Court Stays Yacht-Wreck Coverage Action Pending Concurrent Proceeding to Vacate Arbitration Award in Favor of Insurers

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Taunia Kittler, through Galilea LLC, owned a 60-foot sailing yacht named Galilea. In June 2015, the Galilea crashed off the coast of Panama and was deemed a complete loss. Kittler and Galilea LLC sought insurance coverage from the insurer-defendants, which denied the claim on the ground that the accident had occurred outside the covered cruising area. The insurers then commenced arbitration against Galilea in New York.

In June 2018, while the arbitration was pending, Kittler and Galilea commenced a separate action in Montana federal court, asserting claims that were identical to the counterclaims they asserted in the arbitration proceeding. The insurers moved to dismiss and/or stay the case pending final resolution of the arbitration, and, in March 2019, certain of Kittler and Galilea’s claims were dismissed. The remainder of the insurers’ motion was referred to the magistrate judge for resolution. One month later, the arbitrators issued an award in favor of the insurers, finding that Kittler and Galilea were not entitled to coverage for the Galilea wreckage. In June 2019, while the insurers’ motion to dismiss and/or stay was still pending, Kittler and Galilea moved to vacate the arbitration award in the Southern District of New York.

In the most recent development, the Montana district court agreed with the insurers to stay the case pending the outcome of Kittler and Galilea’s motion to vacate the arbitration award. Because Kittler and Galilea’s claims in the case were identical to those asserted in the arbitration proceeding – which was resolved against Kittler and Galilea – and because Kittler and Galilea have challenged the arbitration award, the court held that the award was not “final.” As such, it determined that a stay of the case was required, citing the “liberal federal policy favoring arbitration.” Given the significant overlap of issues, the court also noted that the case may be rendered moot by the outcome of the proceedings in the Southern District of New York, and that absent a stay of the case, any decisions therein may result in inconsistent rulings.

Galilea, LLC v. Pantaenius Am. Ltd., No. 1:18-cv-00131 (D. Mont. Aug. 26, 2019).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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