East Coast Tender Service, Inc. v. Robert T. Winzinger, Inc., 83-5824

Citation759 F.2d 280
Decision Date18 April 1985
Docket Number83-5847 and 84-5408,Nos. 83-5824,83-5846,No. 83-5846,Nos. 83-5847 and 84-5408,No. 83-5824,83-5824,s. 83-5847 and 84-5408,s. 83-5824
PartiesEAST COAST TENDER SERVICE, INC., v. ROBERT T. WINZINGER, INC., Utah Home Fire Insurance Company, Great Atlantic Insurance Company, Various Underwriters as their Interests May Appear in the Term British Markets. and ROBERT T. WINZINGER, INC., Appellee/Cross-Appellant, v. UTAH HOME FIRE INSURANCE COMPANY; Great Atlantic Insurance Company; Various Underwriters as Their Interests May Appear in the Term British Market, Appellants/Cross-Appellees. Appeal of UTAH HOME FIRE INSURANCE COMPANY, Great Atlantic Insurance Company, Various Underwriters as Their Interests May Appear in the Term British Market, inAppeal of ROBERT T. WINZINGER, INC., inAppeal of EAST COAST TENDER SERVICE, INC., in
CourtU.S. Court of Appeals — Third Circuit

William B. McGuire, William J. Prout, Jr. (argued), James T. O'Halloran, Tompkins, McGuire & Wachenfeld, Newark, N.J., Brendan J. Connolly, Mendes & Mount, New York City, for appellants in No. 83-5824.

Edward V. Cattell, Jr. (argued), Cattell & Keating, Haddonfield, N.J., for appellant in No. 83-5846.

George J. Koelzer (argued), Clarkson S. Fisher, Jr., Evans, Koelzer, Osborne & Kreizman, Red Bank, N.J., for appellant in Nos. 83-5847 & 84-5408.

Before ALDISERT, Chief Judge, BECKER, Circuit Judge and CAHN, District Judge *.

OPINION OF THE COURT

BECKER, Circuit Judge.

This litigation arises out of a February 1979 ice storm on the Delaware River at Penns Grove, New Jersey, which damaged two barges that were linked together and used as a pier. The barges were owned by appellee/cross-appellant East Coast Tender Service, Inc. ("East Coast") and were chartered to appellee/cross-appellant Robert T. Winzinger, Inc. ("Winzinger"). Appellants cross-appellees Utah Home Fire Insurance Company, Great Atlantic Insurance Company and various other insurance underwriters ("Underwriters") had issued Hull insurance and Protection and Indemnity ("P & I") insurance on the barges, naming East Coast and Winzinger as insureds, for the period from April 1, 1978, to March 31, 1979. Although the backs of the barges were broken by the storm and they began to sink in the river within the coverage period of these insurance policies, the barges continued to be operated for profit under a state issued license long after the coverage period expired. Ultimately, the barges sank and Winzinger received formal notice to remove them.

While a number of issues are presented in these appeals, see infra pp. 282-283, we consider in detail only one of them; whether the Underwriters are liable for the costs of removing the wrecked barges under the wreck removal provisions of the P & I policy that make the Underwriters liable for the costs of wreck removal that is "compulsory by law." The district court denied recovery. Before we reach this question, however, we will set out in more detail the relevant facts and procedural history of the case, and dispose of several preliminary issues.

For the reasons that follow, we will affirm the district court's judgment in all its particulars, including its denial of liability for the removal costs, except that we will vacate its award of prejudgment interest for the period from April 1, 1979, until September 30, 1979.

I.

In November 1976, Winzinger chartered and took possession and control of two barges owned by East Coast under a bareboat charter agreement. Winzinger then obtained a license from the New Jersey Department of Environmental Protection ("DEP"), Division of Marine Services, to operate the barges as a temporary loading facility at Penns Grove. The barges were dug into the sand on the river bank and then locked together to form a pier over which large amounts of gravel were conveyed to waiting vessels for transportation to an electric power plant under construction nearby.

In February 1979, there was a break in the ice upriver from the barges. A solid wall of ice broke loose, traveled downstream and struck the barges. 1 The tremendous force of this ice caused one barge to "flop on top" of the other, breaking the backs of both barges.

Although the ice storm that damaged the barges occurred in February 1979, and the barges thereafter gradually sank into the river, Winzinger continued to operate the barges as a pier until September 11, 1979, when its contract with the United States Army Corps of Engineers for exclusive use of the Penns Grove property expired. On January 3, 1980, Winzinger cancelled its license with the DEP and, on April 29, 1980, Winzinger received formal notice from the DEP to remove the barges. The sunken barges have not yet been removed.

This litigation commenced when East Coast filed suit against Winzinger for failure to pay charter hire after September 30, 1979. Winzinger then sued the Underwriters for a declaratory judgment as to the latter's obligation under the P & I policy to pay for the costs of removing the wrecked barges. Both East Coast and Winzinger asserted claims for compensatory damages against the Underwriters on the ground that, as a result of the ice storm, the barges became constructive total losses in February 1979, when the policy was still in force. They also sought punitive damages, fees, and costs. The Underwriters defended their refusal to honor the claims of East Coast and Winzinger under the policy on several grounds: (1) the barges were not vessels under the general maritime law; (2) the insureds misrepresented the use to which the barges were put, materially affecting the risk that was being underwritten; (3) the damage to the barges resulted from ordinary wear and tear and was not the result of a fortuitous event or a peril of the sea; and (4) the barges did not become constructive total losses.

After a trial on the merits, the district court made the following findings with respect to these issues. First, the court found that the barges did not cease to be vessels by reason of their use as a temporary loading pier. According to the court, "[the vessels] were being utilized on only a temporary basis as docks; they had to be seaworthy to be positioned at Penns Grove and to be dismantled as a dock at the conclusion of the operation; and [East Coast] had every intention of chartering them in the future as seaworthy vessels."

Second, the court found that neither East Coast nor Winzinger materially misrepresented the nature of the risk or concealed changed circumstances from the Underwriters. According to the court, the insureds communicated the use and purpose to which the barges were being put to their broker, Adams and Porter, Inc., who relayed this information to the Underwriters of the 1976-78 policies. 2 One person they informed was Dale Maple of the American National General Agencies ("ANGA"), the managing general agent of appellant/cross-appellee Utah Home. The court further found that Maple agreed to bind Utah Home, the lead underwriter of the 1978-79 policy, and that Maple was properly apprised of the circumstances when he did so.

Finally, the court found that the ice storm that occurred in February 1979 proximately caused the backs of the barges to break, and that the barges were constructive total losses. The court characterized this event as fortuitous and as a peril of the sea. Since damages that flow from fortuitous events are covered under the P & I policy, the court entered judgment in favor of East Coast against the Underwriters for the agreed value of the barges ($110,000), plus prejudgment interest from April 1, 1979 ($83,380.47), and costs to be taxed by the Clerk of the Court.

In No. 83-5824, the Underwriters have appealed from the award of damages and interest. We have carefully considered the record and the arguments made by the Underwriters. In connection with the damage award, we conclude that the district court's findings of fact are fully supported by the record and that its application of legal principles was correct. We thus affirm the award of damages for the reasons set forth in the district court's opinion of August 8, 1983. 3

The district court also granted East Coast prejudgment interest at the stipulated rate of 16.69% from April 1, 1979, the approximate date of the loss. The rule in admiralty is that "prejudgment interest should be awarded unless there are exceptional circumstances that would make such an award inequitable." In the Matter of Bankers Trust Co., 658 F.2d 103, 108 (3d Cir.1981). In Bankers Trust, this court noted that prejudgment interest was inappropriate where the party requesting interest has (1) unreasonably delayed in prosecuting its claim; (2) made a bad faith estimate of its damages that precluded settlement; or (3) has not sustained any actual damages. Id. at 108. The district court determined that none of these exceptions was present here. We believe that it did not abuse its discretion in so doing and will therefore affirm the district court's decision to grant prejudgment interest. We will, however, exclude from the calculation of prejudgment interest the period from April 1, 1979, until September 30, 1979, during which time East Coast was receiving charter hire from Winzinger, because to permit prejudgment interest for that period would result in an inequitable double recovery.

The district court denied East Coast's claim for punitive damages and attorneys fees. East Coast appeals this denial in No. 83-5847. With respect to punitive damages, the district court found that "the actions of Underwriters in pursuing its defenses prior to or subsequent to the filing of this complaint [were not] especially egregious or in wanton and wilful disregard of [East Coast's] rights" so as to warrant punitive damages. The court also determined that East Coast was not entitled to attorneys fees on the ground that the Underwriters' conduct was neither vexatious nor...

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