St. Paul Fire & Marine Ins. Co. v. Vest Transp. Co., GC 78-155-K.

• Decision Date: 14 November 1980
• Docket Number: No. GC 78-155-K.,GC 78-155-K.
• Citation: 500 F. Supp. 1365
• Court: U.S. District Court — Northern District of Mississippi
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY v. VEST TRANSPORTATION COMPANY, INC., Victory Towing Company, Inc., and Switzerland General Insurance Corporation of New York.

500 F. Supp. 1365

ST. PAUL FIRE & MARINE INSURANCE COMPANY v. VEST TRANSPORTATION COMPANY, INC., Victory Towing Company, Inc., and Switzerland General Insurance Corporation of New York.

No. GC 78-155-K.

United States District Court, N. D. Mississippi, Greenville Division.

November 14, 1980.

COPYRIGHT MATERIAL OMITTED

John K. Meyer, Houston, Tex., Burkett H. Martin, Vicksburg, Miss., for plaintiff.

J. Murray Akers, Greenville, Miss., for Vest and Victory.

Jacquin Campoy, New Orleans, La., for Switzerland.

MEMORANDUM OPINION

KEADY, Chief Judge.

In this admiralty action, the court is called upon to consider policies of marine insurance and to declare the rights and liabilities of the parties arising thereunder. St. Paul Fire & Marine Insurance Company (St. Paul), as plaintiff, seeks declaratory relief for a determination of nonliability on a marine insurance policy issued to defendants, Vest Transportation, Inc. (Vest) and/or Victory Towing, Inc. (Victory), Mississippi corporations domiciled at Greenville, for a casualty occurring on March 5, 1975, when an insured vessel, Barge B-521, collided with a pier of a Mississippi River bridge at Vicksburg. Also joined as a defendant was Switzerland General Insurance Company of New York (Switzerland General), a New York corporation which insured the same vessels as were covered by St. Paul. Vest and Victory counterclaimed against St. Paul and crossclaimed against Switzerland General for damages and attorney fees arising from failing to pay losses under their insurance policies.

The basic facts relating to the casualty may be simply stated. On or about March 5, 1975, the M/V JOHNNY DAN, a vessel owned by Victory, was towing Barge B-521 in a tow of four loaded tank barges upbound on the Mississippi River when Barge B-521 collided with a pier of the Vicksburg Railroad and Highway Bridge spanning the Mississippi River at approximately Mile 435.8 at Vicksburg. As a result of this casualty, one crew member of the M/V JOHNNY DAN lost his life, another was injured, and about one-third of the cargo of crude oil in tow escaped in the river. Most significant here is that Barge B-521 was wrecked on a pier and subsequently sank. The parties have stipulated that the sinking of the barge was caused by fault on the part of M/V JOHHNY DAN, whose crew members were employed by Victory, and not by the unseaworthiness of Barge B-521, negligence in her maintenance or operation, or other fault on the part of the barge, a dumb vessel without crew or motive power of its own. Vest and/or Victory, with the concurrence of the underwriters, abandoned the wrecked barge to the government. Subsequently the United States incurred expenses of $393,936.28 in removing the wreck of the barge and brought suit against Vest and Victory for these and related expenses. On September 29, 1978, a consent judgment was entered against Vest and Victory, but without prejudice to the rights or defenses held by St. Paul or Switzerland General under their insurance policies.¹

St. Paul seeks a declaration that the claim for the expense of removal of the wreck of the barge does not fall within the coverage afforded by its policy to Vest and/or Victory; in the alternative, it contends that, should there be coverage, such coverage must be limited to Victory as tug owner and not as barge owner, and that therefore the insurance underlying St. Paul's excess coverage is more than adequate to satisfy the government's judgment.

The position of Switzerland General is basically that, like St. Paul's marine policy, its policy provides no indemnity for expenses of removal of the wrecked barge; in the alternative, Switzerland General asserts that if Victory, and not Vest, was the owner of the barge, and should there be coverage, its coverage to Victory as barge owner is limited to $234,000, the amount of its excess coverage on the barge.

Vest and Victory contend that Victory was the owner of the barge, or at least Victory was the bareboat charterer of the barge and therefore the owner, pro hac vice. Vest and Victory next contend that they were engaged in a joint enterprise so that the negligence of Victory, as owner of M/V JOHNNY DAN, is attributable to Vest as the owner of the barge. Alternatively, Vest and Victory contend that, even if neither insured was covered under the policies, Switzerland General is estopped from denying liability for the expenses of removal of the wreck of the barge because of its conduct and actions taken after the casualty which were detrimentally relied upon by Vest and Victory.

At the outset it should be noted that Victory and Vest were family-held, sister corporations,² and the entire stock of each company was owned by Carl D. Vest, and his wife, Ora Vest. Carl D. Vest was president of both corporations, his wife the secretary, and his brother, Oscar J. Vest, the treasurer. Prior to 1972, Vest owned M/V DOUBLE D and several oil tank barges, and Victory owned M/V JOHNNY DAN. Separate books were kept for each corporation, although corporate minutes were not always maintained. On occasions funds were loaned from one corporation to the other. Carl D. Vest on July 10, 1972, contracted with Dixie Carriers, Inc. of Houston, Texas, to purchase four steel tank barges, including Barge B-521, and bills of sale were obtained from Dixie Carriers to the barges in favor of Vest. Each of the barges was enrolled in the name of Vest as owner. Vest executed an affreightment contract with Dixie Carriers for the transportation of crude oil in the four barges. On July 10, 1972, Vest executed a fleet ship mortgage on the four barges to Dixie Carriers securing an indebtedness of $286,650 payable in monthly installments with balance maturing October 11, 1975. On the same date Victory executed a separate ship mortgage on M/V JOHNNY DAN to Dixie Carriers securing payment of the same indebtedness.

Since 1969 Carl Vest placed marine insurance for both Vest and Victory with Bill Andrews Agency, Inc. of Greenville, which had authority to bind Argonaut Insurance Company for hull coverage. Andrews contacted Gulf Coast Marine, Inc. of New Orleans, marine insurance brokers, to procure primary and excess protection and indemnity (P&I) coverages. Gulf Coast Marine obtained insurance for the primary coverage as well as first and second layers of excess coverage as set forth below. Andrews was first advised that Barge B-521 was owned by Vest. On January 29, 1975, Andrews was told by Carl D. Vest's secretary, Ann Cox, that it was Victory which owned Barge B-521, and was directed to draw a premium financing contract obligating Victory to pay the premiums on the hull and P&I coverages on Barge B-521. After further investigation, Andrews on February 24, 1975, notified Gulf Coast Marine (GCM) that the P&I policies should be endorsed to show Victory as the insured, or as an additional insured, of the barge. GCM had authority to bind the primary insurer, but not the two excess insurers.

The insurance policies which Vest and Victory had in effect on the date of the casualty may be summarized as follows:

1. A hull policy issued by Argonaut Insurance Company on M/V JOHNNY DAN for $200,000 and on Barge B-521 for $84,000. Argonaut's policy, which also covered other vessels, originally listed Vest as the insured, and on March 4, 1975, Victory was listed as an additional assured with respect to the four tank barges, including B-521.

2. A P&I policy issued by American Motorists for $100,000 primary coverage on the M/V JOHNNY DAN and $100,000 primary coverage on Barge B-521. This policy, which also covered other vessels, originally named Vest as the assured. Effective January 1, 1975, the name of the assured with respect to the M/V JOHNNY DAN and four barges, including B-521, was changed to Victory by endorsement of GCM.

3. A first "layer" of excess P&I coverage issued by Switzerland General insured M/V JOHNNY DAN for $550,000 in excess of $100,000 and Barge B-521 for $234,000 in excess of $100,000. This policy, also insuring other vessels, named Vest as the assured. Unlike the primary and second layer of excess coverage, Switzerland General's policy was never endorsed to provide that the name of the insured with respect to four oil barges, including B-521, was Victory. GCM's agent claimed he notified G & M Marine, Inc., agent with authority to bind Switzerland General, concerning need to endorse policy in favor of Victory. G & M, however, denies receiving such notification.³

4. A second "layer" of excess P&I coverage issued by St. Paul on M/V JOHNNY DAN for $250,000 in excess of the primary and first layer of P&I coverages ($650,000) and on Barge B-521 $250,000 in excess of $334,000 primary and first layer of P&I coverage. St. Paul's policy, which covered the other vessels, named both Vest and Victory as the assureds.

Each P&I policy had incorporated into its provisions a special risks form known as SP-23,⁴ which provides that the insurer

undertakes to make good to the Assured ... all such loss and/or damage and/or expense as the Assured shall as owners of the vessel named herein have become liable to pay and shall pay on account of the liabilities, risks, events and/or happenings herein set forth:

. . . . .

(7) Liability for cost or expense of, or incidental to, the removal of the wreck of the vessel named herein when such removal is compulsory by law ....⁵ (Emphasis added).

Each P&I insurance policy listed by name specific vessels and contained a clause stating "each vessel deemed a separate insurance."

Three issues emerge from the evidence. First, did Vest or Victory own Barge B-521; if Vest owned the barge, then was the relationship between Vest and Victory such that Vest could become liable for Victory's negligence, i. e., was Victory either the bareboat charterer of the barge or was it engaged with Victory in a joint venture at the time of the casualty so as to impute Victory's negligence to Vest? Second, do the excess...