Bender Shipbuilding & Repair Co., Inc. v. Brasileiro

• Decision Date: 13 June 1989
• Docket Number: No. 88-7131,88-7131
• Citation: 874 F.2d 1551
• Parties: BENDER SHIPBUILDING & REPAIR COMPANY, INC., Plaintiff-Appellee, v. C.N. Lloyd BRASILEIRO, Defendant, The Hartford Insurance Company of Alabama, in personam, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1551

874 F.2d 1551

1991 A.M.C. 220

BENDER SHIPBUILDING & REPAIR COMPANY, INC., Plaintiff-Appellee, v. C.N. Lloyd BRASILEIRO, Defendant,

The Hartford Insurance Company of Alabama, in personam,

Defendant-Appellant.

No. 88-7131.

United States Court of Appeals, Eleventh Circuit.

June 13, 1989.

M. Kathleen Miller and A. Danner Frazer, Jr., Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, Ala., for defendant-appellant.

A. Clay Rankin, III, and Brian P. McCarthy, Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, Ala., for Bender Shipbuilding & Repair Co., Inc. Appeal from the United States District Court for the Southern District of Alabama.

Before KRAVITCH and EDMONDSON, Circuit Judges, and HOFFMAN ^*, Senior District Judge.

WALTER E. HOFFMAN, Senior District Judge:

This appeal concerns whether the United States District Court for the Southern District of Alabama properly granted a cross-motion for summary judgment filed by plaintiff-appellee Bender Shipbuilding and Repair Company, Inc. (Bender). The district court held that Bender's liability for liquidated damages to Todd Shipyards Corporation (Todd) resulting from delay in delivery of a floating drydock was covered under the Collision Liability clause of a Builder's Risk policy of marine insurance issued by defendant-appellant, the Hartford Insurance Company of Alabama (the Hartford). The Hartford appeals this decision.

I.

Bender had entered into a separate contract with Todd for the construction of a floating drydock. The contract called for Bender to deliver the drydock on or before May 27, 1982, and provided for payment of liquidated damages at $5,300.00 per day for a 90-day maximum period if the drydock was delivered after the contract date.

Bender purchased a Builder's Risk insurance policy from the Hartford to cover the drydock during construction and delivery. Bender and Todd were listed as co-insureds and co-loss payees under the policy.

On July 6, 1982, three sections of the drydock moored at the Bender yard on the east bank of the Mobile River broke their moorings during a sudden and severe thunderstorm. The drydocks were blown west across the river and collided with a vessel, the M/V ITAPURA, which was moored at Pier 4 of the Alabama State Docks on the western bank. Both the drydocks and the ITAPURA were damaged. The repairs required on the drydock as a result of the collision delayed the delivery of the drydock to Todd. ¹

As delivery of the drydock was delayed, Todd made a claim against Bender for liquidated damages as provided in the contract. Todd's position was that the damage to the drydock was not the result of circumstances which excused Bender from liability. Bender informed the Hartford of Todd's claim for liquidated damages and sought coverage for the claim under the insurance policy. Bender also sought defense from the Hartford against Todd's claims.

The Hartford denied coverage for delay damages on February 17, 1983. Bender then settled its disputes with Todd for $350,000.00 plus interest of $3,797.26. Todd and Bender signed a joint agreement and complete mutual release in February 1983.

Bender brought an action against the Hartford in the United States District Court for the Southern District of Alabama on November 22, 1985. ²

As the parties agreed that no issues of material fact existed, the dispute between the Hartford and Bender was brought before the district court on the Hartford's motion and Bender's cross-motion for summary judgment.

The district court entered findings of fact and conclusions of law on January 22, 1988. The district court also issued an order granting Bender's cross-motion for summary judgment and denying the Hartford's motion for summary judgment. The Hartford appeals the district court's interlocutory order and judgment under 28 U.S.C. section 1292(a)(3).

II.

The Builder's Risk insurance policy purchased by Bender followed the form of the American Institute Builder's Risk Clauses (February 8, 1979, Form 13-L) and included three sections: hull, liability (both collision and protection and indemnity), and general provisions. Bender and Todd were listed as co-insureds and co-loss payees under the policy.

The general conditions of the policy, which apply to the entire policy, excluded from coverage "[d]elay or disruption of any type whatsoever, including, but not limited to, loss of earnings or use of the Vessel, howsoever caused, except to the extent, if any, covered by the Collision Liability or the Protection and Indemnity clauses of this Policy." District Court Opinion at 6.

The Collision Liability, or "Running Down," clause followed the standard American Institute Hulls form. The clause provided:

(a) If the Vessel shall come into collision with any other ship or vessel, and the Assured or the Surety in consequence of the Vessel being at fault shall become liable to pay and shall pay by way of damages to any other person or persons any sum or sums in respect to such collision, the Underwriters will pay the Assured or the Surety, whichever shall have paid, such proportion of such sum or sums so paid as their respective subscriptions hereto bear to the Agreed Value, provided always that their liability in respect to any one such collision shall not exceed their proportionate part of the Agreed Value.

District Court Opinion at 5-6.

The Collision Liability section excluded from coverage "... any sum which the Assured or Surety may become liable to pay or shall pay in consequence of, or with respect to: (d) cargo or other property on or the engagement of the Vessel." District Court Opinion at 6-7.

The district court stated that a straightforward reading of this language supports a finding that the policy covers a claim for liquidated damages. District Court Opinion at 7. The district court found that for the Hartford to prevail, it must demonstrate clearly and unambiguously that no coverage was intended. Id. The court concluded that no clear language in the policy demonstrated an intent to limit coverage to tort damages or to exclude from coverage liquidated damages resulting from a collision, and therefore granted Bender's cross-motion for summary judgment. District Court Opinion at 9-10.

The Hartford argues on appeal that the district court incorrectly interpreted the language of the Builder's Risk insurance policy as including the liquidated damages and incorrectly identified Todd as "any other person" within the meaning of the policy.

For the reasons stated below, this Court finds that the policy between the parties was not ambiguous as to its terms and that coverage of Bender's liability to Todd was not intended by the parties. We therefore reverse the holding of the district court as to the liability of the Hartford to Bender.

III.

Bender filed its complaint in this case in admiralty under Rule 9(h) of the Federal Rules of Civil Procedure. Although marine insurance policies are generally recognized as being marine contracts and, therefore, within the federal admiralty jurisdiction, see Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 313, 75 S.Ct. 368, 370, 99 L.Ed. 337 (1955); Steelmet, Inc. v. Caribe Towing Corp., 779 F.2d 1485, 1487 (11th Cir.1986); Ingersoll-Rand Fin. Corp. v. Employers Ins., 771 F.2d 910, 911-12 (5th Cir.1985), cert. denied, 475 U.S. 1046, 106 S.Ct. 1263, 89 L.Ed.2d 573 (1986), certain marine insurance policies which only protect against marine risks may not vest a court with admiralty jurisdiction. See Royal Ins. Co. v. Pier 39 Ltd., 738 F.2d 1035, 1036-37 (9th Cir.1984) (finding that marine-type insurance coverage for floating breakwater and floating dock did not cover a maritime interest as required for admiralty jurisdiction as neither insured structure was a "vessel"). See also 7A J. Moore & A. Palaez, Moore's Federal Practice paragraph .255 at 3024 (2d ed. 1982). The interest insured, and not just the risk insured against, must be maritime. Royal Ins. Co., 738 F.2d at 1036.

Courts have consistently found that a floating drydock is not a "vessel" within the meaning of admiralty jurisdiction when the drydock is moored and in use as a drydock. See, e.g., Keller v. Dravo Corp., 441 F.2d 1239, 1244 (5th Cir.1971), cert. denied, 404 U.S. 1017, 92 S.Ct. 679, 30 L.Ed.2d 665 (1972) (although court did not preclude finding that floating drydock could be vessel under different facts, court here found as a matter of law that floating drydock was not a "vessel"); Bernardo v. Bethlehem Steel Co., 314 F.2d 604, 608 (2d Cir.1963) (jury properly decided that floating drydock was not "vessel" within the meaning of Jones Act). Floating drydocks have been classified as "vessels" for admiralty purposes when they become active some way in navigation. See, e.g., United States v. Moran Towing & Trans. Co., 374 F.2d 656, 663 (4th Cir.1967), vacated 389 U.S. 575, 88 S.Ct. 689, 19 L.Ed.2d 775 (1968) (floating drydocks in transit across navigable waters were vessels within admiralty jurisdiction under the Wreck Act); J.M.L. Trading Corp. v. Marine Salvage Corp., 501 F.Supp. 323, 325-26 (E.D.N.Y.1980) ("when floating drydock is treated like a ship or vessel and is used like one, thereby losing its attributes as an extension of land, it may very well be found to be within the admiralty jurisdiction of the Federal courts."). The floating drydock in this case was under construction at the Bender yards on the Mobile River. ³ As a result of a severe and sudden thunderstorm, the drydock broke free of its moorings and entered the navigable waters of the Mobile River. Under the rationale of J.M.L. Trading Corp. and Morgan Towing, the drydock arguably became a "vessel" when it entered the navigable waters of the Mobile River. ⁴ Although such a decision is plausible from the facts of this case, we find jurisdiction more properly vested through the tort branch of admiralty.

Admiralty jurisdiction may exist where some nexus exists between the alleged wrongful...