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

ACE AMERICAN INSURANCE COMPANY v. PUCCIO

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: 
1:15-cv-10262 Search Pacer
ACE Group party(s): 
Court Type: 
Federal
US District Court: 
Massachusetts District Court
Date Filed: 
Feb 4 2015

PETITION TO VACATE ARBITRATION AWARD  
Now comes the Petitioner, Ace American Insurance Company [hereinafter
“ACE”], in the above captioned matter, by and through its undersigned counsel,
Clinton & Muzyka, P.C., and files its Petition to Vacate Arbitration Award granted
to the Respondent, John P. Puccio.   
The Petitioner respectfully moves this Honorable Court to vacate the
Arbitration Award granted to the Respondent by a single arbitrator at American
Arbitration Association.   
Alternatively, this Honorable Court should modify or correct the Award to
the Respondent because the Award was issued on grounds that were never
submitted for the Arbitrator’s decision.
 
PARTIES
1. ACE is a member of the ACE Group and it is duly organized and existing under
the laws of the Commonwealth of Pennsylvania with a usual place of business at
436 Walnut Street, Philadelphia, PA 19106 and at all material times herein was
and now is engaged in insuring marine risks and issuing marine liability and
property insurance policies.
2. Respondent, John P. Puccio, is an individual residing at 15 Osprey Drive,
Berkley, Massachusetts 02779 and at all material times herein owned a 26’,
fiberglass, 1998 Glacier Bay 260 Canyon Runner power boat [hereinafter “the
Vessel”].

JURISDICTION
3. This Honorable Court has jurisdiction to entertain this action pursuant to 9
U.S.C.A. § 1 as the controversy arises out of a maritime contract and under the
Federal General Maritime Law of the United States.
4. The jurisdiction of this Court is based upon and within the Admiralty and
Maritime Jurisdiction and of the United States District Court pursuant to 28
U.S.C. 1333 and as hereinafter more fully appears, is an admiralty and maritime
nature within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure.
5. The jurisdiction of this Court is also based upon and within Subject Matter
Jurisdiction of the United States District Court pursuant to 28 U.S.C. 1332 and
process under the Rules of Civil Procedure for the United States District Courts.
6. Venue is proper in the United States District Court for the District of
Massachusetts pursuant to 9 U.S.C. 10(a) because the award was made
following a hearing in Fall River, Massachusetts and because this maritime
action constituting the civil claim arose within this Judicial District.

FACTS AND CLAIMS FOR RELIEF
7. On September 8, 2012, ACE issued an insurance policy covering loss of the
Vessel pursuant to a Yachtman/Boatsman Policy, Policy No. YAR Y08235387
[hereinafter “the Policy”].  See Affidavit of Terence G. Kenneally., Esq. attached
hereto as Exhibit 1 and a copy of the Policy and its Declaration Page attached
thereto as Exhibit A.
8. The Policy provides property coverage under Part A, Property Damage
Coverage as follows:
PERILS INSURED AGAINST: We will pay for Property Damage to the
Insured Vessel caused by an Occurrence as well as Protection Against
Loss and Salvage charges, except as excluded in this policy or by
endorsement.
VALUATION: The amount shown on the Declarations Page or
endorsements of this policy for PART A: PROPERTY DAMAGE
COVERAGE represents the agreed value of the Insured Vessel. This is
the maximum amount we will pay in the event of a covered loss for
Property Damage to the Insured Vessel.
9. Under the Policy’s Exclusions,  the contract excludes coverage under Part A,
Property Damage Coverage, for any loss or resulting damage from:
i. wear and tear, gradual deterioration, weathering, neglect, lack
of reasonable care or due diligence in the maintenance of the
Insured Vessel…
[hereinafter “the wear and tear exclusion”].   
See Page 2 of Policy.
 
10. The Policy contains an Arbitration Clause that provides as follows:
ARBITRATION: Any controversy or claim, whether based on contract,
tort, statute or other legal or equitable theory (including but not limited
to any claim of fraud, misrepresentation or fraudulent inducement,
arising out of or related to this policy, the interpretation, enforcement,
or breach thereof, or the handling of any claim involving this policy),
shall be referred to and settled by arbitration in accordance with the
then current CPR Institute for Dispute Resolution Rules for Non-
Administered Arbitration and this provision.
The arbitration shall be governed by the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards,
implemented at if U.S.C. §§ 201-208, or if said Convention shall be
held not to be applicable, by the United States Arbitration Act, 9 U.S. C.
§§1-16, to the exclusion of any provision of state or other law
inconsistent therewith or which would produce a different result, and
judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction The arbitration shall be held in the State
appearing in your address as contained upon the Declarations Page
and in accordance  with the following procedure:
a. You and we will agree on a single arbitrator to decide the dispute,
whose fee will be paid fifty percent (50%) by you and US.
b. If you and we are unable to agree on a single arbitrator, you and
we will each appoint an arbitrator and those two (2) arbitrators will
appoint a third arbitrator. The three (3) arbitrators will decide the
dispute by a majority vote. You will pay the fee of the arbitrator
that you appoint and we will pay the fee of the arbitrator that we
appoint. You and we will each pay fifty percent (50%) of the fee
charged by the third arbitrator;
c. You and we will each pay fifty percent (50%) of the fee charged by
the American Arbitration Association to coordinate the arbitration;
d. The request for arbitration must be filed within one (1) year of the
date of loss or damage; and we may arbitrate the amount of your
loss or damage without waiving our right to determine coverage or
a lack of coverage for the loss.
 
11. During the boating season, the Respondent moors the Vessel uncovered at a
dock situated behind his home on the Assonet River in Berkley, Massachusetts.
12. On Tuesday, September 4, 2012, the U.S. National Weather Service’ Daily
Summary for its station at the Taunton Municipal Airport in Taunton,
Massachusetts recorded.31 inches of rainfall.  
13. On Wednesday, September 5, 2012, the U.S. National Weather Service’ Daily
Summary for its station at the Taunton Municipal Airport in Taunton,
Massachusetts recorded 3.45 inches of rainfall.
14. According to weather records submitted to ACE by the Respondent’s insurance
agent, winds recorded at the Taunton Municipal Airport were steady from the
South Southwest at 7 mph with maximum wind speed reaching 15 mph. and
gusting to 25 mph.  
15. On Thursday, September 6, 2012, the Respondent traveled to Winthrop,
Massachusetts for the weekend.   
16. On or about Saturday, September 8, 2012, the Vessel sank while it was moored
at the dock located behind the Respondent’s home in Berkley, Massachusetts.
17. On Monday, September 10, 2012, the Respondent’s neighbor contacted him
advising that the Vessel’s sank at the dock.
18. On September 10, 2012, the Respondent’s insurance agent faxed a Property
Loss Notice to ACE, which stated in pertinent part:
Ins. notified that boat had sunk overnite [sic].  Boat has 170 gall of fuel
onboard and to be lifted from water. Mon 9/10 by Borden Light Marina
Contracting, Inc. and towed to Borden Light Marina for repairs.  
Unknown reason for lifting as all new pumps and battery backups
installed over the summer.
 
19. Upon receipt of the Property Loss Notice, ACE assigned Claim No.
JY12J0449625 to the loss and its investigation to its Claims Director, R.
Michael Burns, to manage and investigate the claim.
20. ACE’s Claims Director immediately assigned a marine surveyor to investigate
the loss and determine the cause of the Vessel’s sinking and the scope of its
damage.
21. On September 11, 2012, the marine surveyor traveled to Borden Light Marina in
Fall River, Massachusetts and inspected the Vessel.  During this inspection, the
surveyor obtained numerous photographs.   
22. On September 13, 2012, ACE’s Claims Director sent a Reservation of Rights
Letter to the Respondent which stated, in pertinent part:
On September 10, 2012 we received notice of a loss that was reported to
have occurred on or about September 10, 2012, which involved the
sinking of your vessel from an undetermined cause.
Due to the nature of the loss, this matter will be handled under a
complete Reservation of Rights under the terms and conditions of the
policy. Please refer to the Yachtsman/Boatsman Policy on page 4,
under:
PERILS INSURED AGAINST: We will pay for Property Damage to
the Insured Vessel caused by an Occurrence as well as Protection
Against Loss and Salvage charges, except as excluded in this policy or
by endorsement.
VALUATION: The amount shown on the Declarations Page or
endorsements of this policy for PART A: PROPERTY DAMAGE
COVERAGE represents the agreed value of the Insured Vessel. This is
the maximum amount we will pay in the event of a covered loss for
Property Damage to the Insured Vessel.
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;
b. insects, animals or marine life; however Property Damage
coverage is provided for:
i. engines, generators, or pumps due to the attachment of zebra
mussels;
ii. collision with marine mammals;
iii. muskrats or sea lions when their actions result in the sinking or
submersion of the Insured Vessel;
c. marring, scratching or denting;
d. osmosis or blistering;
e. manufacturing defect(s) or manufacturer's defect(s) in design;
f. a Latent Defect; however, resulting damage caused by a Latent
Defect is covered;
g. corrosion, except electrolytic (stray current) corrosion;
h. transportation onboard a cargo vessel or during loading or
unloading, excepting a passenger/car ferry used as a means of
conveyance while the Insured Vessel is upon a trailer owned by
you;  
i. Fungi, bacteria and the abating, testing for, monitoring, cleaning
up, removing, containing, treating, detoxifying, neutralizing,
remediating or disposing of, or in any way responding to, or
assessing the effects of Fungi or bacteria.
 
One or more exclusions above may apply.
We are proceeding to investigate this loss under a complete reservation
of rights. Upon completion of our investigation and receipt of your
master's protest and the surveyor's report we will advise you further as
to the findings, and their application to coverage provided to you in the
above captioned policy.  ACE American Insurance Company is
required to expressly reserve all of its rights under the policy and at law
in many states, including the right to deny coverage; should the facts
warrant. No act of any company representative during the investigation
will be considered a waiver of these rights.
23. On September 18, 2012, the marine surveyor submitted a written report,
including eighteen [18] photographs, to ACE concerning his survey of the
Vessel on September 11, 2013.  See Exhibit 1 and a copy of the report attached
thereto as Exhibit B.
24. The surveyor’s report also details his initial findings and opinions on the cause
of the Vessel’s sinking as follows:
The vessel's rubber boot on the starboard side engine for the steering
cable was deteriorated (rubber rot).  This hole could or would allow
wind driven waves to flood directly into the bilges of the vessel, when
any sea way occurred from the stern.
The vessel's aft engine well's small deck/access hatch on the port side
motor well area was found with a significant gap between the silicone
caulking and the hatch flange assembly. The assured reported this area
had been caulked at some point in the past, to prevent leaking. The
caulking was missing on an aft section/portion of the hatch cover.
There was a large gap in the fitting that would/did allow any wind
generated and/or wave wash and or water flooding through the scupper
into the engine well area, to flood the bilges.
 
The engine well area and waterline is within a couple of inches of the
hatch cover under static conditions. Evidence of standing water is
observed within the engine well area (barnacles etc). During water
testing we placed a garden hose in the deck area and in the drain and
water poured directly into the bilges.  
 
The vessel's portside forward deck drain was found with a failure
(hole) (freezing suspected) in the elbow prior to the drain line exiting
the side of the vessel. The 90 degree elbow is connected to the deck
drain itself. During water testing we placed a garden hose in the deck
area and in the drain and water poured directly into the bilges. A close
up examination of the elbow which was partially hidden behind a
removal access panel revealed appears to be a freezing split in t he
bottom of the elbow. The elbow bottom is distended consistent with
freezing failure.
 
The vessels port side hull was found with water leaking through the
laminate on the inboard side of the pontoon.
The battery on the portside pontoon appeared to be dead at the time of
vessel submersion. No electrolysis and/ or evidence of electro galvanic
action (sulfation) was present on the battery's positive terminal, even
though it had been submerged in saltwater. This suggests that the bilge
pump may have run until the battery was extinguished, prior to vessel
submersion.
25. The report details the Scope of Damages as follows:
1) The vessel's electronics including Furuno radar, ICOM M602
VHF radio, ACR RCL-100 spotlight control, standard Hailer,
Garmin plotter (which was not observed due it being locked) and
other electronics were all water damaged.
 
2) All of the vessel's electrical systems were water damaged. All
batteries, battery cables, battery switches, ignition systems, lights
and other associated cables were all water damaged. The vessel's
engine control cables and related components were water damaged.  
3) The vessel's twin 130 Honda outboard engines were completely
submerged in water. The shop was in the process of pickling and
trying to restart same. All electrical and possible mechanical
components on the engines were salt water damaged.
 
26. After reinspecting the Vessel with the Respondent and the Respondent’s
representatives on September 25, 2012, the surveyor authored a supplemental
report dated September 29, 2012.  See Exhibit 1 and a copy of the supplemental
report attached thereto as Exhibit C.
27. The supplemental report details following information:
1) The assured reported that he was aware of the leaking deck hatch
in the aft portside engine well cover assembly. The assured
reported that he was aware that it existed, and that the vessel had
leaked through same in the past. He just presumed that the bilge
pumps would maintain the bilges in a dry condition, and had
meant to get the area caulked.
2) The vessel owner reported that he was unaware that the vessel's
portside deck drain had a hole in the bottom of same, and was
leaking water into the bilges when the decks had water flow over
same.  
 
3) The assured reported that due to water intrusion in the vessel in the
past, and water accumulating in the fish boxes he had installed
new bilge pumps in the vessel. He reported a total of 4 new
Johnson automatic ultimate combo bilge pumps had been installed
by the above named mechanic.
4) Both fish boxes have deck gutter drains that allow water to drain
from the deck directly into the fish boxes.  
5) The fish boxes do not drain into the bilges, and any water must be
manually discharged by actuating the macerator pump for each
box.  
 
6) The fish boxes are approximately 60-80 gallons each. Each would
have 450-650 pounds of water in each when full.
7) The bilge pumps in the forward portion of the vessel were tested at
the time of my inspection. Both the port and starboard forward
bilge pumps were tested using a battery pack and splicing into the
leads near the pumps. The automatic float switch and the pump (on
both the port and starboard) functioned correctly when power was
provided to them.
8) It was reported by the mechanic that all pumps on the vessel had
been wired to the portside battery.
9) It was reported by the mechanic that the Sea Choice solar triple
charger had been wired to provide charging support to the portside
battery.
10) The Sea Choice solar triple charger provided a maximum of 1.3
amps in charging capacity for the battery under good sunlight
conditions.
11) Each bilge pump in the vessel is rated at 3.2 amps.  
12) It was determined that the failure in the portside deck drain was
approximately 3.5" above the standing waterline of the vessel.
 
13) The aft bilge pump discharge is located in the engine well of the
port side motor. This engine well has the leaking deck hatch cove,
as reported previously.
 
28. On October 2, 2012, ACE sent a letter to the Respondent, which stated in
pertinent part:
We have completed our investigation and have reviewed the surveyor's
report, copy enclosed. We find that sinking of your vessel resulted from
wear and tear, gradual deterioration and lack of reasonable care or
due diligence in the maintenance of the insured vessel. Based on the
above mentioned and that the cause of your loss was wear and tear,
gradual deterioration and lack of reasonable care or due diligence in
the maintenance of the insured vessel, we regret that we must advise
that we are unable to honor your claim for damages to your vessel.
See Exhibit 1 and a copy of the letter attached thereto as Exhibit D.
29. On January 23, 2013, the Respondent’s counsel sent a Demand Letter to ACE
requesting that ACE “[p]lease consider this correspondence to be a notice of
warranty claim.” The Demand Letter also advises “that it [sic] our intention to
lay claim against Ace for damages pursuant to G.L.c.93A.”  The Claimant’s
Demand Letter further alleges that ACE violated M.G.L. c. 176D §3 by failing
to “effectuate prompt, fair and equitable settlements of claims in which liability
has become reasonably clear.” The Demand Letter also provides to ACE for the
first time a copy of a Yacht Damage Report, dated December 8, 2012, and
authored by a marine surveyor retained by the Respondent.
30. Within his report Respondent’s surveyor, opines that “[t]he direct cause of this
sinking is the failed forward cockpit drain fitting apparently due to heavy rains
allowing the vessel to depress until this fitting was below the waterline thus
allowing free flooding of the hull.”
31. On February 19, 2013, ACE sent a letter to Respondent’s counsel that stated in part:
We have reviewed and thank you for the information and documentation
that you have provided.  We regret that we must stand by our position as
outlined in our correspondence of October 2, 2012.
We refer your attention to the Yachtsman/Boatsman Policy jacket on page 11,
beginning under GENERAL PROVISIONS IN THE EVENT OF LOSS….
We feel that arbitration may be suitable method to resolve this matter and
we would be happy to discuss this further at your convenience.
See Exhibit 1 and a copy of the letter attached thereto as Exhibit E.
 
32. On May 29, 2013, the Respondent’s counsel filed a Request for Arbitration, a
check in the amount of $200.00 and a copy of the Policy to the American
Arbitration Association. The Respondent’s Request for Arbitration explains this
dispute as “[t]he failure of business [sic] pay on claim of loss of pleasure vessel
as a result of storm.”  The amount of the Respondent’s alleged damages is
$50,000.00.  Respondent’s counsel notes that Respondent also seeks “double or
treble damages and attorney’s fee [sic] as provided by Massachusetts Law.”  See
Exhibit 1 and a copy of the Respondent’s Demand for Arbitration attached
thereto as Exhibit F.
33. On December 18, 2013, May 7, 2014, and August 12, 2014, an Arbitrator
assigned to the matter by the American Arbitration Association received
evidence and heard sworn testimony from several witnesses, including the
Respondent, his retained marine surveyor, ACE’s Claims Director and its
retained marine surveyor.   
34. Before the December 18, 2013 hearing, the Parties exchanged written discovery
and exhibits for the hearing[s] and submitted pre-hearing memoranda to the
Arbitrator.  See Exhibit 1 and copies of the Parties’ Pre-Hearing Memoranda
attached thereto as Exhibit G.
35. Following the August 12, 2014, the Parties submitted post-hearing memoranda
and reply briefs to the Arbitrator. See Exhibit 1 and copies of the Parties’ Post-
Hearing Memoranda attached thereto as Exhibit H.
36. On November 26, 2014, the Arbitrator issued an “Interim Award” stating, in
part, as follows:
a. The Vessel was seaworthy.
b. Torrential rainfall caused the Vessel to “take on more water than
could be discharged by [its] bilge pumps.”
c. The Respondent maintained the Vessel properly, but an issue
remained whether Borden Light Marina properly maintained the
Vessel.
d. The specific cause of the Vessel’s sinking is not really the
relevant issue.
e. If the Vessel’s sinking was due to [a] “hole in the drainpipe, then
it was the result of a latent defect and it would have been covered
under the” Policy.
f. If [the Vessel’s sinking] “was due to wear and tear, the real
question is: was the wear and tear on the [Vessel] beyond what
[ACE] would have expected when it insured a 1998 vessel?
g. [ACE] could not possibly have assumed that a 1998 boat was in
new condition when it insured the [Vessel] for 2012.  “[She]
believe[s] that the wear and tear exclusion cannot apply.”
 
h. “If the "wear and tear" exclusion were enforceable in this case,
[ACE] could comfortably insure boats beyond a certain age
without any expectation of ever having to pay on its policies. In
my opinion, this would border on fraud.”
i. ACE address[ed] the claim in a timely fashion.
j. ACE “made a reasonable investigation and then denied the
claim.”
 
k. [ACE] violated c. 93A by enforcing an unconscionable provision
in its insurance policy and stating that it would not payout on a
1998 vessel that sunk because the [Vessel] had normal wear and
tear.
l. The Arbitrator awarded the Respondent single damages plus his
attorney’s fees pursuant to M.G.L.c. 93A.
m. The Conclusion of the Arbitrator’s Interim Award states:
 
Judgment for [Respondent] in the amount of $50,000.00 minus the
policy deductible of $2,000.00.  Accordingly, I hereby AWARD, as
follows:
[ACE] shall pay to [Respondent] the sum of Forty-Eight Thousand
Dollars and Zero Cents ($48,000.00).
As per the insurance policy, each party shall bear fifty (50%) percent of
the costs. [Respondent]'s attorney shall submit an Affidavit of Attorney's
Fees for this matter and I will award reasonable attorney's fees to
[Respondent].
The administrative fees and expenses or the AAA, totaling $2,200.00,
and the compensation of the Arbitrator, totaling $6,675.00 are to be
borne equally. Therefore. [Respondent], to pay Ace North America, an
amount of $3,150.00, representing costs previously incurred by Ace
North America.
This Award is in full settlement of all claims and counterclaims
submitted to this Arbitration. All claims not expressly granted herein are
hereby, denied.
See Exhibit 1 and a copy of the Arbitrator’s “Interim Award” attached
thereto as Exhibit I.
 
37. On December 10, 2014, Respondent’s counsel submitted an Affidavit of
Attorney’s Fees requesting $44,360.25 in fees and $7,268.77 in disbursements.
38. On December 22, 2014, ACE’s counsel submitted an Objection to the Amount
of [Respondent’s] Expert’s Fees to the Arbitrator.  See Exhibit 1 and a copy of
ACE’s Objection attached thereto as Exhibit J.
39. On December 24, 2014, the Arbitrator sent an email to the Parties’ counsel that
stated, in part, “I am allowing the amount of attorney’s fees and disbursements
to stand.” See Exhibit 1 and a copy of the Arbitrator’s email attached thereto as
Exhibit K.
40. The Arbitrator’s Award to the Respondent violates 9 U.S.C. § 10 (a)(4) because
the Arbitrator failed to render a decision on whether the Policy’s “wear and tear
exclusion” excluded coverage for the loss of the Vessel.
41. The Arbitrator manifestly disregarded well-established insurance law by not
applying the clear and unambiguous language of the Policy’s “wear and tear
exclusion.”
42. The Arbitrator violated 9 U.S.C. § 11(b) by issuing an award on equitable
grounds that were never submitted to her by either party for her review.
43. The Arbitration Award has not been vacated or modified upon any ground
specified under 9 U.S.C. § 10 or § 11.   
44. No prior application for relief has been made to this Honorable Court or any
other court.   
45. A Motion to Vacate the Award and a Memorandum of Law in support thereof
has been filed contemporaneously with this Petition to Vacate.
WHEREFORE, Petitioner prays that pursuant to 9 U.S.C. § 10, this
Honorable Court issues an Order vacating the Award granted to the Respondent, John
P. Puccio, by the American Arbitration Association and grant any further relief as it
may deem just.  Alternatively, this Honorable Court should vacate the Award to the
Respondent because the Arbitrator manifestly disregarded both General Maritime Law
and the laws of the Commonwealth of Massachusetts concerning the enforcement of
clear and unambiguous insurance policy exclusions.  Finally, this Honorable Court
pursuant to 9 U.S.C. § 11, should modify or correct the Award to the Respondent,
John P. Puccio, because the Award was issued on grounds that were never submitted
for the Arbitrator’s decision

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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