Frederick v. Electro-Coal Transfer Corp., Civ. A. No. 74-1230.

• Decision Date: 16 September 1982
• Docket Number: Civ. A. No. 74-1230.
• Citation: 548 F. Supp. 83,1983 AMC 2364
• Parties: Anthony C. FREDERICK, Plaintiff, v. ELECTRO-COAL TRANSFER CORPORATION, A/B/C Insurance Company, Alter Fleet, Inc. X/Y/Z Insurance Company, in personam The BARGE AGS 607-B her Engines, Tackle, Apparel, Furniture, etc. in rem, Defendants.
• Court: U.S. District Court — Eastern District of Louisiana

548 F. Supp. 83

1983 AMC 2364

Anthony C. FREDERICK, Plaintiff, v. ELECTRO-COAL TRANSFER CORPORATION, A/B/C Insurance Company, Alter Fleet, Inc. X/Y/Z Insurance Company, in personam The BARGE AGS 607-B her Engines, Tackle, Apparel, Furniture, etc. in rem, Defendants.

Civ. A. No. 74-1230.

United States District Court, E. D. Louisiana.

September 16, 1982.

Robert McComiskey, New Orleans, La., for plaintiff.

Russell Cornelius, New Orleans, La., for Fidelity & Cas. Co. of New York.

Donald Bann, Metairie, La., for Alter Co.

John O. Charrier, Jr., New Orleans, La., for Gulf Coast Transit, Inc.

CASSIBRY, District Judge:

Plaintiff, an employee of Electro-Coal Transfer Corporation, brought suit against Alter Company,¹ alleging that he was injured while working on a barge of which Alter Company was the owner pro hac vice.

Alter Company contracted to deliver phosphate rock from ports in Florida to Cairo, Illinois, for the benefit of a company that is not a party to this suit. Alter Company then entered into a transportation agreement with Gulfcoast Transit Company for the actual movement of this phosphate cargo. Under this transportation agreement, Gulfcoast Transit agreed to carry the cargo on its oceangoing barges from the Florida ports to Davant, Louisiana. Once in Davant, Gulfcoast Transit had arranged for Electro-Coal Transfer to then load the cargo into Alter Company barges for the transit upriver to Illinois; the barge upon which the plaintiff was injured, the AGS-607B, was one of these Alter Company vessels. The barges were then to be towed to Illinois by Mid-South Towing Company.

After plaintiff filed suit against Alter Company, Alter Company filed a third party claim against Gulfcoast Transit, alleging that Gulfcoast Transit failed to provide adequate stevedoring services. Specifically, Alter Company alleged that the plaintiff's injuries were sustained as a result of the negligence of Electro-Coal Transfer, who had been employed by Gulfcoast Transit to perform the stevedoring services in Davant, Louisiana. Thus, Alter alleged that Gulfcoast had breached its warranty of providing workmanlike service since Electro-Coal allegedly did not perform the job in a workmanlike manner. (At this point, plaintiff then brought a claim against Gulfcoast Transit also, but this claim was later dismissed on summary judgment).

In response, Gulfcoast alleged that Electro-Coal performed competently and, therefore, denied liability. Furthermore, Gulfcoast alleged that even if it were found to be liable, it was insured by Fidelity & Casualty Company of New York. However, Fidelity & Casualty contended that although it had issued a comprehensive general liability insurance policy to Gulfcoast Transit, for several reasons the claims against Gulfcoast Transit were not covered under the policy. Thus, Fidelity & Casualty denied coverage to Gulfcoast Transit. As a consequence, Gulfcoast Transit then filed a third party claim against Fidelity & Casualty to recover the loss it suffered as a result of the failure of Fidelity & Casualty to defend and indemnify Gulfcoast under the insurance policy.

The claim of the plaintiff against Alter Company, and the claim of Alter Company against Gulfcoast Transit were finally settled. However, Gulfcoast in no respect compromised its third party complaint against Fidelity & Casualty. Therefore, the final question that remains in this suit is whether Gulfcoast was entitled to coverage by Fidelity & Casualty under the insurance policy. For the reasons discussed below, I find that the claims against Gulfcoast Transit are covered under the insurance policy, and that Fidelity & Casualty was arbitrary and capricious in denying coverage.

I.

COVERAGE

The Warranty of Workmanlike Performance Is Covered Under the Insurance Policy

Alter Company's claim against Gulfcoast Transit was based upon Gulfcoast Transit's alleged breach of its warranty of workmanlike performance. Gulfcoast Transit made this warranty in its transportation agreement with Alter Company. Alter alleged that Gulfcoast Transit breached this warranty by providing incompetent stevedoring services via Electro-Coal Transit Corporation.

Exclusion (a) of the Fidelity & Casualty insurance policy excludes from coverage any "liability assumed by the insured under any contract or agreement ..., but this exclusion does not apply to ... a warranty that work performed by or on behalf of the named insured will be done in a workmanlike manner." (emphasis added). Thus, the claim by Alter Company against Gulfcoast Transit was clearly within the coverage of the insurance policy since the Alter Company claim was based on unworkmanlike performance.

The Watercraft Exclusion, On Its Face, Does Not Preclude Coverage

Fidelity & Casualty also argues that exclusion (e) of the insurance policy precludes its liability to Gulfcoast Transit. This exclusion states that no coverage is provided for:

bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of

(1) any watercraft owned or operated by or rented or loaned to any insured, or

(2) any other watercraft operated by any person in the course of his employment by any insured;

but this exclusion does not apply to watercraft while ashore on premises owned by, rented to or controlled by the named insured.

A proper reading of this exclusion makes clear that coverage for watercraft is excluded only when there is bodily injury arising from the loading of:

(1) any watercraft owned, or operated by, or rented or loaned to any insured, or

(2) any other watercraft operated by any person in the course of his employment by any insured.

In terms of the first "prong" of this exclusion, clearly Gulfcoast did not own, operate, rent, or have on loan the barge on which the plaintiff was injured. In terms of the second prong, the barge was not operated by any person in the course of his employment with Gulfcoast Transit; no employee or representative of Gulfcoast was anywhere near the barge, or had anything to do with its operation. Therefore, exclusion (e) does not preclude coverage of the "watercraft accident" involved in this case.

The Watercraft Exclusion Was Deleted

Even if the "watercraft exclusion" were deemed to preclude coverage, I find that this exclusion was intended to be deleted from the insurance policy. Gulfcoast Transit alleges that although endorsement number five of the policy states that "exclusion (d) of the comprehensive liability coverage part of the policy is inapplicable," this was a typographical error and that it was exclusion (e), the "watercraft exclusion," that was intended to be made inapplicable. At trial, Gulfcoast Transit introduced testimony by deposition of the insurance agent who ordered the policy. This agent testified that he unknowingly ordered the wrong exclusion deleted from the policy. He testified that he thought he was asking that the company delete the "watercraft exclusion." In fact, the agent ordered another exclusion — exclusion (d) — deleted. Exclusion (d) deals with bodily injuries arising out of the transportation of mobile equipment by the insured by means of an automobile.

The very language of endorsement number five makes the insurance agent's error clear. The endorsement states:

As respects the vessels covered under this policy, it is agreed that exclusion (d) of the comprehensive general liability coverage part is inapplicable.

(emphasis added). Yet exclusion (d) has nothing to do with vessels. In this respect, the terms of the contract are not clear and unambiguous; therefore, parole evidence in the form of the agent's deposition testimony is admissable to explain or vary the terms of the contract. Mid-Continent Underwriters, Inc., v. Rodriguez, 323 So.2d 518 (La.App. 4th Cir. 1975); Lakeshore, Inc., v. Sarafyan, 225 So.2d 15 (La.App. 4th Cir. 1969).

Clearly, it was not exclusion (d) — the "automobile exclusion" — that the agent intended to delete in endorsement number five since that endorsement has to do with coverage under the policy of vessels, not automobiles. In Louisiana, a contract of insurance can be reformed if there was fraud, negligence, or mistaken conduct on the part of the agent issuing the policy. Kolmaister v. Connecticut Life Insurance Company, 370 So.2d 630 (La.App. 4th Cir. 1979); M.F.A. Life Insurance Company v. Huey, 347 So.2d 63 (La.App. 2d Cir. 1977); Hebert v. Breaux, 285 So.2d 829 (1st Cir. 1973). I find that in this case, there was clearly "mistaken conduct" on the part of the insurance agent. Therefore, the contract should be reformed so that exclusion (e) rather than exclusion (d) is deleted in endorsement number five.

Endorsement Number One Does Not Preclude Coverage

Fidelity & Casualty also argues that endorsement number one of the insurance policy precludes coverage. That endorsement states:

Anything in the policy to the contrary notwithstanding, it is agreed that this policy does not cover vessels used by the insured for freight or passenger service whether away from or at any premises owned by, rented to, or controlled by the insured.

It is further agreed that this policy covers the insured's

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