The long history of this case began in July 1998, when a tugboat ran aground in a coral reef in Biscayne National Park in Florida. The tugboat operator was Dann Ocean Towing, Inc. (“DOT”). The accident spawned litigation between DOT, the owner of the boat that DOT was towing, and the United States, which owned the coral reef.

DOT’s insurance carriers accepted responsibility for the accident, and were able to obtain a favorable settlement for DOT. DOT was insured by a number of different underwriters, and DOT also had an excess insurance policy with the American Steamship Owners Mutual Protection and Indemnity Association, Inc., which was essentially a club for tugboat operators who pooled their resources to create a non-profit excess insurance company (“the Club”). During the settlement process, however, one of DOT’s insurers, HIH, Inc. (“HIH”), declared bankruptcy and could not cover its proportional obligation in the settlement. In order to preserve the settlement, the Club loaned DOT HIH’s portion of the settlement. DOT and the Club, however, contested whether the Club, as the excess insurer, was responsible for the portion of the settlement that HIH could not pay.

DOT and the Club engaged in approximately a decade of negotiations to try to resolve which party was responsible for HIH’s portion of the settlement. During the negotiations, DOT refused to pay its insurance premiums to the Club. Instead, DOT paid its insurance premiums into a separate account, which was held in trust by another insurance company. While the negotiations were pending, multiple claims were lodged against DOT, which DOT submitted to the Club. The Club evaluated each claim and even approved the majority of the claim. Instead of paying the approved claims, however, the Club deducted the amount of the claims from DOT’s due and owing insurance premiums. In response, DOT began withdrawing the amount of the approved claims from the trust account.

On August 21, 2008, the Club filed this lawsuit against DOT, which alleged breach of contract and sought to recover: (1) the amount of the shortfall left by HIH’s bankruptcy; and (2) the amount of the premiums DOT owed. On a prior motion, this Court found that DOT, not the Club, was responsible for the shortfall of HIH’s bankruptcy.

DOT filed a Motion for Summary Judgment and asserted that the Club’s claim was barred by the statute of limitations. DOT claimed that the New York statute of limitations applied to the Club’s claims because, in the parties’ insurance contract, the parties chose New York law as the prevailing law for the contract. DOT argued that the New York statute of limitations, which is ten (10) years, barred the Club’s claims. The Court, however, sua sponte, noted that the statute of limitations could have been equitably tolled and the parties had not briefed equitable tolling. The Court found that DOT could have induced the Club into settlement negotiations for the fraudulent purpose of waiting until the statute of limitations had expired. Therefore, the Court denied DOT’s Motion for Summary Judgment, so that the parties could brief the issue of equitable tolling.