718 F.2d 702 (5th Cir. 1983), 81-3749, Scarborough v. Travelers Ins. Co.

Docket Nº:81-3749.
Citation:718 F.2d 702
Party Name:William A. SCARBOROUGH, Plaintiff, v. TRAVELERS INSURANCE CO., et al., Defendants, and LAND & MARINE APPLICATORS, INC., Defendant-Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, et al., Third-Party Defendants-Appellees.
Case Date:October 31, 1983
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
FREE EXCERPT

Page 702

718 F.2d 702 (5th Cir. 1983)

William A. SCARBOROUGH, Plaintiff,

v.

TRAVELERS INSURANCE CO., et al., Defendants,

and

LAND & MARINE APPLICATORS, INC., Defendant-Appellant,

v.

INSURANCE COMPANY OF NORTH AMERICA, et al., Third-Party

Defendants-Appellees.

No. 81-3749.

United States Court of Appeals, Fifth Circuit

October 31, 1983

Page 703

Simon, Peragine, Smith & Redfearn, Daniel J. Caruso, New Orleans, La., for Land & Marine.

Deutsch, Kerrigan & Stiles, A. Wendel Stout, III, Bertrand M. Cass, Jr., Brunswick Deutsch, New Orleans, La., for Ins. Co. of North America.

Robert B. Deane, New Orleans, La., for Lloyd's & Harbor Ins.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before TUTTLE [*], POLITZ and GARWOOD, Circuit Judges.

GARWOOD, Circuit Judge:

This is an appeal from a summary judgment dismissing appellant's cross-claim against its primary and two excess insurers, upholding the insurers' denial of coverage of a Jones Act claim, based on occupational disease, successfully maintained in the main suit below against appellant by one of appellant's former employees. The principal questions before us are (1) whether an exclusion provision in the primary insurer's policy, requiring that a claim, based on an occupational disease, must be asserted against the insured no later than thirty-six months after the end of the policy period, is void as against the public policy of Louisiana; and if not, then (2) whether LSA-R.S. 22:628, as amended on July 20, 1976, is to be applied "retroactively" so as to validate the

Page 704

incorporations by reference of this same thirty-six-month exclusion provision into the policies of the excess insurers. We hold that the thirty-six-month exclusion provision is valid and does not contravene the public policy of Louisiana, and that LSA-R.S. 22:628, as amended in 1976, validated the incorporations by reference of this exclusion into the excess policies. We therefore affirm the district court's judgment.

I.

The material facts are undisputed. William A. Scarborough ("Scarborough"), the original claimant, worked as a sandblaster on offshore drilling platforms from 1959 until May 1967. From October 1963 until May 1967, he was employed by appellant Land & Marine Applicators, Inc. ("Land & Marine").

On August 15, 1977, over ten years after he had left Land & Marine's employ and had ceased working as a sandblaster, Scarborough filed suit under the Jones Act, 46 U.S.C. Sec. 688, and the general maritime law, against his former employers, the owners of the offshore drilling platforms on which he had worked, certain manufacturers of equipment and suppliers of sand used in his sandblasting operations, and these parties' insurers, alleging that he had contracted silicosis as a result of having been exposed to siliceous particles while performing his duties as a sandblaster.

Among those made defendants to Scarborough's referenced suit were appellant Land & Marine and Chevron Oil Company ("Chevron"), the owner of one of the offshore platforms on which Scarborough had worked. Neither Land & Marine's primary insurer, appellee Insurance Company of North America ("INA"), which was providing employers' liability coverage to Land & Marine when Scarborough left Land & Marine's employ in May 1967, nor its excess insurers during the INA policy period, appellees Underwriters at Lloyd's ("Lloyd's") and Harbor Insurance Company ("Harbor"), were made defendants to Scarborough's suit as originally filed.

On November 7, 1977, however, Chevron filed a third-party complaint against Land & Marine, INA, Lloyd's, and Harbor seeking contribution, damages, and indemnity. On December 14, 1977, Scarborough amended his complaint and made INA, Lloyd's, and Harbor defendants.

  1. INA

    INA was the workers' compensation and employers' liability carrier for Land & Marine from August 1, 1965 to August 1, 1967. Under Section I of the "INSURING AGREEMENTS" of the INA policy (No. WC 568590) in effect during May 1967 (when Scarborough last worked for Land & Marine), Coverage B, as amended by endorsement, obligated INA to pay on behalf of Land & Marine

    "... all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident or disease ... sustained by any employee of the insured arising out of and in the course of his employment by the insured ...." 1

    Section IV of the insuring agreements further provided that:

    "This policy applies only to injury (1) by accident occurring during the policy period, or (2) by disease caused or aggravated by exposure of which the last day of the last exposure, in the employment of insured, to conditions causing the disease occurs during the policy period."

    The "EXCLUSIONS" section of the policy provided, in part, that:

    "This policy does not apply:

    "(e) under coverage B, to bodily injury by disease unless prior to thirty-six months after the end of the policy period written claim is made or suit is brought against the insured for damages because of such injury or death resulting therefrom."

    Page 705

    It is undisputed that Scarborough's last exposure to siliceous particles occurred while he was employed by Land & Marine and within the INA policy period, which expired on August 1, 1967, and was not renewed. Because Scarborough's claim was not asserted within thirty-six months after the policy period expired, INA denied coverage, and, on April 6, 1978, moved for a summary judgment against Scarborough and Chevron on that basis.

    On June 14, 1978, the district court granted INA's motion for summary judgment. Though this judgment initially contained the Fed.R.Civ.Proc. 54(b) finality determinations, that aspect of it was subsequently vacated so it remained interlocutory until September 24, 1981.

    Thereafter, on March 6, 1980, Land & Marine filed a cross-claim against INA, Lloyd's, and Harbor seeking indemnity should it be held liable for Scarborough's damages, and for its own attorneys' fees, costs, and expenses.

    In January 1981, Scarborough's Jones Act and general maritime law claims were tried to a jury, which found that Land & Marine and three other defendants, who are not parties to this appeal, were liable, jointly and severally, for $650,000 in damages. 2 Thereafter, on March 20, 1981, Land & Marine moved the district court to set aside the outstanding interlocutory summary judgment in favor of INA, on the grounds that (1) enforcement of the thirty-six-month exclusion provision of the INA policy would render that policy vague and ambiguous, and (2) enforcement of the exclusion provision was contrary to public policy. However, the district court denied Land & Marine's motion, relying on McMillian v. Coating Specialists, Inc., 427 F.Supp. 54 (E.D.La.1976), and Livingston Parish School Board v. Fireman's Fund American Insurance Company, 282 So.2d 478 (La.1973), to hold that the thirty-six-month exclusion provision was valid and did not violate public policy.

  2. LLOYD'S AND HARBOR

    Meanwhile, on January 13, 1981, Lloyd's and Harbor, which provided excess coverage for Land & Marine during the time period covered by the INA policy (August 1, 1965--August 1, 1967), had jointly moved for summary judgment against Land & Marine based on the thirty-six-month exclusion provision of the INA policy, which had been incorporated by reference into both the Lloyd's and the Harbor excess policies.

    Neither Land & Marine nor Lloyd's could locate the Lloyd's policies issued to Land & Marine. Instead, the cover notes, which evidenced the issuance of these policies, were relied upon to show the policy terms. The terms of Cover Note JHB 5127 provided, in part, as follows:

    "1. This insurance, subject to the terms, conditions and limitations hereinafter mentioned, is to indemnify Land and Marine Applicators, Inc. (hereinafter called 'the Employer') in the manner following namely:

    "For claims arising out of their operations in accordance with the terms and conditions of Coverage B including Maritime Coverage of the underlying Policy/Policies No. WC 568590 (or renewals

    Page 706

    or replacements thereof) issued to the Employer by Insurance Company of North America (hereinafter called 'the Primary Insurers').

    "2. Liability shall attach to the Underwriters [Lloyd's] only after the Primary Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability as follows:

    "....

    "(b) As regards Maritime Coverage only:

    "$25,000. ultimate net loss in respect of each person and subject to that same limit each person.

    "$25,000. ultimate net loss in respect of each accident.

    "(all hereinafter referred to as 'the Primary Limit or Limits') and the Underwriters shall then be liable to pay only such additional amount or amounts as will provide the Employer with a total coverage under the Policy or Policies of the Primary Insurers and this insurance combined of:

    "....

    "(b) As regards Maritime Coverage only:

    "$75,000. ultimate net loss in respect of each person and subject to that same limit each person.

    "$175,000. ultimate net loss in respect of each accident.

    "....

    "7. Liability to pay under this insurance shall not attach unless and until the Primary Insurers shall have admitted liability for the Primary Limit or Limits or unless and until the Employer has by final judgment been adjudged to pay an amount which exceeds such Primary Limit or Limits and then only after the Primary Insurers have paid or have been held liable to pay the full amount of the Primary Limit or Limits.

    "8. This insurance is subject to the same warranties, terms, and conditions ... as are contained in or as may be added to the said Policy/Policies of the Primary Insurers."

    The...

To continue reading

FREE SIGN UP