Irwin v. Eagle Star Insurance Company

• Decision Date: 13 April 1972
• Docket Number: No. 71-2348.,71-2348.
• Citation: 455 F.2d 827
• Parties: Millard V. IRWIN, owner of the YACHT "JOMIE", Plaintiff-Appellee, v. EAGLE STAR INSURANCE COMPANY, Ltd., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

455 F.2d 827 (1972)

Millard V. IRWIN, owner of the YACHT "JOMIE", Plaintiff-Appellee, v. EAGLE STAR INSURANCE COMPANY, Ltd., Defendant-Appellant.

No. 71-2348.

United States Court of Appeals, Fifth Circuit.

February 29, 1972.

Rehearing Denied April 13, 1972.

Gerald M. Walsh, James V. Dolan, Ft. Lauderdale, Fla., for defendant-appellant.

G. E. Hartwig, Fort Lauderdale, Fla., for plaintiff-appellee.

Before WISDOM, COLEMAN and SIMPSON, Circuit Judges.

COLEMAN, Circuit Judge:

Did the marine insurance policy issued by Eagle Star Insurance Company, Ltd., cover the loss of the yacht "Jomie"? Upon a complaint filed in admiralty the District Court held for the insured. We reverse.

The circumstances of the loss are not disputed.

One afternoon the "Jomie" was tied up at the dock, with no premonition of impending disaster. During the night, while unoccupied, the yacht sank. A one inch iron nipple in the piping of the air conditioning system broke within approximately six months of its installation by an independent air conditioning firm. The iron nipple was joined to two brass fittings. It was usually submerged in the bilge water and was located directly beneath a hatch cover which was left open and observed by the owner as often as once a week when making inspections of the vessel. The fittings had been painted black and, in the absence of scraping, the type of metal of which the nipple was made would not be discerned in the course of a customary inspection.

The expert witnesses on both sides agreed that the sinking of the vessel was caused by the separation of the elbow pipe from the sea strainer in the water intake of the air conditioning system, allowing water to fill the vessel. The separation was caused by an electrolysis which, in turn, had been caused by the union of steel with brass in the presence of air and salt water.

The District Court specifically found as follows:

"(1). That the use of the steel elbow in the installation of this air conditioning system created a defect in the machinery of the vessel and that this defect was a latent defect within that definition included in the Latent Defect, Negligence, Risk On Shore, et cetera, clause of the policy;

"(2). It steel to brass is not a standard acceptable type of material to use in this elbow;

"(3). The insured was not aware of this condition, this latent defect, until after the loss had been sustained, until after the part had separated and until after the boat had sunk;

"(4). The plaintiff not only did not know and was not aware of the different materials but had no reason to be aware of them, and acting as a reasonable person should not have been aware of them, since apparently the installer did paint the steel elbow when all of these parts were installed;

"(5). There is no conflict but what new parts were used when it was installed and that a reasonable person inspecting this area after such installation, in the words of even Captain Holland, who was an expert, could not have told from such an inspection or it would have been very, very difficult to determine whether that elbow was, in fact, steel or brass;

"(6). The insured would have no reason to suspect this defect, and I find it a very definite defect;

"(7). That this is corroborated by the fact that apparently it only took from early 1969 to September, 1969, for this accelerated wear and tear to cause this separation and to, in fact, cause this loss."

The insurance policy by its Inchmaree clause covered "any latent defect in the machinery or hull".

The decisive issue on appeal is whether the condition hereinabove described was a latent defect within the terms of the policy. Eagle Star says that it was not and declined to pay the loss. This suit followed.

A hundred years ago, the Supreme Court, in a thoroughly exhaustive opinion authored by Mr. Justice Bradley, held that a contract of marine insurance is a maritime contract, within the admiralty and maritime jurisdiction, though not within the exclusive jurisdiction of the United States Courts, Insurance Company v. Dunham, 78 U.S. (11 Wall.) 1, 20 L.Ed. 90 (1870). In Kossick v. United Fruit Company,¹ the Supreme Court repeated that a contract to insure a ship is maritime. That, however, does not determine whether the interpretation and application of the policy terms are to be governed by state or maritime law.

Wilburn Boat Company v. Fireman's Fund Insurance Company² was commenced in a Texas state court by the insured against an insurer for fire loss to a vessel covered by a full marine risk insurance policy. The case was removed to the United States District Court for the Eastern District of Texas on diversity grounds. At the time of the loss the boat was located on Lake Texoma, a small artificial inland lake between Texas and Oklahoma. The district court found for the insurer. This Court upon appeal, 201 F.2d 833 (1953) affirmed on the theory that the insured had breached the policy warranty as to private use and was therefore barred from recovery under general maritime law, from which maritime policies are derived. We held that a cause of action on a marine policy was a cause of action in admiralty, unchanged in substance when asserted in a court of law. The insured argued in the lower courts that a Texas Statute (prohibiting a forfeiture under the circumstances present and thereby rendering the warranty in the policy unenforceable) should...