Chevron's jury demand denied in seized oil insurance dispute

Chevron can't assert its right to a jury trial in its legal battle with several insurance companies challenging the oil giant's claim to cargo aboard a ship that was seized by the Iranian military.

At a hearing Thursday, U.S. District Judge Jacqueline Scott Corley denied two motions brought by the oil company, one to assert its right to a jury trial and another for leave to file a supplemental counterclaim, according to court documents. Zurich American Insurance Company et al v. Chevron U.S.A. Inc. et al., 3:24-cv-02733 (N.D. Cal., filed May 7, 2024).

The Iranian military seized the Advantage Sweet off the Gulf of Oman in 2023, taking over $50 million worth of oil from the ship. Chevron tried to claim the cargo under its marine cargo and war risks policies, but its insurers fought against the claims. They argued the seizure of the ship wasn't covered by the war risks policy because it was a one-off action and not an act of war. The marine cargo policy, meanwhile, had exceptions for cargo seized by another country, the insurers argued. A lengthy legal battle followed, with insurers suing Chevron to block its claims and the oil company countersuing.

While the right to a jury trial has exceptions for maritime cases, Chevron claims that it's entitled to make its case to a jury because the case was brought under diversity jurisdiction and not admiralty jurisdiction.

The insurers responded that they brought the case under maritime jurisdiction and Chevron itself admitted the case was under maritime jurisdiction in its counterclaim but was now trying to change its tune to get the benefits of diversity jurisdiction.

"Chevron's Motion ignores the crucial fact that Chevron also specifically pled that the Court has maritime jurisdiction over the entire action," a response to the motion, filed by Jonathan Gross of Mound Cotton Wollan & Greengrass LLP states.

Corley sided with the insurers -- Zurich American Insurance, Liberty Mutual and Great American Insurance - and told the parties to prepare for a bench trial.

Gross further argued that, while Chevron's counterclaims attempt to assert diversity jurisdiction against the primary insurers, the company didn't differentiate between those claims and ones against the additional insurers, where Chevron only asserts maritime jurisdiction. Since the claims are a single action, the court only has maritime jurisdiction.

"This failure to plead an independent basis for the Court's subject matter jurisdiction, separate from Chevron's broad allegation of maritime jurisdiction over all claims, is fatal to Chevron's jury trial demand," Gross wrote.

Chevron disagreed, saying that the 9th U.S. Circuit Court of Appeals' decision in 1997's Ghotra by Ghotra v. Bandila Shipping, Inc. entitles parties to claim diversity jurisdiction in a case that also includes claims to maritime jurisdiction.

"In that case, after the district court limited the plaintiffs to a bench trial, the Ninth Circuit reversed and awarded the plaintiffs a jury trial on all of their claims, including those that arose under maritime jurisdiction," the motion, filed by McGuireWoods partner Mikaela Whitman, stated. "In reasoning that applies equally here, the Ninth Circuit refused to 'penalize' the plaintiffs by denying them a jury trial simply because they opted to consolidate claims with independent jurisdictional bases into one action."

Chevron also moved for leave to amend its counterclaim to argue the insurers intended to cancel or renegotiate its war risks policy should an actual war break out, but Corley denied the motion.

Corley referred the case to U.S. Magistrate Judge Sallie Kim for a settlement conference.