Graham v. Milky Way Barge, Inc.
| Decision Date | 17 August 1987 |
| Docket Number | 81-951 and 81-3616,No. 84-3695,Nos. 80-4016,No. 80-3684,80-3684,s. 80-4016,84-3695 |
| Parties | Eddie Lee GRAHAM, Plaintiff, v. MILKY WAY BARGE, INC., and Chevron U.S.A., Inc., Defendants-Appellees- Appellants, v. LAND AND OFFSHORE SERVICES, INC., et al., Defendants-Third Party Plaintiffs- Appellees Cross-Appellants, v. AMERICAN FIDELITY INS. CO., Third Party Defendant-Appellant, Cross-Appellee and Southern American Insurance Co., Third Party Defendant-Appellee Cross Appellant. (District Courtand related District Court) |
| Court | U.S. Court of Appeals — Fifth Circuit |
David L. Carrigee, New Orleans, La., for Continental Underwriters, ltd.
Ross Scaccia, G. Frederick Kelly, III, New Orleans, La., for Charles Taylor.
Robert S. Reich, Benjamin W. Yancey, New Orleans, La., for Chevron.
Harvey J. Lewis, New Orleans, La., for Elizabeth Daniels.
Clarence A. Frost, Mat M. Gray, III, New Orleans, La., for E.A. Hermitage.
Randolph J. Waits, John F. Emmett, New Orleans, La., for American Fidelity Ins.
Thomas Lewis, Thomas Loehn, New Orleans, La., for St. Paul Fire & Marine.
Charles E. Lugenbuhl, Larzelere, Ellefson, Pulver, New Orleans, La., for North River Ins. & Land & Offshore.
Robert A. Vosbein, Lynn M. Luker, New Orleans, La., for Milky Way Barge & Bossier Bank.
Terry Bell, Belle Chasse, La., for Graham.
Edward F. LeBreton, III, Neal D. Hobson, Bruce R. Hoefer, Jr., J. Barbee Winston, New Orleans, La., for amicus-La. Land.
Stanley L. Perry, Galliano, La., for Horace Herrin & Horace Herrin Agency.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before GEE and WILLIAMS, Circuit Judges and HINOJOSA, * District Judge.
On Petitions for Rehearing we issue the following opinion in place of the opinion of March 9, 1987. Other than those matters reflected in this opinion, the other matters raised in the petitions for rehearing are DENIED.
On September 5, 1980, the lift or "jack up" vessel, the M/V STAR II (hereinafter STAR II), capsized off the coast of Louisiana in the Gulf of Mexico. Four men were thrown overboard as the vessel capsized. One, Barton Daniel, is missing and presumed drowned. Three others, Charles Taylor, (hereinafter Taylor), Eddie Lee Graham (hereinafter Graham) and Captain Rodney Terrebone, (hereinafter Captain Terrebone) were injured but eventually rescued.
The STAR II was owned by Milky Way Barge Line, Inc., (hereinafter Milky Way), and time chartered to Chevron, U.S.A., Inc., (hereinafter Chevron) to service Chevron's equipment in the Gulf. Chevron also had a contract with Land and Offshore Services, Inc., (hereinafter LOS) to perform sandblasting and painting services on Chevron's offshore drilling platforms. The four men thrown overboard were employees of LOS.
In early September of 1980 the STAR II was jacked up next to Chevron's "CM" platform in the South Timbalier Block 24 of Realizing that there was an insufficient air gap between the elevated hull and the surface of the water, Captain Terrebone then tried to jack up the vessel further in an attempt to maintain an air gap. One of the hydraulic jacks malfunctioned and Captain Terrebone was unable to raise the ship to safety. Captain Terrebone gave an order to abandon the ship and board the platform, but the ship capsized before Captain Terrebone, Barton Daniel, Graham or Taylor could reach the platform. The STAR II was a total loss. LOS lost equipment and supplies which had been stored on the STAR II. After the STAR II capsized, it floated downwind until it hit and damaged Chevron's adjacent South Timbalier 24 "CC" platform.
the Gulf, approximately 5 miles offshore and in approximately 54 feet of water. The STAR II had been jacked up next to the CM platform since the 3rd of September. The LOS maintenance crew, housed on the STAR II to service the CM platform, had not been able to do any work on the platform since the afternoon of the 3rd, due to increasingly severe weather conditions. By the 4th, the waves had increased to 4 to 6 feet and the wind was predicted to pick up as well. In the early hours of the 5th, Captain Terrebone, the captain of the STAR II, was awakened by the sound of the waves striking the hull of the vessel.
This appeal concerns review of four separate actions consolidated for trial together with various cross-claims, counterclaims and third party demands.
Graham, Taylor, and the surviving spouse of Barton Daniel, (hereinafter Daniel) instituted actions against Milky Way and Chevron. A fourth suit was brought by Milky Way and the Bossier Bank & Trust Company, (hereinafter Bossier Bank), which held a mortgage on the STAR II, against American Fidelity Insurance Company, (hereinafter American Fidelity) and Underwriters at Lloyds, (hereinafter Lloyds) seeking recovery for the loss of the vessel. In turn, Milky Way and Chevron responded to the injury and death claims with an Answer and third party demand against their protection and indemnity underwriters, American Fidelity and Southern American Insurance Company (hereinafter Southern American).
Milky Way also brought third party demands against its insurance agent, Horace Herrin, and against Continental Underwriters, Ltd., (hereinafter Continental), a surplus lines broker. Continental brought an action for indemnity against the St. Paul Fire & Marine Insurance Company, (hereinafter St. Paul), its errors and omissions carrier.
There were five policies upon which Milky Way, Bossier Bank, the preferred ship Mortgage holder on the STAR II, and Chevron relied to establish coverage of the loss. Bossier Bank is named as the loss payee in the policies issued by American Fidelity and certain underwriters at Lloyd's. American Fidelity was the primary underwriter for both the hull and Protection and Indemnity (P & I) policies. Southern American provided excess hull and P & I insurance, and Lloyd's wrote an increased value policy for the STAR II.
The district court found that the following limitations were explicit in the primary policies and incorporated by reference into the remaining policies: (a) the STAR II was to be operated in "the inland waters of the Gulf states"; (b) the vessel would be limited to 40 feet of water "for elevating purposes"; and (c) the vessel would neither elevate in seas of 5' or more, nor remain elevated, when the seas increased to 5 feet and were predicted to rise. 1 The holders of the primary and excess coverage policies, American Fidelity, Southern American and Lloyd's denied coverage, asserting breaches of the limits in the policies.
Milky Way, the owner of the STAR II, purchased the insurance policies through the Horace Herrin Insurance Agency.
Horace Herrin (hereinafter Herrin) of the Horace Herrin Agency acted through Continental, an insurance agency and brokerage firm. When Sidney Duet, (hereinafter Duet), acting for Milky Way Barge, contacted Herrin to obtain the initial coverage for the STAR II, Herrin contacted Elder Brown at Continental who bound coverage in a matter of days.
In the summer of 1980, after the original insurance policies were bound, Milky Way extended the legs on which the STAR II jacks from their previous 60 feet to 90 feet, in order to work in deeper water. Duet discussed with Herrin the possibility of altering the STAR II, and its effect on the insurance coverage before the work was begun. However, Duet requested additional coverage to extend the navigational and operational limits on the STAR II only after the legs were extended. Herrin again immediately contacted Continental and Continental dispatched a marine surveyor to look at the alterations to the vessel. The surveyor recommended that a naval architect assess the STAR II. Continental did inform Herrin that a naval architect should be called in, but neither Herrin nor Continental engaged one.
Continental never procured a naval architect or the additional coverage. Herrin's telephone calls to Elder Brown, Jr. concerning the additional coverage were never returned. Consequently, Herrin and Milky Way were never aware that the additional coverage had not been secured until after the accident on September 5, 1980.
When American Fidelity, Southern American and Lloyd's denied coverage based upon a breach of the limitations, Milky Way and Bossier Bank also sought to recover against Herrin and Continental for failing to secure the additional coverage. Continental sought indemnity and a defense from its errors and omissions insurer St. Paul some two and one-half years after the incident. St. Paul denied coverage claiming untimely notice.
The district court used an advisory jury to assist on various issues, including the insurance question, throughout the trial. The jury heard testimony concerning the effect of the operational limits in the policies, the likely causes of the accident and that of insurance experts concerning the language in the policies. The jury answered in the affirmative a general question concerning insurance coverage under the existing policies.
In the district court's analysis, the limitations were either warranties, the breach of which would automatically void coverage, or special conditions, limitations that require a causal connection between the breach of the policy and the accident in question to avoid coverage. Although the jury's verdict made no distinction between a warranty and a condition in an insurance policy, the district court found that the limitations imposed in the policies were not warranties.
The district court went on to find in its Findings of Fact and Conclusions of Law that "[t]he limitations contained in the policies were not express warranties and, therefore, coverage existed at the time of the casualty." The district court cited no authority for its distinction between a warranty and a special condition.
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