Albany Ins. Co. v. Wisniewski

• Decision Date: 14 February 1984
• Docket Number: Civ. A. No. 82-0155 S.
• Citation: 1985 AMC 689,579 F. Supp. 1004
• Parties: ALBANY INSURANCE COMPANY and United States Fire Insurance Company, Plaintiffs, v. Leonard WISNIEWSKI, Defendant.
• Court: U.S. District Court — District of Rhode Island

579 F. Supp. 1004

1985 AMC 689

ALBANY INSURANCE COMPANY and United States Fire Insurance Company, Plaintiffs, v. Leonard WISNIEWSKI, Defendant.

Civ. A. No. 82-0155 S.

United States District Court, D. Rhode Island.

February 14, 1984.

COPYRIGHT MATERIAL OMITTED

Gorham & Gorham, Arthur M. Read III, Bradford Gorham, Providence, R.I., Hoch, Flanagan & Snyder, Bertram E. Snyder, F. Dore Hunter, Boston, Mass., for plaintiffs.

Richard N. Morneau, Providence, R.I., Glen J. Vida, Union, N.J., for defendant.

OPINION

SELYA, District Judge.

This is an action brought pursuant to 28 U.S.C. §§ 2201-2202 and Rules 9(h) and 57, Fed.R.Civ.P., by Albany Insurance Company ("Albany") and United States Fire Insurance Company ("USF"), to rescind, or otherwise to declare null and void, a binder of marine insurance issued jointly on their behalf to the named defendant, Leonard Wisniewski ("Wisniewski"). While the parties are of diverse citizenship and the requisite amount is in controversy, the plaintiffs' complaint invokes the court's admiralty jurisdiction. 28 U.S.C. § 1333.

Following a bench trial which began on December 13, 1983 and concluded on December 27, 1983, the matter was taken under advisement pending receipt of post-trial submissions by the parties. Compendious briefs have now been filed. This opinion constitutes the court's findings of fact and conclusions of law as required by Fed.R.Civ.P. 52(a).

I. Embarking on the Voyage

The antecedents of the case at bar are convoluted, and certain aspects of the litigation are shrouded in mystery. Finical perscrutation of the facts is, therefore, a prerequisite to a reasoned consideration of the merits.

The centerpiece of this nautical chanty is the hydrofoil patrol vessel "Flagstaff." The Flagstaff was originally conceived and built by Grumman Aerospace Corporation ("Grumman") as an experimental warship for the United States Navy. The court had the benefit of the testimony of both Robert Johnston (who was in charge of Grumman's marine programs during the design/build period) and his successor, Walter Wohleking, who was piped aboard into Johnston's berth in 1973. Both Johnston and Wohleking were excellent and reliable witnesses: articulate, knowledgeable, and thoroughly professional. The court credits them, as well, as experts in matters relating to hydrofoils.

Initially, the Navy let two contracts, one to Grumman and one to The Boeing Company ("Boeing"). Each was to build a prototype hydrofoil vessel. It became evident early on, however, that the original design concepts were impractical; and the two ships (Grumman's "Flagstaff" and Boeing's "Tecumcari") were eventually completed as evaluation vessels for a hypothetical fleet of larger craft. While the Flagstaff and the Tecumcari were competitive in the sense that both were vessels of aluminum construction built to meet identical performance specifications, their designs were dissimilar.¹

As completed, the Flagstaff's hull was 74.4 feet in length between perpendiculars and 82 feet long overall. She was designed for a full load displacement of 568 tons and to carry a crew of thirteen. She had a 21.4 foot beam and enjoyed dual propulsion systems: hull-borne and hydrofoil. The former operated on two diesel engines, using water jet propulsion. The latter involved three fully-submerged, subcavitating foils (controlled by a hydropilot instrument) which could be pivoted out of the water; when operating on her foils, the craft was powered by a Rolls Royce turbine. The vessel, in this mode, could achieve speeds five to six times greater than her wonted hull-borne velocity.

The Navy placed the Flagstaff into service in 1968. Operational results were mixed, at best. Some eight years later, she was transferred to the Coast Guard. As to events occurring after the Coast Guard took possession, the court had the benefit of, inter alia, depositions of Lawrence Bauer, a Grumman marine engineer, and David Power, who had served as the Flagstaff's engineering officer. In addition, both Wohleking (as Grumman's man-incharge) and Johnston (who, subsequent to his departure from Grumman, had become a consultant for the Navy) continued their acquaintance with the vessel.

The Coast Guard's efforts to use its newly-acquired hydrofoil in a utilitarian manner proved, in the main, to be unavailing. The Flagstaff manifested a seabag full of imperfections: power-plant degradation had occurred, the vessel would not perform to specifications, mechanical unreliability and engineering casualties were the norm, and a major overhaul was plainly necessary. A signal transmission casualty idled the Flagstaff in March, 1978; and, in undergoing transmission repairs, persistent difficulty with maintenance of acceptable turbine gas temperature surfaced. It was evident that the vessel could not "fly" on her foils without risking terminal damage to the turbine. And, the turbine problem was particularly acute, as the engine was no longer in regular production. No test bed was available; spare parts were in short supply. After studying the lay of the land, the Coast Guard gave up the ghost and elected, in September of 1978, to decommission the vessel. It is undisputed that, at the time of lay-up, the Flagstaff was incapable of operating on her hydrofoils at her designed speeds. She was, and had increasingly become, a sea-going Rocinante, ready for the maritime equivalent of the glue factory. Upon decommissioning, the tatterdemalion craft was placed out of the water, on a cradle atop a pier at the Bristol (R.I.) Coast Guard facility.

After withdrawing the vessel from service, the Coast Guard made no further effort to rehabilitate her. The Flagstaff was, at best, a white elephant — and a wounded one, at that. The only realistic way in which the ship could have been fitted for continued reliable operation would have been to replace her turbine, reengineer her transmission, and repair her other salient defects. The cost of so doing would have been at least $3,000,000. And, this estimate did not include the substantial further costs which would inevitably be associated with conversion of the vessel to other than military uses.

The mills of the bureaucrats grind slowly. Eventually, however, ownership of the Flagstaff was transferred to the General Services Administration ("GSA"); and, in October of 1980, the GSA advertised the Flagstaff for public sale. The advertisement cautioned that the vessel was incomplete; that parts and items were missing; and that the sale would be on an "as is" basis. The GSA bid specifications, while disclaiming any warranty, described the hull as being "in fair condition and towable without repairs." At the bid opening on November 6, 1980, four tenders were received. The high bid ($35,000) was rejected by GSA as insufficient, and the Flagstaff was reoffered. On December 9, 1980, the new bids (five in number) were unsealed. Wisniewski, using the nom de plume of "Milford Salvage", successfully offered $68,151.50. The defendant then requested, and received, an extension of time within which to take possession.

While the Flagstaff remained at Bristol, Wisniewski employed the part-time services of Coast Guard moonlighters to effect minor repairs and to ready the vessel for transit. One such worker was Richard Newcomb, an obviously nervous and tentative witness, whose testimony was, nonetheless, both truthful and helpful. Newcomb and his co-workers were able, after considerable effort, to put the hull-borne propulsion system into operating condition. But, the vessel was not fit for hydrofoil travel. The spare parts and related gear which Wisniewski had acquired as part of the GSA purchase were stored at Otis Air Force Base on Cape Cod. These were ultimately retrieved at the defendant's behest in the summer of 1981. Two government employees (Robert Mosher and Arnie Ikkela) testified as to this equipment. Mosher's testimony established that no fully-assembled engines were among the purchased items. The high-stands and the low-stands, essential for hydrofoil operation, were never claimed by Wisniewski from Otis. Lastly, it is of significance, given the widely divergent assertions of the parties as to the condition of the Flagstaff and her appurtenances, that Wisniewski did receive, with the spare parts, the maintenance records for the vessel, including the engine log and the machinery history data. These were never produced at trial; and, their absence was never explained.

II. Damn the Torpedoes Full Speed Ahead

As the date neared for the defendant to remove his newly-acquired chattel from Bristol, the plot thickened. On or about September 23, 1981, Wisniewski contacted Adams & Porter, Inc. ("A & P"), a New York based marine insurance broker. His initial approach was by long-distance telephone to Robert Savage, A & P's chairman. It should be noted, parenthetically, that none of the defendant's dealings with A & P were conducted face-to-face. Wisniewski claimed to have been steered to Savage by a mutual friend, although he declined to identify the referrer. He asked to have A & P act as his broker in obtaining insurance coverage for the Flagstaff. His inquiry was transmitted through channels from Savage to David Adams (A & P's executive vice-president) to Joseph Valenza, an A & P employee engaged in the servicing of new prospects. Wisniewski wanted to secure both lift coverage in the $200,000/$300,000 range (referable to the impending placement of the ship in the water) and port risk coverage to attach thereafter. It is clear from the evidence that the comparatively low insurance ceiling sought for the lift coverage was fashioned on the theory that, given the nature of the hoisting operation, the reasonably foreseeable loss and damage which could result from that peril (even in a worst-case situation) was severely limited.

The A & P officials testified by deposition. Wisniewski failed to testify at all. The court finds that the defendant...