Underwriters at Lloyd's v. LaBarca
| Decision Date | 11 May 2001 |
| Docket Number | No. 00-2142,00-2142 |
| Parties | (1st Cir. 2001) UNDERWRITERS AT LLOYD'S, AND THE COX SYNDICATE AT LLOYD'S, PLAINTIFF, APPELLEE, v. CARLOS H. LABARCA, DEFENDANT, APPELLANT. Heard |
| Court | U.S. Court of Appeals — First Circuit |
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v.
CARLOS H. LABARCA, DEFENDANT, APPELLANT.
Decided August 2, 2001
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Jaime Pieras, Jr., U.S. Senior District Judge]
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Carlos J. Quilichini for appellant.
Jose F. Sarraga with whom Jorge L. Arroyo were on brief for appellee.
Before Torruella, Circuit Judge, Campbell and Bownes, Circuit Judges.
Campbell, Senior Circuit Judge.
On June 5, 1999, the M/V GYPSY sank at her slip in San Juan Bay Marina, San Juan, Puerto Rico. Defendant Carlos Labarca, the owner of the GYPSY, filed a claim with the vessel's insurer, plaintiff Underwriters at Lloyd's ("Underwriters"). Underwriters denied coverage under the marine insurance policy, asserting that the policy explicitly excluded coverage for two reasons: (1) GYPSY was unseaworthy and her unseaworthy condition caused her to sink, and (2) the loss of the vessel was due to repairs, restoration or remodeling. Underwriters then filed a declaratory judgment action with the district court for the purpose of deciding the rights of the parties under the insurance policy. On Underwriters' motion for summary judgment, the district court held that, on the undisputed facts, the vessel was unseaworthy at the time she sank and that her unseaworthy condition was the cause of the sinking, thus relieving Underwriters of any obligation under the insurance policy. Labarca appeals.
I. Factual Background
The relevant facts are undisputed.
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Underwriters issued a contract of marine insurance to Labarca for his boat, GYPSY, for one hundred seventy thousand dollars. That policy became effective on July 15, 1998 and was up for renewal on July 15, 1999. Under the policy, Underwriters agreed, subject to various terms and conditions, to pay Labarca for "direct physical loss or damage to the Vessel [resulting] from any external cause, including direct physical loss or damage to the Vessel caused by any hidden defect (excluding the cost of repair or replacement of the defective part) . . . ." This promise was limited by the following exclusion: "[W]e will not pay for any damage or loss of the Vessel . . . caused, in whole or in part by . . . [y]our failure to maintain the Vessel in a sound and reasonably fit condition; or loss or damage occurring during or resulting from repairs, restoration or remodeling." The policy also contained a warranty on the part of the insured owner, Labarca,
that the Vessel shall be maintained in a seaworthy condition at all times. In the event of a loss or damage affecting the seaworthiness of the Vessel, the Vessel shall be restored to a seaworthy condition as soon as reasonably possible and the Vessel will not be operated pending completion of such repair without Our express written approval. 1
Several days before the GYPSY sank at her slip, Labarca and a mechanic, whom he hired, removed two of the four air-conditioning units from the vessel in order to paint the vessel's interior. All four of the vessel's air-conditioning units were cooled with raw sea water that was pumped, via a single Oberdorfer brand Model 104M pump, through four individual hoses that ran from the ocean into each unit. When two of the four units were removed, the two hoses that carried sea water to those two units were left unsealed at the ends that would have been attached to the units. The other two air-conditioning units remained installed on-board.
On June 4, 1999, after working aboard the GYPSY, Labarca returned home but left running the air-conditioning system aboard the vessel. He did not know that two of the four hoses connected to the pump that supplied raw...
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