Ferrante v. Detroit Fire and Marine Insurance Co.

• Decision Date: 20 October 1954
• Docket Number: No. 14143-C.,14143-C.
• Court: U.S. District Court — Southern District of California
• Parties: Salvatore FERRANTE, et al., Plaintiff, v. DETROIT FIRE AND MARINE INSURANCE COMPANY, et al., Defendant.

125 F. Supp. 621

1954 AMC 2026

Salvatore FERRANTE, et al., Plaintiff, v. DETROIT FIRE AND MARINE INSURANCE COMPANY, et al., Defendant.

No. 14143-C.

United States District Court, S. D. California, Central Division.

October 20, 1954.

Arch E. Ekdale, Gordon P. Shallenberger and George E. Toner, San Pedro, Cal., for plaintiffs.

Derby, Cook, Quinby & Tweedt, San Francisco, Cal., Overton, Lyman, Prince & Vermille and Dan Brennan, Los Angeles, Cal., for defendants.

JAMES M. CARTER, District Judge.

This case presents a question of marine insurance and concerns the "Inchmaree" clause¹ usually appearing in American and English Marine insurance policies.

On June 1, 1951, Salvatore Ferrante was the owner and Master of a purseseiner, the "Rosanna". The "Rosanna" was covered by a policy of marine insurance issued by the defendant for the period from August 22, 1950, to August 22, 1951, insuring the hull and machinery of the "Rosanna" against loss and damage from certain specified perils and causes in the amount of $52,500. Prior to the filing of the action, all of Ferrante's rights under the policy were assigned to the co-plaintiffs herein, Herbert W. Elander, Einar Jall and William R. Bird, doing business under the fictitious firm name of Western Engine Service Co. This company made the repairs on the "Rosanna" following the happenings hereinafter related.

The facts of the accident are related by Salvatore Ferrante, the owner and Master and W. D. Newby, Chief Engineer, contained in a surveyor's report.

"June 1, 1951. 12:00 noon. We were trolling along looking for fish when the exhaust stack gave out a heavy cloud of white smoke. I then checked my pyrometer for fire in exhaust boxes. The engine was slowly turning and I noticed vibration in the front end, so I immediately shut it off. As the motor stopped I heard a distinct thud and then started looking to see what the trouble was. I pulled side inspection plates on the engine and found the crankshaft broken through the back main bearing * * *"

The "Rosanna" was towed to San Pedro and the expense of the towing, $502.64 is conceded by the pretrial stipulation to be a proper claim for the plaintiff. Repairs were made by the Western Engine Service Company, commencing June 6, 1951 and were completed July 27, 1951. The parties have agreed that the total cost of repairs amounted to $11,682.05. The evidence established that the cost of repairing the consequential damages done to the engine when the shaft broke amounted to $1,080.10 and that the balance of $10,601.95 represents the cost of replacing the broken shaft.

The surveyor's report also states: "It was found that a new crankshaft was not immediately available from the factory. A second-hand used shaft of the same type and model as original was located. It was accordingly checked between centers and found true * * *" The second-hand shaft and its testing and preparation for installation in the "Rosanna" amounted to $2,578.40; the new crankshaft would have cost $3,887, a difference or saving of $1,309.

Plaintiff sues for the following:

1. Towing charge, $502.64;

2. The cost of repairs on the engine, $11,682.05; and

3. The difference in value between the used crankshaft and the new crankshaft, $1,309.

There is a deductible provision in the policy of $600, the amount being deductible from the total claimed in (2) and (3) above, but not from the towing.

The policy provides that it is warranted free from particular average under 3%, which in this instance amounts to $1,575, namely 3% of the $52,500 shown on the policy face.²

The marine insurance policy sued upon, is like woman, "fearfully and wondrously wrought." It consists of nine additions or endorsements fastened to the top of a one-page marine policy. This policy is written in the archaic language of marine policies, similar to that referred to by the Supreme Court in the case of Calmar S. S. Co. v. Scott, 1953, 345 U.S. 427, at page 432, 73 S.Ct. 739, at page 742, 97 L.Ed. 1125, where the court said, "Construing such conglomerate provisions requires a skill not unlike that called for in the decipherment of obscure palimpsest texts. * * * nor have we any Elder Brethren of Trinity House to help us."

To the first policy sheet is attached an endorsement entitled, "American Hulls (Pacific) 1938, Rev. Nov. 1945," consisting of some twenty-four numbered paragraphs, plus additional matter listed as (a), (b) and (c) at the bottom thereof. Next is attached another endorsement entitled, "California Fishing Vessels, Endorsement No. 2 (Rev.) Nov. 1945-K." It provides that clauses 10, 11, 14, 15, 23, 24 and C are deemed to be deleted from the prior endorsement, "American Hulls." On top of these are attached seven additional endorsements not pertinent here.

In this hodge-podge we find certain provisions clearly and definitely stated. The policy sheet states: "This insurance is understood and agreed to be subject to English Law and Usage as to liability for and settlement of any and all claims."

Endorsement No. 1 states in (c): "Warranted to be subject to English Law and Usage as to liability for and settlement of any and all claims." However, endorsement No. 2 expressly deletes (c) above, from endorsement No. 1, but no reference is made to the policy sheet. It is assumed therefore that the foregoing warranty in the policy sheet remains untouched and that this case is governed by English Law and usage. This point need not be labored in that it does not appear that a different result would follow under American Law and usage.

Endorsement No. 1 in paragraph 10, contains what is generally termed the "Inchmaree" clause, but paragraph 10 is deleted from endorsement No. 1 by endorsement No. 2.

However, endorsement No. 2 terminates our frustration in that it contains in paragraph 9, the "Inchmaree" clause with which we are here concerned.

"9. This insurance also specially to cover (subject to the average and deductible average warranties) loss of or damage to hull or machinery directly caused by the following: —

"Accidents in loading, discharging or handling cargo, or in bunkering or in taking in fuel;

"Explosions on shipboard or elsewhere;

"Bursting of boilers, breakage of shafts or any latent defect in the machinery or hull (excluding, however, the cost and expense of repairing or renewing the defective part);

"Contact with aircraft;

"Negligence of Master, Charterers, Mariners, Engineers or Pilots;

"Provided such loss or damage has not resulted from want of due diligence by the Owners of the vessel, or any of them, or by the Managers. Masters, Mates, Engineers, Pilots or Crew not to be considered as part owners within the meaning of this clause should they hold shares in the vessel." (Exclusion phrase underlined.)

The breaking of shafts in vessels has been a fertile field for litigation. At the threshold we are met with a question of fact, and different results flow from different factual determinations. For example, the shaft may break from (1) "negligence of Master, Charterers, Mariners, Engineers or Pilots" insured against in the "Inchmaree" clause, or from (2) "any latent defect in the machinery or hull" insured against in the clause. Obviously "machinery" includes the shaft. Or from (3) obsolescence, old age and wear and tear, or (4) other causes or combinations of causes.³

If the shaft breaks through negligence as specified in the clause, then it is clear that since negligence was a peril insured against, the cost of replacing the shaft and all resulting damage caused by the breakage, including the expense of removing and replacing the shaft⁴ are properly recoverable.

If the shaft breaks because of a latent defect,⁵ the latent defect is a peril insured against. The liability of the insurer is for "damage to hull or machinery directly caused by" this latent defect. The question of liability for the cost of renewing the shaft itself, and for the cost of removing and replacing the shaft, raise serious questions which we discuss hereafter.

If the shaft breaks from obsolescence, old age or ordinary wear and tear, such a peril is insured against. The liability of the insurer is for "loss or damage to hull or machinery directly caused by * * * breakage of shafts * * *" The same question arises as to liability for the cost of renewing the shaft itself and for the cost of removing and replacing the shaft.

At the trial, pictures of portions of the broken shaft were before the court.⁶ Tests were made and there was conflicting expert testimony as to the cause of the break. There was evidence of other conditions and circumstances, such as the fact that the pistons and walls of the cylinders were scored, indicating overheating and freezing from expansion. The usual cause of such a condition is ineffective lubrication bringing about the over-heating and expansion and consequent binding or freezing. This would so increase the stress on the engine that, unless given attention it would result in stalling or breakage. This could have been averted by proper attention by the engineer, whose duty it was to give such attention. There was also expert testimony based on the happenings in question and the appearance of the shaft as to what an engineer would have seen and observed had he been using due care in the operation of the engine.

On examination of the evidence, we found no latent defect existed. Defendants' expert testimony on the subject of latent defects was unsatisfactory and the manufacturer's report contradicted this testimony. From the evidence we found that the shaft failure and entire engine damage was proximately caused by negligence of the engineer in failing properly to lubricate the engine, and in failing to observe the symptoms of inadequate or improper lubrication which were or should have been apparent to a competent engineer. If, as suggested by defendant, the engineer was not in the engine room, he was nonetheless negligent by his absence.

Since the shaft...