Antilles SS Co. v. MEMBERS OF AMERICAN HULL INS., 80 Civ. 7426 (WCC).
| Decision Date | 24 May 1982 |
| Docket Number | No. 80 Civ. 7426 (WCC).,80 Civ. 7426 (WCC). |
| Citation | 539 F. Supp. 572,1983 AMC 1100 |
| Parties | ANTILLES STEAMSHIP COMPANY, LTD., Plaintiff, v. The MEMBERS OF the AMERICAN HULL INSURANCE SYNDICATE, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Waesche, Sheinbaum & O'Regan, P. C., New York City, for plaintiff; Donald M. Waesche, John R. Foster, New York City, of counsel.
Bigham, Englar, Jones & Houston, New York City, for defendants; Joseph J. McGrath, New York City, of counsel.
Plaintiff Antilles Steamship Company, Ltd. ("Antilles") brought this action seeking to recover under a contract of marine insurance for damage to its vessel, the Alchemist. The case was tried by the Court without a jury and by consent of Antilles and defendants, 62 insurance companies, the trial was limited to the question of liability. The following opinion constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52, F.R.Civ.P.
Prior to trial, the parties submitted a stipulation in which they agreed on most of the relevant facts. Accordingly, only limited evidence was presented at trial and the following factual recitation is derived largely from the parties' stipulation.
Antilles, a Liberian corporation, is the owner and operator of the T/V Alchemist and is engaged in business as an ocean carrier of chemicals. The Alchemist is a tank vessel with 34 tanks designed for the carriage of liquid chemicals. During the relevant period, the Alchemist was managed and operated by the Steuber Company. In September of 1975, James Kingston ("Kingston") was a marine superintendent for Steuber.
Defendants are 62 insurance companies, both foreign and domestic, engaged in the business of underwriting marine insurance. The American Hull Insurance Syndicate ("the Syndicate") consisted at all relevant times of 53 insurance companies organized to insure ocean-going vessels. On or about September 14, 1975, Antilles and defendants entered into two contracts of marine insurance. Antilles is an assured on the policies, which provide coverage against loss or damage to the hull and machinery of the Alchemist. Both contracts are essentially the same, with the first (Plaintiff's Exhibit 13) being with the Syndicate and the second (Plaintiff's Exhibit 14) being with the remaining defendants. The non-Syndicate defendants contracted in their policy to "follow the leading Underwriter the Syndicate in all or any settlements or agreements pertaining to losses and/or claims, including legal proceedings, and in the settlement thereof, ...." The relevant portion of the policies states that "this insurance also covers loss of or damage to the vessel directly caused by the following ... Explosions on shipboard or elsewhere; ...." Lines 80, 81, 84 of Plaintiff's Ex. 13, 14.
Seventy per cent of the risk was insured in the American market with defendants; the remaining thirty per cent was underwritten in London. The English policy contained clauses identical to those at issue here.
Pursuant to a contract of affreightment between Antilles and Union Carbide Corporation, on September 12, 1975, the Alchemist loaded liquid chemicals for carriage from Taft, Louisiana to Antwerp, Belgium. One of the cargos placed on board was 202.22 tons of glacial acrylic acid ("GAA"), which was loaded in its monomer state into No. 6 starboard wing tank aft ("No. 6 SWA"). The Alchemist was also carrying a shipment of ethylene norbonene ("ENB"), which was stored in No. 6 starboard wing tank forward ("No. 6 SWF"). Both No. 6 SWA and No. 6 SWF are stainless steel, and they share a common wall.
GAA is a pure form of acrylic acid which, in its monomer state, looks and flows like water. When polymerized, however, GAA is a solid. The only chemical characteristic of ENB that is relevant to this lawsuit is its extremely noxious odor.
On September 16, 1975, while the Alchemist was at sea and the insurance policy in effect, the GAA explosively polymerized. The cause of the explosion has never been determined, but the result was extensive damage to the ship. The tank walls of No. 6 SWA bulged and the common wall between No. 6 SWA and No. 6 SWF ruptured. Seams opened in the tank walls of No. 6 SWA, thus allowing cargo to escape into the cofferdam, the space between the cargo tanks and the skin of the ship. The skin of the ship in the vicinity of No. 6 SWA bulged.
In order to reduce the tremendous heat being produced by the explosive polymerization of the GAA, the ship's personnel pumped seawater into the cofferdam. Because No. 6 SWA had ruptured, the GAA, ENB and seawater intermingled in No. 6 SWA, No. 6 SWF and the cofferdam.
Despite the explosion, the Alchemist continued its voyage to Antwerp where it discharged all of its cargos except the GAA and ENB. The public authorities in Antwerp forbade any attempt to unload the commingled GAA, ENB and seawater because of the extremely noxious and penetrating odor emanating from the damaged tanks. While the ship was in Antwerp, numerous meetings were held to discuss possible ways of repairing the vessel. These meetings were attended by various surveyors and representatives of Union Carbide as well as Kingston, who was responsible for getting the Alchemist ready to enter the shipyard.
Kingston testified at trial that Antilles unsuccessfully explored the possibilities of repairing the vessel without piecemeal removal of the polymer and liquid. Union Carbide was unable to suggest a solvent for the polymer. Removal of the entire affected area was rejected since such a procedure would have required cutting through good tanks and portions of the deck and because no welding or burning could be done on the ship. Moreover, disposal of the polymer presented problems. Antilles also was faced with continuing noxious odor from the ENB. Finally, Antilles contracted with Booy Support ("Booy") to clean the tanks and the cofferdam and do everything else necessary to prepare the Alchemist for entry into a repair yard.
Accordingly, the Alchemist proceeded to the Booy tanker cleaning facility near Rotterdam. Work began on October 21, 1975 with the removal from the cofferdam, No. 6 SWA and No. 6 SWF of a brownish, liquid mixture consisting of GAA, ENB, seawater and lumps of polymer. Work then proceeded on No. 6 SWF, which contained approximately 1½ feet of semi-solid polymer at the bottom of the tank. Most of this material could be removed by high pressure washing equipment and vacuum trucks. The remainder of this phase of the job was completed by hand, using shovels.
Initial cleaning of No. 6 SWA then began with the use of high pressure washing equipment. Vacuum trucks were used to remove the wash water and the broken-up rubbery polymer. It then became necessary to remove by hand the hardened polymer, which extended from bulkhead to bulkhead in the tank and adhered to the bulkheads. The solid polymer was about 20 feet deep and became harder with depth. Ultimately, jack hammers had to be used to remove the polymer. During the 30-day period it took to clean No. 6 SWA, considerable damage was unavoidably done to the stainless steel skin of the tank. All work necessary for the Alchemist to enter the repair yard was complete on November 25, 1975. Antilles paid the costs incurred in Rotterdam.
Following the removal of the GAA, ENB and seawater and the preparation of the tank areas for repair, the Alchemist was moved to a shipyard where she was restored to her condition prior to the explosion of the polymer. Subsequently, Antilles' insurance brokers prepared a statement of particular average adjustment. The claim included the cost of repairs at the shipyard, the expenses incurred in Rotterdam and various related costs.
The London market, which had underwritten 30 per cent of the risk under the same terms as the policies at issue here, honored the claim and paid it in full. Defendants, the American market, paid the shipyard costs and various related expenses but refused to pay for the work done in Rotterdam. Defendants do agree that they are liable for the expenses incurred in removal of material from the cofferdam spaces. They also accept responsibility to pay for the removal of the last residue of the material clinging to the bulkheads of No. 6 SWA and No. 6 SWF. Thus, the only issue of liability contested by the parties is whether defendants are responsible for the cost of removing the bulk of the polymer from the cargo tanks themselves.
The question whether a hull insurer is responsible for the costs of removing material, which has solidified from bulkhead to bulkhead and which has caused damage to the vessel, is one of the first impression in this jurisdiction. This somewhat arcane issue essentially boils down to whether cargo loaded is cargo forever or whether it can, under these circumstances, so change its character and have such an effect as to constitute damage to the vessel. Defendants' basic position is that material in the cargo spaces is always the ship owner's responsibility; Antilles argues that the solidified polymer actually constituted damage to the vessel.
Defendants' rationale for allowing the costs of removing material from non-cargo carrying areas and of removing the last residue of the polymer clinging to the cargo tank walls1 is that they are expenditures necessary to prepare the ship for repair work. Transcript ("Tr.") 24.
Defendants, however, take the position that even though it also was necessary to remove all the polymer that lay on top of the thin layer of polymer that adhered directly to the tank in order to effect repairs to the ship, see Tr. 26, 31, the bulk of the solidified mass was not "damage to the vessel." Defendants' reasoning behind this position, which seemingly ignores the fact that the explosion and solidification of the GAA was the cause of the vessel's damage, is that "the cargo is in a compartment where it's supposed to be, and you have...
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Antilles S.S. Co., Ltd. v. Members of American Hull Ins. Syndicate, s. 266
...of the case both parties submitted post-trial briefs. The district court issued two opinions and orders. In its opinion dated May 24, 1982, 539 F.Supp. 572, the court found that the defendants were obligated to indemnify plaintiff for removal of all the hardened polymer. In a supplemental o......
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