Craddock Intern. Inc. v. W.K.P. Wilson & Son, Inc.

• Decision Date: 26 June 1997
• Docket Number: No. 95-60552,95-60552
• Parties: CRADDOCK INTERNATIONAL INCORPORATED; Pesquera Malla, S.A., Plaintiffs-Appellees-Cross-Appellants. v. W.K.P. WILSON & SON, INC., et al., Defendants, W.K.P. Wilson & Son, Inc., Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1095

116 F.3d 1095

1998 A.M.C. 1107

CRADDOCK INTERNATIONAL INCORPORATED; Pesquera Malla, S.A., Plaintiffs-Appellees-Cross-Appellants. v. W.K.P. WILSON & SON, INC., et al., Defendants, W.K.P. Wilson & Son, Inc., Defendant-Appellant-Cross-Appellee.

No. 95-60552.

United States Court of Appeals, Fifth Circuit.

June 26, 1997.

Richard Ben Foster, Kent B. Ryan, Lemle & Kelleher, New Orleans, LA, for Plaintiffs-Appellees-Cross-Appellants.

Marvin S. Sloman, Jeffrey Scott Levinger, Carrington, Coleman, Sloman & Blumenthal, Dallas, TX, Eric Brian Klopfer, Nashville, TN, for Defendant-Appellant-Cross-Appellee.

Appeals from the United States District Court for the Southern District of Mississippi.

Before BARKSDALE, EMILIO M. GARZA and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

The M/V Scotia Seahorse, a 176-foot offshore supply vessel, sank off the Venezuelan coast en route to Pisco, Peru. A fish meal processing plant worth approximately $1.7 million sank with the vessel. Through a remarkable chain of events, the loss of the plant was entirely uninsured. The vessel owner and the cargo owner brought suit against W.K.P. Wilson & Son, Inc. ("Wilson"), an Alabama marine insurance broker, alleging that the loss was uninsured because of Wilson's negligence. This appeal requires us to decide the basis and the extent of Wilson's liability to the vessel owner and the cargo owner. To facilitate an understanding of the legal issues presented on appeal, we provide a detailed history of the unusual underlying facts.

I. FACTS

Cradock International, Inc. ("Cradock"), ¹ purchased the M/V Scotia Seahorse from Marinsa Miami Company ("Marinsa"), a marine equipment supplier. Cradock, a Panamanian corporation, had two stockholders: Manuel Cabada Celorrio ("Cabada") and Milan Orlic. Cabada and Orlic formed Cradock to purchase a coastal transport vessel to transport oil and other liquids along the coast of Peru. Cabada and Orlic are also shareholders in a Peruvian company called Pesquera Malla, S.A. ("PMSA"). PMSA operates a fleet of sardine fishing boats. Cabada testified that the plan Ueli Walchli, the majority owner and operator of Marinsa, located the Scotia Seahorse in Pascagoula, Mississippi. Marinsa purchased the Scotia Seahorse and then sold it to Cradock. The first order of business was getting the vessel to Venezuela to pick up the fish meal processing plant. Acting on Cradock's behalf, Walchli hired Richard Sassman to captain the vessel from Pascagoula to Venezuela; Captain Sassman in turn hired the crew.

to purchase a coastal transport vessel solidified when PMSA decided to purchase a fish meal processing plant, which PMSA wanted to transport from Carupano, Venezuela to Pisco, Peru.

Before the Scotia Seahorse left Pascagoula, she was inspected by Jack Bolding, a marine surveyor. He did ultrasound testing of the vessel's hull, which showed that the steel plating was close to its original thickness. Even so, the vessel needed a good deal of cleaning and repair before departure. Bolding inspected the vessel again after the repairs were completed. In a written report, he recommended that another inspection be conducted upon the vessel's arrival in Carupano. He also noted in his written report that the vessel would be scrapped upon arrival in Peru. This notation apparently resulted from a miscommunication; Cradock planned to scrap the vessel only if it was unable to obtain the permits necessary to use it as a coastal transport vessel in Peru.

The vessel left Pascagoula for Venezuela in early September 1989. The trip to Venezuela was not without its difficulties. The Scotia Seahorse's hydraulic steering motors failed, the compressors required repair, and the vessel lost generator power. The generator problems required a stopover in the Cayman Islands for three or four days. Despite these Workers began to load PMSA's fish meal processing plant onto the vessel. Cabada helped oversee the loading. Many pieces of equipment were so large that a crane was required to load them. Captain Sassman testified that he expressed concerns to Cabada that they were loading too much cargo and that it was not being loaded properly. Captain Sassman testified that there were two cargo containers and "hundreds" of individual items on the deck of the vessel.

problems, the Scotia Seahorse arrived safely in Carupano on September 15th or 16th, 1989, where she was moored at a large cement dock. Cabada was waiting for the Scotia Seahorse when she arrived.

Carupano is an open port, unprotected from the ocean by levies or seawalls. As fate would have it, the effects of Hurricane Hugo were being felt in Carupano at that time. Swells created by the hurricane caused the Scotia Seahorse to work against the dock, and steel lines that moored her began to break. Captain Sassman recommended that Cabada postpone loading the rest of the equipment until the swells subsided. Although Cabada did not accede immediately, the Scotia Seahorse was eventually unmoored and put to sea for a day or so to avoid damage to the vessel and the dock. At trial Sassman, his memory refreshed by a memorandum from Cabada to an insurance agent, recalled that he had detected a starboard side shell indentation before departure, although he had seen no indication of any fracture. He also testified that a portion of the vessel's starboard side rub rail had collapsed.

A surveyor for Lloyd's of London conducted an inspection on behalf of the hull insurance underwriters immediately before the Scotia Seahorse left Carupano. The hull underwriters requested the additional inspection because Bolding had recommended it and because the underwriters knew that cargo would be loaded onto the vessel in Carupano. The notation in Bolding's report that the vessel would be scrapped upon arrival in Peru also appears to have heightened the underwriters' concerns. According to Sassman and Cabada, the Lloyd's surveyor did not inspect the hull but instead examined how the cargo was loaded.

Although Captain Sassman had originally agreed to serve as captain only on the trip from Pascagoula to Carupano, Cabada asked him to stay on for the voyage to Peru. At Cabada's request, Consulmar, a maritime agent, assembled a Venezuelan crew to replace the American crew. Consulmar also prepared the bills of lading for the transport of PMSA's plant.

The Scotia Seahorse left Carupano at 9:30 on Sunday morning, September 24, 1989. The weather was fair and clear. Cabada recalled watching the Scotia Seahorse as she disappeared over the horizon. Cabada then flew to Caracas, Venezuela to take care of business there. The next morning, Cabada called Domingo Barbiere, who was then the general manager of PMSA, to tell him that the vessel had left Carupano.

Unbeknownst to Cabada, twelve hours after the Scotia Seahorse left Carupano, her main engines had come to a dead stop. Captain Sassman's immediate concern was to secure loose acetylene tanks that were working back and forth on deck. As Captain Sassman and the crew attempted to secure the tanks, the vessel began to list. Although he was able to start the port engine, the list worsened. The crew attempted to pump the water from the bilge, but the main bilge pump worked only intermittently. Although Sassman revived the starboard engine at 4:30 a.m., his efforts were to no avail. Around 9:15 a.m. on Monday, September 25th, the Scotia Seahorse rolled over and sank to the bottom of the sea.

Captain Sassman jumped from the vessel as she rolled over. The crew had abandoned ship less than an hour before. A Venezuelan naval frigate, the General Subelet, was standing by to take Captain Sassman and the crew to Puerto La Cruz, Venezuela.

Behind-the-scenes efforts to obtain marine insurance were almost as ill-fated as the voyage itself. Walchli agreed to help Cabada obtain insurance in the United States, although this was not normally a service provided by his marine equipment supply company, Marinsa. Walchli contacted W.K.P.

                Wilson & Son, Inc., an insurance broker in Mobile, Alabama, 2 on the recommendation of the marine surveyor Jeff Bolding.  Frank Wayne Hall, Sr., an account executive at Wilson, was in charge of the Cradock account.  Cabada never spoke with Hall or anyone else at Wilson directly;  all communications between Cabada and Wilson were through Walchli or Zarko Kulisic. 3  Kulisic is a shareholder in PMSA and at the time of trial was the general manager of PMSA
                

Through Wilson, Walchli obtained for Cradock a $350,000 hull insurance policy with various Lloyd's of London underwriters and a $1 million protection and indemnity ("P & I") policy with West of England Ship Owners Mutual Insurance Association's fixed premium facility. Generally speaking, hull insurance covers the loss or damage of the vessel and its equipment. See Raymond P. Hayden & Sanford E. Balick, Marine Insurance: Varieties, Combinations, and Coverages, 66 TUL.L.REV. 311, 315 (1991). P & I insurance covers shipowners, charterers, and the similar individuals for liabilities to third parties arising out of the operation of the vessel. Id. at 327.

Wilson arranged to add PMSA as an additional assured on both the hull and the P & I policies. Whether Hall was told only to add PMSA on the hull policy or on both policies was a matter hotly disputed at trial. The district court resolved this disputed fact issue in the plaintiffs' favor, concluding that Hall was asked only to add PMSA as an additional assured on the hull policy and was not asked to add PMSA as an additional assured on the P & I policy.

PMSA did not obtain first-party cargo insurance ⁴ for the fish meal processing plant before the Scotia Seahorse sank. Cabada originally informed Wilson, through Walchli, that PMSA would arrange for first-party cargo insurance through Napoleon De La Colina, a Peruvian insurance broker. When De La Colina was unable to obtain cargo coverage, he contacted Wilson to ask for assistance. The next day PMSA's...