) MSM made attempts to purchase other vessels, but the fleet size remained at two (SILVER TOY and SATURN II) as of early May 2002. (Tr. 396-97, 403.)
The SILVER TOY was sold for scrap pursuant to a contract dated May 24, 2002 and delivered to a scrap yard in China on or about June 6, 2002. (S.F. ## 13, 25-26.) Nikos Christodoulatos testified that he did not become aware of the sale until June 2002. (Tr. 1269.) This testimony was incredible, coming as it did from the self-proclaimed “top man” at MSM. Mr. Christodoulatos in so testifying wants the Court to believe that during the early stages of the H & M renewal process, which began in May 2002, he knew nothing about the sale of the SILVER TOY. Thus he would not have known that the SATURN II was the only vessel on the account. The Court rejects this testimony.
There was one additional vessel: the DOO YANG HOPE. This vessel was listed as part of MSM’s fleet on documents sent to the underwriters during negotiations in 2002. On some of the documents, the abbreviation “TBR,” (“to be renamed”) or some equivalent description appeared. Plaintiffs assumed that defendants had acquired the DOO YANG HOPE and would add it to the fleet. (Tr. 191.) Defendants deny making any such guarantee. (Tr. 387.) The DOO YANG HOPE was never purchased and never became part of the MSM fleet. (S.F. #24.)
II. THE INSURANCE POLICIES
A. Overview
MSM was responsible for arranging H & M insurance for the SATURN II. (S.F. # 14.) Endeavour relied on MSM to obtain this insurance. (S.F. # 15.) HBI was the U.S. based broker for MSM and En-deavour and coordinated all placement negotiations on their behalf. (S.F. ## 16-17; Tr. 348-49.) Inship Ltd. was MSM’s local insurance broker in Greece and acted as the liaison between HBI and MSM. (S.F. # 18.) As plaintiffs proved repeatedly at trial, the brokers acted on behalf of the owners, not the insurers. (Tr. 50, 83, 187-88, 258, 301, 348-49.)
The SATURN II was insured for a 12-month period commencing June 22, 2002. Eighty percent of the SATURN IPS $7,500,000 agreed value was insured with plaintiffs. Each underwriter agreed to insure its respective share as follows:
American Home 15.0% $1,125,000
New York Marine 12.5% $ 937,500
Bluewater 20.0% $1,500,000
Generali France ■ 10.0% $ 750,000
Hamburger A 4.5% $ 337,500
Hamburger B 4.5% $ 337,500
Gothaer 1.5% $ 112,500
ING 4.5% $ 337,500
Ethniki 7.5% $ 562,500
80.0% $6,000,000
(S.F. ##20-23, 28.) Each of the plaintiffs, as discussed more fully below, entered into a separate insurance contract evidenced by a binder, bordereau, cover note or slip. (Ex. 4, 22, 28, 34, 38.) The policy for the SATURN II was based on the American Institute Hull Clauses Form 1-16.2 (June 2, 1977). (Ex. 5.) The policy provided coverage for a constructive total loss if the expense of recovering and repairing the vessel exceeded the $7,500,000 agreed value. (Ex. 5 at 1-229.) The policy also contained American Institute Form 1.16-7 (June 2, 1977). This provision was a liner negligence clause which covered:
Loss of or damage to the subject matter insured directly caused by:
1. Accidents on shipboard or elsewhere ...;
2. Negligence, error of judgment or incompetence of any person;
provided such loss or damage ... has not resulted from want of due diligence by the Assured(s), the Owner(s) or Managers(s) of the Vessel, or any of them.
(Ex. 6.) The policy additionally covered general average and sue and labor expenses. (Ex. 5; Tr. 194-96, 1184-88.)
B. The Placement of the H & M Insurance
The terms of the insurance policy are not at issue. What the parties dispute, inter alia, is whether the defendants made material misrepresentations during placement of the insurance. The evidence at trial on this issue was as follows:
1. American Home/AIMA
On May 20, 2002, Anthony Piazza, the president of HBI, acting on behalf of MSM, sent a provisional binder via facsimile to Joseph O’Doherty, the vice president and hull manager for bluewater business at AIMA. (Ex. 1; Tr. 184, 348.) Mr. O’Do-herty testified that the MSM account was a renewal account. (Tr. 185.) American Home, through AIMA, had written H & M insurance for MSM in June 2000. (Ex. 142.) For the 2002 policy, American Home would act as lead underwriter. According to the second page of the binder, the proposed coverage would be “HULL AND MACHINERY, ETC.” The names of the vessels were “ ‘SILVER TOY’ PLUS 2 AS PER ATTACHED SCHEDULE.” (Ex. 1.) The schedule listed three vessels: “SILVER TOY,” “SATURN II” and “DOO YANG HOPE TBR.” (Id.) The abbreviation “TBR” meant “to be renamed.” (Tr. 187, 258.) The facsimile cover sheet accompanying the binder stated: “PLEASE NOTE THE ‘DOO YANG HOPE’ WILL IN ALL LIKELY HOOD [sic] ATTACH PRIOR TO THE RENEWAL DATE SO WE WILL ALSO NEED A RATE TO ATTACH HER TO THE CURRENT FLEET.” (Ex. 1.) The binder also contained the proposed rates and deductibles. On May 23, 2002, Mr. Piazza faxed Mr. O’Doherty a further written proposal modifying the proposed rates and deductibles for the SILVER TOY, SATURN II and DOO YANG HOPE. (Ex. 2.)
On May 30, 2002, one of Mr. O’Doherty’s colleagues at AIMA sent a fax to Mr. Piazza confirming AIMA’s “binding of a 15% line of the [MSM] account, as per the rates, terms and conditions outlined in [HBI’s] faxes of May 20 and May 23, 2002.” (Ex. 3.) HBI provided AIMA with a final binder dated June 28, 2002, which AIMA signed and stamped on behalf of American Home. (Ex. 4.) The vessels again were listed as the SILVER TOY, SATURN II and DOO YANG HOPE TBR. (Id.) The inception date of the policy was June 22, 2002 at 0900 hours Greek time “EXCEPT VESSEL 3 [DOO YANG HOPE] WHICH FROM TIME AND DATE OF ATTACHMENT TO BE ADVISED TO COMMON EXPIRY.” (Id.)
Sometime after the inception date, Mr. Piazza learned that the SILVER TOY had been sold. He telephoned Mr. O’Doherty with this information. This was the first time that AIMA had heard of the SILVER TOY’S sale. (Tr. 197-98.) Mr. O’Doherty could not recall the exact date of the telephone conversation, but in a handwritten memorandum dated June 27, 2002, two days after the grounding, he wrote “June 3 — Sold->SILVER TOY.” (Tr. 198; Ex. F-17.) The credible testimony of Messrs. O’Doherty and Piazza establishes that AIMA was not aware that the SILVER TOY had been sold on June 6, 2002. (Tr. 213.) There is evidence that MSM sent a fax to HBI on June 13, 2002 advising HBI that the SILVER TOY had been sold and that this information should be conveyed to the underwriters. (Ex. K-4; Tr. 1270, 1371-74.) This evidence conflicts with Mr. Piazza’s testimony. (Tr. 358.) Regardless, AIMA was not notified of the sale. AIMA therefore was not aware that it would be insuring only a single vessel, the SATURN II.
Mr. O’Doherty further testified as to his assumption that the DOO YANG HOPE would attach to the policy. (Tr. 191, 236.) In his words, he believed that the brokers had approached him for a quote on the DOO YANG HOPE “in the anticipation that it would be bought.” He testified that “basically it’s supposition; that the vessel was shown on the schedule to be attaching during that policy period when we underwrote the risk.” He conceded, however, that there was no document in his files showing affirmatively that the vessel had been bought. (Tr. 236.) Nikos Christo-doulatos testified that he never represented to his brokers or to the underwriters that the DOO YANG HOPE had in fact been purchased. (Tr. 1267.) The Court is inclined to believe this statement because Mr. Piazza testified that he also did not make such a representation to the underwriters. (Tr. 387.)
The sale of the SILVER TOY and failure to acquire the DOO YANG HOPE meant that the SATURN II was the only vessel on MSM’s account during placement negotiations in late May and June 2002. In maritime parlance, the MSM account was a “singleton” — a fleet consisting of one vessel. Mr. O’Doherty testified that had he known that the account was a singleton, he would not have agreed to accept the risk and renew the insurance. (Tr. 213.) In 2002, AIMA’s policy was not to consider single-vessel risks as new or renewal business. (Tr. 199.) The Court accepts Mr. O’Doherty’s testimony as credible.
2. New York Marine/MMO
On May 20, 2002, Mr. Piazza sent a provisional binder to Tim McAndrew, a marine underwriter at MMO, the managing general agent of New York Marine. (Ex. 14; Tr. 298.) The MSM account was renewal business for New York Marine, as it was for American Home. The binder schedule listed three vessels: “SILVER TOY,” “SATURN II” and “DOO YANG HOPE TBR.” The binder also contained expected rates and premiums for the three vessels, which were to be deemed separately insured. (Ex. 14.) In other words, the insurance would be treated as though three separate contracts of insurance had been issued, one for each vessel in the fleet. (Tr. 243.) On May 29, 2002, Mr. Piazza advised Mr. McAndrew by fax that HBI had concluded negotiations with the lead underwriter, American Home. On June 19, 2002, MMO, on behalf of New York Marine, confirmed acceptance of a 12.5% share of the proposed risk. (Ex. 18; Tr. 317-18.) HBI provided MMO with a final binder dated June 28, 2002, which MMO signed and stamped on behalf of New York Marine. (Ex. 4.)
Mr. McAndrew testified that prior to June 22, 2002, MMO was not aware that the SILVER TOY was no longer part of the MSM fleet, or that the SILVER TOY had been scrapped. Mr. McAndrew also testified that MMO had no knowledge pri- or to June 22, 2002 that the DOO YANG HOPE did not become part of the MSM fleet. In 2002, MMO was willing to underwrite single-vessel risks only when able to transfer its exposure to a “total loss only” (“TLO”) reinsurer. MMO even went to the TLO market when MMO was under the impression that the MSM fleet consisted of three vessels. (Tr. 325.) The cost of TLO coverage was prohibitive, so MMO did not buy it. (Tr. 326.) Mr. McAndrew noted that the TLO reinsurance rate for SATURN II alone probably would have been even higher (25 to 30 percent) than the rate for the SATURN II as part of a fleet. (Tr. 328.) He testified that MMO ultimately would have declined the 12.5% share of the risk on the MSM account had MMO known that the account was a singleton. (Tr. 326.) The Court finds Mr. McAndrew’s testimony credible.
3. Bluewater
On June 7, 2002, Kjell Einarsveen of the Norwegian broker Anglo-Nordic Insurance Brokers A/S (“Anglo-Nordic”), with whom HBI was working, sent an email to Erik Lund, an underwriter at Bluewater. (Ex. 19; Tr. 124.) Attached to the email was a three-page proposal requesting that Bluewater underwrite a portion of H & M insurance for the vessels in MSM’s fleet. (Ex. 19; Tr. 125-26.) This proposal to Mr. Lund represented new business for Blue-water. (Tr. 126.) Mr. Einarsveen described the risk as follows: “The fleet currently comprises two bulk carriers but we understand that a new acquisition— ‘DOO YANG HOPE’ — will be added to the slip shortly.” (Ex. 19.) Mr. Lund testified that he understood the proposal as representing that three vessels were in the MSM fleet. (Tr. 126.)
After receiving the proposal, Bluewater undertook an evaluation of the risk that included an analysis of the number of vessels on the account, the class of the vessels, the size of the vessels and the terms and conditions. (Tr. 127.) On June 10, 2002, Mr. Lund e-mailed Mr. Einarsveen that Bluewater was “interested in subscribing for a share of 20% of this [MSM] fleet.” (Ex. 20.) On June 21, 2002, Mr. Einarsveen informed Mr. Lund by email that Anglo-Nordic had received instructions to tie up a 20% share with Bluewater. (Ex. 21.) On June 24, 2002, Mr. Lund emailed Mr. Einarsveen and confirmed Bluewater’s 20% share. (Id.)
Anglo-Nordic provided Bluewater with a provisional insurance bordereau and addendum, which Bluewater stamped. (Ex. 22.) Mr. Lund credibly testified that after the June 22, 2002 inception date, Blue-water learned for the first time that the SILVER TOY had been scrapped. (Tr. 133.) He also testified as to Bluewater’s understanding that the DOO YANG HOPE had been purchased and was awaiting only a formal takeover. (Tr. 133-34.) Bluewater was not advised prior to the inception date of the policy that the DOO YANG HOPE was not part of the MSM account, nor was Bluewater advised that the account was a singleton. (Tr. 133, 138.) Mr. Lund testified that this information would have controlled Bluewater’s decision to insure the risk because Bluewa-ter’s general underwriting policy in 2002 was not to underwrite single-vessel risks except “in a few occasions if it made commercial sense.” (Tr. 134.) Mr. Lund testified that had Bluewater known that the MSM account was a singleton, Bluewater would not have underwritten a 20% share on the terms presented in Anglo-Nordic’s proposal. (Tr. 138.) If Bluewater had underwritten such a risk, it would have charged a higher premium, required higher deductibles or agreed only to limited terms. (Tr. 135.) The Court accepts this testimony as credible.
4. Generali France
On June 11, 2002, Steven Watson of the French broker La Séeurité Nouvelle (“LSN”), with whom HBI was working, faxed a proposal to Stephane de Rooy of Generali France. Mr. de Rooy was the assistant to Francois Azou, the head of Generali France’s H & M department at the time. (Ex. 25; Tr. 81, 87.) Mr. Watson requested that Generali France underwrite a portion of the H & M insurance for the vessels in MSM’s fleet. (Ex. 25.) The name of the three ships (SATURN II, SILVER TOY, DOO YANG HOPE) appeared in the proposal. (Ex. 25.) In a facsimile dated June 14, 2002, Mr. Watson represented to Mr. de Rooy that MSM had “recently purchased” the DOO YANG HOPE. (Ex. 26.) The same day, after Generali France completed its evaluation of the risk, Mr. de Rooy informed Mr. Watson that Generali France would be prepared to take a 10% share. (Ex. 25; 83-84, 87, 93-94.) Mr. Watson confirmed Generali France’s 10% share in an email to Mr. de Rooy dated June 21, 2002. (Ex. 27.)
Mr. Azou testified that Generali France did not learn until October 2002 that the SILVER TOY had been sold prior to the June 22, 2002 inception date. (Tr. 94,122.) Mr. Azou was aware that the DOO YANG HOPE was to be renamed, but he believed that the vessel would attach to the policies during the policy year. (Tr. 93.) Mr. Azou explained that Generali France had written guidelines that generally prohibited single-vessel risks. (Ex. 29; Tr. 97.) There were exceptions to the rule: (1) if the vessel was recently built and high-valued, or (2) if the vessel had the “probability” of being part of a larger fleet. (Tr. 97.) Mr. Azou testified that “recently built” to Generali France meant a vessel less than five years old. (Tr. 96.) “High value” meant $100 million at a minimum. (Tr. 97.) The SATURN II was 21 years old with an insured value of $7,500,000. It did not fit into the first exception. Mr. Azou testified that since 1998, Generali France had never written a single-vessel risk under the second exception. (Tr. 98.) Mr. Azou noted that Generali France was free to decline a single-vessel risk even if it met one of the two exceptions. (Id.)
Mr. Azou testified that Generali France would not have agreed to underwrite the 10% share of H & M insurance for the MSM account had Generali France known that the SATURN II was the only vessel on the account. (Tr. 122.) The Court finds Mr. Azou’s testimony credible.
5. The Hamburger Insurers, Gothaer and ING
On May 31, 2002, Mr. Watson of LSN sent a fax to Belmarine requesting it, on behalf of its principals, to underwrite a portion of the H & M insurance for the vessels in MSM’s fleet. (Ex. 31; Tr. 46-47.) Listed in the proposal are the vessels SATURN II, SILVER TOY and DOO YANG HOPE. (Ex. 31; Tr. 49.) On the same day, Belmarine informed LSN by fax that Belmarine could accept a 20% share of the proposed risk on either of two specified conditions having to do with premiums and deductibles. (Ex. 32; Tr. 51-52.) On June 24, 2002, Mr. Watson offered Belma-rine a 15% share of the risk and requested a modification of one of the two specified conditions. (Ex. 33; Tr. 54.) Belmarine agreed to the modification and accepted the 15% share. (Ex. 33; Tr. 54-55.)
LSN provided Belmarine with a Cover Note dated June 25, 2002, which Belma-rine stamped. (Ex. 34.) Three vessels are listed on the Cover Note: the SATURN II, SILVER TOY and DOO YANG HOPE. (Ex. 34.) Next to “DOO YANG HOPE” is an asterisk referencing the notation “ vessel n° 3 wef dtba” (“with effect from date to be advised”). (Ex. 34; Tr. 56.) The vessel is listed as “TBR” elsewhere in the cover note. (Ex. 34.) Pierre Cobus, an assistant marine underwriter at Belmarine, testified that this expression indicated that the DOO YANG HOPE was not to be. insured immediately, but at some later date during the policy period. (Tr. 56-57.) Mr. Cobus testified on cross-examination, however, that “TBR” also could mean that the vessel was going to be purchased and then renamed. (Tr. 65-67.)
The 15% share of H & M insurance was underwritten as follows among Belma-rine’s principals: Hamburger A — 4.5%, Hamburger B — 4.5%, Gothaer — 1.5% and ING — 4.5%. (Ex. 43.) According to Mr. Cobus, it was not until October 15, 2002 that Belmarine learned of the sale of the SILVER TOY. (Tr. 58.) He further testified that Belmarine never received documentation from LSN explaining that the DOO YANG HOPE would not become part of MSM’s fleet. (Id.) Belmarine only became aware of this fact in late October 2002 upon receiving a fax from LSN stating that the lead underwriter had ceased to insure the ship. (Id.)
Mr. Cobus testified that Belmarine did not necessarily refuse to underwrite single vessel risks. (Tr. 59.) He made clear, however, that Belmarine treated singletons differently from multiple-vessel fleets. (Id.) Belmarine would charge different premiums and deductibles, require different conditions or underwrite a smaller share of the risk. (Id.) He testified that if Belmarine had known that the MSM account was a singleton, such knowledge would have controlled Belmarine’s decision to underwrite the risk. (Tr. 60.) At the very least, Belmarine would have charged a higher premium or accepted a smaller share of the risk. (Id.) The Court accepts this testimony as credible.
6. Ethniki
On June 19, 2002, the English broker Forbes sent a fax to Ethniki requesting that it underwrite a portion of H & M insurance for the vessels in MSM’s fleet. (Ex. 35; Tr. 256-57.) The vessels in MSM’s fleet were represented as the SILVER TOY, SATURN II and DOO YANG HOPE TBR. (Ex. 35.) George Dalianis, the director of the marine casualty and credit division at Ethniki in 2002, testified that the letters “TBR” in no way meant that the DOO YANG HOPE would not attach to the insurance. (Tr. 255, 258.) On June 20, 2002, after evaluating the risk, Ethniki notified Forbes by facsimile that Ethniki was ready to underwrite a 7.5% share of the proposed risk on a “cancelling returns only” (“CRO”) basis. (Ex. 36; Tr. 259-60.) On June 22, 2002, Forbes confirmed back to Ethniki that it had obtained a firm order for a 7.5% share of the risk on the terms and conditions in Ethniki’s June 20 facsimile. (Ex. 37; Tr. 260.)
On June 24, 2002, Forbes sent an insurance slip to Ethniki. (Ex. 38; Tr. 260-61.) The slip, as defined by Mr. Dalianis, was the “official document” to bind the insurance. (Tr. 261.) The slip lists three vessels: the SILVER TOY, SATURN II and DOO YANG HOPE “[i]neluding, if required, New and/or Acquired and/or Managed and/or Chartered vessels on values, terms, conditions and rates to be agreed.” (Ex. 38.) The inception date of the policy, as in all cases, was June 22, 2002.
Mr. Dalianis testified that Ethniki was never advised prior to the inception date that the SILVER TOY had been sold or scrapped. (Tr. 263.) He testified that Forbes never advised Ethniki that the DOO YANG HOPE did not become part of the MSM fleet. (Id.) He testified that at no time during the placement of the H & M insurance was Ethniki informed that there was only one vessel on the MSM account. According to Mr. Dalianis, this knowledge would have controlled Ethniki’s decision to underwrite the risk. (Tr. 268.) In 2002, Ethniki’s underwriting practice was not to insure singletons without serious consideration of the risk. (Id.) Mr. Dalianis insisted that at no time would Ethniki agree to a risk as high as 7.5% for a singleton. If Ethniki were to insure a single vessel, it would charge a higher premium than for a vessel that was part of a fleet. (Tr. 268-69.) Moreover, in the underwriting year 2002, Ethniki rejected 137 proposals, twenty-one of which were because the risk involved a singleton. (Ex. 40; Tr. 266-67.)
Mr. Dalianis testified that if Ethniki had known that the SATURN II was the only vessel in the MSM account, Ethniki may not have underwritten the risk at all or, at the very least, it would have demanded a higher premium and a lesser share of the risk. (Tr. 268-69.) The Court finds this testimony credible.
C. Marine Insurance and Recuperative Power
There was much attention paid at trial to the distinction between a singleton and a multiple-vessel fleet in the insurance context. The insurers’ representatives all testified credibly that insurance companies are far less likely to insure a vessel if it stands alone rather than as part of a fleet. The reason is that insurers prefer to spread their risk whenever possible. Harry S. Keefe, plaintiffs’ expert witness on H & M insurance, stated that the focus of the business is “recuperative power.” (Tr. 25.) If the insurer insures a single ship, and that ship is lost, the insurer pays the claim, the risk ends and there is no chance for the insurer to recoup his loss. If the insurer insures the same ship as part of a fleet and the ship is lost, the insurer recoups the loss from increased premiums on the other ships in the fleet. (Tr. 24-26.) Messrs. Cobus, Lund and O’Doherty were in agreement with Mr. Keefe on this point. (Tr. 59, 135-36, 199.) Mr. Keefe also noted that in the event of a loss of a single vessel, the owner may form a new company, buy another ship and come out as a new assured with a clean record. (Tr. 26.) Such action also would deprive the insurer the opportunity to recoup his loss.
Mr. Keefe conceded on cross-examination that there is no industry-wide prohibition among bluewater H & M underwriters against insuring singletons. (Tr. 36.) Defendants also brought out at trial that some underwriters or their agents did not have written guidelines prohibiting the underwriting of singletons. (Tr. 62, 106, 134, 142.) American Home had a four-vessel minimum fleet size guideline that applied to new accounts, but not to renewal accounts such as MSM’s. (Tr. 224; Ex. 7.) Moreover, Mr. O’Doherty testified that he had the discretion to deviate from American Home guidelines on insuring singletons. (Tr. 225.) This evidence does not contradict the credible testimony of Messrs. Keefe, O’Doherty, McAndrew, Lund, Azou, Cobus and Dalianis that the underwriters would have been loath to underwrite the MSM account if they had known it was a singleton. Even Mr. Piazza, the owners’ broker, testified that fleet size was a material fact that should have been disclosed to the insurers. (Tr. 359.) Nikos Christodoulatos agreed that it was important for the insurers to be informed about the sale of the SILVER TOY “for pricing reasons.” (Tr. 1377.)
III. THE GROUNDING OF THE SATURN II
A. The SATURN II’s Overloaded Departure
On May 27 and 28, 2002, the SATURN II was at port in Xingang, China. (S.F. # 31.) According to a draft survey measurement, approximately 63,897 metric tons of coal were loaded onto the vessel at this time. (Id.) On the morning of May 28, 2002, local time, the SATURN II departed Xingang. (S.F. # 32.) The port of Xin-gang is in a “summer zone.” (Moundreas Dep. 279-80.) Nikos Christodoulatos testified at his deposition that the SATURN II’s summer load line mark was the maximum draft to which the vessel could be loaded with respect to this voyage. (N. Christodoulatos Dep. 232-33.) Mr. Chris-todoulatos stated that the SATURN II’s maximum summer draft, according to the charter party, was 12.85 meters. He conceded that the SATURN II would be overloaded if it went above that figure. (Id. at 233.) According to a draft survey, the mean draft of the SATURN II was 12.920 meters when the vessel left Xingang. (Ex. 115.) A stowage plan put the draft at 12.915 meters. (Ex. 117.) Either number is above the maximum summer draft. MSM’s superintendent engineer, Mr. Moundreas, testified that the measurements would be subject to a 0.5% margin for error, the salinity of the water and the removable onboard water ballast. (Tr. 1834-35.) He testified that with these factors taken into account, the SATURN II was at its summer load line upon departure from Xingang. (Tr. 1842.) Mr. Moundreas was not credible enough as a witness for the Court to take his testimony at face value. (See infra, Part IV.C.) The Court finds that the SATURN II was overloaded at the beginning of the voyage.
On May 28, 2002, the SATURN II departed Xingang for its ultimate destination of Dahej, India. (S.F. # 32.) From June 8, 2002 through June 10, 2002, the vessel anchored outside the port limits of Singapore in order to effect a crew change and obtain supplies. (S.F. # 33.) On June 8, at Singapore, Captain Manuel Padayhag assumed command of the vessel from Captain Eustaquio Pereja. (S.F. # 34.) There is some question as to whether the turnover of command to Captain Padayhag was proper. Captain Padayhag claimed at deposition and in his affidavit that Georg-ios Petsinis, the crew manager at MSM at this time, forced him to sign a protocol for the change of command. (Padayhag Dep. 8; Padayhag Aff. ¶ 7.) While the propriety of the command turnover, in and of itself, is not significant, the incident is consistent with Mr. Petsinis’s behavior after the grounding. On several occasions, he commanded SATURN II crew members to engage in questionable activities with respect to ship documents and records.
While at Singapore, the SATURN II received some 100 metric tons of fresh water and 700 metric tons of fuel oil and diesel oil. (S.F. # 35.) On June 10, 2002 at about 8:20 P.M. local time, the SATURN II departed the outer anchorage at Singapore bound for Dahej. (S.F. #36.) Captain Padayhag testified that the SATURN II had a forward draft of 12.80 meters and an aft draft of 13.25 meters, for a mean draft of 13.025 meters. (Padayhag Aff. ¶ 10; Padayhag Dep. 46) The draft now was even greater than it had been at Xingang. Dahej also was in the summer zone. (Moundreas Dep. 280.) With its mean draft above 12.85 meters, the SATURN II was overloaded at the most critical stage of its voyage.
B. The SATURN II’s Cracked Cylinder Liner
On June 15, 2002, a 17 to 22 inch crack developed in the No. 6 cylinder liner of the vessel’s main engine. (Padayhag Dep. 153-54; Tr. 818.) This incident caused the SATURN II to stop at 6:30 A.M. local time in order for the crew to address the accompanying fire. (Ex. 140 at P 3816.) The voyage was resumed at 12:00 noon. (Id.) Unfortunately, the crack in the liner caused the vessel’s fresh water to leak. (Tr. 818; Padayhag Dep. 155.) The crew of the SATURN II could have utilized the fresh-water evaporator to replace the lost fresh water. (Tr. 814.) Captain Padayhag and Chief Engineer Rogelio Santos testified, however, that the ship’s fresh-water evaporator did not function when the vessel was loaded. (Ex. 129, ¶ 6; Ex. 132, ¶ 12.) The SATURN II had to depend on outside sources to replace the lost water. (Id.)
Stavros Trimis testified as to the reason that the cylinder cracked. Mr. Trimis, a former seagoing chief engineer, was the senior surveyor at Evdemon. The underwriters retained Evdemon to inspect the SATURN II after the grounding. (Tr. 777-83.) Mr. Trimis testified that the No. 6 cylinder was afflicted with a condition he termed “excessive ovality.” (Tr. 841, 846.) According to the No. 6 engine cylinder inspection report dated March 26, 2001, the original liner dimension for- the cylinder was 760 millimeters in diameter. (Ex. 116-2; Tr. 847.) Mr. Trimis testified that according to his experience, this kind of engine is allowed a maximum “ovality” (i.e. deviation) of no more than “two per thousand” (i.e. two millimeters for every 1000 millimeters). (Tr. 846.) Mr. Trimis explained that the measurement is the diameter across the cylinder, measured from forward to aft and from port to starboard. (Tr. 847.) On the March 26, 2001 report, seven measurements from seven positions were taken forward-to-aft, and seven were taken from port-to-starboard. (Ex. 116-2.) The measurements from positions 2, 3, and 4 — both forward-to-aft and port-to-starboard — exceeded 762 millimeters. (Ex. 116-2; Tr. 848.)
If Mr. Trimis’s analysis is correct, the walls of the No. 6 cylinder interior had thinned, leading to an increase in interior diameter and the eventual crack. The only problem with this analysis is that there is evidence that Chief Engineer Santos rewrote portions of the March 2001 engine cylinder report (Ex. 116-2) at the behest of MSM. (See infra, Part IV.B.) Mr. Trimis himself testified that Chief Engineer Santos told him as much. (Tr. 823.) Mr. Trimis based his calculations on the March 2001 report. (Tr. 848.) These calculations, therefore, are not entirely reliable. In any event, what is important is not how the cylinder cracked, but that the SATURN II was leaking fresh water as a result of the crack.
The cracked cylinder and the out-of-commission fresh-water evaporator meant that the SATURN II would have to acquire fresh water from an external source. Captain Padayhag testified at deposition that on June 17, 2002, he requested permission from MSM to stop at Trincomalee, Sri Lanka in order to obtain water. (Pa-dayhag Dep. 102.) The owners denied permission on the ground that no fresh water was available in that port, a contention that Captain Padayhag disputes. (Id.) On June 19, 2002, Captain Padayhag requested a stop at Cochin, India for the same reason. (Id.) MSM denied permission on the same ground and additionally because of the SATURN IPs draft. (Id.; Ex. 121.) The SATURN II was out of fresh water by noon on June 23, 2002. (Ex. 121.) Captain Padayhag testified at deposition that MSM was aware of the situation and directed him to proceed to Dahej anyway. (Padayhag Dep. 230, 275.)
C. The Grounding
On June 22, 2002, the time of inception of the H & M policy, the SATURN II was en route to Dahej. Three days later on June 25, 2002, the SATURN II grounded off the west coast of India in the Malacca Banks near the Grant Channel. (S.F. # 37.) This area was in the summer load line zone. (Padayhag Dep. 174.) The blame for the grounding is a complicated matter. Plaintiffs desire the Court to find the owners at fault for ordering Captain Padayhag to take the SATURN II into the Grant Channel despite the overloaded condition of the vessel and the lack of fresh water. Defendants want the blame placed solely at the feet of Captain Padayhag. The Court is inclined to believe the Captain’s testimony that MSM was fully aware of the problems aboard the SATURN II, yet ordered the vessel to proceed. (Pa-dayhag Dep. 230, 275.) Captain Padayhag testified that had he received no instructions, he would not have proceeded. (Id. at 275.)
On the other hand, Defendants’ navigational expert, Captain John Lawrence Ber-gin, criticized some of Captain Padayhag’s decisions once the SATURN II entered the Grant Channel area. Captain Bergin’s criticisms fall into three categories: (1) the SATURN II should not have been in the Western Bank area, which is just southeast of the Grant Channel, (2) the SATURN II got under way too early on June 25, 2002 and (3) Captain Padayhag should have communicated with Chief Engineer Santos to ensure that everything was in working order. (Tr.1983.) The Court disagrees as to (3) because the evidence demonstrates the likelihood that both men knew about the compromised condition of the No. 6 cylinder. Captain Bergin was not aboard the ship, and he is speculating as to the nature of the conversations, if any, between the master and the engineer.
The other two criticisms may have some merit, but they strike the Court as Monday morning quarterbacking. Captain Pa-dayhag was instructed by the local ship’s agent to get under way three hours before high tide at Pipavav, a city on the western bank of the Grant Channel. (Ex. G-15; Tr.1985.) That would have been 12:25 P.M. on June 25, 2002. The SATURN II already was north of Pipavav at that time. Captain Bergin testified that Captain Pa-dayhag should not have been in that shallow area in the first place. (Tr.2005.) Once there, he should have waited an extra hour after 12:25 in order to gain the tide. (Tr.1985.) Instead, the SATURN II lifted anchor at 11:40 A.M. before the water depth had increased. (Tr.1985.) Ten minutes later, Chief Engineer Santos stopped the engine because of the lack of water. The SATURN II thereupon grounded for the first time that day. (Tr.1989.) According to Captain Bergin, the vessel would have run aground even without the engine difficulties because Captain Paday-hag lifted anchor too early.
Chief Engineer Santos testified at deposition that Captain Padayhag never told him about the first grounding. (Santos Dep. 82.) He testified that if he had known, he would have cleaned the mud from the cooling system so that the engine would not overheat. (Id.) The implication is that the Captain Padayhag’s error, not the cracked cylinder, resulted in the engine failure later in the day. The Court discounts Mr. Santos’s testimony. Captain Padayhag testified that the “deck and engine crew immediately mobilized to deal with the [grounding].” (Padayhag Dep. 100.) Captain Padayhag’s scenario is the more likely of the two.
At 12:45 P.M., the tide came in and the vessel floated free. (Tr.1992.) This fact corroborates Captain Bergin’s view that 11:40 was too early for the SATURN II to lift anchor. The SATURN II now had a “mulligan” so to speak. It would be getting under way again within a few minutes of 1:25 P.M., the time that Captain Bergin specified. The SATURN II resumed its northeasterly course toward the Grant Channel until 2:30 P.M., when the engine stopped again. (Tr.1993.) At 2:37 P.M., the SATURN II dropped anchor. (Tr. 1995.) According to Santos’s deposition, the SATURN II was ready to proceed at 5:00 P.M. Nevertheless, Captain Padayhag kept the vessel anchored. At 7:17 P.M., the SATURN II settled solidly onto the bottom near latitude 20°55'N, longitude 71°55'E. (Tr.1997-98; Ex. H-15.)
Given the cracked engine cylinder and the lack of fresh water, the Court is not inclined to second-guess Captain Paday-hag’s decision not to move his ship, despite Chief Engineer Santos’s testimony that the ship was ready to go at 5:00 P.M. Additionally, Captain Padayhag offered undisputed testimony that the currents in the area were “very confusing.” (Paday-hag Dep. 227.) Captain Bergin made no independent effort to determine the force and direction of the wind and seas experienced by the SATURN II on the day of the groundings. (Tr.2027.) Captain Ber-gin also conceded that he had not inspected the SATURN II’s deck logs because of allegations that they had been altered. (Tr.2009.) He relied on the predicted tidal tables but did not perform any calculations to determine whether the predicted tidal data coincided with actual tidal conditions. (Tr.2019-20.) After considering all of the evidence, including the credible testimony of both Captain Padayhag and Captain Bergin, the Court finds that the fault for the grounding lies with the owners and not with Captain Padayhag.
IV. THE AFTERMATH OF THE VOYAGE — THE COVERUP
A. Post-Grounding Communications
After the grounding, Captain Padayhag sent a message to MSM stating: “M/E [main engine] stop due to no more fresh water at M/E — vsl drifted to shallow water and ran aground.” (Ex. 140.) MSM responded: “FYI DON’T ALLEGE TO ANY PARTY THAT REASON FOR GROUNDING IS LACK OF FW [fresh water] AND ADVISE YOUR OFFICERS/ENGINEERS ACCORDINGLY.” (Ex. 140.) MSM further instructed Captain Padayhag not to move and to send the following message to the local agent that had provided the SATURN II with the tidal information: “ADVISE NEXT HIGH TIDE AS AT OUR ANCHORED PSTN THE INDICATED TIDE TABLE INFORMATION YOU PROVIDED U.S. IS INCORRECT AND FOR SAFE NAVIGATION PURPOSES SHALL WAIT FOR NEXT HIGH TIDE.” (Ex. 140 at P 3909.) The Court believes that this message was a directive to the Captain to lie to the local agent. It shows the beginning of an MSM coverup.
The Court does not use the word “coverup” lightly. Other evidence compels this view. Later on June 25, MSM sent a “personal” message to Captain Padayhag which said in part:
AS SEEMS PER DRAFT VSL OVERDRAFT DO DONT DECLARE TO NOBODY YOU HAVE TO READJUST BY DEBALLAST IF ANY ? ? OR YOU HAVE TO DECLARE MAX DRFT 12.85M ... TRY AMEND AND ALL TLX/EMAILS/LOGS SHUD READ NO MORE THAN 12.85M — CNFM BY RETURN AND ALL RELEVANT EMAILS/TLX/DOCS FM COMMENCEMENT OF VOY THROW AWAY.
(Ex. 140 at P 3893; Padayhag Dep. 129-30.) Captain Padayhag responded: “ryt all noted. Draft cannot be readjusted no ballast on board.” (Ex. 140 at P 3894; Padayhag Dep. 131.) MSM further directed Captain Padayhag to advise the local agent that the SATURN II’s maximum draft was only 12.70 meters and to “CORRECT ALL DOCS/LOGS/MSGS IN LINE WITH ABOVE N ALWAYS KEEP LESS THAN MAX SUMMER DRFT.” (Ex. 140 at P 3896; Padayhag Dep. 132.) In the Court’s view, these messages from MSM to the ship are nothing short of damning on the draft issue. They show conclusively that MSM knew that the vessel was overloaded when it proceeded toward the Grant Channel.
On June 26, 2002, in a “personal n confidential” message, MSM directed Captain Padayhag: “WHEN DARK DISCH ABT 150 MT AT SEA W/OUT BEING NOTICED — THEN TRIM SURFACE AND CLEAN DECK.” (Ex. 140 at P 3905; Pa-dayhag Dep. 135-36.) Captain Padayhag testified that Gerassimos Christodoulatos, Nikos’s father, gave him similar instructions over the phone. (Padayhag Dep. 49-50.) On June 27, MSM instructed Captain Padayhag to send a message to the local agent stating “VSL HAS NOT ANY ENGINE PROBLEM FM THE TIME VSL ARRIVED AND ANCHORED” and further instructed “FM NOW ON DON’T CNFM BACK OUR MSGS N WHEN U SEND MSG DON’T REF TO OUR LAST IE. ‘RYL’ OR ‘RYT’ ETC JUST ONLY SAY WHAT YOU HAVE TO SAY.” (Ex. 140 at P 3905; Padayhag Dep. 137-38.) Following MSM’s instructions, Captain Pa-dayhag discharged cargo over the side and discarded some, but not all, of the SATURN II’s documents. (Padayhag Dep. 129-36.)
B. Altered Documents and the Destroyed Computer
Mr. Petsinis, then the crew manager at MSM, arrived at the grounded ship on July 2, 2002, ten days before the salvor, Tsavliris Russ Limited, refloated it. (Tr. 1429, 1433.) This visit lasted until the middle or end of August. (Tr. 1434.) Michael Petrakakos, MSM’s technical consultant, also was on board at various times during this period. (Tr. 548, 982, 993, 1368-69, 1552, 1556.) These two gentlemen continued the coverup. Mr. Petsinis burned the original deck and engine logbooks of the SATURN II, together with other ship documents including incoming and outgoing telexes, emails and faxes, bell books, loading plans and voyage documents in Captain Padayhag’s files, and monthly maintenance reports prepared by the ship’s engineers. (Ex. 123 at P 3392; Ex. 129 at P 3623; Ex. 131 at P 3736; Ex. 120-2; Ex. 155 (Santos Dep. (9/25/03) 199, 206 (9/26/03) 38-39, 45); Padayhag Dep. 20-21, 30-31, 57-58, 82-83, 106; Tr. 792-97, 800-02, 808, 823-24, 898, 940-41.) Mr. Petsinis also removed parts from the SATURN II’s computer, which was used to calculate load, ballast and strength conditions for the vessel. (Ex. 129 at P 3622; Ex. 120-3 (photograph of disassembled computer); Ex. 120-4 (same); Padayhag Dep. 53; Tr. 811.) It does not take a genius to figure out Mr. Petsinis’s motive for destroying the computer. Most of the written communications between MSM and the SATURN II were by email. (Tr. 806-07,1408-10.)
Captain Padayhag testified several times at deposition that Mr. Petsinis instructed him to rewrite the SATURN II’s deck log. (Padayhag Dep. 24-25, 28-29, 44; Ex. 129.) Captain Padayhag said the same thing in his master’s report of August 21, 2002, written while he was still aboard the ship. (Ex. 123.) The Captain also testified that Mr. Petsinis instructed Chief Engineer Santos to rewrite the SATURN II’s engine log. (Padayhag Dep. 29-31.) Mr. Santos confirmed Captain Padayhag’s testimony on this point. (Ex. 130.) Mr. Trimis also offered testimony to this effect. He testified that he went to the MSM offices in August 2002 and that Gerassimos Christodoulatos gave him one deck logbook and three engine logbooks for inspection. (Tr. 784-86.) They were represented as originals, but they were written in pencil and not in ink Mr. Trimis expected. (Tr. 786-87, 789, 791.) Later in 2002, Mr. Trimis went to the Philippines and spoke to certain crew members of the SATURN II who had been repatriated. (Tr. 792.) Some of those individuals informed him that original ship documents had been destroyed and logbooks fabricated. (Tr. 793.) When Mr. Trimis boarded the SATURN II in December 2002 with copies of the “original” ship’s log, Captain Padayhag told him that the true original differed from those copies. (Tr. 794.) Captain Padayhag also told Mr. Trimis that Mr. Petsinis had burned certain documents. (Tr. 794-96.) On the same visit, Chief Engineer Santos told Mr. Trimis that the original logbooks differed from his copies and that Mr. Petsinis had taken the originals. (Tr. 796-97, 799; Ex. 106.)
Other documents were altered or destroyed. Chief Engineer Santos stated in his, affidavit that Messrs. Petsinis and Petrakakos instructed him to retype the SATURN II’s monthly maintenance reports and to delete entries in those reports which identified certain problems with the vessel’s machinery. (Ex. 130 at P 3736.) Mr. Trimis testified that Santos told him the same thing. (Tr. 821.) Mr. Petsinis also instructed Santos to rewrite the “Monthly Running Hours Report” for all months after November 2001 and rewrite the engine bell book in order to change entries that referenced the grounding. (Ex. 130 at P 3737.) Captain Padayhag stated that Mr. Petsinis destroyed the original bell book. (Padayhag Dep. 183-84.) Finally, Santos created an “M.E. Cylinder Inspection Report,” dated March 26, 2001, for the No. 6 cylinder of the main engine. (Ex. 131 at P 3737) Mr. Petra-kakos told Santos what to put in the document. The measurements of the liner were not actual measurements, but those fabricated by Mr. Petrakakos. (Id.) Santos told all of the foregoing to Mr. Trimis while Mr. Trimis was aboard the SATURN II. (Tr. 821-23.) According to Captain Padayhag, Messrs. Petsinis and Petraka-kos took the rewritten deck log when they disembarked from the SATURN II in August 2002. (Ex. 129 at P 3624.) Chief Engineer Santos testified at deposition that he gave Mr. Petsinis the original and rewritten versions of the engine log. (Santos Dep. 206-07.)
C. The Bag and the Envelope
Mr. Petsinis testified that Captain Pa-dayhag gave him a sealed plastic envelope to be delivered to the MSM office. (Tr. 1497.) Mr. Petsinis says that he put this envelope in his bag with some of his personal effects. (Tr. 1497-98.) On his way back to Greece, Mr. Petsinis checked the bag with the airline. (Tr. 1498.) When he arrived back in Greece, he went directly to the MSM office. (Tr. 1500.) Mr. Petsinis testified on direct that upon opening the bag, he discovered that the envelope had been unsealed and that some of his personal items were missing. (Tr. 1501.) On cross, however, he testified that he left the bag with “someone” at the office, but he could not remember whom. (Tr. 1640.) More importantly, he testified that he did not open the bag. (Id.) When the Court pressed him on the inconsistency, Mr. Pet-sinis claimed that he learned the next day that two logbooks were missing from the envelope, but he did not remember who told him. (Tr. 1646, 1649.) He had testified on direct, however, that Mr. Moun-dreas or Nikos Christodoulatos told him that some logbooks from the SATURN II were in the envelope. (Tr. 1505-06.)
Mr. Moundreas’s version of the same events varies from Mr. Petsinis’s story. Mr. Moundreas testified that he and Nikos Christodoulatos had given instructions to Mr. Petsinis before his trip to the SATURN II. (Tr. 1849.) They told Mr. Petsin-is “to tell the captain to collect all of the documents which I reference [sic] from that trip of China to India, and to bring it back to us.” (Tr. 1850.) Mr. Moundreas testified that when Mr. Petsinis returned, he left a pile of documents on a secretary’s desk. (Tr. 1851.) This testimony contradicts Mr. Petsinis’s claim that he never opened the bag. Mr. Moundreas testified rather incredibly that he never looked at the documents and that he did not know to whom the secretary gave them. (Tr. 1852.) He then testified that Mr. Petsinis told him which documents were in the pile (Tr. 1854-55.) This is inconsistent with Mr. Petsinis’s testimony.
Nikos Christodoulatos’s testimony on this subject is no more illuminating. When asked how MSM came into possession of the deck log and engine log (Exhibits 104 and 106), Mr. Christodoulatos guessed as to the former that the ship sent it, and could not remember as to the latter. (Tr. 1412.) He also testified that these were not the original deck and engine logs and that he did not know what happened to the originals. (Tr. 1411.) He also could not explain why MSM did not send the original deck log and engine log to HBI for forwarding to the underwriters. (Tr. 1414.) He claimed only that he sent the logs that MSM had in possession. (Tr. 1414.) Chief Engineer Santos testified at deposition that he did not know what happened to the original engine log, but later he said he gave it to Mr. Petsinis along with the re-written log. (Ex. 151 at 199— 206.)
The only thing that the Court can say for sure about the SATURN II’s books and documents is that they are hopelessly compromised as a result of defendants’ actions. If defendants intended to confuse the post-grounding investigation, they more than succeeded.
D. The Abandonment and Scrapping of the SATURN II
Mr. Petsinis testified that he arrived back in Athens, Greece on August 25, 2002. (Tr. 1612.) The Court will give Mr. Pet-sinis the benefit of the doubt on that statement. Before Mr. Petsinis’s return, MSM, on behalf of Endeavour, notified the plaintiff insurers that Endeavour was abandoning the SATURN II and claiming her insured value. (S.F.# 42.) In the notice of abandonment, dated August 8, 2002, MSM stated in part:
According to our various messages, we believe the vessel’s hull structure has sustained permanent longitudinal and transverse deformation whilst the bottom plating starboard side ... is damaged severely and far more extensively than anticipated.
In view of the foregoing, we concur with owner’s consultant opinion that repairs in order to restore the vessel in her original condition as before the casualty are not viable as the cost and ancillary expenditures shall exceed insured value.
(Ex. 47.) The last sentence indicated MSM’s belief that the SATURN II was a constructive total loss (“CTL”) under the policy. In August 2002, the salvor, cargo receiver and others arrested the SATURN II in India. (S.F. #47.)
V. THE INSURERS’ INVESTIGATION
A. Assessment of the Damage
AI Marine investigated the SATURN II insurance claim on behalf of all plaintiff insurers. (S.F.# 43.) The claims handler responsible for the file was Vincent Cor-teselli. (Tr. 952.) Mr. Corteselli sent MSM and Endeavour a reservation of rights letter dated August 19, 2002. (Ex. 49; Tr. 953, 1099-1100.) He informed MSM and Endeavour that the insurers would investigate whether the H & M policy was void ab initio because facts material to the risk were not disclosed during placement of the policy, or because the SATURN II was unseaworthy at the inception of the policy. (Ex. 49.) In addition, the insurers intended to investigate whether the SATURN II was unseaworthy when the voyage at issue commenced. (Ex. 49.) The letter requested that MSM and Endeavour provide documents such as the deck and engine logbooks and maintenance records. (Ex. 49.) The insurers also declined MSM’s August 8, 2002 notice of abandonment, thereby putting MSM and Endeavour on notice that they remained responsible for the SATURN II. (Ex. 49; Tr. 953-54.)
On the same day, August 19, 2002, Mr. Corteselli faxed a letter informing MSM’s broker, HBI, that the insurers had approved Endeavour’s retention of the English law firm Clyde & Co. (Piraeus, Greece office) on the salvage issue. (Ex. D-17; Tr. 418, 954-55, 1211.) Clyde & Co. had agreed to represent Endeavour subject to the insurers’ approval of the retention and guarantee of payment. (Ex. 102; Tr. 418-20, 426-27, 434, 443-44.) In the same communication, Mr. Corteselli confirmed the appointment of the Salvage Association, an H & M surveying firm, to assess the damage to the SATURN II. (Ex. D-17; Tr. 525, 529.) He also indicated that AI Marine had appointed the London law firm of Waltons & Morse (“Wal-tons”) to act on behalf of the underwriters with respect to unseaworthiness and the issue of whether the policy was void ab initio. (Ex. D-17; Tr. 955.) Finally, Mr. Corteselli notified HBI that the underwriters would appoint Evdemon (Mr. Trimis’s firm) to assist Waltons in its inquiry. (Ex. D-17; Tr. 783, 955.)
As part of the investigation, William Johnstone, a principal surveyor with the Salvage Association, visited the SATURN II on three occasions: August 20, 2002, October 14, 2002 and January 13-14, 2003. (Tr. 525, 531-32, 956-57.) The SATURN II was loaded with its coal cargo for Mr. Johnstone’s first two trips. The cargo was discharged before the third. (Tr. 561.) During the first visit, Mr. Johnstone inspected the vessel with Mr. Petsinis and Mr. Petrakakos, who showed Mr. John-stone the damaged areas. (Tr. 532-34.) Messrs. Johnstone and Petrakakos signed a joint Field Survey Report setting forth their joint findings on a without-prejudice basis. (Ex. 83; Tr. 534-38.) Mr. John-stone prepared a typed version of that report, titled “Advice No. 7.” He shared the report with Mr. Corteselli. (Ex. 84; Tr. 539, 957.) Mr. Corteselli testified that even though the Advice was titled “No. 7,” it was the first time that AI Marine had received firsthand information from a witness who had been aboard the SATURN II. (Tr. 957.)
As was clear from their notice of abandonment, the owners were claiming that the SATURN II was a CTL. Mr. Cortesel-li found the information in the Advice significant because it did not support the owners’ CTL claim. (Tr. 957-58.) Mr. Johnstone commented in the Advice:
The owners have claimed that the vessel is twisted. Their evidence appears to show this is the case, however it is based on freeboard readings taken on location where it is unlikely to be calm enough to give truly accurate readings. Also as the vessel is heavily loaded this may influence readings. Further evidence of twisting/hogging sagging is necessary, either in drydock or in calm location.
(Ex. 84 at P 0065.) In a subsequent report dated August 28, 2002, Mr. John-stone stated as follows:
The owne