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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

ACE AMERICAN INSURANCE COMPANY v. EWING et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
3:14-cv-00036 Search Pacer
Court Type: 
Federal
US District Court: 
Middle District of Tennessee

General Allegations about Insurance Application and Policy
8. From July 27, 2012 until its rescission on or about May 28, 2013, ACE provided
marine insurance coverage to Sabin Ewing under a Yachtsman Policy of Insurance (hereinafter
"the Policy"). A true and correct copy of the Policy is attached hereto as Exhibit 1. The Policy
attached as Exhibit 1 provided marine insurance coverage to Sabin Ewing and a 2008 110'
Sunstar Houseboat with Hull Identification Number SNS00256C808 (hereinafter referred to as
"the Vessel") for the periods July 24, 2013 to July 27, 2013, Policy Number YKR Y 08522327.
9. First & Farmers was named as a Loss Payee on the Policy's Declarations Page.
10. On or about August 11, 2009, Sabin submitted to ACE an application for marine
insurance coverage for the Vessel. A true and correct copy of the application is attached hereto
as Exhibit 2.
11. In this application, Ewing represented the following:
INSURED INFORMATION
Policy to be Issued in the Name of:
Dr. Sabin Ewing
Address:
739 Presidents Place Ste 210
City:
Smyrna
OWNER/OPERATOR INFORMATION
Primary Owner's SSN
XXX-XX
Owner's E-mail Address
sabinewine(3>,vahoo.com
Primary Owner/Beneficial
Owner's Occupation:
Orthodontist
12. In this application, Ewing further acknowledged as follows:
Fraud Statement: Any person who knowingly and with intent to defraud any
insurance company or another person files an application for insurance containing
any materially false information, or conceals for the purposes of misleading,
information concerning a fact material thereto, commits a fraudulent insurance
act, which is a crime and subjects the person to criminal and [NY: substantial]
civil penalties.
Applicant's Statement: I certify that to the best of my knowledge all statements
on this application are true. I understand and agree that the company may obtain
from third parties information regarding me, my watercraft, and listed operators,
including driving records, financial credit information and prior claims
information. I understand that I have the right of access and correction with
respect to all such information collected and that the company will provide further
information regarding my statutory rights upon request.
13. As part of this application, Sabin Ewing also submitted an "Assignment and
Assumption of Contract" dated July 13, 2009 which listed Randall Cross as the "Assignor" and
Crotts Trust as the "Assignee." A true and correct copy of the Assignment and Assumption of
Contract dated July 13, 2009 (hereinafter "the Contract") is annexed hereto as Exhibit 3.
14. The Contract states, inter alia, as follows:
. .. Assignee will pay $497,000.00 cash to Assignor. Additionally, the Assignee
will assume the current primary lean [sic] holder's note of the Assignor in the
amount of $448,000.00 with First and Farmers Bank out of Kentucky. It is
understood that the duration of the note is 20 years and payments of $3,509.00 are
due at the first of each month.
15. The Contract further states, inter alia, as follows:
Assignor hereby irrevocably conveys, transfers, sets over and assigns to Assignee
(the "Assignment"), and its successors and assignees, all of the Assignor's right,
title and interest in and to the Houseboat and its contents and all benefits arising
thereunder or therefrom, such Assignment to take effect on the Assignment date
(as herein defined).
16. Sabin Ewing also submitted to ACE a "Laying Up Afloat Questionnaire" dated
May 24, 2010, annexed hereto as Exhibit 4, in which he made the following representation:
Question 5: Does location provide for daily inspection of the yacht to prevent
sinking or damage from leaking and weight of snow or ice?
Answer: YES
17. In response to and reliance upon the information, documentation, and
representations presented by Sabin Ewing, ACE issued a certain policy of marine insurance
pursuant to the following terms and conditions:
The Named Insured Under This Policy:
Dr Sabin Ewing
Address:
739 Presidents Place Ste 210
Smyrna, TN 37167
PART A: PROPERTY DAMAGE COVERAGE
EXCLUSIONS: We do not provide coverage under PART A: PROPERTY
DAMAGE COVERAGE for any loss or resulting damage from:
a. wear and tear, gradual deterioration, weathering, neglect, lack of reasonable
care or due diligence in the maintenance of the Insured Vessel;
GENERAL CONDITIONS AND EXCLUSIONS
CHOICE OF LAW/CONFORMITY OF STATE LAW: This Policy shall be
construed in accordance with the General Maritime Law or Admiralty Rule.
If no General Maritime Law or Admiralty Rule applies, the law of the State
appearing in your address as contained upon the Declarations Page will apply
without regard to the conflict of laws provisions thereof....
PRIVATE PLEASURE USE ONLY: This policy only provides coverage while
the Insured Vessel is used for private pleasure purposes. However, this
limitation on use does not apply while you are operating or using the Insured
Vessel to entertain business associates or clients or other types of use wherein no
monetary or other directly related remuneration is received by you in relation to
operation or use of the Insured Vessel.
LAY-UP WARRANTY: It is expressly warranted by you that the Insured Vessel
will be in Lay-up and out of commission for the period of time shown on the
Declarations. During the Lay-up period, the
CONCEALMENT, MISREPRESENTATION OR FRAUD: All coverage
provided by us will be voided from the beginning of the Policy Period in any case
of fraud by you. It is also void if you conceal or misrepresent any material
fact or circumstance relating to this contract of insurance, or the application
for such insurance, whether before or after a loss.
DISHONEST, ILLEGAL OR INTENTIONAL ACTS: We do not pay for loss or
damage caused by the dishonest, illegal or intentional acts of any Covered Person,
or any person to whom the Insured Vessel is entrusted, regardless of whether or
not such person is convicted of such an act by a criminal court.
PAYMENT OF LOSS: We will pay for any claim of covered Property Damage
or damage to Person Property you incur under this policy to the Named Insured,
and any loss payee . . . .
However:
c. the loss payee's rights are no greater than those of the Named
Insured under this Contract.
(emphasis added).
18. The Policy attached on or about July 27, 2009 and was renewed annually until the
Policy at issue, which was in force from July 27,2012 thru July 27,2013.
Sabin Ewing's Lawsuit against TN Department of Revenue
19. On or about December 17, 2010, Sabin Ewing filed suit in the Chancery Court for
the State of Tennessee against Charles Trost, the Commission of Revenue for the State of
Tennessee in order to prevent the Department of Revenue from collecting sales and use taxes in
connection with his alleged purchase of the Vessel. In this lawsuit, Sabin Ewing submitted into
evidence a letter from First & Farmers dated June 21, 2010, a true and correct copy of which is
annexed hereto as Exhibit 5, which states, inter alia, as follows:
First & Farmers National Bank, Inc. has not provided permission to allow the
transfer of the [Houseboat] to the Crotts Trust via re-documentation with the
United States Coast Guard, and no bill of sale has been executed to the bank's
knowledge. In order for the transfer to occur, the bank must agree to the transfer
and note same as documented with the United States Coast Guard. An
assumption of the note by the trust was rejected, and for the bank to agree to the
transfer it will require Mr. Ewing to guarantee the note. He has refused to do so
at this time.
As it stands today, and according to the bank's documentation, Mr. Crotts
continues to be the sole owner of the [Houseboat]. Our understanding is the
Crotts Trust has taken possession of the [Houseboat] and its beneficiary, Sabin
Ewing, is making monthly mortgage payments on behalf of Mr. Crotts.
Negotiations regarding the guarantee of the note, and possible alternative
financing with Mr. Ewing and the Trustee of the Trust, M. Ben Moore, II, are
ongoing.
(emphasis added).
20. Sabin Ewing testified under oath that Randall Crotts never conveyed title for the
Vessel as represented in the Contract. Sabin Ewing further testified that he requested First &
Farmers convey title but that First & Farmers refused to do so unless he agreed to be personally
responsible for the promissory note on the Vessel. Since Sabin Ewing never agreed to be
personally liable on the promissory note, First & Farmers never conveyed title.
21. Sabin Ewing never disclosed the true nature of the Vessel's ownership and title to
ACE.
22. First & Farmers knew Sabin Ewing did not own or possess title to the Vessel, and
knew or should have known that this type of information must be disclosed to ACE as the marine
insurer for the risk at issue.
23. In the lawsuit against the Tennessee Department of Revenue, Sabin Ewing
submitted into evidence another Assignment and Assumption Contract which substantially
differed from the version presented to ACE. A tme and correct copy of this second version of
the Contract is annexed hereto as Exhibit 6. In this second version of the Contract, Sabin Ewing
agreed to: (a) assume the Promissory Note of $448,000; (b) assume the outstanding tax lien of
approximately $35,000 on the Houseboat; (c) make a payment of only $10,000 to Fire &
Farmers to bring the note current; (d) provide dental care for Mr. Crotts; and (e) make monthly
payments of $200 to Mr. Crotts for a period of sixty (60) months.
24. Sabin Ewing also submitted into evidence an affidavit which states that the fair
market value of the Vessel was $420,000.00. A true and correct copy of the affidavit is annexed
hereto as Exhibit 7. Upon information and belief, the $420,000.00 figure was a depreciated
amount based upon the amount of consideration set forth in the second version of the Contract
(Exhibit 6), and was not reasonably related to the $945,000 figure submitted to ACE as part of
his insurance application (Exhibit 3).
25. In summary, Sabin Ewing represented that he was the owner of the Vessel and
that he had paid consideration of $945,000 for the Vessel when he applied for marine insurance
coverage with ACE. See Exhibits 2 and 3. In connection with his litigation with the Tennessee
Department of Revenue, Sabin Ewing represented that paid only $448,000 for the Vessel and
that title had never passed from Mr. Crotts, and that for the purposes of vessel registration with
the U.S. Coast Guard, Mr. Crotts remained as the owner of the Vessel, not Sabin Ewing. See
Exhibits 5, 6, and 7.
26. First & Farmers participated in, contributed to, and/or caused these
misrepresentations which materially affected the risk undertaken by ACE by knowingly rejecting
Sabin Ewing's request to transfer ownership or convey title to the Vessel.
The January 16,2013 Sinking of the Vessel
27. On or about January 16, 2013, the Vessel sank at its mooring at Cedar Creek
Marina, located at 9120 Saundersville Road, Mount Juliet, Tennessee 37211. The water around
the Vessel was reported to be calm, with no wind or other adverse weather noted at the time of
sinking.
28. ACE appointed surveyors to inspect the Vessel after the sinking and its surveyors
discovered that none of the three (3) bilge pumps aboard the Vessel were properly operating. All
of the bilge pumps had different operational settings and were supposed to be fully operational
under either shore or battery power.
29. The lack of fully operational bilge pumps caused the Vessel to be unseaworthy.
30. Sabin Ewing failed to inspect or maintain the Vessel or any of its onboard
equipment, including but not limited to its bilge pumps. Sabin Ewing did not repair all of the
Vessel's bilge pumps or ensure that they were fully operational.
31. Sabin Ewing's failure to institute any inspection or maintenance program with
respect to the Vessel's onboard equipment caused the Vessel to be unseaworthy.
32. The Vessel also had four (4) holes drilled into one of two (2) watertight bulklieads
on the lower level. The purpose of the Vessel's watertight bulklieads was to prevent flooding
from spreading throughout the entire lower level, and maintain the Vessel's buoyancy. Four (4)
holes drilled into one of the two (2) supposedly watertight bulkheads subverted the very purpose
and design of the Vessel's lower level.
33. All of the holes in the watertight bulkhead were clearly observable through a
simple visual inspection of the lower level.
34. The drilling of holes in one of two (2) watertight bulkheads in the lower level
caused the Vessel to be unseaworthy.
35. Sabin Ewing failed to inspect or maintain the Vessel's lower level, including but
not limited to the watertight bulkheads. No attempt was ever made by Sabin Ewing to plug the
holes or repair the bulkhead.
36. Sabin Ewing's failure to institute any inspection or maintenance program with
respect to the Vessel's lower level caused the Vessel to be unseaworthy.
37. With respect to the Vessel's lay-up, Sabin Ewing did not arrange for a daily
inspection of the Vessel, contrary to his representations in the ACE Laying-up Afloat
Questionnaire. See Exhibit 4. In the Questionnaire, Sabin Ewing represented that the local
marina would conduct daily inspections of the Vessel. Sabin Ewing never instructed the local
marina to conduct daily inspections of any kind, and he or his agents did not perform daily
inspections while the Vessel was laid up.
38. Sabin Ewing misrepresented the conditions of lay-up to ACE, and his failure to
inspect the Vessel while laid up constitutes unseaworthiness.
39. Subsequent to the Vessel's sinking, ACE learned that Sabin Ewing did not
purchase the Vessel for his personal use. Sabin Ewing rarely, if ever, operated the Vessel for his
personal use. Instead, Sabin Ewing purchased the Vessel in order to resell it at a substantial
profit. The only time the Vessel was ever operated was to show it to prospective buyers.
40. Sabin Ewing never disclosed to ACE that he intended to use the Vessel for a
commercial purpose, rather than a personal, purpose.
41. Sabin Ewing breached his duty of utmost good faith, or ubberimae fidea, by
failing to fully and voluntarily disclosing to ACE all facts material to the risk, whether or not
inquired into by ACE.
42. Sabin Ewing misrepresented the Vessel's true ownership to ACE.
43. Sabin Ewing misrepresented the Vessel's title to ACE.
44. Sabin Ewing misrepresented the Vessel's commercial usage to ACE.
45. Sabin Ewing misrepresented the Vessel's valuation to ACE.
46. Sabin Ewing misrepresented that the Vessel would be inspected daily in ACE's
Laying-up Afloat Questionnaire.
47. Based upon various misrepresentations made by Sabin Ewing, the Policy is void
ab initio.
48. Based upon the various material misrepresentations made by Sabin Ewing, the
Policy is void ab initio.
49. Sabin Ewing breached the Vessel's implied warranty of seaworthiness.
50. Based upon Sabin Ewing's breach of the Vessel's implied warranty of
seaworthiness, the Policy is void ab initio.
51. The claims by Sabin Ewing are expressly excluded under the Policy.
52. Sabin Ewing failed to comply with the conditions of the Policy.
53. Sabin Ewing failed to comply with the implied and express warranties of the
Policy.
54. First & Farmers participated in the misrepresentations concerning ownership or
title to the Vessel because First & Farmers refused Sabin Ewing's request to transfer title from
Randall Crotts. See Exhibit 5.
55. First & Farmers contributed to the misrepresentations concerning ownership or
title to the Vessel because First & Farmers refused Sabin Ewing's request to transfer title from
Randall Cross. See Exhibit 5.
56. First & Farmers caused the misrepresentations concerning ownership or title to
the Vessel because First & Farmers refused Sabin Ewing's request to transfer title from Randall
Crotts. See Exhibit 5.
57. The misrepresentations described herein were made with the actual intent to
deceive and/or such misrepresentation increased the risk of loss to ACE. Therefore, such
misrepresentations were material, and ACE is entitled to have the Policy declared void ab initio,
and/or rescinded.
58. First & Farmers' rights are no greater than Sabin Ewing under the Policy.
59. The claims by First & Farmers are expressly excluded under the Policy.
60. ACE has no obligation to cover claims by Sabin Ewing under the Policy.
61. ACE has no obligation to cover claims by Crotts Trust under the Policy.
62. ACE has no obligation to cover claims by First & Farmers under the Policy.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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